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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, 2005

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, 2005, was 12,249,119.

Table of Contents

TABLE OF CONTENTS - FIRST QUARTER 2005 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, 2005

(Unaudited, except for December 31, 2004)

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 2004 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 2005 presentation format.

Note 2 – Impact of Recently Effective Accounting Pronouncements

In December, 2004, the FASB issued a revision to SFAS 123, Accounting for Stock-Based Compensation. This revision will require the Company to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. This revised statement was effective as to the beginning of the first interim or annual reporting period that begins after June 15, 2005. In April, 2005 the Securities and Exchange Commission announced the adoption of a new rule that amends the compliance dates for SFAS 123 (Revised) and allows for the implementation of SFAS 123 (Revised) at the beginning of the first fiscal year that begins after June 15, 2004. Accordingly, the Company has elected to adopt the revised statement effective for its first quarter 2006 financial statements as opposed to the third quarter 2005 financial statements previously disclosed.

In March 2005, the FASB issued Financial Accounting Standards Board Interpretation (“FIN”) No. 47, Accounting for Conditional Asset Retirement Obligations. This interpretation clarifies the term “conditional asset retirement obligation” as used in SFAS 143, Accounting for Asset Retirement Obligations, and is effective no later than the end of fiscal years ending after December 15, 2005. The Company does not expect the adoption of FIN 47 to have a material effect on its consolidated financial statements.

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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2005

(Unaudited, except for December 31, 2004)

Note 3 – Earnings per Common Share

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

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.

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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2005

(Unaudited, except for December 31, 2004)

Note 4 – Stock-Based Compensation (cont.)

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 2005 and 2004, respectively: dividend yields of .81 percent and .90 percent; expected volatilty of 31.54 percent and 30.00 percent; risk-free interest rates of 3.83 percent and 4.10 percent; and expected lives of five years. Using these assumptions, the weighted average grant-date fair value per share of options granted in 2005 and 2004 was $15.35 and $9.50, respectively.

Note 5 – Inventories

Inventories 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, 2005

(Unaudited, except for December 31, 2004)

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.

Prior to August 26, 2004, the Company had agreed to a contingent equity contribution agreement with Del-Tin Fiber and the group of banks from whom Del-Tin Fiber had obtained its $89,000,000 credit facility. Under this agreement, Deltic and the other 50 percent owner of the joint venture had 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 $17,500,000 for each owner. In addition, each owner had committed to a production support agreement, under which each owner had 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 was able to successfully complete a minimum production test. Both owners had also agreed, in a series of one-year term commitments, to fund any operating working capital needs until the facility was able to consistently generate sufficient funds to meet its cash requirements.

On August 26, 2004, Del-Tin Fiber refinanced its existing long-term debt by entering into a credit agreement consisting of a letter of credit and term loan with multiple lending institutions. The funds provided from this credit agreement were used, together with the existing balance in Del-Tin Fiber’s debt service reserve and bond sinking fund accounts, to redeem $60,000,000 of its $89,000,000 industrial revenue bonds. Under the new credit agreement, the lenders, on September 1, 2004, loaned Del-Tin Fiber $30,000,000 which will be repayable over five years in equal quarterly installments, beginning December 31, 2004, and issued on Del-Tin Fiber’s behalf, a letter of credit in the amount of $29,689,000 to support the remaining industrial revenue bonds originally issued in 1998 by Union County, Arkansas. Concurrent with this event, on August 26, 2004, Deltic executed a guarantee agreement in connection with the refinancing of the debt of Del-Tin Fiber. Under Deltic’s guarantee agreement, Deltic unconditionally guarantees the due and punctual payment of 50 percent ($28,345,000 at March 31, 2005) of Del-Tin’s obligations under its credit agreement. This new credit agreement of Del-Tin Fiber fully replaces Del-Tin Fiber’s prior credit facility, resulting in Deltic’s previous contingent equity contribution agreement of $17,500,000, the production support agreement, and the need for the series of one-year operating working capital commitments being fully extinguished.

The Company has adopted the provisions of FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34 (“FIN 45”). In accordance with FIN 45, Deltic estimated the fair value of its guarantee of Del-Tin Fiber’s credit agreement to be $3,450,000 and included this non-cash amount in the Company’s Consolidated Balance Sheet as a long-term liability with an offsetting increase in the Company’s investment in Del-Tin Fiber. Deltic is reducing this liability systematically over the life of the credit agreement, as the Company is released from risk under the guarantee. Simultaneously, the offsetting amount which represents the difference between the Company’s recorded investment in Del-Tin Fiber and its underlying equity in the net assets of the joint venture is being amortized over the same period as the guarantee. The amortization of the guarantee and the basis difference are netted for purposes of financial reporting and result in no net income statement effect. At March 31, 2005, Deltic’s remaining liability regarding the guarantee was $3,105,000.

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DELTIC TIMBER CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2005

(Unaudited, except for December 31, 2004)

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

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, 2005

(Unaudited, except for December 31, 2004)

Note 7 – Timber and Timberlands

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

Note 8 – Property, Plant, and Equipment

Property, plant, and equipment 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, 2005

(Unaudited, except for December 31, 2004)

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:

Note 10 – Supplemental Cash Flow Disclosures

The Company had neither income tax payments or refunds in the 2005 and 2004 periods. Interest paid, net of amounts capitalized, was $250,000 and $363,000 in the first three months of 2005 and 2004, 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, 2005

(Unaudited, except for December 31, 2004)

Note 11 – Business Segments

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

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Executive Overview

The Company recorded net income of $2.5 million for the first quarter of 2005 compared to $1.3 million for the same period of 2004. All three operating segments of the Company – Woodlands, Mills, and Real Estate – contributed to the current quarter earnings. Deltic’s Woodlands Segment continued its role as the established core operation of the Company during the first quarter, providing $6.8 million in operating income. Deltic’s sawmills have continued to benefit from the combination of increased production efficiencies and the current market condition for softwood lumber products, as evidenced by our Mills segment’s $1.4 million improvement in operating income when compared to the first quarter of 2004. The Real Estate segment reported a 19 percent increase in residential lot sales from the same period last year, and continued strong demand for the Company’s residential offerings was confirmed by purchase commitments, as of March 31, for 122 of the 138 lots offered in late January. The first quarter operations of Del-Tin Fiber L.L.C., in which Deltic owns a 50 percent interest, were hindered by a temporary production curtailment caused by a fire sustained at the facility on January 16, 2005.

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, imports, foreign exchange rates, housing starts, residential repair and remodeling, commercial construction, industry capacity and production levels, the availability of raw material, and weather conditions. Housing starts in the U.S. and Canada, fueled by relatively low mortgage interest rates, remained strong during the first quarter of 2005. Consequently, the high demand for softwood lumber products experienced in 2004, has continued thus far in 2005, resulting in the retention of appropriate pricing levels within the industry. Given its relative size and the nature of most commodity markets, the Company has little or no control over pricing levels for its wood products. Therefore, the Company will continually seek to wring controllable costs and expenses from its manufacturing process. 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.

For the first quarter of 2005, pine sawtimber harvest levels increased 8,421 tons, to 179,202, when compared to the first quarter of 2004. The Company plans to keep 2005’s total pine sawtimber harvest volume comparable to the level in 2004. However, as a result of the segment’s geographic operating area experiencing a higher than normal level of rainfall during the latter half of 2004, which hindered logging operations within the industry, area mills began to deplete their existing log inventories. Consequently, the demand and corresponding price for pine sawtimber logs within the region increased during the first quarter of 2005, and Deltic increased its harvesting activities during the period to take full advantage of these prices. Ultimately, the Company’s ability to sell pine sawtimber at acceptable prices in the future will be dependent upon the size or existence of markets for manufactured lumber and other wood products. Activities to sell timberland identified as having a higher and better use or as being non-strategic continue. However, Deltic will consider these sales only to the extent that the returns on these transactions meet increased expectations, and there were no timberland sales during the first quarter of 2005. Timberland designated as higher and better use consists of tracts with market values that exceed the land’s worth as a timber growing platform. 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.

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For the Mills segment, the improvement in lumber prices, demonstrated by a ten percent rise in sale prices from the average for the first quarter of 2004, significantly impacted operating strategies and financial results. As with any commodity market, the Company expects the historical volatility 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 also continues efforts to improve sales realizations through product and customer mix enhancement, as well as being focused on increased efficiency and reduced cost structure. In response to improved market conditions, the Company continued its efforts to generate increased production, achieving a record level of lumber production for the month of March 2005 and a 31 percent increase in sales volume for the current quarter compared to the first quarter of 2004. 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.

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 2005 and demand for residential lots in the Company’s Chenal Valley development remains high. Weather-related delays prevented the Company from offering for sale 138 lots that were planned for completion in Chenal Valley during the fourth quarter of 2004. Construction of these planned 2004 lots was completed in January and offered for sale on January 20, 2005. As of March 31, the Company had closed or obtained purchase commitments on 122 of these. Deltic plans to develop another 390 lots during the remainder of 2005. In Deltic’s other two active developments, Red Oak Ridge and Chenal Downs, a total of 4 lots were sold, leaving 43 developed lots in Red Oak Ridge and 24 in Chenal Downs uncommitted as of March 31, 2005. While Chenal Downs is fully developed, Deltic plans to develop approximately 40 additional lots within Red Oak Ridge in 2005. Future development activity will be dependent upon the demand for the Company’s residential lots, which is expected to remain strong as long as interest rates remain at or near current levels.

During 2004, the Company disclosed plans for a 1,170-acre upscale residential development, The Ridges at Nowlin Creek, on a portion of its large land holdings located west of Chenal Valley. Construction activity at this site has not yet begun. A portion of the development is located within the watershed of Lake Maumelle, a principal source of drinking water for Little Rock. Due to this environmentally sensitive locale, the Company intends to implement the most modern and proven best management practices to create a low impact development in order to protect water quality in the lake. The Company continues to finalize environmental and civil engineering features of the development and to reach an accord with local utilities and government agencies that the development will be fully protective of water quality. The local water utility continues to express its intention to acquire this watershed acreage, including by condemnation. However, it has commissioned preparation of a new watershed management plan which the Company hopes will reflect current scientific principles that will be compatible with the Company’s low impact development plans. Preparation of this new watershed management plan is expected to take up to 18 months.

The reported average sales price for residential lots for a specific period is largely dependent upon the mix of lot sales closed in that period. The average residential lot sales price for the first quarter of 2005 remained relatively flat when compared to the same period a year ago. Deltic’s lot development plans provide for a mix of lot offerings that represent most real estate market segments for planned communities.

Commercial real estate sales activity is by nature less predictable than residential activity. Commercial sales for the first quarter of 2005 consisted of one .99-acre site versus 2.03 acres during the first quarter of 2004. With the number of residents in Chenal Valley, and other west Little Rock areas, growing steadily and momentum created from previous sales of commercial acreage in the development, interest in the Company’s remaining commercial acreage remains strong. On April 6, 2004, RED Development LLC announced plans for “The Promenade at Chenal”, a 48-acre, open-air, lifestyle shopping center. (The sales contract regarding this site originally was scheduled to close before the end of 2004. However, as is the inherent unpredictable nature of commercial real estate sales, the initial

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contract has been extended and is now scheduled to close in 2005. Some extensions of similar contracts in the past have been followed by the termination of the commercial sale.) In addition, the Real Estate segment completed the sale of 6.73 acres of undeveloped real estate property within Chenal Valley in the first quarter of 2005 with no such sales occurring during the prior-year period. Unlike residential lots and commercial acres, undeveloped real estate property is not directly marketed by the Company, and sales of such property have been historically sporadic in nature and are usually initiated by inquiry from a potential purchaser. No commercial acreage is included in the Chenal Downs or the planned Ridges at Nowlin Creek developments. Red Oak Ridge is planned to include approximately 80 acres of commercial property. The Company will begin to develop and offer commercial sites as this development’s population density increases.

Operating results for Del-Tin Fiber are affected by the overall MDF market and the plant’s operating performance, and both experienced significant improvements during the recently ended year of 2004. However, the facility’s first quarter operations were hindered by a temporary production curtailment caused by a fire sustained at the plant on January 16, 2005. As disappointing as this event was in light of the much-improved operational and financial performance of the plant during 2004, the facility was able to resume production in just three and a half weeks after the incident. Deltic’s focus remains on the continuation of the facility’s recent operating and financial improvements throughout the remainder of 2005.

Results of Operations

In the following tables, Deltic’s net sales and results of operations are presented for the quarters ended March 31, 2005 and 2004. Explanations of significant variances and additional analyses for the Company’s consolidated and segmental operations follow the tables.

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Consolidated

The $1.2 million increase in net income was the result of improved financial results for the Company’s Mills, Woodlands and Real Estate segments, partially offset by increased negative financial results of Del-Tin Fiber, due to the plant’s first quarter production curtailment, and increased Corporate operating expense.

Operating income increased $2.4 million. The Woodlands segment increased $1.3 million due primarily to increased pine sawtimber harvest levels at a 13 percent higher average per ton pine sawtimber price when compared to the first quarter of 2004. Deltic’s Mills segment operations improved $1.4 million due mainly to a $33, or ten percent, per thousand board feet (“MBF”) increase in the average lumber sales price combined with a 31 percent increase in lumber sales volume. Real Estate operating income increased $.4 million, primarily due to the sales of undeveloped real estate and increased sales of residential lots. Corporate operating expense increased $.4 million due to higher general and administrative expenses.

Woodlands

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

Net sales increased $1.5 million. Sales of pine sawtimber increased $1.2 million due to a five percent higher sales volume at a $5 per ton higher average sales price. Sales of pine pulpwood increased $.3 million due to a six percent higher sales volume at a $4 per ton higher average sales price. Other revenues, which includes freight revenues, timberland management fees, and lease income, increased $.4 million. Despite the segment’s increase in net sales, the cost of fee timber harvested remained relatively flat due primarily to the mix of pine sawtimber harvest volume by Company. The improvement in operating results was due primarily to the increase in net sales.

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Mills

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

Net sales increased $9.7 million, or 47 percent, due primarily to higher lumber sales prices and volumes. Average sales price rose 10 percent, or $33 per MBF, as a result of the improved lumber market. Also contributing to the increase in net sales was the corresponding increases in residual sales and freight revenue, resulting from the segment’s volume increase. The improvement in operating results was due primarily to the increase in net sales and the Company’s efforts to improve production efficiencies, offset by an increase in raw material log cost.

Real Estate

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

Net sales increased $1.2 million. The number of residential lots sold increased by six lots with the average sales price per lot remaining relatively flat. Commercial real estate sales volume decreased compared to the first quarter of 2004, but the average sales price per acre significantly increased due to the current-period tract being a developed outparcel at The Village at Rahling Road. In addition, the segment completed the sale of approximately 7 acres of undeveloped real estate property during the quarter. The increase in the Real Estate segment’s operating income was due primarily to the same factors impacting net sales.

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Corporate

The increase in operating expense for Corporate functions of $.4 million was due primarily to higher professional and legal fees relating to the Company’s compliance with Section 404 of the Sarbanes-Oxley Act of 2002 and the continued planning of the Ridges at Nowlin Creek.

Eliminations

Intersegment sales of timber from Deltic’s Woodlands to the Mills segment increased $.8 million to $5.5 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 2005, Deltic’s equity in Del-Tin Fiber was a loss of $.7 million compared to a loss of .2 million for the same period of 2004. The first quarter results of Del-Tin Fiber includes the loss sustained by a fire at the plant on January 16, 2005 and the resulting production curtailment during the quarter.

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