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EXHIBIT 13
HIGHLIGHTS
(Dollar amounts, except per share, and Increase
shares are in millions) 1993 1992 (Decrease)
- -----------------------------------------------------------------------------------------------------------------
Net sales $12,330 $11,847 4%
Loss before extraordinary item and
cumulative effect of accounting change (18) (60) (70)
Loss per share before extraordinary item
and cumulative effect of accounting change (.21) (.69) (70)
Cash provided by operations* 489 868 (44)
Cash dividends paid 142 140 1
Total assets at year end 10,545 10,912 (3)
Total debt at year end** 5,737 5,888 (3)
Total debt to capital at year end 57.0% 57.0%
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Cash dividends paid per share of
common stock $ 1.60 $ 1.60 ----%
Shares of common stock outstanding
at year end 90.3 88.1 2
Shareholders of record at year end 46,000 44,000 5
Employees at year end 50,000 52,000 (4)
- ----------------------------------------------------------------------------------------------------------------
*Excludes the accounts receivable sale program.
**Includes the proceeds from the accounts receivable sale program under the
assumption that at the end of the program the proceeds will be replaced by
debt.
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BUILDING PRODUCTS
Georgia-Pacific is the leading manufacturer and distributor of building
products in the United States. The company produces plywood, oriented strand
board and other wood panels, lumber, gypsum wallboard, chemicals and other
products at 145 facilities in the United States and 2 in Mexico. G-P also is
the country's largest building products wholesaler, with distribution centers
serving markets throughout the U.S. Exports for this segment in 1993 were $158
million, primarily structural wood panels and lumber.
The company's building products business is primarily affected by the level
of housing starts; the level of repairs, remodeling and additions; commercial
building activity; the availability and cost of financing; and changes in the
industry's capacity.
Prices for wood products and G-P's building products profits again reached
record levels in 1993. Lower interest rates helped support an increase in
housing construction; repair and remodeling expenditures also increased.
Supplies of lumber and structural wood panels remained tight due to a reduced
harvest of timber from government-owned lands.
DISTRIBUTION. Georgia-Pacific is the leading wholesaler of building products
in the United States, with 137 distribution centers located in 46 states. The
centers serve traditional lumberyards, consumer-oriented home centers, makers
of mobile homes and other manufacturers. Twelve of these are millwork and
specialty centers that primarily sell wood mouldings, doors and windows.
To supplement Georgia-Pacific's production and to offer customers a broader
line of building products, we also purchase products from other manufacturers.
In 1993, these purchases were approximately $2.5 billion, about one-half of all
materials sold at our centers. Purchased products include wood panels, lumber
and roofing, as well as product lines that we do not manufacture, such as nails
and other metal products, doors, insulation, vinyl siding and adhesives.
Our largest export markets are in the Caribbean and Europe. We have
building products sales offices in the United Kingdom, the Netherlands and
Mexico.
WOOD PANELS. Georgia-Pacific is the largest producer of structural wood panels
in the United States, accounting for about 20 percent of domestic structural
panel capacity. Our 17 softwood plywood plants and 4 oriented strand board
plants, located primarily in the Southern U.S., can produce 6 billion square
feet of panels per year. About 60 percent of our plywood production is devoted
to specialty applications such as decorative siding, sanded plywood and
concrete form.
Oriented strand board (OSB) is a nonveneered structural panel made from
strands of wood that are arranged in layers and bonded with resin. OSB serves
many of the same uses as plywood, including roof decking, sidewall sheathing
and floor underlayment. In September 1993, Georgia-Pacific began construction
of its fifth OSB facility at Mt. Hope, West Virginia. The plant will have an
annual capacity of 325 million square feet and is expected to be completed in
early 1995.
Georgia-Pacific is also a major producer of manufactured board products for
many industrial and construction applications. Hardboard, particleboard,
panelboard, softboard and medium-density fiberboard are made from logs,
sawdust, shavings and chips at 19 mills. Applications include furniture,
cabinets, housing, fixtures and other industrial products.
LUMBER. Georgia-Pacific is the second-largest lumber producer in the U.S. The
company produces about 2.6 billion board feet of lumber annually,
approximately 5 percent of domestic lumber production. Most of our 40 lumber
mills are located in the South. Products include Southern pine, a variety of
Appalachian and Southern hardwoods, cypress, redwood, cedar, spruce, Western
pine, Douglas fir and pressure-treated Southern pine.
Demand for the company's engineered lumber products has rapidly increased
in recent years, primarily as a result of the reduced availability and higher
prices of conventional wide-dimension lumber. Laminated veneer lumber (LVL) and
wood I-joists, made from veneer, oriented strand board and sawn lumber, can be
designed to meet the precise performance requirements of roof and floor
systems.
GYPSUM PRODUCTS. Georgia-Pacific is the third-largest producer of gypsum
products in the United States. Our 10 gypsum board plants have an annual
capacity of 3.1 billion square feet. G-P's gypsum products include wallboard,
fire-door cores, plaster and joint compound. We also operate 3 mills that can
produce a total of 265 thousand tons of 100-percent recycled paperboard to
sheathe gypsum wallboard. The company's gypsum products are primarily used in
residential and commercial construction. The company owns gypsum reserves of
approximately 123 million recoverable tons, an estimated 63-year supply at
current production rates.
CHEMICALS. Georgia-Pacific is the forest products industry's leading supplier
of resins, adhesives and specialty chemicals. The company ships more than 2
billion pounds of thermosetting resins and paper chemicals annually from its
16 resin plants to G-P mills and outside customers. G-P also produces
chemicals for use in other industries.
FOREST RESOURCES. Georgia-Pacific owns or controls more than 6 million acres
of timber and timberlands in the U.S. and Canada. Located near our mills,
approximately 70 percent of our timber is in the South, 20 percent in the East
and 10 percent in the West. The company's forests include Southern pines and
hardwoods; Douglas fir, hemlock and other species in the Pacific Northwest;
redwood, Douglas fir, true firs and Western pines in Northern California; and
numerous species of hardwoods and softwoods in Maine, New Brunswick and
Wisconsin.
Company-owned timberlands and other timber controlled through long-term
contracts supply a significant part of G-P's wood fiber requirements. The
remaining part consists of logs and chips purchased in the open-market, plant
by-products such as chips and shavings, and other recyclable materials.
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PULP AND PAPER
Georgia-Pacific produces containerboard and packaging, communication papers,
market pulp and tissue at 84 facilities in the United States and 1 in Canada.
The company's combined 8.6 million tons of pulp, paper and paperboard capacity
represent approximately 8 percent of the total annual capacity in the United
States. Exports for the pulp and paper segment in 1993 were $667 million,
primarily market pulp and containerboard.
Markets for Georgia-Pacific's pulp and paper products are affected
primarily by changes in industry capacity as well as by the level of economic
growth in the United States, currency exchange rates and export market
conditions.
Prices for many of the company's pulp and paper products declined and
remained at low levels during most of 1993. Market conditions in 1994 will
depend largely on the pace of economic growth in the U.S., Europe and the Far
East.
CONTAINERBOARD AND PACKAGING. Georgia-Pacific produces containerboard,
corrugated containers and packaging, bleached paperboard and kraft paper. The
company is the second-largest producer of containerboard in the United States.
Our 4 containerboard mills have a combined annual capacity of 3 million tons of
linerboard and corrugating medium, about 10 percent of U.S. capacity.
Approximately 50 percent of G-P's containerboard production is transferred to
the company's 37 corrugated packaging plants and the balance is sold to
independent converters in the U.S., Central America, Western Europe and the Far
East. The company exported 472 thousand tons of containerboard in 1993.
In addition to conventional corrugated containers, G-P's packaging plants
manufacture double- and triple-wall boxes, bulk bins, water-resistant packaging
and high-finish and pre-printed packaging for point-of-sale displays. Our
Technology and Development Center uses the latest technology to design and test
the performance of packaging for our customers.
The company can produce 400 thousand tons of bleached paperboard each year
for use in frozen food containers, food service items and other products. We
annually produce approximately 350 thousand tons of kraft paper, primarily for
use in grocery and multiwall bags.
Prices for the company's containerboard and packaging products were lower
in 1993 than in 1992. Prices for the largest grade, linerboard, began to
improve late in the year as a surge in U.S. industrial production boosted
demand for corrugated boxes, and market-related mill shutdowns by several
producers reduced supply.
COMMUNICATION PAPERS. The company is the largest producer of uncoated
free-sheet paper in the United States. Georgia-Pacific's 8 uncoated
free-sheet paper mills have a combined annual capacity of 2.2 million tons,
approximately 16 percent of U.S. industry capacity. Such papers are used
in office reprographics and commercial printing, business forms, stationery,
tablets, envelopes and checks.
During 1994 the company will convert its largest communication papers mills
at Ashdown, Arkansas, and Port Hudson, Louisiana, to the alkaline sizing
(precipitated calcium carbonate) process. The new process will yield a
stronger, higher-quality sheet, while reducing costs for chemicals and wood
fiber.
Prices for communication papers in 1993, on average, were lower than in
1992. An increase in industry capacity of approximately 575 thousand tons in
the second half of 1993 and the first half of 1994 will keep communication
papers prices under pressure until the new supply can be absorbed by an
increase in demand.
MARKET PULP. Georgia-Pacific produces market pulp at 6 mills that have a
combined annual capacity of 1.9 million tons, approximately 18 percent of
U.S. capacity. The company is the world's second-largest market pulp producer.
We produce Southern softwood, Southern hardwood and Northern hardwood pulps
for use in the manufacture of many paper grades. We also are a major supplier
of fluff pulp and other specialty pulps.
Increasing use of recycled paper in the U.S. has limited growth in domestic
demand for market pulp. Over time, however, increased per capita paper
consumption in export markets is expected to boost market pulp demand.
Georgia-Pacific exports approximately 65 percent of its market pulp, and
operates pulp sales offices in France, Germany, Hong Kong, Italy, Japan,
Switzerland, Taiwan and the United Kingdom.
A conversion project at G-P's Brunswick, Georgia, pulp mill in the first
half of 1993 expanded the company's production of fluff pulp to approximately
550 thousand tons per year. Fluff pulp is used primarily in disposable diapers
and other sanitary items. These products are experiencing growing demand,
particularly in developing countries.
Market pulp prices in 1993 were lower than in 1992. Weak economies in major
export markets--especially Japan and Western Europe--reduced demand, and
changes in currency exchange rates increased the relative cost of U.S.-produced
market pulp. Although a number of noncompetitive market pulp mills closed in
1993 and more are expected to close in 1994, world capacity is expected to
increase approximately 2 percent in both 1994 and 1995. A significant rebound
in pulp prices will likely require economic recoveries in the major importing
countries.
TISSUE. Georgia-Pacific is the fifth-largest producer of tissue in the United
States, with approximately 9 percent of the industry's capacity. We annually
manufacture over 500 thousand tons of tissue at 5 mills. Consumer and
commercial tissue products made at our 6 converting facilities include paper
towels, napkins and bath tissue.
We sell most of our consumer products under our brand names Angel Soft,(r)
Sparkle,(r) Coronet,(r) MD(r) and Delta,(r) through major retailers of food and
general merchandise. G-P also produces commercial tissue products for
industrial, food-service, office, hotel, motel and hospital markets.
Tissue demand tends to be relatively stable through economic cycles.
Competition in the industry is intense. Improved tissue margins in 1993
resulted from increased volume, higher prices and lower costs.
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ENVIRONMENT
Protecting the environment is one of Georgia-Pacific's highest priorities. Our
Environmental Policy Committee, chaired by the senior vice president--
environmental, government affairs and communications, has direct access to the
board of directors and regularly provides them with environmental reports.
Through an internal audit program, we monitor compliance with federal, state
and local regulations as well as adherence to company policies.
Traditionally, most environmental regulators in the United States have
targeted specific elements of production and fashioned mandates to address
them, rather than consider a comprehensive goal. The result is a complex,
unwieldy patchwork of federal, state and local regulations, with costs that
often far outweigh the environmental benefits. Rather than waiting for
environmental agencies to dictate unilateral regulations, forest products
companies are using technology and creativity to develop new, often voluntary
environmental solutions.
Georgia-Pacific and a number of other environmental advocates believe that
regulators should take into account the environmental impacts of products over
their entire life cycle. Life-cycle analysis should include an evaluation of a
product's raw materials, manufacturing processes and recycling or disposal, in
a comprehensive system. Using the framework of life-cycle analysis, here are
some examples that illustrate the positive environmental attributes of forest
products.
RAW MATERIALS. One-third of the United States is forested. Despite a
70 percent increase in demand for forest products in the last 30 years, there
are more trees in America today than in 1960. Most of a harvested tree,
including wood fibers, bark and chemicals, is transformed into wood products,
paper and other items that are essential to everyday life. Each year 35 percent
more trees are grown in the U.S. than are harvested or lost to fire, insects or
disease. In 1992, the forestry community planted 1.6 billion seedlings in the
United States. Georgia-Pacific, which manages more than 6 million acres of
timberlands in North America, plants more than 50 million seedlings a year.
Trees provide a number of environmental benefits. Growing trees absorb
carbon into the wood fiber, release oxygen and hold soil and water. Trees also
provide a substantial source of the energy required in forest products
manufacturing. Products made from trees are reusable, recyclable, non-toxic and
biodegradable.
The forest products industry recognizes that resource management must
include protection of plant and animal life. G-P has been successful in efforts
to protect the spotted owl in the Northwest and the red-cockaded woodpecker in
the South, both of which are threatened or endangered species. In 1993, the
company reached a landmark public-private agreement with the U.S. Fish and
Wildlife Service to conserve the red-cockaded woodpecker's habitat. Under the
agreement, more than 4 million acres of company land in the South that are in
the bird's primary habitat area can continue to be managed for timber
production.
MANUFACTURING. Forest products companies have invested billions of dollars to
meet regulations governing air and water quality. We also have installed
systems that have gone beyond compliance. For example, the U.S. pulp and paper
industry has spent more than $1 billion to reduce dioxin in mill effluent.
Georgia-Pacific alone has voluntarily spent approximately $100 million on new
equipment and process changes that reduced dioxin formation during pulp
bleaching to unmeasurable levels. Complementing water treatment systems that
were already in place at our mills, our substitution of chlorine dioxide for
elemental chlorine (chlorine gas) in the kraft pulp bleaching process also
reduced discharges of chlorinated compounds.
Another significant advantage of forest products is renewable energy
sources. While many manufacturing residuals (such as chips and sawdust) are
used as a source of wood fiber for other paper and wood products, some are used
on site as fuel to generate electricity and process steam. At Georgia-Pacific,
these renewable resources supply 67 percent of our total energy needs.
Advances in papermaking technology also have reduced significantly the use
of water during production.
RECYCLING AND DISPOSAL. Disposal of paper and packaging represents a
challenge for the environment. Paper comprises 40 percent of the waste stream
in the United States and the number of landfills is dwindling. In 1993,
however, for the first time in history, the amount of paper recovered for
recycling in the U.S. exceeded the amount of paper going to landfills. That
year, approximately 40 percent of used paper and paperboard in the United
States was recovered for recycling or export.
Georgia-Pacific is among the top ten recyclers in the U.S., recycling about
a million tons of wastepaper each year. In addition to using old corrugated
boxes as a major source of wood fiber supply at our containerboard mills, we
also make 100-percent recycled paperboard to sheathe gypsum wallboard, and we
produce several lines of communication papers using post-consumer waste.
Although the industry is increasing the recycled content of paper and
paperboard, there are economic and practical limits to the types and amounts of
paper that can be recovered and reused in paper products. Energy generation
offers a potentially large market for low-quality mixed paper that cannot be
economically converted into new paper products. Georgia-Pacific is promoting a
program to convert non-marketable, low grade, discarded paper into economical,
clean-burning supplemental fuel pellets for industrial boilers.
CONCLUSION. Our ability to minimize the environmental impact of our operations
is essential for success in today's and tomorrow's marketplace. A
collaborative approach by industry, regulators and environmental groups, using
life-cycle analysis, may be the key to establishing a rational approach to
balancing environmental protection with economic growth.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
1993 COMPARED WITH 1992
Georgia-Pacific's 1993 consolidated net sales were $12.3 billion, slightly
above 1992 net sales of $11.8 billion. The net loss was $34 million (39 cents
per share), an improvement over last year's net loss of $124 million ($1.43 per
share). The 1993 results include a $16 million (18 cents per share) after-tax
extraordinary loss from the early retirement of debt and a $48 million (55
cents per share) after-tax charge due to the increase in the federal income tax
rates resulting from the Revenue Reconciliation Act of 1993. The 1992 results
include a $55 million (64 cents per share) net after-tax charge for an
accounting change and a $9 million (10 cents per share) after-tax extraordinary
loss from the early retirement of debt.
SELECTED INDUSTRY SEGMENT DATA
Year ended December 31
(Millions) 1993 1992 1991
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Net sales
Building products $ 7,067 $ 6,112 $ 5,405
Pulp and paper 5,231 5,711 6,089
Other operations 32 24 30
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Total net sales $12,330 $11,847 $11,524
=============================================================================================
Operating profits
Building products $ 973 $ 691 $ 344
Pulp and paper (187) (8) 362
Other operations 10 9 17
Other income (loss) (26) -- 344
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Total operating profits 770 692 1,067
General corporate (205) (166) (165)
Interest expense (513) (565) (584)
Cost of accounts receivable
sale program (29) (35) (59)
(Provision) benefit for
income taxes (41) 14 (293)
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(Loss) before
extraordinary item and
accounting changes (18) (60) (34)
Extraordinary item,
net of taxes (16) (9) (45)
Cumulative effect of
accounting changes,
net of taxes -- (55) (63)
- ---------------------------------------------------------------------------------------------
Net (loss) $ (34) $ (124) $ (142)
=============================================================================================
The building products segment reported 1993 net sales of $7.1 billion, up 15.6
percent from last year's $6.1 billion. In addition, this segment reported
profits of $973 million in 1993 compared with profits of $691 million in 1992,
an increase of 40.8 percent. Accordingly, the return on sales increased from
11.3% in 1992 to 13.8% in 1993.
The profitability of this segment has improved significantly since 1992
primarily as a result of average prices for the Corporation's plywood and
softwood lumber products being higher by approximately 10 percent and 25
percent, respectively, in 1993 compared with 1992. The impact of these higher
prices was partially offset by an increase of approximately 15 percent in
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wood costs in 1993 compared with 1992. Supply constraints attributable
to environmental factors have continued to have a positive impact on prices
this year, and more recently, an increase in demand during a typically slower
season also contributed to the increase in profits in 1993 compared with 1992.
The supply restrictions which had an impact on prices in 1993 as well as
1992 and the more recent improvements in demand compared with the first half of
1993, due in part to an improving economy and an increase in housing starts,
are expected to continue in 1994. Accordingly, the Corporation does not
anticipate a significant change in 1994 in building products results from 1993.
Results for the Corporation's pulp and paper segment in 1993 were down
significantly from 1992. Net sales of $5.2 billion were reported this year,
down 8.4 percent from $5.7 billion during 1992. This segment also recorded a
$187 million loss in 1993 compared with a loss of $8 million in 1992. Earnings
declined primarily as a result of 1993 average prices for most of the
Corporation's pulp and paper products being lower than 1992 average prices.
Market pulp prices have declined by more than $100 per ton; containerboard
prices have declined by more than $20 per ton; and communication papers prices
have declined by more than $10 per ton when comparing 1993 average prices with
1992 average prices.
The pulp and paper industry continues to face excess capacity and weak
market conditions. Prices for most of the products in the pulp and paper
segment finished the year lower than average prices for all of 1993. Although
not enough to offset the reduced revenue from price declines, the Corporation
made efforts during 1993 to improve productivity and reduce costs at its mills
which resulted in savings in excess of $100 million. To achieve these cost
savings, the mills reduced overtime and administrative expenses, increased
machine efficiencies, better managed raw material and supply inventories and
reduced waste. These efforts will continue throughout 1994.
Prospects for improved market conditions for the pulp and paper industry in
1994 will depend largely on economic recovery and strength in export markets;
however, for most of its products, the Corporation does not anticipate demand
increasing enough during 1994 to absorb the excess capacity. For example,
significant price improvements are not expected in 1994 for communication
papers due to capacity increases projected for this business during 1994 with
no appreciable increase in demand. Although some recent signs of improvement
have been noted for market pulp, the fundamental supply and demand imbalance
continues to exist. Finally, some price improvements have been noted for the
Corporation's containerboard products when comparing fourth quarter 1993 to
third quarter 1993 and are expected to carry over to 1994. With little or no
growth in capacity expected during 1994, a favorable supply and demand
relationship in containerboard is anticipated.
During 1993, the Corporation recognized a pretax loss of $26 million ($7
million gain after taxes) related to the sale of Butler Paper Company. This
amount is reflected as other loss in the accompanying statements of income.
General corporate expense increased 23.5 percent from $166 million in 1992
to $205 million in 1993. Approximately $32
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million of the increase was attributable to compensation programs tied
to the Corporation's common stock price, including approximately $22 million
that was attributable to an increase in the cash bonus portion of the
Corporation's long-term incentive program due to the increase in the marginal
individual income tax rate enacted as part of the Revenue Reconciliation Act of
1993.
The Corporation's 1993 interest expense and cost of accounts receivable
sale program were a combined $542 million, a decrease of 9.7 percent compared
with 1992. Lower expense in 1993 is primarily the result of reduced levels of
debt and a lower weighted average interest rate.
Excluding the sale of Butler Paper Company, the Corporation reported pretax
income before extraordinary item of $49 million and an income tax provision of
$74 million for 1993. The effective tax rate differed from the federal
statutory tax rate primarily because of the one-time charge for the one percent
increase in the federal income tax rate that went into effect in 1993 and
nondeductible goodwill amortization expense associated with past business
acquisitions.
The Corporation reported a $74 million pretax loss for 1992 before the
extraordinary item and the cumulative effect of the accounting change. The 1992
tax benefit of $14 million resulted in an effective tax rate of 18.9 percent.
The pretax loss on which tax expense was computed, excluding the extraordinary
item and the cumulative effect of the accounting change, was approximately $37
million. This amount differs from the 1992 reported pretax loss by $37 million
primarily because of nondeductible goodwill amortization expense associated
with past business acquisitions.
As a result of the decline in interest rates that has occurred throughout
most of 1993, the Corporation decreased both the discount rate and long-term
rate of return assumptions in the 1993 valuation of its pension obligations.
The discount rate was reduced from 8 percent to 7 percent and the long-term
rate of return was reduced from 11.5 percent to 10 percent. In addition, the
Corporation reduced its assumed rate of increase in future compensation levels
from 6 percent in 1992 to 5 percent in 1993. These changes will increase the
1994 expense related to these obligations by approximately $18.4 million, which
after being offset by other factors will result in an overall increase in the
1994 expense from 1993 of approximately $7 million.
The Corporation adopted Financial Accounting Standard Number 109,
"Accounting for Income Taxes" (FAS 109) effective January 1, 1992. The $55
million one-time, after-tax charge resulted primarily from providing deferred
income taxes for differences between the remaining net book values and the tax
bases of net assets acquired in purchase transactions other than the
acquisition of Great Northern Nekoosa Corporation (GNN), partially offset by a
reduction in previously provided deferred taxes to reflect the lower current
statutory income tax rate. Also as a part of the adoption of FAS 109, the
Corporation recorded adjustments to various balance sheet accounts which
resulted from adjusting to pretax amounts the carrying values of certain assets
and liabilities related to the Corporation's acquisition of GNN in March 1990.
These adjustments are detailed in Note 11 of the Notes to Financial Statements.
In November 1992, the Financial Accounting Standards Board issued Financial
Accounting Standard Number 112, "Employers'
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Accounting for Postemployment Benefits," which requires recognition of
benefits provided by an employer to former or inactive employees after
employment but before retirement. The Corporation will be required to adopt the
new standard in the 1994 first quarter. After evaluating the Statement's
requirements, the Corporation estimates that it will recognize a one-time,
pretax charge of approximately $7.9 million during the 1994 first quarter. The
effect of this change on 1994 operating results is not expected to be material.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL. During 1993, the Company's net cash provided by operating activities
was sufficient to meet the cash requirements of its investing activities
(primarily capital expenditures), resulting in free cash flow of $287 million
(excluding the reduction of the accounts receivable sale program). In 1994, the
Corporation expects its cash flow from operations, together with proceeds from
any asset sales and available financing sources, to be sufficient to meet
planned capital investments, dividend requirements and scheduled debt payments.
OPERATING ACTIVITIES. In 1993, cash provided by operations was $389 million
compared with $868 million in 1992. Excluding the reduction of the accounts
receivable sale program of $100 million in 1993 and payments to the Internal
Revenue Service of $205 million to settle the 1984 through 1988 tax years for
Georgia-Pacific Corporation and to substantially settle the 1982 and 1984 tax
years for Great Northern Nekoosa Corporation, cash provided by operations
decreased by $174 million in 1993 compared with 1992.
INVESTING ACTIVITIES. Net cash used for investing activities during 1993 of
$202 million consisted of capital expenditures of $467 million partially offset
by proceeds from asset sales and other investing activities of $265 million.
During 1992, net cash used for investing activities was $333 million. Proceeds
from asset sales increased in 1993 due to the sale of Butler Paper Company in
the third quarter.
Capital expenditures in 1993 include $261 million in the pulp and paper
segment, $146 million in the building products segment, $46 million for timber
and timberlands and $14 million of other expenditures. Capital expenditures of
approximately $900 million are currently projected for 1994 and include
approximately $500 million in the building products segment and approximately
$400 million in the pulp and paper segment. The $900 million projected spending
includes approximately $450 million for projects started prior to 1994. The
1994 projected spending within the building products segment includes
construction of an oriented strand board plant in Virginia, construction of a
hardwood sawmill in West Virginia, construction of a medium-density fiberboard
plant in Canada and a significant expansion project at the Corporation's North
Carolina engineered lumber mill. In addition, building products' spending
includes the continuation of projects started in 1993 including an industrial
particleboard plant in Canada, a sawmill in Oregon and an oriented strand board
operation in West Virginia. Capital expenditures within the pulp and paper
segment will be limited to maintaining facilities in good operating condition,
environmental improvements, cost reduction opportunities and safety
improvements.
9
During 1993, capital expenditures for pollution control and abatement were
approximately $74 million. The Corporation's 1994 capital expenditure budget
includes another approximately $150 million for environmental-related projects.
Certain other capital projects which are being undertaken for the primary
reasons of improving financial returns or safety will also include expenditures
for pollution control.
The Corporation is expected to be required to increase its environmental
capital expenditures over the next several years in order to conform its
operations to increasingly stringent standards for compliance with air, water
and solid and hazardous waste regulations. On December 17, 1993, the
Environmental Protection Agency ("EPA") proposed regulations implementing
portions of the Clean Air Act of 1990 and the Clean Water Act applicable to
pulp and paper facilities known as the "cluster rules." The EPA has indicated
that significant changes to the regulations will be considered prior to the
adoption of final regulations in late 1995. In connection with the rule-making
process, the Corporation is evaluating the potential impact of such proposed
regulations and the possible changes to the Corporation's capital expenditures
over the next several years. Based on preliminary estimates the Corporation
could be required to spend between $1.0 billion and $1.7 billion during the
1996-1998 period to comply with the regulations if they are approved as
currently proposed. Environmental spending in 1994 and 1995 may meet some of
these proposed requirements which would reduce the amounts required to be
expended in the 1996-1998 period. The ultimate financial impact of the
regulations cannot be predicted with any reasonable certainty at this time and
will depend on several factors, including changes in the proposed regulations,
new developments in control process technology and inflation. In order to
establish the upper limit of the above range, assumptions least favorable to
the Corporation among the range of possible outcomes were used. Additionally,
this estimate was developed without consideration of management's review of
each of its mills to determine if the required expenditures can be economically
justified. Finally, there is a possibility that the implementation deadline of
1998 in the proposed regulations will be extended when the final regulations
are issued in 1995.
The Corporation completed the sale of the assets of Butler Paper Company to
Alco Standard Corporation effective July 1, 1993. The transaction resulted in
after-tax cash proceeds of approximately $222 million.
In January 1994, the Corporation announced that it signed a definitive
agreement with Atlas Roofing Corporation to sell the assets of its five roofing
plants located in Oklahoma, Texas, Ohio, Georgia and Pennsylvania. The
Corporation expects the sale to result in after-tax cash proceeds between $30
million and $35 million. The sale, which is expected to close in the 1994 first
quarter, is subject to certain closing conditions.
Also, as previously announced, the Corporation signed a definitive
agreement with a newly created company sponsored by The Sterling Group, Inc. to
sell the assets of Georgia-Pacific's envelope manufacturing business. The
transaction includes the sale of 15 envelope manufacturing plants and certain
assets of another plant, all of which are operated primarily as Mail-Well
Envelopes and Wisco Envelopes. The Corporation expects the sale to be completed
in the first quarter of 1994 and result in after-
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tax cash proceeds of approximately $115 million and an after-tax net
gain of approximately $20 million, subject to certain post-closing adjustments.
The Corporation will continue to review its business units to identify
those that are not strategic to its principal operations.
FINANCING ACTIVITIES. During 1993, the Corporation reduced total debt,
including bank overdrafts and the accounts receivable sale program, by $151
million to $5.7 billion. This includes a net reduction in commercial paper and
other short-term notes of $41 million, a net reduction in long-term debt of $62
million and a reduction in the accounts receivable sale program of $100
million, all of which is partially offset by a net increase of $52 million in
bank overdrafts.
During the year, the Corporation issued $250 million of 8-1/4% Debentures
Due March 1, 2023, and $250 million of 8-1/8% Debentures Due June 15, 2023. In
addition, the Corporation prepaid approximately $317 million of its outstanding
debt, producing an after-tax extraordinary loss for the year of $16 million (18
cents per share). The early retirement will result in an estimated economic,
after-tax savings of approximately $34 million. Finally, the Corporation
repurchased $100 million of receivables previously sold by it under the
accounts receivable sale program. Pursuant to an amendment of the accounts
receivable sale agreement effective October 15, 1993, the program was reduced
from $800 million to $700 million. This agreement expires in June 1994. The
Corporation is currently in the process of negotiating a renewal of the
program.
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. The revolving credit agreement contains certain restrictive
covenants described in Note 5 of the Notes to Financial Statements. The
Corporation was in compliance with these covenants at December 31, 1993. As of
December 31, 1993, $850 million of committed credit was available in excess of
all short-term borrowings outstanding under or supported by the facility.
At December 31, 1993, the Corporation's weighted average interest rate on
total debt, including the $700 million accounts receivable program and floating
rate debt, was 8.8%. At December 31, 1993, the Corporation had outstanding
interest rate exchange agreements which effectively converted $1.7 billion of
floating rate obligations with a weighted average interest rate of
approximately 3.4% to fixed rate obligations with an average effective interest
rate of approximately 9.0%. As of December 31, 1993, the Corporation's total
floating rate debt, including the accounts receivable sale program, exceeded
related interest rate exchange agreements by approximately $270 million.
Approximately $800 million of the interest rate exchange agreements outstanding
at December 31, 1993 will expire in 1994.
Georgia-Pacific's ratio of total debt to capital, assuming the proceeds
from the accounts receivable sale program will be replaced by debt at the end
of the program, was 57.0% at December 31, 1993 and 1992. For the foreseeable
future the Corporation intends to continue to use cash flow for dividends,
capital expenditures and debt reduction.
11
The Corporation has disclosed the fair value of its short- and long-term
debt and its interest rate exchange agreements in accordance with Financial
Accounting Standard Number 107, "Disclosures about Fair Value of Financial
Instruments," in Note 5 of the Notes to Financial Statements. The fair value of
these liabilities is greater than the carrying value because market interest
rates have declined.
As of December 31, 1993, 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.
OTHER. Due to inflation, the current values of property, plant and equipment
and timber and timberlands are higher than the historical costs reported in the
financial statements. Accordingly, depreciation and depletion expense would be
higher if the costs of such assets were adjusted to a current cost basis. The
adverse effects resulting from such an adjustment to income would be offset to
some extent by a gain due to the fact that the Corporation's net excess of
monetary liabilities over monetary assets would be repaid in less costly
dollars than the dollars (with higher purchasing power) originally received for
the obligations to be repaid.
The Corporation employs approximately 50,000 people. The majority of the
hourly employees are members of unions. Georgia-Pacific considers its
relationship with its employees to be good. Seventy-four union contracts are
subject to negotiation and renewal in 1994, including eight at large paper
facilities.
For a discussion of commitments and contingencies, see Note 9 of the Notes
to Financial Statements.
1992 COMPARED WITH 1991
Georgia-Pacific's consolidated net sales of $11.8 billion in 1992 were 2.8
percent higher than 1991 net sales of $11.5 billion. The Corporation's net loss
in 1992 was $124 million ($1.43 per share), which includes a $55 million (64
cents per share) after-tax charge for an accounting change and a $9 million (10
cents per share) after-tax loss on the early extinguishment of debt. The
Corporation's net loss in 1991 was $142 million ($1.65 per share), including
$72 million (84 cents per share) of after-tax gains on asset sales, a $45
million (52 cents per share) net after-tax loss on early extinguishment of debt
and a $63 million (73 cents per share) net after-tax charge for accounting
changes.
The Corporation adopted Financial Accounting Standard Number 109,
"Accounting for Income Taxes," (FAS 109) effective January 1, 1992. In addition
to the one-time, after-tax charge of $55 million for the cumulative effect of
the adoption of FAS 109, the pretax loss for 1992 includes an additional charge
for depreciation and depletion of $69 million, which was offset by a reduction
in income tax expense of approximately $83 million, as a result of the
accounting change. The $55 million charge resulted primarily from providing
deferred income taxes for differences between the remaining net book values and
the tax bases of net assets acquired in purchase transactions other than the
acquisition of Great Northern Nekoosa Corporation (GNN) in March 1990,
partially offset by a reduction in previously provided deferred taxes to
reflect the lower current statutory income tax rate. Also as a part of the
adoption of FAS 109, the Corporation recorded adjustments to various balance
sheet
12
accounts which resulted from adjusting to pretax amounts the carrying
values of certain assets and liabilities related to the Corporation's
acquisition of GNN. These adjustments are detailed in Note 11 of the Notes to
Financial Statements. The adjusted carrying values resulted in additional
depreciation and depletion expense of $4 million for the building products
segment and additional depreciation of $65 million for the pulp and paper
segment for 1992.
The Corporation adopted Financial Accounting Standard Number 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions,"
effective January 1, 1991. This resulted in a one-time, after-tax charge of
$119 million in 1991.
Also effective January 1, 1991, the Corporation changed its accounting
policy to include in inventory certain supplies that were previously expensed.
The cumulative effect of this change for years prior to 1991 was to increase
income by $56 million after taxes in 1991.
The building products segment reported sales of $6.1 billion in 1992, 13.1
percent higher than $5.4 billion in 1991. Operating profits in 1992 of $691
million were significantly higher than $344 million in 1991. The return on
sales was 11.3% and 6.4% in 1992 and 1991, respectively. The increase in
operating profits is primarily the result of average prices for 1992 being
higher for most of the Corporation's building products compared with 1991.
Supply constraints caused by environmental restrictions on logging in the West
resulted in higher prices during most of 1992. Additionally, wet weather in the
South further reduced log inventories throughout the industry, thus tightening
an already restricted supply.
Sales in the pulp and paper segment declined 6.2 percent to $5.7 billion in
1992 compared with $6.1 billion in 1991. The operating loss in 1992 of $8
million compared with operating profits of $362 million in 1991. In 1992,
continuing excess industry capacity and weak market conditions resulted in
lower prices for most of the Corporation's pulp and paper grades. Bleached
board, kraft paper and communication papers average prices were lower in 1992
compared with 1991, and average market pulp, containerboard and packaging
prices in 1992 were approximately the same compared with 1991. Prices for most
of these pulp and paper products, however, finished the year lower than average
prices for all of 1992. Pulp and paper's 1992 operating results were also
impacted by additional depreciation expense of $65 million due to the adoption
of FAS 109 and, in the fourth quarter, a $28 million charge for the write-down
of certain facilities to net realizable value.
The Corporation reported a $74 million pretax loss for 1992 before the
extraordinary item and the cumulative effect of the accounting change. The 1992
tax benefit of $14 million resulted in an effective tax rate of 18.9 percent.
The pretax loss on which tax expense was computed, excluding the extraordinary
item and the cumulative effect of accounting changes, was approximately $37
million. This amount differs from the 1992 reported pretax loss by $37 million
primarily because of nondeductible goodwill amortization expense associated
with past business acquisitions.
Excluding asset sales, the extraordinary item and the cumulative effect of
accounting changes, the Corporation reported a pretax loss of $85 million for
1991. The 1991 tax provision of
13
$293 million resulted in an effective tax rate of 113.1 percent. Income
on which the 1991 tax provision was computed, excluding asset sales, the
extraordinary item and the cumulative effect of accounting changes, was
approximately $57 million. This amount differs from the 1991 reported pretax
loss by $142 million primarily because of nondeductible depreciation, depletion
and goodwill amortization expenses associated with the revaluation of assets in
past business acquisitions. The lower effective tax rate in 1992 is primarily a
result of the adoption of FAS 109.
During 1991, the Corporation sold assets for combined cash proceeds of
approximately $1.2 billion and recognized a pretax gain of $344 million ($72
million after taxes) which is included in other income in the accompanying
statements of income. The Corporation had no major divestitures in 1992.
The Corporation's interest expense and cost of accounts receivable sale
program were a combined $600 million in 1992, compared with $643 million in
1991. Interest expense includes $4 million in 1992 and $35 million in 1991 of
noncash amortization. Lower expense in 1992 compared with 1991 is primarily the
result of a reduction in debt of $332 million.
14
STATEMENTS OF INCOME
Year ended December 31
------------------------------------------
(Millions, except per share amounts) 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------
Net sales $12,330 $11,847 $11,524
- ----------------------------------------------------------------------------------------------------------------
Costs and expenses
Cost of sales 9,814 9,397 9,164
Selling, general and administrative 1,190 1,170 1,137
Depreciation and depletion 764 789 724
Interest 513 565 584
Other (income) loss 26 -- (344)
- ----------------------------------------------------------------------------------------------------------------
Total costs and expenses 12,307 11,921 11,265
- ----------------------------------------------------------------------------------------------------------------
Income (loss) before income
taxes, extraordinary item and
accounting changes 23 (74) 259
Provision (benefit) for income taxes 41 (14) 293
- ----------------------------------------------------------------------------------------------------------------
(Loss) before extraordinary item
and accounting changes (18) (60) (34)
Extraordinary item--loss from early
retirement of debt, net of taxes (16) (9) (45)
Cumulative effect of accounting
changes, net of taxes -- (55) (63)
- ----------------------------------------------------------------------------------------------------------------
Net (loss) $ (34) $ (124) $ (142)
================================================================================================================
Per share:
(Loss) before extraordinary item and
accounting changes $ (.21) $ (.69) $ (.40)
Extraordinary item--loss from early
retirement of debt, net of taxes (.18) (.10) (.52)
Cumulative effect of accounting
changes, net of taxes -- (.64) (.73)
- ----------------------------------------------------------------------------------------------------------------
Net (loss) $ (.39) $ (1.43) $ (1.65)
================================================================================================================
Average number of shares outstanding 87.7 86.4 85.8
================================================================================================================
The accompanying notes are an integral part of these
financial statements.
15
STATEMENTS OF CASH FLOWS
Year ended December 31
-----------------------------------------
(Millions) 1993 1992 1991
- -----------------------------------------------------------------------------------------------------
Cash provided by (used for) operations
Net (loss) $(34) $(124) $(142)
Adjustments to reconcile net (loss)
to cash provided by operations:
Depreciation 711 747 673
Depletion 53 42 51
Deferred tax benefit (125) (133) (25)
Amortization of goodwill 59 59 60
Stock compensation programs 53 42 67
Gain on sales of assets (32) (33) (38)
Amortization of debt issue costs,
discounts and premiums 7 6 35
Other (income) loss 26 -- (344)
Extraordinary item, net of taxes -- -- 45
Cumulative effect of accounting
changes, net of taxes -- 55 63
(Increase) decrease in receivables (174) (87) 92
(Increase) decrease in inventories (93) 61 (43)
Change in other working capital 40 193 45
Increase (decrease) in taxes payable (158) 13 (2)
Change in other assets and other
long-term liabilities 56 27 43
- -----------------------------------------------------------------------------------------------------
Cash provided by operations 389 868 580
- -----------------------------------------------------------------------------------------------------
Cash provided by (used for)
investment activities
Capital expenditures
Property, plant and equipment (421) (347) (490)
Timber and timberlands (46) (37) (38)
- -----------------------------------------------------------------------------------------------------
Total capital expenditures (467) (384) (528)
Proceeds from sales of assets 260 55 1,251
Other 5 (4) 23
- -----------------------------------------------------------------------------------------------------
Cash provided by (used for)
investment activities (202) (333) 746
- -----------------------------------------------------------------------------------------------------
Cash provided by (used for)
financing activities
Repayments of long-term debt (576) (566) (2,055)
Additions to long-term debt 511 754 610
Fees paid to issue debt (5) (7) (4)
Increase (decrease) in bank overdrafts 52 (50) 27
Increase (decrease) in commercial
paper and other short-term notes (41) (519) 226
Cash dividends paid (142) (140) (140)
- -----------------------------------------------------------------------------------------------------
Cash (used for) financing activities (201) (528) (1,336)
- -----------------------------------------------------------------------------------------------------
Increase (decrease) in cash (14) 7 (10)
Balance at beginning of year 55 48 58
- -----------------------------------------------------------------------------------------------------
Balance at end of year $ 41 $ 55 $ 48
=====================================================================================================
The accompanying notes are an integral part of these financial statements.
Refer to Note 11 for supplemental cash flow information.
16
BALANCE SHEETS
December 31
-------------------------
(Millions, except shares and per share amounts) 1993 1992
- ----------------------------------------------------------------------------------------------------------------
Assets
Current assets
Cash $ 41 $ 55
Receivables, less allowances of $32 and $35 377 331
Inventories
Raw materials 367 321
Finished goods 786 792
Supplies 262 282
LIFO reserve (213) (203)
- --------------------------------------------------------------------------------------------------------------
Total inventories 1,202 1,192
- --------------------------------------------------------------------------------------------------------------
Other current assets 26 29
- --------------------------------------------------------------------------------------------------------------
Total current assets 1,646 1,607
- --------------------------------------------------------------------------------------------------------------
Timber and timberlands, net 1,381 1,402
- --------------------------------------------------------------------------------------------------------------
Property, plant and equipment
Land and improvements 237 247
Buildings 1,074 1,101
Machinery and equipment 9,550 9,420
Construction in progress 125 64
- --------------------------------------------------------------------------------------------------------------
Total property, plant and equipment, at cost 10,986 10,832
Accumulated depreciation (5,538) (5,001)
- --------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net 5,448 5,831
- --------------------------------------------------------------------------------------------------------------
Goodwill 1,832 1,891
Other assets 238 181
- --------------------------------------------------------------------------------------------------------------
Total assets $10,545 $10,912
==============================================================================================================
December 31
---------------------
(Millions, except shares and per share amounts) 1993 1992
- --------------------------------------------------------------------------------------------------------------
Liabilities and shareholders' equity
Current liabilities
Bank overdrafts, net $ 173 $ 121
Commercial paper and other short-term notes 650 691
Current portion of long-term debt 57 257
Taxes payable 35 193
Accounts payable 582 563
Accrued compensation 184 179
Accrued interest 114 132
Other current liabilities 269 316
- --------------------------------------------------------------------------------------------------------------
Total current liabilities 2,064 2,452
- --------------------------------------------------------------------------------------------------------------
Long-term debt, excluding current portion 4,157 4,019
- --------------------------------------------------------------------------------------------------------------
Other long-term liabilities 827 731
- --------------------------------------------------------------------------------------------------------------
Deferred income taxes 1,095 1,202
- --------------------------------------------------------------------------------------------------------------
Commitments and contingencies
Shareholders' equity
Common stock, par value $.80; authorized
150,000,000 shares; 90,269,000 and
88,111,000 shares issued 71 70
Additional paid-in capital 1,202 1,094
Retained earnings 1,217 1,393
Long-term incentive plan deferred compensation (56) (39)
Other (32) (10)
- --------------------------------------------------------------------------------------------------------------
Total shareholders' equity 2,402 2,508
- --------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $10,545 $10,912
==============================================================================================================
The accompanying notes are an integral part of these financial statements.
17
STATEMENTS OF SHAREHOLDERS' EQUITY
(Millions, except shares)
Long-term
Additional incentive
Common stock Common paid-in Retained plan deferred
shares issued Total stock capital earnings compensation Other
- ----------------------------------------------------------------------------------------------------------------
Balance at
December 31,
86,704,000 1990 $2,975 $69 $ 995 $1,939 $(30) $ 2
Net loss (142) -- -- (142) -- --
Cash dividends
declared-
$1.60 per
common
share (140) -- -- (140) -- --
Common stock
issued:
Stock option
145,000 plan 8 -- 8 -- -- --
Employee stock
purchase
580,000 plans 20 1 19 -- -- --
Long-term
incentive
(8,000) plan 25 -- 23 -- 2 --
Other (10) -- -- -- -- (10)
- ----------------------------------------------------------------------------------------------------------------
Balance at
December 31,
87,421,000 1991 2,736 70 1,045 1,657 (28) (8)
Net loss (124) -- -- (124) -- --
Cash dividends
declared-
$1.60 per
common
share (140) -- -- (140) -- --
Common stock
issued:
Stock option
186,000 plan 12 -- 12 -- -- --
Employee stock
purchase
112,000 plan 4 -- 4 -- -- --
Long-term
incentive
392,000 plan 22 -- 33 -- (11) --
Other (2) -- -- -- -- (2)
- ----------------------------------------------------------------------------------------------------------------
Balance at
December 31,
88,111,000 1992 2,508 70 1,094 1,393 (39) (10)
Net loss (34) -- -- (34) -- --
Cash dividends
declared-
$1.60 per
common share (142) -- -- (142) -- --
Common stock
issued:
Stock option
107,000 plans 7 -- 7 -- -- --
Employee stock
purchase
1,575,000 plans 55 1 54 -- -- --
Long-term
incentive
476,000 plan 26 -- 43 -- (17) --
Other (18) -- 4 -- -- (22)
- ----------------------------------------------------------------------------------------------------------------
Balance at
December 31,
90,269,000 1993 $2,402 $71 $1,202 $1,217 $(56) $(32)
================================================================================================================
The accompanying notes are an integral part of these financial statements.
18
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The consolidated financial
statements include the accounts of Georgia-Pacific Corporation
and subsidiaries (the Corporation). All significant intercompany
balances and transactions are eliminated in consolidation.
REVENUE RECOGNITION. The Corporation recognizes revenue when
title to the goods sold passes to the buyer, which is generally
at the time of shipment.
(LOSS) PER SHARE. (Loss) per share is computed based on net
(loss) and the weighted average number of common shares
outstanding (net of restricted stock). The effects of assuming
issuance of common shares under long-term incentive, stock option
and stock purchase plans were either insignificant or
antidilutive. The number of shares used in the (loss) per share
computations were 87,711,000 in 1993, 86,402,000 in 1992 and
85,837,000 in 1991.
INVENTORY VALUATION. Inventories are valued at the lower of
average cost or market and include the cost of materials, labor
and manufacturing overhead. The last-in, first-out (LIFO) dollar
value pool method is used to value approximately 45% and 49%,
respectively, of inventories at December 31, 1993 and 1992.
Effective January 1, 1991, the Corporation changed its accounting
policy at certain manufacturing facilities to include in
inventory certain supplies that were previously expensed. The
Corporation believes this method is preferable because it
provides a better matching of costs and related revenues and is
more consistent with the Corporation's tax reporting method. The
cumulative effect of this change for years prior to 1991 was to
increase net income by $56 million in 1991 after related income
tax expense of $35 million. This change had no effect on 1991
operating results after recording the cumulative effect for years
prior to 1991. The pro forma effect of the change on years prior
to 1991 was not determinable.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment are
recorded at cost. Lease obligations for which the Corporation
assumes substantially all the property rights and risks of
ownership are capitalized. Replacements of major units of
property are capitalized and the replaced properties are retired.
Replacements of minor components of property and repair and
maintenance costs are charged to expense as incurred.
Depreciation is computed by the straight-line method over the
estimated useful lives of the related assets. Upon retirement or
disposition of assets, cost and accumulated depreciation are
removed from the related accounts and any gain or loss is
included in income.
The Corporation changed the estimated useful lives used to
compute depreciation for land improvements and buildings added on
or after January 1, 1993. Lives for land improvements were
changed from 20 years to 25 years. Lives for buildings were
changed from 20 to 33 years to 20 to 45 years. These changes were
made to better reflect the estimated periods during which such
assets will remain in service. Useful lives for machinery and
equipment, which remain unchanged, range from 3 to 20 years.
The Corporation capitalizes interest on projects when
construction takes considerable time and entails major
expenditures. Such interest is charged to the property, plant and
equipment accounts and amortized over the approximate life of the
related assets in order to properly match costs with revenues
resulting from the facilities. Interest capitalized, expensed and
paid were as follows:
Year ended December 31
------------------------
(Millions) 1993 1992 1991
-------------------------------------------------------
Total interest costs $516 $567 $598
Interest capitalized (3) (2) (14)
-------------------------------------------------------
Interest expense $513 $565 $584
=======================================================
Interest paid $529 $544 $585
=======================================================
19
TIMBER AND TIMBERLANDS. The Corporation depletes its investment
in timber based on the total fiber that will be available during
the estimated growth cycle. Timber carrying costs are expensed as
incurred.
LANDFILLS AND LAGOONS. The Corporation accrues for landfill
closure costs over the periods that benefit from the use of the
landfill and accrues for lagoon clean-out costs over the useful
period between clean-outs.
GOODWILL. The Corporation amortizes costs in excess of fair value
of net assets of businesses acquired using the straight-line
method over a period not to exceed 40 years. Recoverability is
reviewed annually or sooner if events or changes in circumstances
indicate that the carrying amount may exceed fair value.
Recoverability is then determined by comparing the undiscounted
net cash flows of the assets to which the goodwill applies to the
net book value including goodwill of those assets.
Amortization expense was $59 million in 1993 and 1992 and $60
million in 1991. Accumulated amortization at December 31, 1993,
1992 and 1991 was $247 million, $188 million and $129 million,
respectively.
ENVIRONMENTAL REMEDIATION AND COMPLIANCE. Environmental
expenditures are expensed or capitalized, as appropriate.
Liabilities are recorded when assessments and/or remedial efforts
are probable and the cost can be reasonably estimated.
RECLASSIFICATIONS. Certain 1992 and 1991 amounts have been
reclassified to conform with the 1993 presentation.
NOTE 2. INDUSTRY SEGMENT INFORMATION
Manufactured product lines in the building products segment
consist primarily of wood panels (plywood, hardboard,
particleboard and oriented strand board), lumber, gypsum
products, chemicals and roofing.
Manufactured product lines in the pulp and paper segment
consist primarily of containerboard and packaging (linerboard,
medium, bleached board, kraft paper and corrugated packaging),
communication papers, market pulp, tissue and envelopes.
Timber and timberlands are managed to supply raw materials to
both the pulp and paper and building products segments. Profits
from sales of logs and chips to the pulp and paper segment and to
outside customers in the ordinary course of business are included
in the operating profits of the building products segment.
During the years 1991 through 1993, sales to foreign markets
represented less than 10% of total sales to unaffiliated
customers. No single customer accounted for more than 10% of
total sales to unaffiliated customers in any year during that
period.
20
Year ended December 31
------------------------------------------------------------------
(Millions) 1993 1992 1991
------------------------------------------------------------------------------------------------------
Net sales
Building products $ 7,067 58% $ 6,112 52% $ 5,405 47%
Pulp and paper 5,231 42 5,711 48 6,089 53
Other operations 32 -- 24 -- 30 --
------------------------------------------------------------------------------------------------------
Total net sales $12,330 100% $11,847 100% $11,524 100%
======================================================================================================
Net (loss)
Building products $ 973 126% $ 691 100% $ 344 32%
Pulp and paper (187) (24) (8) (1) 362 34
Other operations 10 1 9 1 17 2
Other income (loss)* (26) (3) -- -- 344 32
------------------------------------------------------------------------------------------------------
Total operating
profits 770 100% 692 100% 1,067 100%
General corporate (205) (166) (165)
Interest expense (513) (565) (584)
Cost of accounts
receivable sale
program (29) (35) (59)
(Provision) benefit
for income taxes (41) 14 (293)
------------------------------------------------------------------------------------------------------
(Loss) before
extraordinary
item and
accounting
changes (18) (60) (34)
Extraordinary
item--loss
from early
retirement of
debt, net of
taxes (16) (9) (45)
Cumulative effect
of accounting
changes, net
of taxes -- (55) (63)
------------------------------------------------------------------------------------------------------
Net (loss) $ (34) $ (124) $ (142)
======================================================================================================
Depreciation,
depletion
and goodwill
amortization
Building products $ 215 26% $ 206 24% $ 232 30%
Pulp and paper 595 72 626 74 537 68
Other and general
corporate 13 2 16 2 15 2
------------------------------------------------------------------------------------------------------
Total depreciation,
depletion and
goodwill
amortization $ 823 100% $ 848 100% $ 784 100%
======================================================================================================
Capital expenditures**
Building products $ 146 31% $ 111 29% $ 43 8%
Pulp and paper 261 56 217 56 436 83
Timber and
timberlands 46 10 37 10 38 7
Other and general
corporate 14 3 19 5 11 2
------------------------------------------------------------------------------------------------------
Total capital
expenditures $ 467 100% $ 384 100% $ 528 100%
======================================================================================================
Assets
Building products $ 1,726 16% $ 1,634 15% $ 1,681 16%
Pulp and paper 6,909 66 7,414 68 7,208 68
Timber and
timberlands 1,380 13 1,402 13 1,377 13
Other and general
corporate 530 5 462 4 363 3
------------------------------------------------------------------------------------------------------
Total assets $10,545 100% $10,912 100% $10,629 100%
======================================================================================================
*Other income represents the results of various asset
divestitures as described in Note 3. If these amounts had
been included in segment operating profits, pulp and paper
operating profits would have been $(213) million in 1993
and $546 million in 1991 and building products operating
profits would have been $504 million in 1991.
**The capital expenditure amounts reported above represent
additions, at cost, to property, plant and equipment and
timber and timberlands.
21
NOTE 3. ASSET DIVESTITURES
After the acquisition of GNN in 1990, the Corporation announced
plans to sell certain assets identified as not strategic to its
principal operations.
The following divestitures were completed during the years
1993 and 1991. The Corporation had no major divestitures in 1992.
The pretax gains and losses associated with these sales are
included in other income in the accompanying statements of
income.
- In July 1993, the Corporation completed the sale of the assets
of Butler Paper Company, which operated 80 distribution centers
in 31 states, to Alco Standard Corporation. The transaction
resulted in after-tax cash proceeds of approximately $222
million. In addition, the Corporation recognized a $26 million
pretax loss and a $7 million after-tax gain (8 cents per share)
on the transaction. The large tax benefit results from the loss
on the sale as well as the fact that the tax basis was
significantly greater than the financial basis of stock included
in the assets sold in the transaction.
- In December 1991, the Corporation completed the sale of an 80
percent ownership interest in two groundwood paper mills, the
hydro-electric assets that power those mills, a sawmill and
approximately 2.1 million acres of fee timberland for
approximately $303 million in cash. A pretax gain of $52 million
($15 million after taxes) was recognized on this transaction. In
July 1992, the Corporation received $22 million less working
capital settlements of approximately $12 million related to the
remaining 20 percent ownership interest.
- In June 1991, the Corporation sold 49,000 acres of fee
timberland in Washington for $48 million in cash. A pretax gain
of $46 million ($29 million after taxes) was recognized on this
transaction.
- In January 1991, the Corporation sold two domestic
containerboard mills, 19 corrugated packaging plants and
approximately 540,000 acres of fee timberland (and lease rights
to 98,000 acres of timberland) for $725 million in cash and, in a
separate transaction, sold its interests in a foreign
containerboard mill, two corrugated packaging plants and two
sheet plants for $102 million in cash. A combined pretax gain of
$246 million ($28 million after taxes) was recognized on these
transactions.
NOTE 4. RECEIVABLES
The Corporation has a large, diversified customer base, which
includes some customers who are located in foreign countries. The
Corporation closely monitors extensions of credit and has not
experienced significant losses related to its receivables. In
addition, a majority of the receivables from foreign sales are
covered by either export credit insurance or confirmed letters of
credit to help ensure collectibility.
The Corporation had sold fractional ownership interests in a
defined pool of trade accounts receivable for $700 million as of
December 31, 1993 and $800 million as of December 31, 1992 and
1991. The $100 million reduction in the accounts receivable sale
program in 1993 is reported as an increase in receivables in the
accompanying statements of cash flows. The sold accounts
receivable are reflected as a reduction of receivables in the
accompanying balance sheets. The full amount of the allowance for
doubtful accounts has been retained because the Corporation has
retained substantially the same risk of credit loss as if the
receivables had not been sold. A portion of the cost of the
accounts receivable sale program is based on the purchasers'
level of investment and borrowing costs. Additionally, the
Corporation pays fees based on its senior debt ratings. The total
cost
22
of the program, which was $29 million in 1993, $35 million
in 1992 and $59 million in 1991, is included in selling, general
and administrative expense in the accompanying statements of
income.
Under the accounts receivable sale agreement, the maximum
amount of the purchasers' investment is subject to change based
on the level of eligible receivables and restrictions on
concentrations of receivables. The program was reduced from $800
million to $700 million, pursuant to an amendment of the
agreement effective October 15, 1993. In addition, the current
agreement expires in June 1994. The Corporation is currently in
the process of negotiating a renewal of the program.
Supplemental information on the accounts receivable balances
at December 31, 1993 and 1992 is as follows:
December 31
--------------
(Millions) 1993 1992
-----------------------------------------------------
Receivables
Trade $358 $270
Other 51 96
-----------------------------------------------------
409 366
Less estimated allowances 32 35
-----------------------------------------------------
Receivables, net $377 $331
=====================================================
NOTE 5. INDEBTEDNESS
The Corporation's indebtedness included the following:
December 31
-----------------
(Millions) 1993 1992
------------------------------------------------------
Debentures, 9.4% average rate,
payable through 2023 $2,804 $2,579
Notes, 7.7% average rate,
payable through 2000 974 1,238
Commercial paper and other
short-term notes, 3.6%
average rate 650 691
Revenue bonds, 4.0% average
rate, payable through 2026 375 371
Other loans, 5.9% average
rate, payable through 2009 96 121
------------------------------------------------------
4,899 5,000
Less:
Commercial paper and other
short-term notes 650 691
Current portion of
long-term debt 57 257
Unamortized discount 35 33
------------------------------------------------------
Long-term debt $4,157 $4,019
======================================================
The scheduled maturities of long-term debt for the next five
years are as follows: $57 million in 1994, $55 million in 1995,
$39 million in 1996, $313 million in 1997 and $446 million in
1998.
NOTES AND DEBENTURES. During 1993, the Corporation issued $250
million of 8-1/4% Debentures Due March 1, 2023, and $250 million
of 8-1/8% Debentures Due June 15, 2023.
In addition, the Corporation prepaid approximately $317 million
in principal of its outstanding debt during 1993 resulting in an
after-tax extraordinary loss of $16 million ($27 million before
taxes). During 1992, the Corporation reported an after-tax
extraordinary loss
23
of $9 million ($14 million before taxes) related to the early
retirement of approximately $207 million of outstanding debt.
The estimated fair value of the Corporation's notes and
debentures at December 31, 1993 was $4,172 million compared with
a carrying amount of $3,778 million. At December 31, 1992, the
estimated fair value of the Corporation's notes and debentures
was $4,046 million compared with a carrying amount of $3,817
million. The fair value was estimated primarily by obtaining
quotes from brokers for these and similar issues. For notes and
debentures for which there are no quoted market prices, the fair
value was estimated by calculating the present value of
anticipated cash flows. The discount rate used was an estimated
borrowing rate for similar debt instruments with like maturities.
UNSECURED TERM LOAN AND REVOLVING CREDIT FACILITY. On December
31, 1991, the Corporation entered into an agreement with Bank of
America National Trust and Savings Association and 24 other
domestic and international banks which provides a three-year
unsecured revolving credit facility of $1.5 billion. The
revolving credit facility is being used as support for commercial
paper and other short-term borrowings, including bid borrowings
made under the credit agreement. Effective June 30, 1993, the
Corporation entered into a revised Credit Agreement with
substantially the same lending group which extends the
termination date until 1996, eliminates the minimum interest
coverage ratio, and modifies certain representations and
warranties. As of December 31, 1993, $850 million of committed
credit was available in excess of all short-term borrowings
outstanding under or supported by the facility.
Borrowings under the revised agreement bear interest, at the
election of the Corporation, at either (A) the higher of the
reference rate and the Federal Funds Rate plus 1/2% or (B) LIBOR
plus 5/8% or (C) fixed or floating rates set by competitive bids.
Fees associated with this revolving credit facility include a
commitment fee of 1/8% per annum on the unused portion of the
commitments and a facility fee of 1/8% per annum on the aggregate
commitments of the lenders.
The revolving credit agreement contains certain restrictive
covenants. The covenants include a maximum leverage ratio (funded
indebtedness to operating cash flow) of 4.5 to 1.0 which is to be
maintained throughout the term of the Credit Agreement. As of
December 31, 1993, the leverage ratio was 3.8 to 1.0.
During 1991, the Corporation prepaid the outstanding balance
of a term loan entered into in 1990 in connection with the
acquisition of GNN. The prepayment of the term loan and the
refinancing of the revolving credit facility in 1991 resulted in
the accelerated write-off of approximately $72 million ($45
million after taxes) of capitalized debt issue costs associated
with the original borrowings. This loss on early extinguishment
of debt is reflected as an extraordinary item in the accompanying
statements of income.
COMMERCIAL PAPER AND OTHER SHORT-TERM NOTES. These borrowings are
classified as current liabilities although all or a portion of
them might be refinanced on a long-term basis in 1994. The
carrying amounts approximate fair value because of the short
maturity of these instruments.
REVENUE BONDS AND OTHER LOANS. The estimated fair value of the
Corporation's revenue bonds and other loans at December 31, 1993
was $375 million and $96 million, respectively. The estimated
fair value of the Corporation's revenue bonds and other loans at
December 31, 1992 was $367 million and $121 million,
respectively. The fair value was estimated by calculating the
present value of anticipated cash
24
flows. The discount rate used was an estimated borrowing rate
for similar debt instruments with like maturities.
OTHER. At December 31, 1993, the amount of long-term debt secured
by property, plant and equipment and timber and timberlands was
not material.
At December 31, 1993, the Corporation had outstanding interest
rate exchange agreements which effectively converted $1.7 billion
of floating rate obligations with a weighted average interest
rate of 3.4% to fixed rate obligations with an average effective
interest rate of approximately 9.0%. Under the agreements, which
have a remaining average maturity of approximately 2.5 years, the
Corporation makes payments to counterparties at fixed interest
rates and in turn receives payments at variable rates. The
differential to be paid or received is accrued as interest rates
change and is recognized over the lives of the agreements. The
Corporation is exposed to credit risk in the event of
nonperformance by the counterparties, but does not anticipate
such nonperformance. As of December 31, 1993, the Corporation's
total floating rate debt, including the accounts receivable sale
program, exceeded related interest rate exchange agreements by
approximately $270 million.
The estimated fair value of the Corporation's liability under
interest rate exchange agreements at December 31, 1993 and 1992
was $99 million and $153 million, respectively, and represents
the estimated amount the Corporation might have paid to terminate
the agreements. The fair value at December 31, 1993 was estimated
by calculating the present value of anticipated cash flows. The
discount rate used was an estimated borrowing rate for similar
debt instruments with like maturities. The estimated fair value
at December 31, 1992 was based on quotes obtained from brokers
and calculated by them using the same methodology described above
for the 1993 calculation. The Corporation accrued interest of $31
million and $37 million at December 31, 1993 and 1992,
respectively, related to these agreements.
The carrying amounts of bank overdrafts at December 31, 1993
and 1992 approximate fair value.
NOTE 6. INCOME TAXES
Effective January 1992, the Corporation changed its method of
accounting for income taxes from the deferred method to the
liability method required by Financial Accounting Standard Number
109, "Accounting for Income Taxes" ("FAS 109"). The cumulative
effect of adopting FAS 109 as of January 1, 1992 was to increase
the net loss by $55 million. Prior years' financial statements
were not restated to reflect the provisions of FAS 109.
25
The provision (benefit) for income taxes includes income taxes
currently payable and those deferred because of temporary differences between
the financial statement and tax bases of assets and liabilities. The provision
(benefit) for income taxes consists of the following:
Year ended December 31
--------------------------------------
(Millions) 1993 1992 1991
- ----------------------------------------------------------------------------------------------
Federal income taxes:
Current $128 $ 105 $277
Deferred (89) (117) (21)
State income taxes:
Current 17 14 41
Deferred (15) (16) (4)
- ----------------------------------------------------------------------------------------------
Provision (benefit) for
income taxes $ 41 $ (14) $293
==============================================================================================
Income taxes paid, net
of refunds $300 $ 68 $273
==============================================================================================
Income taxes paid includes payments to the Internal Revenue Service (IRS) of
approximately $205 million in 1993 to resolve all pending income tax issues for
the years 1981 through 1988 for Georgia-Pacific Corporation and substantially
all issues for the years 1982 through 1984 for Great Northern Nekoosa
Corporation (GNN). Income taxes paid for 1991 include approximately $275
million of payments associated with asset sales.
Included in Taxes Payable in the accompanying balance sheet are amounts the
Corporation expects to pay in 1994 to resolve the remaining income tax issues
for GNN for the years 1982 through 1984 and for Georgia-Pacific Corporation for
the years 1989 through 1990. These amounts are offset by the tax benefit
related to the deductibility of interest paid in 1993. In addition, the IRS is
currently examining GNN's federal income tax returns for the years 1985 through
1990. The IRS has proposed certain adjustments, some of which are being
contested by the Corporation. In the opinion of management, adjustments
resulting from these examinations will not have a material adverse effect on
the Corporation's financial condition.
26
The difference between the statutory federal income tax rate
on income (loss) before income taxes, extraordinary item and
accounting changes and the Corporation's effective income tax
rate is summarized as follows:
Year ended December 31
-----------------------------
1993 1992 1991
------------------------------------------------------------
Statutory federal income
tax rate 35.0% (34.0)% 34.0%
State income tax, net of
federal benefit 4.0 (4.0) 4.0
Permanent differences
resulting from purchase
accounting:
Goodwill 99.7 30.2 8.7
Other -- -- 19.6
Permanent differences on
assets sold (101.7) -- 52.2
Foreign loss producing
no tax benefit 14.7 -- --
Tax rate increase 143.2 -- --
Foreign sales corporation (10.1) (7.9) (2.0)
Interest on tax audits -- -- (5.4)
Percentage depletion (3.9) (1.5) (.4)
Life insurance, net (5.0) (1.8) (.5)
Dividends--nonvested
LTIP shares (3.7) (1.4) (.3)
Meals and entertainment
disallowance 4.9 1.7 .4
Other 1.2 (.2) 2.8
------------------------------------------------------------
Effective income tax rate 178.3% (18.9)% 113.1%
============================================================
As a result of the Revenue Reconciliation Act of 1993, the
Corporation incurred after-tax charges of $34 million due to the
one percent increase in the corporate income tax rate and $14
million related to the cash bonus portion of its long-term
incentive program due to the increase in the marginal individual
income tax rate.
27
FAS 109 requires recognition of deferred tax liabilities and
assets for the expected future tax consequences of events that
have been included in the financial statements or tax returns.
The components of the net deferred tax liability are as follows:
Year ended
December 31
--------------
(Millions) 1993 1992
---------------------------------------------------------
Deferred tax asset:
Compensation related accruals $303 $281
Other accruals and reserves 83 86
Other 81 61
---------------------------------------------------------
467 428
Valuation allowance -- --
---------------------------------------------------------
467 428
---------------------------------------------------------
Deferred tax liability:
Property, plant and
equipment (1,333) (1,392)
Timber and timberlands (167) (161)
Other (62) (77)
---------------------------------------------------------
(1,562) (1,630)
---------------------------------------------------------
Deferred tax liability, net $(1,095) $(1,202)
=========================================================
As of December 31, 1993, the net deferred tax liability includes
alternative minimum tax credit carryforwards of $48 million which
may be utilized to offset future tax liabilities to the extent
that the Corporation's regular tax liability exceeds the
alternative minimum tax liability.
During 1991, the provision for income taxes was based on
pretax financial income which differs from taxable income.
Deferred income taxes were provided for significant timing
differences between revenue and expenses for tax and financial
statement purposes. Following is a summary of the significant
components of the deferred tax (benefit):
Year ended
December 31
-----------
(Millions) 1991
------------------------------------------------------------------
Tax (under) financial depreciation and depletion $(5)
Liability accruals and write-down of certain assets 41
Compensation expense (52)
Financing costs (1)
Other (8)
------------------------------------------------------------------
Deferred tax (benefit) $(25)
==================================================================
NOTE 7. RETIREMENT PLANS
DEFINED BENEFIT PENSIONS PLANS. Most of the Corporation's
employees participate in noncontributory defined benefit pension
plans. These include plans which are administered solely by the
Corporation and union-administered multiemployer plans. The
Corporation's funding policy for solely administered plans is
based on actuarial calculations and the applicable requirements
of federal law. Contributions to multiemployer plans are
generally based on negotiated labor contracts.
Benefits under the majority of plans for hourly employees
(including multiemployer plans) are primarily related to years of
service. The Corporation has separate plans for salaried
employees and officers under which benefits are primarily related
to compensation and years of service. The officers' plan is not
funded and is non-qualified for Federal income tax purposes.
28
Plan assets consist principally of common stocks, bonds,
mortgage securities, interests in limited partnerships, cash
equivalents and real estate. At December 31, 1993 and 1992,
respectively, $57 million and $46 million of noncurrent prepaid
pension cost was included in other assets. The accrued pension
cost of $79 million and $56 million at December 31, 1993 and
1992, respectively, was included in other long-term liabilities.
The following table sets forth the funded status of the solely
administered plans and the amounts recognized in the accompanying
balance sheets.
Year ended December 31, 1993 Year ended December 31, 1992
-------------------------------------- ------------------------------------------
Plans having Plans having Plans having Plans having
assets in excess accumulated assets in excess accumulated
of accumulated benefits in of accumulated benefits in
(Millions) benefits excess of assets benefits excess of assets
-----------------------------------------------------------------------------------------------------------------------
Accumulated
benefit
obligation at
November 30
Vested portion $896 $373 $918 $244
Nonvested portion 27 17 28 12
-------------------------------------------------------------------------------------------------------------------
923 390 946 256
Effect of
projected future
compensation levels 4 14 10 11
-------------------------------------------------------------------------------------------------------------------
Projected benefit
obligation at
November 30 927 404 956 267
Plan assets at
fair value at
November 30 1,101 312 1,119 201
-------------------------------------------------------------------------------------------------------------------
Plan assets in
excess of (less
than) projected
benefit obligation 174 (92) 163 (66)
Contributions made
in December -- -- 4 --
Unrecognized net
(gain) loss (80) 57 (68) 33
Unrecognized prior
service cost (17) 30 (24) 22
Unrecognized net
asset from initial
application of
FAS 87 (20) (15) (29) (15)
Adjustment required
to recognize minimum
liability -- (59) -- (30)
-------------------------------------------------------------------------------------------------------------------
Prepaid (accrued)
pension cost at
December 31 $57 $(79) $46 $(56)
===================================================================================================================
Pursuant to the provisions of Financial Accounting Standard
Number 87, "Employers' Accounting for Pensions," intangible
assets of $30 million and $22 million were recorded as of
December 31, 1993 and 1992, respectively.
Net periodic pension cost for solely and jointly administered
pension plans included the following:
Year ended December 31
------------------------
(Millions) 1993 1992 1991
-------------------------------------------------------
Service cost of benefits
earned $80 $75 $73
Interest cost on projected
benefit obligation 96 96 93
Actual (gain) on plan assets (185) (157) (206)
Net amortization and deferral 30 11 70
Contributions to multiemployer
pension plans 4 4 4
-------------------------------------------------------
Net periodic pension cost $25 $29 $34
=======================================================
The following assumptions were used:
1993 1992 1991
---------------------------------------------------------
Discount rate used to
determine the projected
benefit obligation 7.0% 8.0% 8.5%
Rate of increase in future
compensation levels used
to determine the projected
benefit obligation 5.0 6.0 6.0
Expected long-term rate of
return on plan assets used
to determine net periodic
pension cost 10.0 11.5 11.5
---------------------------------------------------------
During 1993 and 1991, the Corporation recognized a net aggregate
pretax settlement and curtailment gain of $12.7 million and $10
million, respectively, resulting from pension obligations assumed
by the purchaser in certain asset divestitures (Note 3).
29
DEFINED CONTRIBUTION PLANS. The Corporation sponsors several
defined contribution plans to provide eligible employees with
additional income upon retirement. The Corporation's
contributions to the plans are based on employee contributions
and compensation. These contributions totaled $44 million in 1993
and $43 million in 1992 and 1991.
RETIREE HEALTH CARE AND LIFE INSURANCE BENEFITS. The Corporation
provides certain health care and life insurance benefits to
eligible retired employees. Salaried participants generally
become eligible for retiree health care benefits after reaching
age 55 with 10 years of service or after reaching age 65.
Benefits, eligibility and cost-sharing provisions for hourly
employees vary by location and/or bargaining unit. Generally, the
medical plans pay a stated percentage of most medical expenses
reduced for any deductible and payments made by government
programs and other group coverage. The plans are unfunded.
For 1992 and 1993 the cost of providing most of these benefits
has been shared with retirees. The Corporation began transferring
its share of the cost of post-age 65 health care benefits to
future salaried retirees in 1991. It is currently anticipated
that the Corporation will continue to reduce the percentage of
the cost of post-age 65 benefits that it will pay on behalf of
salaried employees who retire in each of the years 1992 through
1999 and that the Corporation will continue to share the pre-age
65 cost with future salaried retirees, but will no longer pay any
of the post-age 65 cost for salaried employees who retire after
1999.
30
The Corporation adopted Financial Accounting Standard Number
106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," as of January 1, 1991. This statement requires
the accrual of the cost of providing postretirement benefits,
including medical and life insurance coverage, during the active
service period of the employee. The Corporation elected to
immediately recognize the accumulated liability, measured as of
January 1, 1991. This resulted in a one-time, after-tax charge of
$119 million (after reduction for income taxes of $73 million)
which does not include amounts accrued in prior years for
business acquisitions. The effect of this change on 1991
operating results, after recording the cumulative effect for
years prior to 1991, was to recognize additional pretax expense
of $23 million. The pro forma effect of the change on years prior
to 1991 was not determinable. Prior to 1991, the Corporation
recognized expense in the year the benefits were provided.
The following table sets forth the funded status of the plans,
reconciled to the accrued postretirement benefit cost recognized
in the Corporation's balance sheet at December 31, 1993 and 1992:
Year ended
December 31
--------------
(Millions) 1993 1992
----------------------------------------------------------
Accumulated postretirement
benefit obligation:
Retirees $273 $242
Fully eligible active
plan participants 33 44
Other active participants 135 131
----------------------------------------------------------
441 417
Unrecognized net loss (60) (58)
Unrecognized prior service
cost 6 --
----------------------------------------------------------
Accrued postretirement benefit cost $387 $359
==========================================================
Net periodic postretirement benefit cost for 1993, 1992 and 1991
included the following components:
Year ended
December 31
-------------------------
(Millions) 1993 1992 1991
-------------------------------------------------------------
Service cost of benefits earned $ 9 $ 6 $ 8
Interest cost on accumulated
postretirement benefit
obligation 31 27 30
Amortization of loss 1 -- --
-------------------------------------------------------------
Net periodic postretirement
benefit cost $41 $33 $38
=============================================================
For measuring the expected postretirement benefit obligation, a
13 percent, 14 percent and 15 percent annual rate of increase in
the per capita claims cost was assumed for 1993, 1992 and 1991,
respectively. The rate was assumed to decrease 1 percent per year
to 7 percent in 1999 and remain at that level thereafter. The
weighted-average discount rate used in determining the
accumulated postretirement benefit obligation was 6.5 percent at
December 31, 1993, 7.5 percent at December 31, 1992 and 8.0
percent at December 31, 1991.
If the health care cost trend rate were increased 1 percent,
the accumulated postretirement benefit obligation would have
increased by 15 percent as of December 31, 1993 and 13 percent as
of December 31, 1992 and 1991. The effect of this change on the
aggregate of service
31
and interest cost for 1993, 1992 and 1991 would be an increase of
17 percent, 14 percent and 15 percent, respectively.
During 1991, the Corporation recognized a pretax settlement
gain of $43 million resulting from postretirement benefit
obligations assumed by the purchaser in certain asset
divestitures (Note 3).
OTHER. In November 1992, the Financial Accounting Standards Board
issued Financial Accounting Standard Number 112, "Employers'
Accounting for Postemployment Benefits," which requires
recognition of benefits provided by an employer to former or
inactive employees after employment but before retirement. The
Corporation will be required to adopt the new standard in the
1994 first quarter. After evaluating the Statement's
requirements, the Corporation estimates that it will recognize a
one-time, pretax charge of approximately $7.9 million during the
1994 first quarter. The effect of this change on 1994 operating
results is not expected to be material.
NOTE 8. COMMON AND PREFERRED STOCK
The Corporation's authorized capital stock consists of 10 million
shares of no par value Preferred Stock and 25 million shares of
no par value Junior Preferred Stock, of which no shares were
issued at December 31, 1993, and 150 million shares of Common
Stock, par value $.80 per share.
At December 31, 1993, the following authorized shares of the
Corporation's common stock were reserved for issue:
1993
-------------------------------------------------------
1993 Employee Stock Purchase Plan 1,154,000
1990 Long-Term Incentive Plan 2,912,000
1993 Employee Stock Option Plan 500,000
1984 Employee Stock Option Plan 654,000
-------------------------------------------------------
Common stock reserved 5,220,000
=======================================================
EMPLOYEE STOCK PURCHASE PLANS. At December 31, 1993, the 1993
Employee Stock Purchase Plan (Purchase Plan) had reserved for
issue 1,154,000 shares of common stock at a subscription price of
$57.06. Subscribers have the option to receive a refund of their
payments plus interest at the rate of 5% per annum in lieu of
stock. Additional shares can no longer be subscribed under the
Purchase Plan, which expires on July 31, 1995. Approximately
8,000 subscribers remained in the Purchase Plan at December 31,
1993.
Under the 1993 Purchase Plan, the Corporation issued 2,000
shares of common stock in 1993. Under the 1991 Purchase Plan
(which expired on May 31, 1993), the Corporation issued 1,573,000
shares, 112,000 shares and 21,000 shares of common stock in 1993,
1992 and 1991, respectively. Under the 1989 Employee Stock
Purchase Plan (which expired on April 30, 1991), the Corporation
issued 559,000 shares of common stock in 1991.
LONG-TERM INCENTIVE PLANS. The 1990 Long-Term Incentive Plan
(Incentive Plan) initially reserved 4,000,000 shares for issue.
Specified portions of allocated shares under this plan are
awarded as restricted stock, at no cost to the employee, based on
increases in the average market value of the Corporation's common
stock. At the time restricted shares are awarded, the market
value of the stock is added to common stock and additional
paid-in capital and an equal amount is deducted from
shareholders' equity (long-term incentive plan deferred
compensation). Long-term incentive plan deferred compensation is
amortized over the vesting (restriction) period, generally five
years, with adjustments made quarterly for market price
fluctuations.
32
At the time awarded shares become vested, the Corporation will pay
on behalf of each participant a cash bonus in the amount of the
estimated income tax liability to be incurred by the participant
as a result of the award and cash bonus. Shares totaling 1,089,000
have been awarded under the Incentive Plan of which 925,000
restricted shares remain outstanding as of December 31, 1993.
The Incentive Plan replaced the 1988 Long-Term Incentive Plan
(1988 Incentive Plan). As of December 31, 1993, 1,420,000 shares
have been awarded to the plan participants under the 1988
Incentive Plan of which 689,000 restricted shares remain
outstanding. These awarded shares will vest based on the
provisions in the 1988 Incentive Plan.
The Corporation recognized Incentive Plan and 1988 Incentive
Plan compensation expense of $69 million in 1993, $36 million in
1992 and $43 million in 1991. Additional information relating to
the Incentive Plan is as follows:
Year ended December 31
------------------------------------
1993 1992 1991
--------------------------------------------------------------
Shares allocated but not
awarded at January 1 2,310,000 2,708,000 2,733,000
Shares allocated 483,000 400,000 122,000
Previously allocated
shares cancelled (235,000) (407,000) (155,000)
Shares awarded (551,000) (538,000) --
Previously awarded shares
cancelled 75,000 147,000 8,000
--------------------------------------------------------------
Shares allocated but not
awarded at December 31 2,082,000 2,310,000 2,708,000
Shares available for
allocation at
December 31 830,000 1,152,000 1,292,000
--------------------------------------------------------------
Total shares reserved 2,912,000 3,462,000 4,000,000
==============================================================
EMPLOYEE STOCK OPTION PLAN. The 1993 Employee Stock Option Plan
(1993 Option Plan) provides for the granting of stock options to
certain key employees who are not officers. The 1984 Employee
Stock Option Plan (1984 Option Plan) provides for the granting of
stock options to certain officers and key employees.
Holders of stock options may be granted cash bonuses, payable
upon exercise of an option, of an amount not to exceed the amount
by which the market value of the common stock, as defined,
exceeds the option price. In addition, holders may surrender all
or part of the related stock option in exchange for common stock
with a fair market value equal to the amount by which the market
value of the shares covered by the option exceeds the aggregate
option exercise price.
Compensation resulting from stock options and cash bonuses is
initially measured at the grant date based on the market value of
the common stock, with adjustments made quarterly for market
price fluctuations. The Corporation recognized 1984 Option Plan
compensation expense of $7 million in 1993, $15 million in 1992
and $31 million in 1991. The Corporation recognized 1993 Option
Plan compensation expense of $7 million in 1993.
33
Additional information relating to the 1993 Option Plan as of
December 31, 1993 is as follows:
--------------------------------------------------------
Options outstanding at January 1 --
Options granted 472,000
Options cancelled (71,000)
--------------------------------------------------------
Options outstanding at December 31 401,000
Options available for grant at
December 31 99,000
--------------------------------------------------------
Total reserved shares 500,000
========================================================
Options prices per share:
Granted $59
Cancelled $59
========================================================
Additional information relating to the 1984 Option Plan is as
follows:
Year ended December 31
--------------------------------
1993 1992 1991
-----------------------------------------------------------
Options outstanding at
January 1 981,000 1,029,000 1,191,000
Options granted -- 446,000 461,000
Options exercised/
surrendered (267,000) (464,000) (570,000)
Options cancelled (60,000) (30,000) (53,000)
-----------------------------------------------------------
Options outstanding at
December 31 654,000 981,000 1,029,000
Options available for
grant at December 31 -- 244,000 659,000
-----------------------------------------------------------
Total reserved shares 654,000 1,225,000 1,688,000
===========================================================
Options exercisable at
December 31 654,000 557,000 599,000
===========================================================
Option prices per share:
Granted -- $66 $39-$54
Exercised/surrendered $34-$66 $34-$46 $26-$46
Cancelled $39-$66 $34-$66 $34-$46
===========================================================
SHAREHOLDER RIGHTS PLAN. The Corporation has a Shareholder Rights
Plan pursuant to which preferred stock purchase rights are issued
at the rate of one Right for each share of common stock. The
Rights expire on July 31, 1999, unless redeemed earlier. Each
Right entitles the holder to buy, at an exercise price of $175,
one one-hundredth of a newly issued share of Series A Junior
Preferred Stock of which 5 million shares were reserved for issue
at December 31, 1993. Due to the nature of its dividend,
liquidation and voting rights, the economic value of one
one-hundredth of a share of Junior Preferred Stock that may be
acquired upon the exercise of each Right should approximate the
economic value of one share of common stock. The Rights are
exercisable only if a person or group acquires 15% or more of the
Corporation's common stock or announces a tender offer for 30% or
more of the common stock.
If a person becomes the beneficial owner of 15% or more of the
Corporation's outstanding common stock, or if a holder of 15% or
more of the Corporation's stock engages in certain self-dealing
transactions or a merger transaction in which the Corporation is
the surviving Corporation and its common stock remains
outstanding, then each Right not owned by such party will entitle
its holder to purchase, at the then-current exercise price,
shares of the Corporation's Series A Junior Preferred Stock with
a market value of twice the exercise price.
34
In addition, if after any person acquires 15% or more of the
Corporation's outstanding common stock, the Corporation is
involved in a merger or other business combination transaction
with another person after which its common stock does not remain
outstanding, or the Corporation sells 50% or more of its assets
or earning power, each Right will entitle its holder to purchase,
at the then-current exercise price, shares of the other party's
common stock with a market value of twice the exercise price.
NOTE 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.
The Corporation is involved in environmental remediation
activities at sites in which it has been named a potentially
responsible party under the Comprehensive Environmental Response,
Compensation and Liability Act or similar state "superfund" laws
and at certain of its own plants. Of the known sites in which it
is involved, the Corporation estimates that slightly over 50
percent are being investigated. Of the remaining sites,
approximately one-half are being remediated and the other
one-half 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 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 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
currently available information and analysis, 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 $72 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
reserves 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.
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 is seeking a
declaratory judgment to
35
the effect that past and future environmental remediation and
other related costs with respect to certain of the sites are
within the policy provisions.
Approximately 220 suits involving approximately 9,160
plaintiffs are currently pending in Mississippi which primarily
allege nuisance, trespass and infliction of emotional distress
caused by the discharge of dioxin into the Leaf River prior to
1990 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 two of these cases (Ferguson and
Simmons) with respect to certain claims, and the jury found in
favor of the Corporation with respect to a fourth plaintiff and
with respect to certain claims brought by the other plaintiffs.
The Corporation has appealed both judgments. On July 8, 1993, in
the third of the Mississippi dioxin cases to be tried, the jury
returned a verdict in favor of the Corporation on all counts,
with no award being made to any of the plaintiffs. The plaintiffs
have filed notice of appeal.
On November 9, 1993, the circuit court judge to whom almost
all the remaining Mississippi dioxin cases have been assigned
issued an Order delaying trials and other material proceedings in
these cases until the Mississippi Supreme Court considers the
Ferguson and Simmons appeals. The Supreme Court has advised the
Corporation that it will hear the appeal of these cases on March
21, 1994.
In January 1994, one of the two dioxin-related cases pending
in federal court in Mississippi, which was scheduled for trial in
June 1994, was voluntarily dismissed with prejudice by the
plaintiffs after testing of the plaintiffs' property indicated
that no dioxin from the pulp mill was present on the property.
Although there can be no assurances as to the ultimate
outcome, the Corporation, based on the opinions of counsel,
believes that substantial grounds exist for reversal of the two
judgments and that it has meritorious defenses to the remaining
claims (the vast majority of which are principally for emotional
distress as a result of consuming fish from the rivers).
On July 15, 1992, the plaintiffs in one of the pending suits
moved to certify a class action. On October 20, 1992, the court
issued an order certifying a class action on behalf of between
8,000 and 13,000 plaintiffs owning property and businesses on the
Leaf, Pascagoula and Escatawpa Rivers as well as persons who have
eaten fish from, swam in or made recreational use of the rivers.
The Corporation appealed and on October 7, 1993, the Mississippi
Supreme Court vacated the trial court's order. The Supreme Court
ruled that the trial judge lacked authority under his special
appointment to allow a class to be certified.
On January 23, 1992, the mill's primary insurance carrier took
the position that the claims in these Mississippi cases are not
within its coverage. Suit has been filed against the mill's
carriers seeking a declaratory judgment to the effect that such
claims are within the policy provisions.
Although the ultimate outcome of these environmental actions
and legal proceedings cannot be determined with certainty,
management believes that any liability resulting from the pending
matters, after considering existing reserves, will not have a
material adverse effect on the consolidated financial condition
of the Corporation.
36
NOTE 10. RELATED PARTY TRANSACTION
The Corporation is a 50% partner in a joint venture (GA-MET) with
Metropolitan Life Insurance Company (Metropolitan). GA-MET owns
and operates the Corporation's office headquarters complex in
Atlanta, Georgia. The Corporation accounts for its investment in
GA-MET under the equity method.
At December 31, 1993, GA-MET had an outstanding mortgage loan
payable to Metropolitan in the amount of $160 million. The note
bears interest at 9-1/2%, requires monthly payments of principal
and interest through 2011 and is secured by the land and building
of the Atlanta headquarters complex. In the event of foreclosure,
each partner has severally guaranteed payment of one-half of any
shortfall of collateral value to the outstanding secured
indebtedness. Based on the present market conditions and building
occupancy, the likelihood of any obligation to the Corporation
with respect to this guarantee is considered remote.
NOTE 11. SUPPLEMENTAL CASH FLOW INFORMATION
The noncash effect of the adoption of Financial Accounting
Standard Number 109 (Note 6) as of January 1, 1992 was as
follows:
(Millions)
------------------------------------------------------
Increase (decrease) in:
Receivables $ 3
Inventories 25
Timber and timberlands 39
Property, plant and
equipment, net 676
Other assets (6)
(Increase) decrease in:
Taxes payable (177)
Other current liabilities (9)
Long-term debt, excluding
current portion 3
Other long-term liabilities (112)
Deferred income taxes (442)
------------------------------------------------------
$ --
======================================================
NOTE 12. UNAUDITED SELECTED QUARTERLY FINANCIAL DATA
First Quarter Second Quarter Third Quarter Fourth Quarter
(Millions, -----------------------------------------------------------------------------
except per share amounts) 1993 1992(1) 1993 1992(1) 1993 1992(1) 1993 1992
------------------------------------------------------------------------------------------------------------------
Net sales $2,944 $2,830 $3,205 $3,046 $2,982 $3,061 $3,199 $2,910
Gross profit (net sales
minus cost of sales) 676 630 617 617 619 635 604 568
Income (loss) before
extraordinary item
and accounting change(2) 41 (3) 5 4 (28) (174) (36) 113
Income (loss) per share
before extraordinary item
and accounting change .47 (.03) .06 .04 (.33) (2.01) (.41) 1.31
Net income (loss)(2) 41 (58) (3) 4 (36) (174) (36) 104
Net income (loss) per share .47 (.67) (.03) .04 (.42) (2.01) (.41) 1.21
Dividends declared per
common share .40 .40 .40 .40 .40 .40 .40 .40
Price range of common stock
High 69.50 72.00 69.25 71.75 64.13 62.63 75.00 62.50
Low 55.00 53.50 56.38 57.75 59.25 50.13 59.00 48.25
-------------------------------------------------------------------------------------------------------------------
(1)As restated to reflect the change in accounting for
income taxes (Note 6).
(2)Includes after-tax gains (losses) on asset divestitures
of $(3) million in the 1993 first quarter and $10
million in the 1993 third quarter.
37
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and the Board of Directors of Georgia-Pacific
Corporation:
We have audited the accompanying balance sheets of
Georgia-Pacific Corporation (a Georgia corporation) and
subsidiaries as of December 31, 1993 and 1992 and the related
statements of income, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1993.
These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Georgia-Pacific Corporation and subsidiaries as of December
31, 1993 and 1992 and the results of their operations and their
cash flows for each of the three years in the period ended
December 31, 1993 in conformity with generally accepted
accounting principles.
As explained in Note 6 to the financial statements, effective
January 1, 1992, the Corporation changed its method of accounting
for income taxes. Also as explained in Notes 1 and 7 to the
financial statements, effective January 1, 1991, the Corporation
changed its methods of accounting for certain manufacturing
supplies and for postretirement health care and life insurance
benefits.
/s/ Arthur Andersen & Co.
-------------------------
Arthur Andersen & Co.
Atlanta, Georgia
February 18, 1994
38
REPORT ON MANAGEMENT'S RESPONSIBILITIES
Management of Georgia-Pacific Corporation is responsible for the
preparation, integrity and fair presentation of the consolidated
financial statements and the estimates and judgments upon which
certain amounts in the financial statements are based. Management
is also responsible for preparing the other financial information
included in this annual report. In our opinion, the financial
statements on the preceeding pages have been prepared in
conformity with generally accepted accounting principles, and the
other financial information in this annual report is consistent
with the financial statements.
Management is also responsible for establishing and
maintaining a system of internal control over financial
reporting, which encompasses policies, procedures and controls
directly related to, and designed to provide reasonable assurance
as to, the reliability of the published financial statements. An
independent evaluation of the system is performed by the
Corporation's internal audit staff in order to confirm that the
system is adequate and operating effectively. The Corporation's
independent public accountants also consider certain elements of
the internal control system in order to determine their auditing
procedures for the purpose of expressing an opinion on the
financial statements. Management has considered any significant
recommendations regarding the internal control system which have
been brought to its attention by the internal audit staff or
independent public accountants and has taken the steps it deems
appropriate to maintain a cost-effective internal control system.
The Audit Committee of the Board of Directors, consisting of five
independent directors, provides oversight to the financial
reporting process. The Corporation's internal auditors and
independent public accountants meet regularly with the Audit
Committee to discuss financial reporting and internal control
issues and have full and free access to the Audit Committee.
There are inherent limitations in the effectiveness of any
system of internal control, including the possibility of human
error and the circumvention or overriding of controls.
Accordingly, even an effective internal control system can
provide only reasonable assurance with respect to financial
statement preparation. Furthermore, the effectiveness of an
internal control system can vary over time due to changes in
conditions.
Management believes that as of December 31, 1993, the internal
control system over financial reporting is adequate and effective
in all material respects.
James E. Terrell
Vice President and Controller
James C. Van Meter
Vice Chairman and Chief Financial Officer
A.D. Correll
Chairman and Chief Executive Officer
February 18, 1994
39
SELECTED FINANCIAL DATA--OPERATIONS
CASH DIVIDENDS TO EARNINGS. Cash dividends declared (common and
preferred) divided by net income (loss).
EARNINGS TO INTEREST. Income (loss) from continuing operations
before income taxes, extraordinary items and accounting changes
plus interest expense divided by total interest cost (interest
expense plus capitalized interest). In the 1993, 1992, 1991 and
1990 calculations, respectively, the $29 million, $35 million, $59
million and $48 million cost of the accounts receivable sale
program was included in interest expense.
CASH FLOW TO INTEREST. Cash provided by continuing operations plus
interest expense divided by total interest cost (interest expense
plus capitalized interest). In the 1993, 1991 and 1990
calculations, respectively, cash provided by continuing operations
excludes $(100) million, $(50) million and $850 million from the
accounts receivable sale program. In the 1993, 1992, 1991 and 1990
calculations, respectively, the $29 million, $35 million, $59
million and $48 million cost of the accounts receivable sale
program was included in interest expense.
EFFECTIVE INCOME TAX RATE. Provision (benefit) for income taxes
divided by income (loss) from continuing operations before income
taxes, extraordinary items and accounting changes.
Year ended December 31
(Dollar amounts, except per share, -------------------------------------------------------------------
and shares are in millions) 1993 1992 1991 1990* 1989 1988 1987
- ---------------------------------------------------------------------------------------------------------
Operations
Net sales $12,330 $11,847 $11,524 $12,665 $10,171 $9,509 $8,603
- ---------------------------------------------------------------------------------------------------------
Costs and expenses
Cost of sales 9,814 9,397 9,164 9,738 7,621 7,452 6,777
Selling, general and
administrative 1,190 1,170 1,137 951 689 632 583
Depreciation and depletion 764 789 724 699 514 450 387
Interest 513 565 584 606 260 197 124
Other (income) expense 26 -- (344) (48) -- -- --
- ---------------------------------------------------------------------------------------------------------
Total costs and expenses 12,307 11,921 11,265 11,946 9,084 8,731 7,871
- ---------------------------------------------------------------------------------------------------------
Income (loss) from continuing
operations before unusual items,
income taxes, extraordinary items
and accounting changes 23 (74) 259 719 1,087 778 732
Unusual items -- -- -- -- -- -- 66
Provision (benefit) for income taxes 41 (14) 293 354 426 311 340
- ---------------------------------------------------------------------------------------------------------
Income (loss) from continuing
operations before extraordinary
items and accounting changes (18) (60) (34) 365 661 467 458
Income (loss) from discontinued
operations, net of taxes -- -- -- -- -- -- --
Extraordinary items and accounting
changes, net of taxes (16) (64) (108) -- -- -- --
- ---------------------------------------------------------------------------------------------------------
Net income (loss) $ (34) $ (124) $ (142) $ 365 $ 661 $ 467 $ 458
=========================================================================================================
Cash provided by continuing
operations** $ 489 $ 868 $ 630 $ 1,223 $ 1,358 $ 865 $ 781
=========================================================================================================
Other statistical data
Per common share
Income (loss) from continuing
operations before extraordinary
items and accounting changes $ (.21) $ (.69) $ (.40) $ 4.28 $ 7.42 $ 4.76 $ 4.23
Income (loss) from discontinued
operations -- -- -- -- -- -- --
Extraordinary items and accounting
changes (.18) (.74) (1.25) -- -- -- --
- ---------------------------------------------------------------------------------------------------------
Net income (loss) $ (.39) $ (1.43) $ (1.65) $ 4.28 $ 7.42 $ 4.76 $ 4.23
=========================================================================================================
Dividends declared $ 1.60 $ 1.60 $ 1.60 $ 1.60 $ 1.45 $ 1.25 $ 1.05
Average shares of common stock
outstanding 87.7 86.4 85.8 85.3 89.1 98.1 107.5
Shares of common stock outstanding
at year end 90.3 88.1 87.4 86.7 86.7 94.8 104.7
Cash dividends to earnings 100%+ 100%+ 100%+ 38.1% 19.7% 26.3% 25.1%
Earnings to interest 1.0 0.9 1.4 2.0 5.0 4.4 6.9
Cash flow to interest 1.9 2.4 1.9 2.7 5.9 4.8 6.8
Effective income tax rate 178.3% (18.9)% 113.1% 49.2% 39.2% 40.0% 42.6%
=========================================================================================================
Year ended December 31
(Dollar amounts, except per share, -----------------------------------------
and shares are in millions) 1993 1986 1985 1984 1983
- --------------------------------------------------------------------------------------------
Operations
Net sales $7,223 $6,716 $6,682 $6,040
- --------------------------------------------------------------------------------------------
Costs and expenses
Cost of sales 5,783 5,553 5,441 4,978
Selling, general and
administrative 511 431 426 374
Depreciation and depletion 339 310 282 289
Interest 138 132 156 157
Other (income) expense -- -- -- 135
- --------------------------------------------------------------------------------------------
Total costs and expenses 6,771 6,426 6,305 5,933
- --------------------------------------------------------------------------------------------
Income (loss) from continuing
operations before unusual items,
income taxes, extraordinary items
and accounting changes 452 290 377 107
Unusual items 33 19 19 --
Provision (benefit) for income taxes 189 102 143 32
- --------------------------------------------------------------------------------------------
Income (loss) from continuing
operations before extraordinary
items and accounting changes 296 207 253 75
Income (loss) from discontinued
operations, net of taxes -- (30) (134) 30
Extraordinary items and accounting
changes, net of taxes -- 10 -- --
- --------------------------------------------------------------------------------------------
Net income (loss) $ 296 $ 187 $ 119 $ 105
============================================================================================
Cash provided by continuing
operations** $ 575 $ 771 $ 509 $ 460
============================================================================================
Other statistical data
Per common share
Income (loss) from continuing
operations before extraordinary
items and accounting changes $ 2.70 $ 1.84 $ 2.28 $ .53
Income (loss) from discontinued
operations -- (.29) (1.31) .30
Extraordinary items and accounting
changes -- .10 -- --
- --------------------------------------------------------------------------------------------
Net income (loss) $ 2.70 $ 1.65 $ .97 $ .83
============================================================================================
Dividends declared $ .85 $ .80 $ .70 $ .60
Average shares of common stock
outstanding 104.1 103.0 102.2 101.5
Shares of common stock outstanding
at year end 107.3 103.2 102.5 101.5
Cash dividends to earning 32.8% 49.7% 71.4% 72.4%
Earnings to interest 4.2 2.7 3.3 1.6
Cash flow to interest 4.9 5.6 4.0 3.8
Effective income tax rate 39.0% 33.0% 36.1% 29.9%
============================================================================================
* The results of Great Northern Nekoosa Corporation and its
subsidiaries have been included beginning on March 9, 1990.
**Excludes the accounts receivable sale program.
40
SELECTED FINANCIAL DATA--FINANCIAL POSITION, END OF YEAR
BOOK VALUE PER COMMON SHARE. Shareholders' equity minus the unamortized
discount on redeemable preferred stock, divided by shares of common stock
outstanding as of the end of the year.
TOTAL DEBT TO CAPITAL. Total debt divided by the sum of total debt,
deferred income taxes, other long-term liabilities, redeemable preferred stock
and shareholders' equity as of the end of the year. Total debt includes bank
overdrafts, commercial paper and short-term notes, current portion of long-term
debt, long-term debt and accounts receivable sold.
CURRENT RATIO. Current assets divided by current liabilities as of
the end of the year.
Year ended December 31
(Dollar amounts, except per share, ------------------------------------------------------------------
are in millions) 1993 1992 1991 1990* 1989 1988 1987
----------------------------------------------------------------------------------------------------------
Financial position, end of year
Current assets $1,646 $1,607 $1,562 $1,766 $1,829 $1,892 $1,729
Timber and timberlands, net 1,381 1,402 1,377 1,630 1,246 1,289 915
Property, plant and equipment, net 5,448 5,831 5,567 6,341 3,691 3,723 3,048
Net assets of discontinued operations -- -- -- -- -- -- --
Goodwill 1,832 1,891 1,949 2,042 91 101 92
Other assets 238 181 174 284 202 113 90
----------------------------------------------------------------------------------------------------------
Total assets 10,545 10,912 10,629 12,063 7,059 7,118 5,874
----------------------------------------------------------------------------------------------------------
Current liabilities 2,064 2,452 2,722 2,535 924 1,013 996
Long-term debt 4,157 4,019 3,743 5,218 2,336 2,514 1,298
Other long-term liabilities 827 731 633 407 241 168 156
Deferred income taxes 1,095 1,202 795 928 841 788 744
Redeemable preferred stock -- -- -- -- -- -- --
----------------------------------------------------------------------------------------------------------
Shareholders' equity $2,402 $2,508 $2,736 $2,975 $2,717 $2,635 $2,680
----------------------------------------------------------------------------------------------------------
Working capital $(418) $(845) $(1,160) $(769) $905 $879 $733
----------------------------------------------------------------------------------------------------------
Other statistical data
Capital expenditures
(including acquisitions)** $467 $384 $528 $3,789 $499 $1,552 $825
Capital expenditures
(excluding acquisitions)** 467 384 528 866 493 711 550
Per common share
Market price:
High 75.00 72.00 60.25 52.13 62.00 42.88 52.75
Low 55.00 48.25 36.25 25.38 36.63 30.75 22.75
Year-end 68.75 62.38 53.63 37.25 48.50 36.88 34.50
Book value 26.60 28.47 31.30 34.31 31.35 27.79 25.59
Total debt to capital 57.0% 57.0% 60.1% 63.6% 40.1% 44.1% 31.4%
Current ratio .8 .7 .6 .7 2.0 1.9 1.7
=============================================================================================================
Year ended December 31
(Dollar amounts, except per share,--------------------------------------------
are in millions) 1986 1985 1984 1983
------------------------------------------------------------------------------
Financial position, end of year
Current assets $1,420 $1,291 $1,406 $1,268
Timber and timberlands, net 844 804 840 753
Property, plant and equipment, net 2,691 2,606 2,270 1,989
Net assets of discontinued operations -- 11 158 653
Goodwill -- -- -- --
Other assets 160 154 111 69
-------------------------------------------------------------------------------
Total assets 5,115 4,866 4,785 4,732
-------------------------------------------------------------------------------
Current liabilities 837 631 640 612
Long-term debt 893 1,257 1,383 1,453
Other long-term liabilities 125 69 34 26
Deferred income taxes 695 606 503 413
Redeemable preferred stock 113 156 190 215
-------------------------------------------------------------------------------
Shareholders' equity $2,452 $2,147 $2,035 $2,013
-------------------------------------------------------------------------------
Working capital $583 $660 $766 $656
-------------------------------------------------------------------------------
Other statistical data
Capital expenditures
(including acquisitions)** $482 $642 $710 $188
Capital expenditures
(excluding acquisitions)** 444 624 403 184
Per common share
Market price:
High 41.25 27.38 25.75 31.88
Low 24.75 20.50 18.00 22.38
Year-end 37.00 26.50 25.00 24.75
Book value 22.70 20.59 19.58 19.48
Total debt to capital 26.3% 32.0% 35.7% 37.4%
Current ratio 1.7 2.0 2.2 2.1
=============================================================================
* The financial position of Great Northern Nekoosa Corporation and
its subsidiaries has been included beginning March 9, 1990.
**Represents additions, at cost, to property, plant and equipment
and timber and timberlands.
41
SALES AND OPERATING PROFITS BY INDUSTRY SEGMENT
Year ended December 31
----------------------------------------------------
(Millions) 1993 1992 1991
-------------------------------------------------------------------------------
Net sales
Building products
Wood panels $ 2,913 24% $ 2,543 22% $ 2,097 18%
Lumber 2,672 22 2,055 17 1,819 16
Chemicals 267 2 240 2 223 2
Gypsum products 236 2 216 2 222 2
Roofing 180 1 185 2 183 2
Other 799 7 873 7 861 7
-------------------------------------------------------------------------------
7,067 58 6,112 52 5,405 47
-------------------------------------------------------------------------------
Pulp and paper
Containerboard and
packaging 1,902 15 2,001 17 2,008 17
Communication papers 1,195 10 1,070 9 1,134 10
Tissue 713 6 682 6 664 6
Market pulp 622 5 681 6 645 6
Paper distribution
and envelopes 748 6 1,208 10 1,218 10
Other 51 -- 69 -- 420 4
-------------------------------------------------------------------------------
5,231 42 5,711 48 6,089 53
-------------------------------------------------------------------------------
Other operations 32 -- 24 -- 30 --
-------------------------------------------------------------------------------
Continuing operations $12,330 100% $11,847 100% $11,524 100%
===============================================================================
Operating results*
Building products $ 973 126% $ 691 100% $ 344 32%
Pulp and paper (187) (24) (8) (1) 362 34
Other operations 10 1 9 1 17 2
Other income (expense)** (26) (3) -- -- 344 32
- --------------------------------------------------------------------------------
Continuing operations $ 770 100% $ 692 100% $ 1,067 100%
================================================================================
Year ended December 31
- --------------------------------------------------------------------------------------------------
(Millions) 1990*** 1989 1988 1987 1986
- --------------------------------------------------------------------------------------------------
Net sales
Building products
Wood panels $ 2,296 18% $ 2,488 24% $2,442 26% $2,355 28% $1,864 26%
Lumber 1,966 16 2,109 21 2,134 22 2,002 23 1,676 23
Chemicals 247 2 253 3 241 2 189 2 155 2
Gypsum products 270 2 299 3 305 3 361 4 375 5
Roofing 192 2 194 2 189 2 194 2 230 3
Other 952 7 745 7 718 8 654 8 553 8
- --------------------------------------------------------------------------------------------------
5,923 47 6,088 60 6,029 63 5,755 67 4,853 67
- --------------------------------------------------------------------------------------------------
Pulp and paper
Containerboard and
packaging 2,440 19 1,578 15 1,433 15 1,246 15 1,029 15
Communication papers 1,360 11 983 10 796 8 621 7 461 6
Tissue 719 6 679 7 590 6 539 6 502 7
Market pulp 779 6 728 7 533 6 314 4 221 3
Paper distribution
and envelopes 1,027 8 -- -- -- -- -- -- -- --
Other 377 3 74 1 84 1 90 1 68 1
- --------------------------------------------------------------------------------------------------
6,702 53 4,042 40 3,436 36 2,810 33 2,281 32
- --------------------------------------------------------------------------------------------------
Other operations 40 -- 41 -- 44 1 38 -- 89 1
- --------------------------------------------------------------------------------------------------
Continuing operations $12,665 100% $10,171 100% $9,509 100% $8,603 100% $7,223 100%
==================================================================================================
Operating results*
Building products $ 423 29% $ 533 36% $ 428 41% $ 533 58% $ 500 73%
Pulp and paper 979 67 917 63 616 58 383 41 146 22
Other operations 17 1 15 1 10 1 10 1 35 5
Other income (expenses)** 48 3 -- -- -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------
Continuing operations $ 1,467 100% $ 1,465 100% $1,054 100% $ 926 100% $ 681 100%
==================================================================================================
Year ended December 31
----------------------------------------------------------
(Millions) 1985 1984 1983
------------------------------------------------------------------------------------
Net sales
Building products
Wood panels $1,666 25% $1,637 25% $1,560 26%
Lumber 1,434 21 1,461 22 1,424 24
Chemicals 173 3 186 3 162 3
Gypsum products 377 6 360 5 269 4
Roofing 260 4 268 4 222 4
Other 560 8 540 8 506 8
- ------------------------------------------------------------------------------------
4,470 67 4,452 67 4,143 69
- ------------------------------------------------------------------------------------
Pulp and paper
Containerboard and
packaging 1,037 15 909 13 647 11
Communication papers 356 5 445 7 450 7
Tissue 514 8 507 8 449 7
Market pulp 157 2 225 3 191 3
Paper distribution
and envelope -- - -- - -- -
Other 70 1 25 - 31 1
- ------------------------------------------------------------------------------------
2,134 31 2,111 31 1,768 29
- ------------------------------------------------------------------------------------
Other operations 112 2 119 2 129 2
- ------------------------------------------------------------------------------------
Continuing operations $6,716 100% $6,682 100% $6,040 100%
====================================================================================
Operating results*
Building products $ 391 86% $ 379 63% $ 354 117%
Pulp and paper 29 6 202 34 71 23
Other operations 35 8 20 3 13 4
Other income (expenses)** -- -- -- -- (135) (44)
- ------------------------------------------------------------------------------------
Continuing operations $ 455 100% $ 601 100% $ 303 100%
====================================================================================
*Operating results are before income taxes, interest, cost of
accounts receivable sale program, general corporate expenses,
unusual items, extraordinary items and accounting changes.
**Other income (expense) includes a net $26 million pretax loss in
1993, a net $344 million pretax gain in 1991 and a net $48 million
pretax gain in 1990 resulting from asset divestitures and pretax
restructuring charges of $135 million in 1983. If these amounts
had been included in segment operating profits, pulp and paper
operating profits would have been $(213) million in 1993, $546
million in 1991, $939 million in 1990 and $13 million in 1983;
building products operating profits would have been $504 million
in 1991, $511 million in 1990 and $277 million in 1983; and other
operations operating profits would have been $13 million in 1983.
***Sales and operating profits of Great Northern Nekoosa Corporation
and its subsidiaries have been included beginning on March 9, 1990.
42
OPERATING STATISTICS
As of December 31, 1993
-------------------------------------------------------
Number of Annual
Facilities Capacity 1993 1992 1991 1990* 1989 1988
- ---------------------------------------------------------------------------------------------------------------------------------
Pulp and paper
Paper (t.tons)
Containerboard and packaging
Linerboard and medium 4 2,941 3,030 2,889 2,936 3,139 1,419 1,297
Other paperboard 5 664 567 526 522 544 555 458
Kraft paper 2 342 343 377 358 354 350 356
Communication papers 8 2,223 2,119 2,002 1,994 1,780 1,161 970
Tissue 5 573 594 576 556 553 519 511
Groundwood papers -- -- -- -- 603 531 -- --
Market pulp (t.tons) 6 1,880 1,940 1,829 1,793 1,667 1,194 870
- ---------------------------------------------------------------------------------------------------------------------------------
Total paper and market pulp 30 8,623 8,593 8,199 8,762 8,568 5,198 4,462
=============================================================================
Converting
Corrugated packaging (m.sq.ft.) 37 27,963 29,998 25,411 24,010 31,356 16,640 16,577
Tissue (t.tons) 6 610 543 521 491 497 467 462
Envelopes (billion envelopes) 17 15 13 13 13 12 -- --
Other 12
- --------------------------------------------------------
Total paper, market pulp and converting 102
========================================================
Distribution centers 0**
Building products
Wood panels
Softwood plywood (3/8") (m.sq.ft.) 17 5,019 5,462 5,133 4,968 5,395 5,341 5,545
Hardwood plywood (sm) (m.sq.ft.) 2 600 477 458 424 437 420 456
Hardboard (1/8") (m.sq.ft.) 8 1,395 1,388 1,330 1,202 1,203 1,203 1,198
Particleboard (3/4") (m.sq.ft.) 8 1,210 1,089 977 932 984 1,062 1,004
Oriented strand board (3/8") (m.sq.ft.) 4 952 1,045 1,011 851 969 873 793
Panelboard (1/8") (m.sq.ft.) 1 379 366 365 332 344 318 330
Softboard (1/2") (m.sq.ft.) 1 250 247 234 237 252 242 238
Medium-density fiberboard (3/4") (m.sq.ft.) 1 100 98 92 79 88 74 62
Lumber (m.bd.ft.) 40 2,732 2,580 2,568 2,570 2,674 2,426 2,324
Moulding (m.bd.ft.) 2 21 21 23 22 36 29 30
Gypsum board (m.sq.ft.) 10 3,063 2,409 2,112 1,955 2,309 2,403 2,406
Roofing--shingles (t.squares) 5 9,484 7,274 7,447 7,775 7,674 8,106 7,155
Formaldehyde (m.lbs.) 13 1,891 1,809 1,614 1,540 1,547 1,454 1,394
Thermosetting resins (m.lbs.) 16 3,014 2,761 2,571 2,377 2,470 2,372 2,362
Other 19
- --------------------------------------------------------
Total building products 147
========================================================
Distribution centers 137
Other operations 2
========================================================
Resources (as of December 31)
North American timberlands (t.acres)
Owned 5,821 5,942 5,969 8,203*** 5,430 5,480
Controlled 681 707 922 1,047*** 670 1,010
================================================================================================================================
As of December 31, 1993
------------------------------------------------
1987 1986 1985 1984 1983
- ------------------------------------------------------------------------------------------------------
Pulp and paper
Paper (t.tons)
Containerboard and packaging
Linerboard and medium 1,318 1,146 976 740 452
Other paperboard 393 368 368 374 377
Kraft paper 348 394 452 529 541
Communication papers 868 731 552 574 518
Tissue 490 496 476 486 487
Groundwood papers -- -- -- -- --
Market pulp (t.tons) 718 611 587 629 601
- --------------------------------------------------------------------------------------------------
Total paper and market pulp 4,135 3,746 3,411 3,332 2,976
================================================
Converting
Corrugated packaging (m.sq.ft.) 15,750 14,572 13,703 11,880 8,427
Tissue (t.tons) 446 437 432 422 422
Envelopes (billion envelopes) -- -- -- -- --
Other
- ---------------------------------------
Total paper, market pulp and converting
=======================================
Distribution centers
Building products
Wood panels
Softwood plywood (3/8") (m.sq.ft.) 5,050 4,706 4,414 4,443 4,430
Hardwood plywood (sm) (m.sq.ft.) 357 335 311 343 442
Hardboard (1/8") (m.sq.ft.) 1,159 349 368 361 346
Particleboard (3/4") (m.sq.ft.) 695 425 410 381 400
Oriented strand board (3/8") (m.sq.ft) 652 525 173 96 51
Panelboard (1/8") (m.sq.ft.) 295 248 290 311 299
Softboard (1/2") (m.sq.ft.) 231 241 239 243 241
Medium-density fiberboard (3/4") (m.sq. ft.) 59 75 76 69 77
Lumber (m.bd.ft.) 1,956 1,784 1,684 1,650 1,603
Moulding (m.bd.ft.) 30 8 -- -- --
Gypsum board (m.sq.ft.) 2,620 2,473 2,495 2,412 2,242
Roofing--shingles (t.squares) 6,976 7,361 7,789 7,539 5,973
Formaldehyde (m.lbs.) 1,309 1,233 1,188 1,169 1,081
Thermosetting resins (m.lbs.) 2,136 1,805 1,650 1,527 1,451
Other
- ---------------------------------------
Total building products
=======================================
Distribution centers
Other operations
=======================================
Resources (as of December 31)
North American timberlands (t.acres)
Owned 4,910 4,700 4,760 4,920 4,630
Controlled 670 530 480 480 530
==================================================================================================
sm = surface measure basis
t = thousands
m = millions
The Corporation has 248 manufacturing facilities in the United States,
one recycled-paper mill in Canada, and 2 wood moulding manufacturing
facilities in Mexico.
*The production of Great Northern Nekoosa facilities has been
included beginning on March 9, 1990.
**Butler Paper assets were sold in July, 1993.
***Excludes 540,000 fee acres and 98,000 controlled acres of
timberland sold in January 1991.
43
INVESTOR INFORMATION
CORPORATE HEADQUARTERS
Georgia-Pacific Center, 133 Peachtree Street, N.E., Atlanta, Georgia 30303
STOCK EXCHANGES AND SYMBOLS
Georgia-Pacific Corporation Common Stock is listed on the New York Stock
Exchange ("NYSE"). The Corporation's NYSE symbol is "GP"; however, the stock is
quoted as "GaPac" in stock table listings in newspapers. G-P options are traded
on the Philadelphia Stock Exchange.
TRANSFER AGENT AND REGISTRAR
First Chicago Trust Company of New York
Post Office Box 2500
Jersey City, New Jersey 07303-2500
SHAREHOLDER INFORMATION
For shareholder information, contact the Transfer Agent and Registrar, First
Chicago Trust Company of New York, at Post Office Box 2500, Jersey City, New
Jersey 07303-2500, or telephone (201) 324-0498.
Registered G-P shareholders are eligible to participate in the G-P Dividend
Reinvestment Plan. For information on the Plan, contact the Plan agent, First
Chicago Trust Company of New York, Post Office Box 2500, Jersey City, New
Jersey 07303-2500.
FINANCIAL INFORMATION
A copy of the Georgia-Pacific 1993 Annual Report to the Securities and Exchange
Commission on Form 10-K will be supplied without charge. Annual Statistical
Updates are also available. Requests for financial information should be
directed to: Investor Relations, Georgia-Pacific Corporation, P.O. Box 105605,
Atlanta, Georgia 30348, or telephone (404) 652-5555.
Georgia-Pacific is an equal opportunity employer.
Photo Descriptions:
Douglas Fir near Coos Bay, Oregon cover
Loblolly Pine in Crossett, Arkansas page 10
Slash Pine in Gainesville, Florida 16
Douglas Fir near Martell, California on the American River 22
Yellow Poplar near Big Island, Virginia 28
Longleaf Pine located near Leaf River pulp mill 72 and 73
(c)1994 Georgia-Pacific Corporation. All rights reserved.
ANGEL SOFT, SPARKLE, CORONET, MD, DELTA and HOPPER are registered trademarks
and PROTERRA, KIANA and FLECKS are trademarks of Georgia-Pacific Corporation.
Printed on Georgia-Pacific papers:
Cover--Hopper(r) Proterra(tm) Flecks(tm) Chalk 100 lb. cover
Text--Hopper(r) Proterra(tm) Flecks(tm) Chalk 70 lb. text
Hopper(r) Kiana(tm) Smooth White 80 lb. text
Design: Samata Associates
Principal Photography: Marc Norberg
Typography: Fine Print Typography, Inc.
Lithography: George Rice & Sons
Lithography in the United States of America