1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_____________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number 1 - 3506
_____________
GEORGIA-PACIFIC CORPORATION
(Exact Name of Registrant as Specified in its Charter)
GEORGIA 93-0432081
(State of Incorporation) (IRS Employer Id. Number)
133 PEACHTREE STREET, N.E., ATLANTA, GEORGIA 30303
(Address of Principal Executive Offices)
(404) 652 - 4000
(Telephone Number of Registrant)
_____________
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 and 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 .
------- -------
As of the close of business on April 30, 1995, Georgia-Pacific Corporation had
90,630,103 shares of Common Stock outstanding.
2
PART I - FINANCIAL INFORMATION
-------------------------------------------
ITEM 1. FINANCIAL STATEMENTS
STATEMENTS OF INCOME (Unaudited)
Georgia-Pacific Corporation and Subsidiaries
Three months
ended March 31,
-------------------
(Millions, except per share amounts) 1995 1994
- -----------------------------------------------------------------------
Net sales $3,477 $2,942
- -----------------------------------------------------------------------
Costs and expenses
Cost of sales 2,444 2,310
Selling, general and
administrative 350 284
Depreciation and depletion 186 185
Interest 105 121
Other income - (57)
- -----------------------------------------------------------------------
Total costs and expenses 3,085 2,843
- -----------------------------------------------------------------------
Income before income taxes,
extraordinary item and
accounting change 392 99
Provision for income taxes 160 43
- -----------------------------------------------------------------------
Income before extraordinary item
and accounting change 232 56
Extraordinary item - loss from
early retirement of debt,
net of taxes - (11)
Cumulative effect of accounting
change, net of taxes - (5)
- -----------------------------------------------------------------------
Net income $ 232 $ 40
- ----------------------------------------------------===================
Per share:
Income before extraordinary item
and accounting change $ 2.59 $ .63
Extraordinary item - loss from early
retirement of debt, net of taxes - (.12)
Cumulative effect of accounting
change, net of taxes - (.06)
- -----------------------------------------------------------------------
Net income $ 2.59 $ .45
- ----------------------------------------------------===================
Average number of shares outstanding 89.6 88.7
- ----------------------------------------------------===================
The accompanying notes are an integral part of these financial statements.
3
STATEMENTS OF CASH FLOWS
Georgia-Pacific Corporation and Subsidiaries
(Unaudited) Three months
ended March 31,
------------------
(Millions) 1995 1994
- -----------------------------------------------------------------------
Cash provided by (used for) operations
Net income $ 232 $ 40
Adjustments to reconcile net income to cash
provided by operations:
Depreciation 174 175
Depletion 12 10
Amortization of goodwill 15 15
Stock compensation programs 24 (6)
Gain on sales of assets (3) (7)
Other income - (57)
Cumulative effect of accounting change - 5
(Increase) in receivables (182) (116)
(Increase) in inventories (91) (100)
Change in other working capital (23) (45)
Change in deferred income tax liabilities (12) (32)
Increase in taxes payable 136 28
Change in other assets and other
long-term liabilities 28 27
- -----------------------------------------------------------------------
Cash provided by (used for) operations 310 (63)
- -----------------------------------------------------------------------
Cash provided by (used for) investing activities
Capital expenditures
Property, plant and equipment (214) (138)
Timber and timberlands (33) (14)
- -----------------------------------------------------------------------
Total capital expenditures (247) (152)
Proceeds from sales of assets 6 208
Other 1 (2)
- -----------------------------------------------------------------------
Cash provided by (used for) investing activities (240) 54
- -----------------------------------------------------------------------
Cash provided by (used for) financing activities
Repayments of long-term debt (19) (53)
Additions to long-term debt 3 4
Increase (decrease) in bank overdrafts (25) 41
Increase (decrease) in commercial paper and
other short-term notes (32) 76
Cash dividends paid (36) (36)
- -----------------------------------------------------------------------
Cash provided by (used for) financing activities (109) 32
- -----------------------------------------------------------------------
(Decrease) increase in cash (39) 23
Balance at beginning of period 53 41
- -----------------------------------------------------------------------
Balance at end of period $ 14 $ 64
- -----------------------------------------------------==================
The accompanying notes are an integral part of these financial statements.
4
BALANCE SHEETS
Georgia-Pacific Corporation and Subsidiaries
March 31, December 31,
(Millions, except shares and per share amounts) 1995 1994
- -----------------------------------------------------------------------
(Unaudited)
ASSETS
Current assets
Cash $ 14 $ 53
Receivables, less allowances of $29 and $28 752 566
Inventories 1,300 1,209
Deferred income tax assets 136 136
Other current assets 35 34
- -----------------------------------------------------------------------
Total current assets 2,237 1,998
- -----------------------------------------------------------------------
Timber and timberlands, net 1,384 1,363
- -----------------------------------------------------------------------
Property, plant and equipment
Land, buildings, machinery and equipment,
at cost 11,696 11,500
Accumulated depreciation (6,171) (6,012)
- -----------------------------------------------------------------------
Property, plant and equipment, net 5,525 5,488
- -----------------------------------------------------------------------
Goodwill 1,758 1,773
- -----------------------------------------------------------------------
Other assets 234 242
- -----------------------------------------------------------------------
Total assets $11,138 $10,864
- ---------------------------------------------------====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank overdrafts, net $ 187 $ 212
Commercial paper and other short-term notes 836 868
Current portion of long-term debt 211 37
Taxes payable 173 39
Accounts payable 581 603
Accrued compensation 163 182
Accrued interest 94 89
Other current liabilities 309 295
- -----------------------------------------------------------------------
Total current liabilities 2,554 2,325
- -----------------------------------------------------------------------
Long-term debt, excluding current portion 3,715 3,904
- -----------------------------------------------------------------------
Other long-term liabilities 843 825
- -----------------------------------------------------------------------
Deferred income tax liabilities 1,181 1,190
- -----------------------------------------------------------------------
Commitments and contingencies
Shareholders' equity
Common stock, par value $.80; 150,000,000
shares authorized; 90,572,000 and 90,466,000
shares issued 72 72
Additional paid-in capital 1,249 1,220
Retained earnings 1,578 1,382
Long-term incentive plan deferred compensation (40) (39)
Other (14) (15)
- -----------------------------------------------------------------------
Total shareholders' equity 2,845 2,620
- -----------------------------------------------------------------------
Total liabilities and shareholders' equity $11,138 $10,864
- ---------------------------------------------------====================
The accompanying notes are an integral part of these financial statements.
5
NOTES TO FINANCIAL STATEMENTS (Unaudited)
GEORGIA-PACIFIC CORPORATION
MARCH 31, 1995
1. PRINCIPLES OF PRESENTATION. 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 Corporation's financial position, results
of operations and cash flows for the interim periods. All such
adjustments are of a normal, recurring nature. Certain 1994 amounts
have been reclassified to conform with the 1995 presentation.
2. INCOME (LOSS) PER SHARE. Income (loss) per share is computed based
on net income (loss) and the weighted average number of common
shares outstanding, net of restricted shares. The effects of
assuming issuance of common shares under long-term incentive, stock
option and stock purchase plans were either insignificant or
antidilutive.
3. ACCOUNTING CHANGE. Effective January 1, 1994, the Corporation
adopted Financial Accounting Standard Number 112 (FAS 112),
"Employers' Accounting for Postemployment Benefits." FAS 112
requires accrual-basis recognition of benefits provided by an
employer to former or inactive employees after employment but before
retirement. The adoption of FAS 112 resulted in a one-time, after-
tax charge of $5 million (6 cents per share) in the 1994 first
quarter.
4. OTHER INCOME. In the 1994 first quarter, the Corporation recorded
other pretax income of $57 million ($34 million after taxes),
primarily resulting from the sales of its roofing manufacturing and
envelope businesses.
5. EXTRAORDINARY ITEM. The Corporation called for redemption
approximately $204 million of its outstanding debt during the 1994
first quarter. As a result, an after-tax extraordinary loss of $11
million (12 cents per share) was recognized.
6. SUPPLEMENTAL DISCLOSURES - STATEMENTS OF CASH FLOWS. The cash
impact of interest and income taxes is reflected in the table below.
The effect of foreign currency exchange rate changes on cash was not
material in either period.
Three months
ended Mar. 31,
--------------
(Millions) 1995 1994
-----------------------------------------
Total interest costs $ 110 $ 122
Interest capitalized (5) (1)
---------------------------==============
Interest expense $ 105 $ 121
---------------------------==============
Interest paid $ 105 $ 130
---------------------------==============
Income taxes paid,
net of refunds $ 35 $ 40
---------------------------==============
6
7. INVENTORY VALUATION. Inventories include costs of materials, labor
and plant overhead. The Corporation uses the dollar value pool
method for computing LIFO inventories. The major components of
inventories were as follows:
March 31, December 31,
(Millions) 1995 1994
------------------------------------------------
Raw materials $ 404 $ 390
Finished goods 890 809
Supplies 279 275
LIFO reserve (273) (265)
------------------------------------------------
Total inventories $ 1,300 $ 1,209
--------------------------======================
8. PROVISION FOR INCOME TAXES. The Corporation reported pretax income
of $392 million and an income tax provision of $160 million for the
three months ended March 31, 1995. Excluding asset sales, the
Corporation reported pretax income before extraordinary item and
accounting change of $42 million and an income tax provision of $20
million for the three months ended March 31, 1994. The actual
effective tax rate for both periods was higher than the federal
statutory rate primarily because of nondeductible goodwill
amortization expense.
9. COMMITMENTS AND CONTINGENCIES. The Corporation is a party to
various legal proceedings incidental to its business and is subject
to a variety of environmental and pollution control laws and
regulations in all jurisdictions in which it operates. As is the
case with other companies in similar industries, the Corporation
faces exposure from actual or potential claims and legal proceedings
involving environmental matters. The Corporation is self-insured
for general liability claims up to $5 million per occurrence.
Liability insurance in effect during the last several years provides
coverage for environmental matters only to a limited extent.
The Corporation is involved in environmental remediation activities
at numerous sites where it has been notified that it is or may be a
potentially responsible party under the Comprehensive Environmental
Response, Compensation and Liability Act or similar state
"superfund" laws and at certain of its own properties. Of the known
sites in which it is involved, the Corporation estimates that
approximately 45 percent are being investigated, approximately 40
percent are being remediated and approximately 15 percent are being
monitored (an activity which occurs after either site investigation
or remediation has been completed). The ultimate costs to the
Corporation for the remediation of many of these sites cannot be
predicted with certainty due to the often unknown magnitude of the
pollution or the necessary cleanup, the varying costs of alternative
cleanup methods, the amount of time necessary to accomplish such
cleanups, the evolving nature of cleanup technologies and government
regulations and the inability to determine the Corporation's share
of multi-party cleanups or the extent to which contribution will be
available from other parties. The Corporation has established
reserves for environmental remediation costs for these sites in
amounts which it believes are probable and reasonably estimable.
Based on analysis of currently available information and previous
experience with respect to the cleanup of hazardous substances, the
Corporation believes that it is reasonably possible that costs
associated with these sites may exceed current reserves by amounts
that may prove insignificant or that could range, in the aggregate,
up to approximately $75 million. This estimate of the range of
reasonably possible additional costs is less certain than the
estimates upon which reserves are based, and in order to establish
the upper limit of such range, assumptions least favorable to the
Corporation among the range of reasonably possible outcomes were
used. In estimating both its current reserve for environmental
remediation and the possible range of additional costs, the
Corporation has not assumed it will bear the entire cost of
remediation of every site to the exclusion of other known
potentially responsible parties who may be jointly and severally
liable. The ability of other potentially responsible parties to
participate has been taken into account, based generally on the
parties' financial condition and probable contribution on a per site
basis. No amounts have been recorded for potential recoveries from
insurance carriers.
7
In the fourth quarter of 1992, the Corporation filed suit in the
State of Washington against numerous insurance carriers for coverage
under comprehensive general liability insurance policies issued by
those carriers. The Corporation sought a declaratory judgment to
the effect that past and future environmental remediation and other
related costs with respect to certain of the sites are covered by
such policies. The Corporation has now dismissed or settled its
claims against all but two of those carriers.
The Corporation previously received and responded to two
comprehensive information requests from the Environmental Protection
Agency (EPA) concerning air emissions at approximately 30 of the
Corporation's facilities which manufacture oriented strand board,
medium-density fiberboard, plywood and particleboard. A third
request relating to these and adjacent facilities was received in
December 1994, and the Corporation has responded to it. On
August 5, 1994, the EPA issued a Notice of Violation (NOV)
with respect to alleged violations of certain requirements of the
Clean Air Act at these facilities relating to, among other things,
alleged emissions of volatile organic compounds from sources
constructed or modified since 1978. The Corporation expects to be
able to negotiate settlements of the allegations contained in the
NOV with the EPA and the state environmental agencies involved on
terms which the Corporation considers reasonable. The Corporation
expects these settlements will entail the payments of fines and the
agreement by the Corporation to install air emission control
equipment at certain of its facilities.
Approximately 220 suits involving 9,160 plaintiffs are currently
pending in several state courts in Mississippi. The suits allege a
variety of torts including nuisance, trespass and infliction of
emotional distress primarily related to the alleged discharge of
dioxin into the Leaf River from a pulp mill owned by a subsidiary of
the Corporation. Three of these cases have been tried. A total of
$241,000 in compensatory damages and $4 million in punitive damages
were awarded to three plaintiffs in the first two cases (Simmons and
Ferguson) with respect to certain claims. The jury found in favor
of the Corporation with respect to a fourth plaintiff. The
Corporation appealed both judgments. On July 8, 1993, in the third
Mississippi dioxin case tried, the jury returned a verdict in favor
of the Corporation on all counts. The plaintiffs have filed a
notice of appeal. The Mississippi Supreme Court heard oral
arguments in Simmons and Ferguson on March 21, 1994. At May 3,
1995, no decision on these appeals had been issued.
In early 1994 two dioxin cases pending in federal court in
Mississippi were voluntarily dismissed with prejudice by the
plaintiffs. On September 1, 1994, the circuit court judge to whom
almost all the remaining Mississippi dioxin cases have been assigned
lifted a stay which he had entered pending the Supreme Court's
decision in Simmons and Ferguson. None of such cases pending
against the Corporation have yet been set for trial.
Although there can be no assurances as to the ultimate outcome of
the approximately 220 suits pending against the Corporation for
alleged discharges of dioxin, based on the opinions of counsel the
Corporation believes that substantial grounds exist for reversal of
the judgments in Simmons and Ferguson, and that it has meritorious
defenses to the remaining lawsuits. Suit has been filed against the
mill's insurance carriers seeking a declaratory judgment to the
effect that these dioxin claims are covered by various insurance
policies issued to the Corporation.
8
The Corporation and many other companies are defendants in suits
brought in various courts around the nation by plaintiffs who allege
that they have suffered personal injury as a result of exposure to
asbestos-containing products. The Corporation currently is
defending claims of approximately 24,300 such plaintiffs and
anticipates that additional suits or claims will be filed against it
over the next several years. These suits allege a variety of lung
and other diseases based on alleged exposure to products previously
manufactured by the Corporation. In many cases the plaintiffs are
unable to demonstrate that they have suffered any compensable loss
as a result of such exposure.
The Corporation generally resolves asbestos cases by voluntary
dismissal or settlement for amounts it considers reasonable given
the facts and circumstances of each case. The amounts it has paid
in settlement have been substantially covered by product liability
insurance, and the Corporation believes that it has insurance
available in amounts adequate to cover substantially all of the
reasonably foreseeable damages and settlement amounts arising out of
claims and suits currently pending. The Corporation also
anticipates that equivalent amounts of insurance will be available
with respect to the disposition of suits and claims that may be
filed against the Corporation in the future, but there can be no
assurance in this regard. The Corporation has established reserves
for liabilities and legal defense costs for these suits and claims
in amounts it believes are probable and reasonably estimable. It
also has recorded a receivable for expected insurance recoveries
with respect to pending suits and claims.
Although the ultimate outcome of these environmental matters and
legal proceedings cannot be determined with certainty, based on
presently available information management believes that adequate
reserves have been established for probable losses with respect
thereto and that such ultimate outcome, after taking such reserves
into account, will not have a material adverse effect on the
consolidated financial position of the Corporation.
9
SALES AND OPERATING PROFITS BY INDUSTRY SEGMENT (unaudited)
Georgia-Pacific Corporation and Subsidiaries
(Dollar amounts, except Second Quarter Third Quarter Fourth Quarter
per share, in millions) First -------------------- ----------------- --------------------
Quarter Quarter Year-to-date Quarter Year-to-date Quarter Year-to-date
- ------------------------------------------------------------------------------------------------------------
1995
NET SALES
Building products $1,800 52%
Pulp and paper 1,665 48
Other operations 12 -
- ------------------------------------------------------------------------------------------------------------
Total net sales $3,477 100%
============================================================================================================
OPERATING PROFITS
Building products $ 197 35%
Pulp and paper 368 65
Other operations 5 -
- ------------------------------------------------------------------------------------------------------------
Total operating
profits 570 100%
===
General corporate
expense (62)
Interest expense (105)
Cost of accounts
receivable sale
program (11)
Provision for
income taxes (160)
- ------------------------------------------------------------------------------------------------------------
Net income $ 232
============================================================================================================
Per common share:
Net income $ 2.59
============================================================================================================
10
SALES AND OPERATING PROFITS BY INDUSTRY SEGMENT (unaudited)
Georgia-Pacific Corporation and Subsidiaries
(Dollar amounts, except Second Quarter Third Quarter Fourth Quarter
per share, in millions) First -------------------- ----------------- --------------------
Quarter Quarter Year-to-date Quarter Year-to-date Quarter Year-to-date
- ------------------------------------------------------------------------------------------------------------
1994
NET SALES
Building products $1,767 60% $1,982 62% $3,749 61% $1,941 60% $5,690 61% $1,871 56% $ 7,561 60%
Pulp and paper 1,167 40 1,196 38 2,363 39 1,315 40 3,678 39 1,460 44 5,138 40
Other operations 8 - 9 - 17 - 11 - 28 - 11 - 39 -
- ------------------------------------------------------------------------------------------------------------
Total net sales $2,942 100% $3,187 100% $6,129 100% $3,267 100% $9,396 100% $3,342 100% $12,738 100%
============================================================================================================
OPERATING PROFITS
Building products $ 247 97% $ 218 118% $ 465 106% $ 262 75% $ 727 93% $ 262 59% $ 989 81%
Pulp and paper (53)(20) (40)(21) (93)(21) 83 24 (10) (1) 181 41 171 14
Other operations 3 1 6 3 9 2 3 1 12 1 (2) - 10 -
Other income 57 22 - - 57 13 - - 57 7 - - 57 5
- ------------------------------------------------------------------------------------------------------------
Total operating
profits 254 100% 184 100% 438 100% 348 100% 786 100% 441 100% 1,227 100%
=== === === === === === ===
General corporate
expense (28) (31) (59) (78) (137) (32) (169)
Interest expense (121) (113) (234) (110) (344) (109) (453)
Cost of accounts
receivable sale
program (6) (8) (14) (9) (23) (10) (33)
Provision for
income taxes (43) (18) (61) (64) (125) (121) (246)
- ------------------------------------------------------------------------------------------------------------
Income before
extraordinary item
and accounting
change 56 14 70 87 157 169 326
Extraordinary item,
net of taxes (11) - (11) - (11) - (11)
Cumulative effect of
accounting change,
net of taxes (5) - (5) - (5) - (5)
- ------------------------------------------------------------------------------------------------------------
Net income $ 40 $ 14 $ 54 $ 87 $ 141 $ 169 $ 310
============================================================================================================
Per common share:
Income before
extraordinary item
and accounting
change $ .63 $ .16 $ .79 $ .98 $ 1.77 $ 1.89 $ 3.66
Extraordinary item,
net of taxes (.12) - (.12) - (.12) - (.12)
Accounting change,
net of taxes (.06) - (.06) - (.06) - (.06)
- ------------------------------------------------------------------------------------------------------------
Net income $ .45 $ .16 $ .61 $ .98 $ 1.59 $ 1.89 $ 3.48
============================================================================================================
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 COMPARED WITH 1994
The Corporation reported net sales of $3.5 billion for the three months ended
March 31, 1995, up from $2.9 billion in 1994. Net income of $232 million ($2.59
per share) was reported for the first three months of 1995 compared with net
income of $40 million (45 cents per share) for the first three months of 1994.
The 1994 results included a net, after-tax gain of $34 million (38 cents per
share) primarily related to the sale of the Corporation's roofing manufacturing
and envelope businesses. In addition, net income included an $11 million (12
cents per share) after-tax loss on early retirement of debt and a $5 million (6
cents per share) one-time, after-tax charge for the adoption of Financial
Accounting Standard Number 112 (FAS 112), "Employers' Accounting for
Postemployment Benefits."
The remaining discussion refers to the "Sales and Operating Profits by
Industry Segment" table (included in PART I - ITEM 1. hereto).
The building products segment reported net sales of $1.8 billion for the
1995 first quarter, a slight increase from a year ago. Operating profits for
this segment decreased, however, to $197 million for the three months ended
March 31, 1995 compared with $247 million in 1994, primarily as a result of an
increase in wood costs for plywood and softwood lumber by approximately 22
percent and 11 percent, respectively.
Prices for the Corporation's softwood lumber products averaged
approximately 12 percent below 1994 first quarter levels which, combined with
higher wood costs, resulted in a significant decline in profit margins for this
business. Profit margins for the distribution business were also impacted by a
decrease in softwood lumber prices. Average prices for the Corporation's
oriented strand board products were approximately 6 percent below 1994 first
quarter averages and average gypsum-wallboard prices were approximately 25
percent higher than 1994 first quarter averages. Average prices for the
Corporation's plywood products were approximately 11 percent higher than year
ago levels, although margins were impacted by the rise in wood costs.
The pulp and paper segment reported $1.7 billion in net sales in the 1995
first quarter up from $1.2 billion in the same 1994 period. This segment also
reported operating profits of $368 million for the three months ended March 31,
1995 compared with an operating loss of $53 million for the same period a year
ago, primarily as a result of higher prices for most of the Corporation's pulp
and paper products. First quarter average prices for market pulp were nearly
double the 1994 first quarter average prices, and average containerboard and
communication paper prices increased approximately 50 percent compared with
first quarter 1994 levels. Improved demand and low industry-wide inventory
levels for most pulp and paper products had a positive impact on prices.
During the 1994 first quarter, the Corporation recorded other pretax income
of $57 million ($34 million after taxes), primarily resulting from the sales of
its roofing manufacturing and envelope businesses.
General corporate expense increased to $62 million for the three months
ended March 31, 1995 compared with $28 million in 1994. The majority of the
increase is attributable to compensation programs tied to the Corporation's
common stock price. For the quarters ended March 31, 1995 and 1994, the cost of
these programs was $23 million and $(3) million, respectively.
For the first quarter, the Corporation's interest expense and cost of
accounts receivable sale program were a combined $116 million, a decrease of 8.7
percent compared with $127 million a year ago. Lower expense in 1995 was
primarily the result of a lower level of debt and the expiration of $700 million
in interest rate exchange agreements since March 31, 1994 which had effectively
fixed the rates on a portion of the Corporation's variable rate debt.
The Corporation reported pretax income of $392 million and an income tax
provision of $160 million for the three months ended March 31, 1995. Excluding
asset sales, the Corporation reported pretax income before extraordinary item
and accounting change of $42 million and an income tax provision of $20 million
for the three months ended March 31, 1994. The actual effective tax rate for
both periods was higher than the federal statutory tax rate primarily because of
nondeductible goodwill amortization expense.
12
Liquidity and Capital Resources
- -------------------------------
Operating Activities
- --------------------
The Corporation generated cash from operations of $310 million in the 1995 first
quarter and used cash for operations in the 1994 first quarter of $63 million.
Excluding $37 million paid to the Internal Revenue Service to settle the 1989
and 1990 tax years for the Corporation, cash used for operations was $26 million
in 1994. The increase in cash from operations is primarily the result of higher
prices in the Corporation's pulp and paper segment in the 1995 first quarter
compared with the 1994 first quarter.
Investing Activities
- --------------------
During the 1995 first quarter, the Corporation spent $247 million on capital
expenditures, including $97 million in the pulp and paper segment, $106 million
in the building products segment, $33 million for timber and timberlands and $11
million in other expenditures. The Corporation's 1995 projected capital
spending is slightly in excess of $1 billion.
As previously disclosed in the Corporation's Annual Report on Form 10-K for
the year ended December 31, 1994, the sales of its roofing manufacturing and
envelope businesses were completed during the first quarter of 1994. The
Corporation received after-tax cash proceeds of approximately $156 million from
these transactions.
Financing Activities
- --------------------
As of March 31, 1995, total debt for the Corporation, including the $700 million
accounts receivable sale program, was $5.6 billion, compared with $5.7 billion
at December 31, 1994. Bank overdrafts decreased by $25 million, commercial
paper and short-term notes decreased by $32 million and long-term debt decreased
by $15 million.
The Corporation intends to redeem approximately $200 million of its
outstanding 10-1/8% Debentures during the 1995 second quarter. The redemption
is not expected to result in an after-tax extraordinary loss.
The Corporation called for redemption approximately $204 million in
principal of its 10-1/4% Debentures Due September 15, 2018 during the 1994 first
quarter, which it redeemed in April 1994. During the first quarter, the
Corporation reported an after-tax extraordinary loss of $11 million (12 cents
per share) related to this early retirement.
The Corporation has a $1.5 billion unsecured revolving credit facility
which is used for direct borrowings and as support for commercial paper and
other short-term borrowings, including bid borrowings made under this agreement.
As of March 31, 1995, $664 million of committed credit was available under or
supported by the facility.
The Corporation's weighted average interest rate on total debt as of March
31, 1995 was 8.2%, including floating rate debt and the accounts receivable sale
program which is currently scheduled to expire in May 1995. The Corporation has
requested an extension of the program to May 1996 and is awaiting final
documentation from the banks.
At March 31, 1995, the Corporation had outstanding interest rate exchange
agreements which effectively converted $746 million of floating rate obligations
with a weighted average interest rate of approximately 6.3% to fixed rate
obligations with an average effective interest rate of approximately 9.2%. On
that date, the Corporation's total floating rate debt, including the accounts
receivable sale program, exceeded related interest rate exchange agreements by
approximately $1.2 billion.
As previously reported in the Corporation's Annual Report on Form 10-K for
the year ended December 31, 1994, approximately $450 million of the interest
rate exchange agreements outstanding at December 31, 1994 are due to expire in
1995. As of March 31, 1995, $200 million of these agreements had expired and
another $200 million expired in April.
As of March 31, 1995, the Corporation had registered for sale up to $500
million of debt securities under a shelf registration statement filed with the
Securities and Exchange Commission. On April 25, 1995, the Corporation issued
$250 million of 8-5/8% Debentures Due April 30, 2025.
On May 4, 1995, Moody's Investors Service announced an upgrade of the
Corportion's senior unsecured long-term debt rating to Baa-2 from Baa-3 and
an upgrade on the Corporation's commercial paper rating to Prime-2 from Prime-3.
On May 2, 1995, the Corporation's Board of Directors declared a dividend
of 50 cents per share, payable June 12, 1995, to shareholders of record on
May 19, 1995. This represents a 25 percent increase over the previous dividend
amount of 40 cents per share.
In 1995, the Corporation expects its cash flow from operations, together
with proceeds from any asset sales and available financing sources, to be
sufficient to fund planned capital investments, pay dividends and make scheduled
debt payments.
13
Other
- -----
With respect to the Washington environmental remediation insurance coverage suit
described in Note 9 of the Notes to Financial Statements, the Corporation has
now dismissed, or settled its claims against, all but two carriers against whom
suit was filed. Although subject to negotiation of definitive settlement
agreements, the Corporation expects to record pretax income of approximately $30
million in the 1995 second quarter relating substantially to payments expected
in the 1995 third quarter.
For a discussion of other commitments and contingencies, refer to Note 9
of the Notes to Financial Statements.
14
PART II - OTHER INFORMATION
---------------------------
GEORGIA-PACIFIC CORPORATION
March 31, 1995
ITEM 1. LEGAL PROCEEDINGS
The information contained in Note 9 "Commitments and Contingencies" of the Notes
to Financial Statements filed as part of this Quarterly Report on Form 10-Q is
incorporated herein by reference.
As last reported in the Corporation's Annual Report on Form 10-K for the year
ended December 31, 1994, about July 20, 1992, the Corporation received from the
Environmental Protection Agency (EPA) a Notice of Violation (NOV) alleging past
violations of a construction permit regulating air emissions at the
Corporation's Gaylord, Michigan facility. On March 31, 1993, the Corporation
received a second NOV alleging past violations at the same facility. In
addition, the State of Michigan has issued three letters alleging violations of
the facility's opacity limits. The Corporation recently reached an agreement
in principle with the U. S. Department of Justice, the EPA, and the State of
Michigan to settle these claims and all others relating to the facility, which
will entail payment of a $700,000 fine and the installation by the Corporation
of air emission controls at the Gaylord facility.
As last reported in the Corporation's Annual Report on Form 10-K for the quarter
ended December 31, 1994, the EPA filed a Complaint and Compliance Order
("Order") against the Corporation on September 31, 1994, for alleged violations
of the Resource Conservation and Recovery Act at its Brunswick, Georgia pulp and
paper mill. The Order alleges disposal of black liquor without a permit,
treatment of wastewater from accumulated lime mud without a permit, and failure
to respond to a spill of sulfuric acid in a manner adequate to minimize the flow
of hazardous waste. The EPA has proposed a penalty of $160,256. The
Corporation intends to negotiate a resolution of this matter with the EPA
which will include a plan to close the black liquor pond at the Brunswick mill.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 10.12 Outside Directors Stock Plan, adopted March
17, 1995.
Exhibit 10.13(ii) First addendum to Agreement, effective as of
February 1, 1995, among Georgia-Pacific
Corporation, Hercules Incorporated, and Lee
M. Thomas.
Exhibit 11 Statements of Computation of Per Share
Earnings.
Exhibit 27 Financial Data Schedule.
(b) Reports on Form 8-K
The Registrant filed a Current Report on Form 8-K dated February
21, 1995, in which it reported under Item 5 - "Other Events."
15
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.
Date: May 10, 1995 GEORGIA-PACIFIC CORPORATION
(Registrant)
by /s/John F. McGovern
----------------------
John F. McGovern,
Senior Vice President -
Finance and Chief
Financial Officer
by /s/James E. Terrell
----------------------
James E. Terrell,
Vice President and
Controller (Chief Accounting
Officer)
16
GEORGIA-PACIFIC CORPORATION
INDEX TO EXHIBITS
FILED WITH THE QUARTERLY REPORT
ON FORM 10-Q FOR THE
QUARTER ENDED MARCH 31, 1995
NUMBER DESCRIPTION
10.12 Outside Directors Stock Plan, adopted March 17, 1995. (1)
10.13(ii) First addendum to Agreement, effective as of February 1, 1995, among
Georgia-Pacific Corporation, Hercules Incorporated, and Lee M. Thomas.
(1)
11 Statements of Computation of Per Share Earnings. (1)
27 Financial Data Schedule. (1)
___________________
(1) Filed by EDGAR