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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NO. 1-3053
CHAMPION INTERNATIONAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 13-1427390
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
06921
ONE CHAMPION PLAZA, STAMFORD, (ZIP CODE)
CONNECTICUT
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 358-7000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -----------------------
<S> <C>
COMMON STOCK, $.50 PAR VALUE NEW YORK STOCK EXCHANGE
(92,959,357 SHARES OUTSTANDING ON
FEBRUARY 28, 1994)
4 7/8% CONVERTIBLE SUBORDINATED NEW YORK STOCK EXCHANGE
DEBENTURES DUE APRIL 1, 1997
6 1/2% CONVERTIBLE SUBORDINATED NEW YORK STOCK EXCHANGE
DEBENTURES DUE APRIL 15, 2011
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X . NO .
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO
THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [X]
THE AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT AS OF FEBRUARY 28, 1994 WAS APPROXIMATELY $3,224,000,000.
PORTIONS OF THE REGISTRANT'S ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1993 ARE INCORPORATED BY REFERENCE IN PARTS I, II AND
IV HEREOF. PORTIONS OF THE REGISTRANT'S DEFINITIVE PROXY STATEMENT FOR THE
ANNUAL MEETING OF SHAREHOLDERS SCHEDULED TO BE HELD ON MAY 19, 1994 ARE
INCORPORATED BY REFERENCE IN PART III HEREOF; SAID DEFINITIVE PROXY STATEMENT
WILL BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WITHIN 120 DAYS AFTER
THE CLOSE OF THE FISCAL YEAR ENDED DECEMBER 31, 1993.
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PART I
ITEM 1. BUSINESS
GENERAL
Champion International Corporation was incorporated under the laws of the
State of New York on April 28, 1937. References to the "Company" include
Champion International Corporation and its subsidiaries at December 31, 1993,
unless the context otherwise requires.
The Company is one of the leading domestic manufacturers of paper for
business communications, commercial printing, publications and newspapers. In
addition, the Company has significant plywood and lumber manufacturing
operations and owns or controls approximately 5,072,000 acres of timberlands in
the United States. The Company's Canadian and Brazilian subsidiaries also own
or control significant timber resources supporting their operations.
The Company's business segments are paper and wood products. See Note 13 of
Notes to Financial Statements on pages 37 and 38 of the Company's Annual Report
to Shareholders for the fiscal year ended December 31, 1993 (the "Company's 1993
Annual Report"), which Note is incorporated by reference herein, for information
concerning the Company's business segments and operations in different
geographic areas for 1991, 1992 and 1993.
PAPER
See the Net Sales table on page 18 of the Company's 1993 Annual Report, which
table is incorporated by reference herein, for information concerning the net
sales to unaffiliated customers of the various products of the paper business
for 1991, 1992 and 1993.
PRINTING AND WRITING PAPERS
The printing and writing papers business manufactures and sells printing and
writing papers, bleached paperboard and pulp. The principal domestic
manufacturing properties of this operation consist of integrated pulp and paper
mills at Courtland, Alabama; Canton, North Carolina; and Pensacola, Florida; and
a paper mill at Hamilton, Ohio. As of December 31, 1993, these mills had an
annual capacity of approximately 1,846,000 tons of pulp and 2,066,000 tons of
printing and writing papers and bleached paperboard.
Most of the pulp produced by the printing and writing papers business is used
in its own paper mills; approximately 14%, produced at the Pensacola and
Courtland mills, was sold in the open market in 1993. A portion of the fiber
requirements of this business also is supplied by other Company pulp mills, and
approximately 4% of its fiber requirements in 1993 were purchased from third-
party suppliers.
Uncoated papers produced by the printing and writing papers business are used
for computer forms, copier paper and envelope papers. Coated papers are used in
catalogs, magazines, brochures, labels and annual reports.
In 1993, 63% of this operation's bleached paperboard production was used by
the Company's DairyPak unit, which converts polyethylene-coated paperboard into
milk and juice cartons and ovenable packaging. The balance either was sold to
independent purchasers, primarily for conversion to cups, or was exported.
The Company leases substantial portions of the Courtland mill under 10 long-
term net leases which expire between 1997 and 2029. Each of these leases
provides for rental payments over its term sufficient to pay interest on and to
retire the industrial development or pollution control revenue bonds issued in
connection with the financing of the property subject to such lease. The
Company is required to purchase, or has the option to purchase, the property
subject to each such lease for a nominal sum at the time the related bonds are
retired.
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The domestic printing and writing papers business and the publication papers
business jointly maintain 11 sales offices in various parts of the United
States, as well as an order services office in Hamilton, Ohio, for the sale of
their products to direct purchasers and through paper merchants. Certain of
these sales offices are shared with the newsprint and kraft operations.
Champion Papel e Celulose Ltda., a 99%-owned subsidiary ("Champion Papel"),
is a major integrated manufacturer of pulp and printing and writing papers in
Brazil with net sales to unaffiliated customers of (U.S.) $272,498,000 in 1993.
As of December 31, 1993, this mill had an annual capacity of approximately
334,000 tons of pulp and 373,000 tons of paper. In addition to being a leading
supplier of printing and writing papers in Brazil, Champion Papel exports a
substantial portion of its paper production.
PUBLICATION PAPERS
The publication papers business manufactures and sells coated and uncoated
publication papers and pulp. The manufacturing properties of this operation
consist of integrated pulp and paper mills at Bucksport, Maine; Deferiet, New
York; Quinnesec, Michigan; and Sartell, Minnesota. As of December 31, 1993,
these mills had an annual capacity of approximately 810,000 tons of pulp and
1,250,000 tons of publication papers.
A significant portion of the fiber requirements of the publication papers
business is supplied by its own mills. In addition, a portion of its fiber
requirements is supplied by other Company pulp mills, and approximately 26% of
its fiber requirements in 1993 were purchased from third-party suppliers.
The Company manufactures pulp for sale in the open market at the Quinnesec
mill. In 1993, approximately 60% of the pulp production of this mill, or
215,000 tons, was sold in the open market through the Company's headquarters in
Stamford, Connecticut, as well as a sales office in Appleton, Wisconsin. The
balance was used in the production of paper at the Quinnesec mill and at the
Company's printing and writing papers mills.
The Company's publication papers are used primarily for consumer magazines,
direct mail catalogs, directories, textbooks and coupons. Sales are made to
direct purchasers and through paper merchants and brokers from the 11 sales
offices jointly maintained by the publication papers operation and the printing
and writing papers operation, and from the Hamilton, Ohio order services office.
The Company leases the building which houses one of the paper machines at the
Sartell mill until 2008. Thereafter, the Company has options to renew the lease
for five terms of five years each. The Company also has the option to purchase
the building at its then-current market value at the end of the initial term in
2008 or at the end of each five-year renewal term.
The Company leases certain water pollution control facilities at the Deferiet
mill until November 30, 1994. The lease provides for rental payments over its
term sufficient to pay interest on and to retire the tax-exempt bonds (in the
original principal amount of $7 million) issued to finance the acquisition of
those facilities. The Company has the option to purchase the facilities for a
nominal sum at the time the bonds are retired.
NEWSPRINT
The newsprint business manufactures pulp and manufactures and sells
newsprint, directory paper and groundwood specialties. The manufacturing
properties of this operation consist of integrated pulp and paper mills at
Lufkin and Sheldon, Texas. As of December 31, 1993, these mills had an annual
capacity of approximately 1,191,000 tons of pulp (which includes 150,000 tons of
recycled pulp) and 952,000 tons of newsprint, directory paper and groundwood
specialties.
Virtually all of the newsprint operation's pulp production is used in its own
paper mills; approximately 2% was sold in the open market in 1993.
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Most of the newsprint produced by the Company is sold in the Southwest,
Southeast and Midwest. In general, sales are made directly to publishers and
printers through four sales offices, three of which are shared with the printing
and writing papers and publication papers operations, and one order services
office.
PULP
For information concerning market pulp produced at the Pensacola and
Courtland mills, see the section captioned Printing and Writing Papers above,
and for information concerning market pulp produced at the Quinnesec mill, see
the section captioned Publication Papers above.
Weldwood of Canada Limited, a Canadian subsidiary in which the Company has
approximately 85% ownership ("Weldwood"), manufactures bleached softwood kraft
pulp at its mill in Hinton, Alberta, Canada. As of December 31, 1993, this mill
had an annual capacity of approximately 424,000 tons. In 1993, approximately
29% of the mill's pulp production was used in the Company's own publication
papers and printing and writing papers mills. The balance was sold in the open
market through the Company's headquarters in Stamford, Connecticut, a Company
sales office in Appleton, Wisconsin and a Weldwood sales office in Bad Homburg,
Germany.
Cariboo Pulp & Paper Company, a joint venture owned equally by Weldwood and
Daishowa-Marubeni International Limited, operates a bleached softwood kraft pulp
mill in Quesnel, British Columbia, Canada. As of December 31, 1993, this mill
had an annual capacity of approximately 340,000 tons. In 1993, approximately
13% of Weldwood's 50% share of the mill's pulp production was used in the
Company's own publication papers and printing and writing papers mills. The
balance of Weldwood's share was sold in the open market through the Company's
headquarters in Stamford, Connecticut, a Company sales office in Appleton,
Wisconsin and a Weldwood sales office in Bad Homburg, Germany.
While certain of the Company's mills purchase pulp in the open market, the
Company and Weldwood overall are net sellers of pulp. In 1993, the Company and
Weldwood in the aggregate produced approximately 855,000 tons of pulp for sale
to unaffiliated purchasers, while the Company used approximately 314,000 tons of
pulp purchased from third-party suppliers, resulting in net market pulp of
approximately 541,000 tons.
KRAFT
The Company produces pulp, unbleached linerboard and kraft paper for
multiwall and grocery bags at its mill in Roanoke Rapids, North Carolina. As of
December 31, 1993, this mill had an annual capacity to produce approximately
489,000 tons of pulp, 402,000 tons of linerboard and 105,000 tons of kraft
paper. All of this mill's pulp production is used at the mill. In addition,
approximately 7% of its fiber requirements in 1993 were purchased from third-
party suppliers. The linerboard and kraft paper produced at the Roanoke Rapids
mill are sold to converters through three sales offices, two of which are shared
with the printing and writing papers and publication papers operations, and one
order services office.
PAPER DISTRIBUTION OPERATION
Nationwide Papers is the Company's wholly owned distributor of paper and
paper products. Its marketing operations are carried out through 28 wholesale
warehouse facilities in 18 states. In addition, Nationwide Papers operates a
facility which converts rolls of bleached paperboard into sheets for sale to
textile, furniture and tobacco producers. In 1993, approximately 75% of its
sales were attributable to merchandise purchased from numerous manufacturers
other than the Company. However, Nationwide Papers is not dependent on any
single supplier for such merchandise.
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WOOD PRODUCTS
The Company is a major producer of plywood and lumber. The Company's wood
products business is conducted through its domestic wood products operations and
through the wood products operations of Weldwood.
The principal wood products manufacturing facilities operated by the Company
and by Weldwood are summarized under Item 2 of this Report. As of December 31,
1993, the Company had approximate annual capacities of 813 million square feet
(3/8" basis) of softwood plywood and 497 million board feet of softwood lumber.
As of December 31, 1993, Weldwood had approximate annual capacities of 450
million square feet (3/8" basis) of plywood (principally softwood), 927 million
board feet of softwood lumber and 160 million square feet (3/8" basis) of
waferboard.
The Company sells lumber and plywood through four sales offices to
wholesalers, dealers, industrial users and retailers. Weldwood sells wood
products within Canada through a 50%-owned building materials distribution
company which serves all major markets in that country. In addition, Weldwood
exports substantial portions of its products directly. In 1993, Weldwood had
net sales to unaffiliated customers of (U.S.) $610,947,000, of which (U.S.)
$500,905,000 was attributable to the wood products portion of its business.
See the Net Sales table on page 20 of the Company's 1993 Annual Report, which
table is incorporated by reference herein, for information concerning the net
sales to unaffiliated customers of the various products of the wood products
business for 1991, 1992 and 1993.
TIMBER PROPERTIES
The Company owns 4,431,360 acres and controls 640,638 acres of timberlands in
the United States. The Company's owned and controlled timberlands contain in
the aggregate approximately 17,796,000 cunits (one cunit equals one hundred
cubic feet of solid wood) of merchantable sawtimber and approximately 34,686,000
cunits of pulpwood. In 1993, the Company harvested approximately 36% of its
domestic fiber requirements from its owned and controlled timberlands. A
portion of the fiber harvested by the Company is sold in the domestic open
market and in the export market.
Broken down by region, the Company's domestic timber acreage and volume are
as follows: The Company owns 296,862 acres and controls 3,158 acres of
timberlands in the West, primarily in Washington. These timberlands contain in
the aggregate approximately 8,216,000 cunits of merchantable sawtimber and
approximately 706,000 cunits of pulpwood. In the South, primarily in Texas,
North Carolina, South Carolina, Alabama, Georgia, Florida, Tennessee and
Virginia, the Company owns 2,530,471 acres and controls 630,077 acres of
timberlands containing in the aggregate approximately 4,963,000 cunits of
merchantable sawtimber and approximately 20,033,000 cunits of pulpwood. The
Company owns 1,604,027 acres and controls 7,403 acres of timberlands in the
North, primarily in Maine, Michigan, New Hampshire, New York and Vermont. These
timberlands contain in the aggregate approximately 4,617,000 cunits of
merchantable sawtimber and approximately 13,947,000 cunits of pulpwood.
The Company's domestic log and pulpwood requirements are procured from its
owned and controlled lands, as described above, as well as from open market
purchases, short-term timber purchase contracts with independent timber owners
and agencies of the United States and various state governments, and supply
agreements with other companies. In the opinion of management, these sources
will provide an adequate supply of logs and pulpwood to meet the Company's
principal raw materials requirements for the foreseeable future. It is expected
that the proportion of fiber derived from the Company's owned and controlled
lands will decline until the middle to late 1990s but will increase thereafter
as more of the Company's plantations, primarily in the South, reach maturity.
Supplementing the Company's domestic timberlands are its several seed
orchards and nursery operations. These facilities will enable the Company to
produce most of the trees which it plans to plant in the United States in the
future, including the approximately 60 million trees planned for planting in
1994.
Weldwood obtains raw materials for its wood products manufacturing operations
from Weldwood fee-owned timberlands (which at December 31, 1993 totaled
approximately 41,800 acres); from sustained-yield, long-term
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licenses which grant cutting rights on government-owned timberlands; and from
long-term agreements with other companies based on their harvesting licenses.
Weldwood's fee-owned timberlands contain approximately 81,000 cunits of
merchantable sawtimber. Weldwood has rights to harvest approximately 936,000
cunits of merchantable sawtimber from long-term licenses annually and, during
the balance of the current terms of such licenses, has rights to harvest an
aggregate of approximately 11,000,000 cunits. In addition, Weldwood has rights
to obtain approximately 119,000 cunits of merchantable sawtimber on an annual
basis from supply agreements with other companies. Weldwood believes that these
sources will provide a substantial portion of the raw materials required by its
wood products manufacturing operations for the foreseeable future, with the
balance to be obtained from other third-party suppliers.
In addition, in Alberta, Canada, Weldwood has cutting rights through June 15,
2008 with respect to approximately 2,461,000 acres of timberlands pursuant to an
agreement with the Provincial Government of Alberta. This agreement is
renewable at Weldwood's option for successive 20-year periods as long as the
Hinton, Alberta pulp mill remains in operation. Weldwood has the right to
harvest approximately 671,000 cunits of pulpwood annually under this agreement.
Cariboo Pulp & Paper Company holds certain rights to harvest up to 533,000
cunits of pulpwood annually from approximately 3,900,000 acres of government-
owned timberlands in British Columbia pursuant to a long-term license. Weldwood
believes that this source of pulpwood, as well as supplies of wood chips from
sawmills and plywood plants in the area, will satisfy the raw materials
requirements of Cariboo's pulp mill for the foreseeable future. Babine Forest
Products Company, a joint venture in which Weldwood has an indirect 58%
interest, operates a sawmill in British Columbia and is beneficially entitled to
harvest approximately 184,000 cunits of merchantable sawtimber annually pursuant
to long-term licenses. Houston Forest Products Company, a joint venture in
which Weldwood and Eurocan Pulp and Paper Company are equal participants,
operates a sawmill in British Columbia and is beneficially entitled to cut
approximately 229,000 cunits of merchantable sawtimber annually pursuant to a
long-term license.
Champion Papel owns or controls 228,444 acres of timberlands in Brazil, which
are not in or near the Amazon Basin.
Certain of the Company's land holdings have a value substantially in excess
of that of land primarily used for fiber supply purposes. The Company has sold
or contributed to its wholly owned real estate subsidiaries, net of land
repurchased by the Company, an aggregate of approximately 225,000 acres of such
land. These subsidiaries have sold approximately 165,500 acres, of which
approximately 15,500 acres were sold during 1993, for residential, recreational,
commercial or industrial purposes. The balance is being held for similar sale
or long-term appreciation. A substantial portion of the land held by the
Company's real estate subsidiaries is located near Houston, Texas and
Jacksonville, Florida.
MINERAL, OIL AND GAS RESOURCES
The Company owns or controls various mineral, oil and gas rights with respect
to approximately half of the timberlands owned or controlled by the Company in
the United States. The Company has conducted a general review of its domestic
mineral, oil and gas rights and presently is not aware of any significant
reserves or deposits except as discussed below.
The Company has oil and gas interests in fields located in Florida, Alabama,
Texas, Louisiana and Mississippi. Drilling operations are conducted by others
pursuant to leases and other agreements with the Company. The Company estimates
that proved reserves attributable to the Company's interests in such fields
aggregate approximately 1,230,000 barrels of oil and 2,600,000 Mcf (thousand
cubic feet) of natural gas as of December 31, 1993. The Company's share of
production from such fields, which in general has been declining in recent
years, was approximately 295,000 barrels of oil, 562,000 Mcf of natural gas and
1,846,000 gallons of gas products in 1993.
Proved oil and gas reserves attributable to the Company's non-operating
royalty interests and/or operating interests in the oil and gas fields described
above are based primarily upon estimates furnished by the operators of
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those fields. The Company's share of production from such fields during each
calendar year is based on monthly production information received from the
operators, showing the application of such interests of the Company to actual
production volumes for such month.
The Company owns the surface rights and full or partial mineral rights to
considerable timberlands in Texas which overlay lignite deposits. The Company
estimates that it owns approximately 350,000,000 tons of lignite reserves in
Texas, of which 80% is estimated to be recoverable. These lignite reserves
presently are not being mined due to current market conditions.
CAPITAL PROGRAM
The Company presently anticipates that annual capital spending, for
incremental improvements, routine capital replacements and environmental
compliance, will be approximately $260 million in 1994. The Company has no
present plans for new major capital projects.
Major projects were completed at four of the Company's mills in 1993. Of
these, the series of projects at the Courtland, Alabama printing and writing
papers mill was the most significant. Completed in August, the projects at
Courtland primarily involved an expansion of the mill's pulp capacity, the
addition of an uncoated paper machine, the rebuilding of two existing paper
machines, the construction of cogeneration facilities and modifications to
address environmental issues. These projects increase the Courtland mill's
annual pulp capacity by 245,000 tons and, when fully operational, will increase
the Company's annual printing and writing papers capacity by 300,000 tons. The
new paper machine is expected to use 240,000 tons of the additional pulp
production. The cost of the projects was approximately $920 million.
The modernization and environmental improvement project at the Company's
Canton, North Carolina printing and writing papers mill was completed in July at
a cost of approximately $285 million. The project, which improved product
quality as well as the mill's environmental performance, resulted in a reduction
in paper production of approximately 9% and a reduction in pulp production of
approximately 6%.
In March, the construction of a deinking facility at the Company's Sheldon,
Texas newsprint mill was completed. The facility has the capacity to provide
approximately 150,000 tons of recycled pulp annually, all of which is used in
the manufacture of newsprint at the mill, replacing virgin pulp. The project
cost approximately $85 million.
Weldwood completed construction in August of a sawmill at Hinton, Alberta,
Canada to replace the existing sawmill there. The new sawmill, with an annual
capacity of 215 million board feet of lumber, was completed at a cost of
approximately (U.S.) $55 million.
COMPETITION
The markets in which the Company sells its products are highly competitive.
The Company faces numerous competitors within the forest products industry in
each of its major markets and also competes with suppliers of milk and juice
cartons and kraft paper substitutes made from plastics. Competition in all
markets is based primarily on price. The Company is one of the largest domestic
producers and suppliers of printing and writing papers, publication papers,
newsprint, lumber, plywood, milk and juice cartons, and hardwood market pulp.
Weldwood is the largest producer of plywood and one of the largest producers of
lumber in Canada. Champion Papel is one of the largest producers and suppliers
of printing and writing papers in Brazil.
FOREIGN OPERATIONS
Net sales to unaffiliated customers by the Company's foreign subsidiaries for
1993 were (U.S.) $883,445,000, accounting for 17.4% of consolidated net sales of
the Company. Income from operations of the foreign subsidiaries
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for 1993 was (U.S.) $132,278,000 which, reflecting the weak overall results of
the Company's domestic operations, accounted for all of the consolidated income
from operations of the Company. Net income (after minority interest) of the
foreign subsidiaries for 1993 was (U.S.) $59,949,000, which accounted for all of
the consolidated income of the Company.
The major foreign operations, which are discussed above under their
respective business segment headings, are in Canada and Brazil. The Company
believes that the risks associated with its foreign operations are somewhat
greater than those associated with its domestic operations. Weldwood exports
substantial portions of its products and, as a result, is affected significantly
by currency fluctuations. Champion Papel, the Company's Brazilian subsidiary,
is subject to that country's continuing economic and political instability.
Tight monetary and fiscal policies, including high interest rates, imposed in
March 1990 in an attempt to control Brazil's high inflation rate, remain in
effect. Brazil continues to experience high inflation rates and currency
fluctuations. (See Note 13 of Notes to Financial Statements on page 38 of the
Company's 1993 Annual Report, which Note is incorporated by reference herein,
for further information as to foreign operations.)
EMPLOYEES
The Company had 25,250 employees at December 31, 1993. Of these, 18,669 were
domestic employees, 54% of whom were covered by contracts with labor unions.
Overall, 63% of the Company's employees were covered by contracts with labor
unions.
Union contracts covering domestic operations will expire as follows: 1994 -
the Roanoke Rapids, North Carolina kraft mill, the Lufkin and Sheldon, Texas
newsprint mills, and the Florida and Washington wood products operations; 1995
- - the Bucksport, Maine and Sartell, Minnesota publication papers mills, and the
Courtland, Alabama printing and writing papers mill; 1996 - the Pensacola,
Florida printing and writing papers mill; 1997 - the Maine and Georgia wood
products operations; 1998 - the Deferiet, New York publication papers mill and
the Canton, North Carolina and Hamilton, Ohio printing and writing papers mills.
The Quinnesec, Michigan publication papers mill is a non-union facility.
At Weldwood, union contracts covering the Hinton, Alberta, Canada pulp mill,
as well as all of Weldwood's wood products facilities except the Longlac plants,
will expire in 1994. The union contract covering the joint venture pulp mill in
Quesnel, British Columbia, Canada also will expire in 1994. The union contract
covering the waferboard plant and specialty hardwood plywood plant in Longlac,
Ontario, Canada will expire in 1996.
The union contract which covers the paper industry in Brazil, including
Champion Papel, is renegotiated each year.
THE ENVIRONMENT
For information regarding environmental capital expenditures, hazardous
substance cleanup, environmental legal proceedings and other environmental
matters affecting the Company, see Management's Discussion and Analysis of
Financial Condition and Results of Operations, incorporated by reference in Item
7 of this Report from the Company's 1993 Annual Report.
ENERGY REQUIREMENTS
The Company believes that it will be able to meet its energy needs for the
foreseeable future. Wood wastes and pulping liquors, which are by-products from
the manufacture of wood products and pulp, provide a reliable and relatively
low-cost source of energy for the Company's primary manufacturing facilities.
The Company's domestic wood products manufacturing facilities and domestic pulp,
paper and kraft mills satisfy approximately half of their energy requirements
from such wood wastes and pulping liquors.
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The Company's foreseeable needs for purchased energy have been anticipated,
and the Company believes that it has arranged for adequate sources of supply.
ITEM 2. PROPERTIES
In 1993, the overall operating rate for the Company's domestic and foreign
manufacturing facilities exceeded 98% of capacity in the paper segment, 80% of
capacity for lumber and studs, and 97% of capacity for panelboard (plywood and
waferboard). Production curtailments in the Company's paper segment were
attributable primarily to scheduled maintenance. Production curtailments in the
wood products segment were attributable primarily to log supply shortages
resulting from the scarcity of timber, as well as the process of disposing of
several mills.
Reference is made to Item 1 of this Report for information concerning the
general character, adequacy and capacity of the principal plants, timber
properties and other materially important physical properties of the Company.
The following lists show the location, nature and ownership of the Company's
principal plants. Except as indicated, none of these plants is subject to a
mortgage and all are owned in fee.
PAPER
PRINTING AND WRITING PAPERS
(a) Integrated pulp and printing and writing papers mills:
(i) Courtland, Alabama/1/;
(ii) Canton, North Carolina;
(iii) Pensacola, Florida; and
(iv) Mogi Guacu, Brazil.
(b) The Company operates a printing and writing papers mill in Hamilton,
Ohio.
(c) The Company operates a plant in Waynesville, North Carolina which
applies polyethylene coating to bleached paperboard and which also converts roll
stock into cut-size paper.
(d) The Company operates five plants which convert polyethylene-coated
paperboard into milk and juice cartons and one plant which converts
polyethylene-coated paperboard into ovenable packaging. All of these plants are
located in the United States.
PUBLICATION PAPERS
(e) Integrated pulp and publication papers mills:
(i) Bucksport, Maine;
(ii) Deferiet, New York/2/;
(iii) Quinnesec, Michigan; and
(iv) Sartell, Minnesota/2/.
- ----------
/1/For Courtland, Alabama mill lease information, see Item 1 - Paper of this
Report.
/2/For Deferiet, New York and Sartell, Minnesota mill lease information, see
Item 1 - Paper of this Report.
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NEWSPRINT
(f) Integrated pulp and newsprint mills:
(i) Lufkin, Texas; and
(ii) Sheldon, Texas.
PULP
(g) The Company's printing and writing papers mills in Pensacola, Florida
and Courtland, Alabama and publication papers mill in Quinnesec, Michigan also
produce market pulp.
(h) Weldwood operates a pulp mill in Hinton, Alberta, Canada and owns 50% of
a joint venture which operates a pulp mill in Quesnel, British Columbia, Canada.
KRAFT
(i) The Company operates an integrated pulp, unbleached linerboard and
kraft paper mill in Roanoke Rapids, North Carolina.
WOOD PRODUCTS
(a) The Company operates three softwood plywood plants in the United States.
(b) Weldwood operates two softwood plywood plants and one specialty hardwood
plywood plant in Canada. One of these plants is located on leased land.
(c) The Company operates seven softwood lumber mills in the United States.
(d) Weldwood operates five softwood lumber mills in Canada. One of these
mills is located on leased land.
(e) Each of Babine Forest Products Company and Houston Forest Products
Company, joint ventures in which Weldwood has an interest, operates a mill for
the production of softwood lumber in Canada. Both mills are located on leased
land.
(f) Weldwood operates one waferboard plant in Canada.
ITEM 3. LEGAL PROCEEDINGS
On January 4, 1991, a class action was brought against the Company in state
court in Tennessee. The class consisted of all Tennessee residents who own or
lease land around Douglas Lake or along the Pigeon River. Subsequently, the
case was transferred to the United States District Court for the Eastern
District of Tennessee. While the original complaint sought $5 billion in
compensatory and punitive damages, immediately prior to trial the plaintiffs
reduced their demand to $367.9 million. The plaintiffs originally claimed
damages for both personal injury and property damage, but the personal injury
claims were dismissed. The case proceeded to trial on plaintiffs' theory that
discharges of hazardous materials, including dioxin, from the Company's Canton,
North Carolina mill had decreased property values along the river and the lake.
On October 16, 1992, a mistrial was declared when the jury was unable to reach a
unanimous verdict. On May 3, 1993, the court approved a settlement of the
action providing for a payment of $6.5 million by the Company. On June 1, 1993,
the court's approval of the settlement was appealed.
9
<PAGE>
On September 18, 1992, an action was brought in the District Court of
Brazoria County, Texas by 26 individuals engaged in seafood-related businesses
against the Company, Simpson Pasadena Paper Company, the Gulf Coast Waste
Disposal Authority and eight other corporations and individuals. The action
sought unspecified damages for lost business profits, diminution in property
value and mental anguish allegedly resulting from the purported discharge of
dioxin into the Brazos River, Galveston Bay, the Neches River and their adjacent
waters, from the Company's Sheldon and Lufkin, Texas mills, Simpson's Pasadena,
Texas mill and the other defendants' mills and plants. The Company sold the
Pasadena mill to Simpson in 1987 but may be liable for damages, if any, arising
from wastewater discharges which occurred prior to the sale. On September 2,
1993, at the plaintiffs' request, the action was dismissed with respect to the
Company's Lufkin mill. In December 1993, the action was settled for an
immaterial amount.
On September 18, 1992, an action was brought in the District Court of Harris
County, Texas by 71 individuals primarily engaged in seafood-related businesses
against the Company, Simpson Pasadena Paper Company, the Gulf Coast Waste
Disposal Authority and eight other corporations and individuals. The action
sought unspecified damages for lost business profits, diminution in property
value and mental anguish allegedly resulting from the purported discharge of
dioxin into the Brazos River, Galveston Bay, the Neches River and their adjacent
waters, from the Company's Sheldon and Lufkin, Texas mills, Simpson's Pasadena,
Texas mill and the other corporate defendants' mills and plants. The Company
sold the Pasadena mill to Simpson in 1987 but may be liable for damages, if any,
arising from wastewater discharges which occurred prior to the sale. On
September 2, 1993, at the plaintiffs' request, the action was dismissed with
respect to the Company's Lufkin mill. In December 1993, the action was settled
for an immaterial amount.
On November 9, 1992, an action was brought against the Company in the Circuit
Court for Baldwin County, Alabama purportedly on behalf of a class consisting of
all persons who own land along Perdido Bay in Florida and Alabama. The action
originally sought $500 million in compensatory and punitive damages for personal
injury, intentional infliction of emotional distress and diminution in property
value allegedly resulting from the purported discharge of hazardous substances,
including dioxin, from the Company's Pensacola, Florida mill into Eleven Mile
Creek, which flows into Perdido Bay. However, in February 1994, the plaintiffs
reduced their demand to not more than $50,000 for each class member. It is
anticipated that the class, if certified, will consist of approximately 1,000
members. The parties currently are engaged in discovery.
The Company and many other corporations, municipalities and individuals are
defendants in three separate actions filed in the District Court of Galveston
County, Texas by numerous individuals on March 8, 1993, April 20, 1993 and May
13, 1993, respectively. Each of these actions seeks compensatory and punitive
damages in excess of $5 billion for personal injury and property damage
allegedly resulting from the purported disposal of waste materials, including
hazardous substances, into the McGinnis Waste Disposal Site located at Hall's
Bayou Ranch.
On July 17, 1991, an action was brought in the United States District Court
for the District of Colorado against Weldwood and 14 other Canadian forest
products companies purportedly on behalf of a class of United States purchasers
of Canadian lumber. The action, seeking injunctive relief and unspecified
treble damages, alleged a conspiracy by the defendants and others to fix freight
charges for, and to sell on a delivered price basis, Western Canadian softwood
lumber, thereby allegedly artificially raising, fixing, maintaining or
stabilizing prices in violation of United States antitrust laws. On January 8,
1993, the action was dismissed, upon the motion of the defendants, for reasons
of comity. On January 20, 1993, the plaintiff filed a notice of appeal. In
February 1994, the action was settled for an immaterial amount.
The Company is vigorously defending each of the pending actions described
above.
The Company also is involved in other legal and administrative proceedings
and claims of various types. While any litigation contains an element of
uncertainty, management, based upon the opinion of the Company's General
Counsel, presently believes that the outcome of each such proceeding or claim
which is pending or known to be threatened (including the actions described
above), or all of them combined, will not have a material adverse effect on the
Company.
10
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT/1/
John A. Ball (age 65) is a Senior Vice President of the Company, a position
which he has held since March 1983. He has responsibility for corporate and
marketing communications, governmental affairs, public affairs and facilities
services.
L. Scott Barnard (age 51) is an Executive Vice President of the Company, a
position which he has held since August 1992. He has responsibility for sales
and marketing for the printing and writing papers and publication papers
businesses. From February 1989 to August 1992, he was Vice President-Sales and
Marketing for the printing and writing papers and publication papers businesses.
Gerald J. Beiser (age 63) is Senior Vice President-Finance of the Company, a
position which he has held since 1975.
William H. Burchfield (age 58) is an Executive Vice President of the Company,
a position which he has held since November 1982. He has responsibility for the
domestic printing and writing papers business.
Mark V. Childers (age 41) is Senior Vice President-Organizational Development
and Human Resources of the Company, a position which he has held since August
1992. From June 1991 to August 1992, he was Vice President-Organizational
Development Project of the Company. From August 1988 to June 1991, he was
Manager-Organizational Development at the Lufkin, Texas mill.
Richard J. Diforio, Jr. (age 58) is a Senior Vice President of the Company, a
position which he has held since November 1992. He has responsibility for
environmental, health and safety affairs. From September 1990 to November 1992,
he was Vice President-Environment, Health and Safety of the Company. From
September 1986 to September 1990, he was Vice President-Environmental Affairs of
the Company.
Joe K. Donald (age 51) is an Executive Vice President of the Company, a
position which he has held since August 1989. He heads the publication papers
business. From December 1987 to August 1989, he was Vice President-
Manufacturing of the printing and writing papers business.
Mark A. Fuller, Jr. (age 61) is an Executive Vice President of the Company, a
position which he has held since August 1980. He has responsibility for the
Company's overall marketing program as well as for Nationwide Papers, Champion
Export, pulp sales and sales of wood chemicals and by-products. From July 1986
to August 1989, he headed the publication papers business.
Marvin H. Ginsky (age 63) is Senior Vice President and General Counsel of the
Company. He was elected a Senior Vice President in May 1981. He has been the
General Counsel since 1973.
L.C. Heist (age 62) is President and Chief Operating Officer and a director
of the Company, positions which he has held since December 1987.
Burton G. MacArthur, Jr. (age 47) is an Executive Vice President of the
Company, a position which he has held since January 1990. He has responsibility
for the newsprint and kraft operations. From March 1989 to January 1990, he was
Vice President-Management Information Services of the Company.
_______________________________
/1/The term of office for each executive officer expires at the Annual Meeting
of the Board of Directors of the Company scheduled to be held on May 19, 1994.
11
<PAGE>
Kenwood C. Nichols (age 54) is Vice Chairman and a director of the Company,
positions which he has held since August 1989. He has been the principal
accounting officer of the Company since July 1983. He also has responsibility
for internal audit, corporate analysis, tax affairs, management information
services, mineral resources, corporate security and the Company's real estate
subsidiaries. From July 1983 to August 1989, he was a Senior Vice President of
the Company.
Richard E. Olson (age 56) is an Executive Vice President of the Company, a
position which he has held since December 1987. He has responsibility for
engineering, technology, manufacturing support and major projects. From
December 1987 to January 1990, he had responsibility for the newsprint, domestic
pulp and kraft operations.
Richard L. Porterfield (age 47) is an Executive Vice President of the
Company, a position which he has held since August 1992. He heads the forest
products unit, which consists of domestic timberlands operations and the
domestic wood products business. From January 1990 to August 1992, he was
Senior Vice President- Organizational Development and Human Resources of the
Company. From August 1989 to January 1990, he was Vice President-Organizational
Development Project of the Company. From June 1988 to August 1989, he was
Director-Participative Management and Administration of the forest products
unit.
Andrew C. Sigler (age 62) is Chairman of the Board of Directors and Chief
Executive Officer of the Company. He was elected Chairman of the Board
effective January 1, 1979. He has served as Chief Executive Officer since 1974
and has been a director since 1973.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company had 23,394 record holders of its Common Stock as of February 28,
1994.
The Company's Common Stock is traded on the New York Stock Exchange.
Restrictions on the ability of the Company to pay cash dividends are included
in several of the Company's debt instruments and the Company's Restated
Certificate of Incorporation. At December 31, 1993, the most restrictive of
these limitations required the Company to maintain tangible net worth (as
defined below) of at least $2.770 billion. As a result of this requirement,
such amount is unavailable for the payment of dividends. Approximately $454
million of tangible net worth at December 31, 1993 was free of such
restrictions. Tangible net worth is defined as shareholders' equity plus the
Company's $92.50 Cumulative Convertible Preference Stock minus goodwill,
unamortized debt discount and other like intangibles, all determined on a
consolidated basis for the Company.
For information concerning the high and low sales prices of the Company's
Common Stock for each quarterly period during the last two years and the amount
of dividends paid on the Company's Common Stock in each quarterly period during
the last two years, see the section on the inside back cover of the Company's
1993 Annual Report captioned Common Stock Prices and Dividends Paid. Said
section is incorporated by reference herein.
ITEM 6. SELECTED FINANCIAL DATA
There is incorporated by reference herein the table on pages 50 and 51 of the
Company's 1993 Annual Report captioned Eleven-Year Selected Financial Data.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
There is incorporated by reference herein the section on pages 43 to 49 of
the Company's 1993 Annual Report captioned Management's Discussion and Analysis
of Financial Condition and Results of Operations.
12
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
There is incorporated by reference herein the sections of the Company's 1993
Annual Report captioned Consolidated Income, Consolidated Retained Earnings,
Consolidated Balance Sheet, Consolidated Cash Flows, Notes to Financial
Statements and Report of Independent Public Accountants, which sections are
located on pages 22, 23, 24, 25, 26 to 40, and 41, respectively, of the
Company's 1993 Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See the section captioned Executive Officers of the Registrant under Part I
of this Report for information concerning the Company's executive officers.
For information concerning the directors of the Company, see the sections
captioned The Board of Directors -The Nominees, Information on the Nominees and
Directors, and Committees in the Company's definitive Proxy Statement for the
Annual Meeting of Shareholders scheduled to be held on May 19, 1994. Said
sections are incorporated by reference herein.
ITEM 11. EXECUTIVE COMPENSATION
There is incorporated by reference herein from the Company's definitive Proxy
Statement for the Annual Meeting of Shareholders scheduled to be held on May 19,
1994 the sections therein captioned The Board of Directors - Directors'
Compensation; and Executive Compensation - Summary Compensation Table,
Option/SAR Grant Table, Option/SAR Exercise and Year-End Values Table, Pension
Plan Table, and Employment and Severance Agreements.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is incorporated by reference herein from the Company's definitive Proxy
Statement for the Annual Meeting of Shareholders scheduled to be held on May 19,
1994 the sections therein captioned Principal Shareholders and Stock Ownership
by Nominees, Directors and Named Executive Officers.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is incorporated by reference herein from the Company's definitive Proxy
Statement for the Annual Meeting of Shareholders scheduled to be held on May 19,
1994 the section therein captioned Transactions.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) FINANCIAL STATEMENTS. The following Consolidated Financial Statements
of Champion International Corporation and Subsidiaries, Notes to Financial
Statements, and Report of Independent Public Accountants are incorporated by
reference herein from the Company's 1993 Annual Report:
13
<PAGE>
<TABLE>
<CAPTION>
CAPTION IN COMPANY'S
DESCRIPTION 1993 ANNUAL REPORT (PAGE NUMBER)
----------- --------------------------------
<S> <C>
Consolidated Statements of Income for each of the
three years in the period ended December 31, 1993.....................................Consolidated Income (page 22)
Consolidated Statements of Retained Earnings for each of
the three years in the period ended December 31, 1993......................Consolidated Retained Earnings (page 23)
Consolidated Balance Sheets at December 31, 1993 and 1992.......................Consolidated Balance Sheet (page 24)
Consolidated Statements of Cash Flows for each of
the three years in the period ended December 31, 1993.............................Consolidated Cash Flows (page 25)
Notes to Financial Statements.........................................Notes to Financial Statements (pages 26 to 40)
Report of Independent Public Accountants with
respect to the financial statements listed above.................Report of Independent Public Accountants (page 41)
</TABLE>
(b) FINANCIAL STATEMENT SCHEDULES. The following Financial Statement
Schedules and Report of Independent Public Accountants on Schedules are filed
with this Annual Report on Form 10-K on the pages indicated:
<TABLE>
<CAPTION>
DESCRIPTION PAGE
----------- ------
<C> <S> <C>
V. Property, Plant and Equipment............................................. S-1
VI. Accumulated Depreciation and Amortization of Property, Plant and Equipment S-2, 3
VIII. Valuation and Qualifying Accounts......................................... S-4
IX. Short-Term Borrowings..................................................... S-5
X. Supplementary Income Statement Information................................ S-6
Report of Independent Public Accountants on Schedules..................... S-7
</TABLE>
All other schedules have been omitted since the information is not
applicable, is not required or is included in the Consolidated Financial
Statements or Notes to Financial Statements listed under section (a) of this
Item 14.
(c) EXHIBITS. Each Exhibit is listed according to the number assigned to
it in the Exhibit Table of Item 601 of Regulation S-K. The Exhibit numbers
preceded by an asterisk (*) indicate Exhibits physically filed with this Annual
Report on Form 10-K. All other Exhibit numbers indicate Exhibits filed by
incorporation by reference herein. Exhibit numbers 10.1 through 10.29, which
are preceded by a plus sign (+), are management contracts or compensatory plans
or arrangements.
EXHIBIT
NUMBER DESCRIPTION
- ------ ------------
3.1 Restated Certificate of Incorporation of the Company, filed in
the State of New York on October 20, 1986 (filed by incorporation
by reference to Exhibit 3.1 to the Company's Form 10-K for the
fiscal year ended December 31, 1986, Commission File No. 1-3053).
3.2 Certificate of Amendment of Restated Certificate of Incorporation
of the Company, filed in the State of New York on July 18, 1988
(filed by incorporation by reference to Exhibit 4.1 to the
Company's Form 10-Q for the quarter ended June 30, 1988,
Commission File No. 1-3053).
3.3 Certificate of Amendment of Restated Certificate of Incorporation
of the Company, filed in the State of New York on December 6,
1989 (filed by incorporation by reference to
14
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ------ ------------
Exhibit 4.1 to the Company's Form 8-K dated December 14, 1989,
Commission File No. 1-3053).
3.4 Certificate of Amendment of Restated Certificate of Incorporation
of the Company, filed in the State of New York on December 21,
1989 (filed by incorporation by reference to Exhibit 3.4 to the
Company's Form 10-K for the fiscal year ended December 31, 1989,
Commission File No. 1-3053).
3.5 By-Laws of the Company (filed by incorporation by reference to
Exhibit 3(ii).1 to the Company's Form 10-Q for the quarter ended
March 31, 1993, Commission File No. 1-3053).
4.1 Letter agreement dated March 29, 1991 of the Company to furnish
to the Commission upon request copies of certain instruments with
respect to long-term debt (filed by incorporation by reference to
Exhibit 4 to the Company's Form 10-K for the fiscal year ended
December 31, 1990, Commission File No. 1-3053).
4.2 Agreement dated February 2, 1994 between the Company and Loews
Corporation (filed by incorporation by reference to Exhibit 4.7
to the Company's Registration Statement on Form S-3, Commission
Registration No. 33-52123).
+10.1 Champion International Corporation 1986 Management Incentive
Program, consisting of the 1986 Stock Option Plan and the 1986
Contingent Compensation Plan (filed by incorporation by reference
to Exhibit 19.1 to the Company's Form 10-Q for the quarter ended
June 30, 1986, Commission File No. 1-3053).
+10.2 Amendment to Champion International Corporation 1986 Management
Incentive Program (filed by incorporation by reference to Exhibit
10.1 to the Company's Form 10-Q for the quarter ended March 31,
1993, Commission File No. 1-3053).
+10.3 Champion International Corporation Restricted Share Performance
Plan, as amended (filed by incorporation by reference to Exhibit
10.2 to the Company's Form 10-K for the fiscal year ended
December 31, 1989, Commission File No. 1-3053).
+10.4 Champion International Corporation Management Incentive Program,
as amended, consisting of the Amended 1976 Incentive Stock Option
Plan and the Contingent Compensation Plan (filed by incorporation
by reference to Exhibit 4.3 to the Company's Registration
Statement on Form S-8, Commission Registration No. 2-77129).
+10.5 Resolutions of the Board of Directors of the Company adopted on
August 16, 1984 amending the Amended 1976 Incentive Stock Option
Plan (filed by incorporation by reference to Exhibit 10(b) to the
Company's Registration Statement on Form S-14, Commission
Registration No. 2-94030).
+10.6 Champion International Corporation Supplemental Retirement Income
Plan (filed by incorporation by reference to Exhibit 10.7 to the
Company's Form 10-K for the fiscal year ended December 31, 1989,
Commission File No. 1-3053).
+10.7 Supplemental Retirement and Death Payments Agreement dated as of
August 1, 1964, as amended by letter agreement dated January 9,
1965, between the Company and Mr. Sigler (filed by incorporation
by reference to Exhibit 10.8 to the Company's Form 10-K for the
fiscal year ended December 31, 1990, Commission File No. 1-3053).
15
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ------ ------------
+10.8 Restated Agreement between the Company and Mr. Sigler, as amended
as of February 19, 1987, providing certain employment, severance
and retirement arrangements (filed by incorporation by reference
to Exhibit 19.1 to the Company's Form 10-Q for the quarter ended
June 30, 1987, Commission File No. 1-3053).
+10.9 Agreement Relating to Legal Expenses dated February 19, 1987
between the Company and Mr. Sigler providing reimbursement of
certain legal expenses following a change in control of the
Company (filed by incorporation by reference to Exhibit 19.2 to
the Company's Form 10-Q for the quarter ended June 30, 1987,
Commission File No. 1-3053).
+10.10 Amendment dated as of April 21, 1988 to Restated Agreement
between the Company and Mr. Sigler as amended as of February 19,
1987 (filed by incorporation by reference to Exhibit 19.1 to the
Company's Form 10-Q for the quarter ended June 30, 1988,
Commission File No. 1-3053).
+10.11 Amendment dated as of August 18, 1988 to Restated Agreement
between the Company and Mr. Sigler as amended as of February 19,
1987 (filed by incorporation by reference to Exhibit 10.10 to the
Company's Form 10-K for the fiscal year ended December 31, 1988,
Commission File No. 1-3053).
+10.12 Amendment dated as of August 18, 1988 to Agreement Relating to
Legal Expenses dated February 19, 1987 between the Company and
Mr. Sigler (filed by incorporation by reference to Exhibit 10.11
to the Company's Form 10-K for the fiscal year ended December 31,
1988, Commission File No. 1-3053).
+10.13 Amendment dated as of September 19, 1991 to Restated Agreement
between the Company and Mr. Sigler as amended as of February 19,
1987 (filed by incorporation by reference to Exhibit 10.12 to the
Company's Form 10-K for the fiscal year ended December 31, 1991,
Commission File No. 1-3053).
+10.14 Agreement dated as of August 18, 1988 between the Company and Mr.
Heist providing certain employment, severance and retirement
arrangements (filed by incorporation by reference to Exhibit
10.17 to the Company's Form 10-K for the fiscal year ended
December 31, 1988, Commission File No. 1-3053).
+10.15 Agreement Relating to Legal Expenses dated August 18, 1988
between the Company and Mr. Heist providing reimbursement of
certain legal expenses following a change in control of the
Company (filed by incorporation by reference to Exhibit 10.18 to
the Company's Form 10-K for the fiscal year ended December 31,
1988, Commission File No. 1-3053).
+10.16 Amendment dated as of September 19, 1991 to Agreement dated as of
August 18, 1988 between the Company and Mr. Heist (filed by
incorporation by reference to Exhibit 10.15 to the Company's Form
10-K for the fiscal year ended December 31, 1991, Commission File
No. 1-3053).
+10.17 Agreement dated as of October 18, 1990 between the Company and
Mr. Nichols providing certain employment, severance and
retirement arrangements (filed by incorporation by reference to
Exhibit 10.16 to the Company's Form 10-K for the fiscal year
ended December 31, 1990, Commission File No. 1-3053).
+10.18 Agreement Relating to Legal Expenses dated October 18, 1990
between the Company and Mr. Nichols providing reimbursement of
certain legal expenses following a change in
16
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ------ ------------
control of the Company (filed by incorporation by reference to
Exhibit 10.17 to the Company's Form 10-K for the fiscal year
ended December 31, 1990, Commission File No. 1-3053).
+10.19 Amendment dated as of September 19, 1991 to Agreement dated as of
October 18, 1990 between the Company and Mr. Nichols (filed by
incorporation by reference to Exhibit 10.18 to the Company's Form
10-K for the fiscal year ended December 31, 1991, Commission File
No. 1-3053).
+10.20 Agreement dated as of February 19, 1987 between the Company and
Mr. Burchfield providing certain severance arrangements (filed by
incorporation by reference to Exhibit 10.15 to the Company's Form
10-K for the fiscal year ended December 31, 1987, Commission File
No. 1-3053).
+10.21 Agreement Relating to Legal Expenses dated February 19, 1987
between the Company and Mr. Burchfield providing reimbursement of
certain legal expenses following a change in control of the
Company (filed by incorporation by reference to Exhibit 10.16 to
the Company's Form 10-K for the fiscal year ended December 31,
1987, Commission File No. 1-3053).
+10.22 Amendment dated as of April 21, 1988 to Agreement dated as of
February 19, 1987 between the Company and Mr. Burchfield (filed
by incorporation by reference to Exhibit 19.5 to the Company's
Form 10-Q for the quarter ended June 30, 1988, Commission File
No. 1-3053).
+10.23 Amendment dated as of September 19, 1991 to Agreement dated as of
February 19, 1987 between the Company and Mr. Burchfield (filed
by incorporation by reference to Exhibit 10.22 to the Company's
Form 10-K for the fiscal year ended December 31, 1991, Commission
File No. 1-3053).
+10.24 Agreement dated as of August 18, 1988 between the Company and Mr.
Olson providing certain severance arrangements (filed by
incorporation by reference to Exhibit 10.23 to the Company's Form
10-K for the fiscal year ended December 31, 1990, Commission File
No. 1-3053).
+10.25 Agreement Relating to Legal Expenses dated August 18, 1988
between the Company and Mr. Olson providing reimbursement of
certain legal expenses following a change in control of the
Company (filed by incorporation by reference to Exhibit 10.24 to
the Company's Form 10-K for the fiscal year ended December 31,
1990, Commission File No. 1-3053).
+10.26 Amendment dated as of September 19, 1991 to Agreement dated as of
August 18, 1988 between the Company and Mr. Olson (filed by
incorporation by reference to Exhibit 10.28 to the Company's Form
10-K for the fiscal year ended December 31, 1991, Commission File
No. 1-3053).
+10.27 Trust Agreement dated as of February 19, 1987 between the Company
and Connecticut National Bank securing certain payments under the
contracts listed as Exhibit Numbers 10.8 through 10.26, among
others, following a change in control of the Company (filed by
incorporation by reference to Exhibit 19.11 to the Company's Form
10-Q for the quarter ended June 30, 1987, Commission File No. 1-
3053).
17
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ------ ------------
+10.28 Amendment dated as of August 18, 1988 to Trust Agreement dated as
of February 19, 1987 between the Company and Connecticut National
Bank (filed by incorporation by reference to Exhibit 10.29 to the
Company's Form 10-K for the fiscal year ended December 31, 1988,
Commission File No. 1-3053).
+10.29 Champion International Corporation Executive Life Insurance Plan
(filed by incorporation by reference to Exhibit 10.27 to the
Company's Form 10-K for the fiscal year ended December 31, 1990,
Commission File No. 1-3053).
10.30 Extract from the minutes of the meeting of the Board of Directors
of the Company held on October 18, 1979 relating to the $50,000
of group term life insurance provided by the Company for non-
employee directors (filed by incorporation by reference to
Exhibit 10.28 to the Company's Form 10-K for the fiscal year
ended December 31, 1990, Commission File No. 1-3053).
10.31 Resolutions of the Board of Directors of the Company adopted on
September 19, 1991 relating to the compensation of directors
(filed by incorporation by reference to Exhibit 19 to the
Company's Form 10-Q for the quarter ended September 30, 1991,
Commission File No. 1-3053).
10.32 Retirement Plan for Outside Directors (filed by incorporation by
reference to Exhibit 19 to the Company's Form 10-Q for the
quarter ended September 30, 1992, Commission File No. 1-3053).
*11 Schedule showing calculation of primary earnings per common share
and fully diluted earnings per common share.
*13 Portions of the Annual Report to Shareholders of Champion
International Corporation for the fiscal year ended December 31,
1993, which are incorporated herein by reference.
*21 List of significant subsidiaries of the Company.
*23.1 Opinion and Consent of the Senior Vice President and General
Counsel of the Company.
*23.2 Consent of Arthur Andersen & Co.
*24 Power of Attorney relating to the execution and filing of this
Annual Report on Form 10-K and all amendments hereto.
(d) REPORTS ON FORM 8-K. No Reports on Form 8-K were filed during the last
quarter of the period covered by this Report.
18
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON THE 30TH DAY OF MARCH,
1994.
CHAMPION INTERNATIONAL CORPORATION
(Registrant)
By Lawrence A. Fox
-----------------------------------
(LAWRENCE A. FOX)
VICE PRESIDENT AND SECRETARY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Andrew C. Sigler* Chairman of the Board, March 30, 1994
- --------------------------------------- Chief Executive Officer
(ANDREW C. SIGLER) and Director (Principal
Executive Officer)
Kenwood C. Nichols* Vice Chairman and March 30, 1994
- --------------------------------------- Director (Principal
(KENWOOD C. NICHOLS) Accounting Officer)
Gerald J. Beiser* Senior Vice President- March 30, 1994
- --------------------------------------- Finance (Principal
(GERALD J. BEISER) Financial Officer)
Robert A. Charpie* Director March 30, 1994
- ---------------------------------------
(ROBERT A. CHARPIE)
Alice F. Emerson* Director March 30, 1994
- ---------------------------------------
(ALICE F. EMERSON)
Allan E. Gotlieb* Director March 30, 1994
- ---------------------------------------
(ALLAN E. GOTLIEB)
L.C. Heist* Director March 30, 1994
- ----------------------------------------
(L.C. HEIST)
Sybil C. Mobley* Director March 30, 1994
- -----------------------------------------
(SYBIL C. MOBLEY)
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
________________________________________ Director
(H. BARCLAY MORLEY)
Lawrence G. Rawl* Director March 30, 1994
- ----------------------------------------
(LAWRENCE G. RAWL)
Walter V. Shipley* Director March 30, 1994
- -----------------------------------------
(WALTER V. SHIPLEY)
James S. Tisch* Director March 30, 1994
- ------------------------------------------
(JAMES S. TISCH)
Richard E. Walton* Director March 30, 1994
- ------------------------------------------
(RICHARD E. WALTON)
John L. Weinberg* Director March 30, 1994
- -------------------------------------------
(JOHN L. WEINBERG)
*By Lawrence A. Fox March 30, 1994
- -------------------------------------------
(LAWRENCE A. FOX)
</TABLE>
A POWER OF ATTORNEY AUTHORIZING LAWRENCE A. FOX, MARVIN H. GINSKY AND ANDREW
C. SIGLER AND EACH OF THEM TO SIGN THIS REPORT AND ALL AMENDMENTS HERETO AS
ATTORNEYS-IN-FACT FOR OFFICERS AND DIRECTORS OF THE REGISTRANT IS FILED AS
EXHIBIT 24 HERETO.
20
<PAGE>
SCHEDULE V
CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
For the Years Ended December 31, 1993, 1992 and 1991
(in thousands of dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
-------- ---------- --------- ---------- ----------------------- ---------
Balance at Other Changes Balance
Beginning Additions ----------------------- at End
Classification (1) of Period at Cost Retirements Debit Credit of Period
- ------------------ ---------- ---------- ----------- ---------- -------- ---------
For the Year Ended December 31, 1993:
<S> <C> <C> <C> <C> <C> <C>
Land and land improvements $ 273,625 $ 37,502 $ 8,317 $ 1,082 (3) $ 301 (2) $ 303,591
Buildings and leasehold
improvements 812,249 103,664 24,878 14,487 (3) 2,708 (2) 902,814
Machinery and equipment 6,370,952 827,747 183,874 71,770 (3) 20,967 (2) 7,065,628
572 (2)
Construction in progress 762,077 (493,280) 3,545 --- 68,957 (3) 195,723
---------- ---------- ---------- ---------- -------- ----------
$8,218,903 $ 475,633 $ 220,614 $ 87,339 $ 93,505 $8,467,756
========== ========== ========== ========== ======== ==========
Timber and Timberlands, 263 (2)
less cost of timber 6,218 (3)
harvested $2,011,567 $ 130,147 $ 213,489 $ --- $ 83,194 (4) $1,838,550
========== ========== ========== ========== ======== ==========
<CAPTION>
For the Year Ended December 31, 1992:
<S> <C> <C> <C> <C> <C> <C>
Land and land 4,710 (3)
improvements $ 234,704 $ 13,405 $ 4,740 $ 26,370 (5) $ 824 (2) $ 273,625
Buildings and leasehold 4,009 (3)
improvements 786,435 31,796 7,874 4,838 (5) 6,955 (2) 812,249
18,204 (3)
Machinery and equipment 5,953,897 271,650 80,434 261,141 (5) 53,506 (2) 6,370,952
1,067 (2)
Construction in progress 486,916 306,125 856 --- 29,041 (3) 762,077
---------- ---------- ---------- ---------- -------- ----------
$7,461,952 $ 622,976 $ 93,904 $ 319,272 $ 91,393 $8,218,903
========== ========== ========== ========== ======== ==========
Timber and Timberlands,
less cost of timber 11,337 (3) 636 (2)
harvested $1,665,876 $ 95,313 $ 27,726 $ 339,899 (5) $ 72,496 (4) $2,011,567
========== ========== ========== ========== ======== ==========
<CAPTION>
For the Year Ended December 31, 1991:
<S> <C> <C> <C> <C> <C> <C>
27 (2)
Land and land improvements $ 192,240 $ 47,331 $ 1,530 $ --- $ 3,310 (3) $ 234,704
Buildings and leasehold
improvements 614,880 169,526 7,442 9,496 (3) 25 (2) 786,435
1,312 (2)
Machinery and equipment 5,437,297 575,262 97,245 37,271 (3) --- 5,953,897
Construction in progress 758,018 (188,451) 6,333 1,315 (2) 77,633 (3) 486,916
---------- ---------- ---------- ---------- -------- ----------
$7,002,435 $ 603,668 $ 112,550 $ 49,394 $ 80,995 $7,461,952
========== ========== ========== ========== ======== ==========
Timber and Timberlands,
less cost of timber 184 (2)
harvested $1,645,421 $ 57,801 $ 28,382 $ 50,113 (3) $ 59,261 (4) $1,665,876
========== ========== ========== ========== ======== ==========
</TABLE>
- -----------------
Notes:
(1) Property, plant and equipment is carried at cost.
(2) Effect of foreign currency translation.
(3) Reclassifications and transfers to and from other accounts.
(4) Cost of timber harvested charged to costs and expenses.
(5) As the result of adopting, as of January 1, 1992, Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," assets
formerly acquired in purchase business combinations were revalued to
reflect gross values. Prior to adoption of this standard, these assets
were valued net of related tax effects.
S-1
<PAGE>
SCHEDULE VI
CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES
ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
For the Years Ended December 31, 1993, 1992 and 1991
(in thousands of dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
- -------- -------- -------- -------- -------- --------
Additions
Balance at Charged to Other Balance
Beginning Costs and Changes - at End
Classification of Period Expenses (5) Retirements Add (Deduct) of Period
- ------------------------------------- ---------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
For the Year Ended December 31, 1993:
1,051 (1)
Land improvements $ 70,482 $ 14,041 $ 6,433 $ (130)(2) $ 79,011
(483)(1)
Buildings and leasehold improvements 224,986 26,270 16,588 (1,357)(2) 232,828
16,002 (1)
Machinery and equipment 2,160,575 319,929 134,331 (8,294)(2) 2,353,881
---------- ---------- ---------- ---------- ----------
$2,456,043 $ 360,240 (4) $ 157,352 $ 6,789 $2,665,720
========== ========== ========== ========== ==========
<CAPTION>
For the Year Ended December 31, 1992:
<S> <C> <C> <C> <C> <C>
(40)(1)
(360)(2)
Land improvements $ 55,127 $ 8,472 $ 2,139 $ 9,422 (3) $ 70,482
(47)(1)
Buildings and leasehold (3,422)(2)
improvements 186,757 24,034 5,164 22,828 (3) 224,986
3,687 (1)
(19,127)(2)
Machinery and equipment 1,834,029 305,498 57,573 94,061 (3) 2,160,575
---------- ---------- ---------- ---------- ----------
$2,075,913 $ 338,004 (4) $ 64,876 $ 107,002 $2,456,043
========== ========== ========== ========== ==========
<CAPTION>
For the Year Ended December 31, 1991:
<S> <C> <C> <C> <C> <C>
929 (1)
Land improvements $ 46,571 $ 8,217 $ 692 $ 102 (2) $ 55,127
Buildings and leasehold 3,097 (1)
improvements 168,115 19,596 3,999 (52)(2) 186,757
(12,644)(1)
Machinery and equipment 1,670,319 254,497 77,428 (715)(2) 1,834,029
---------- ---------- ---------- ---------- ----------
$1,885,005 $ 282,310 (4) $ 82,119 $ (9,283) $2,075,913
========== ========== ========== ========== ==========
</TABLE>
Notes:
(1) Reclassifications and transfers to and from other accounts.
(2) Effect of foreign currency translation.
(3) As the result of adopting, as of January 1, 1992, Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," assets
formerly acquired in purchase business combinations were revalued to
reflect gross values. Prior to adoption of this standard, these assets
were valued net of related tax effects.
S-2
<PAGE>
(4) Reference is made to Note 1 of Notes to Financial Statements in the
Company's Annual Report to Shareholders for the fiscal year ended December
31, 1993, which Note is incorporated by reference herein, for the
Company's policies in providing for depreciation, cost of timber harvested
and amortization. The reconciliations of depreciation, cost of timber
harvested and amortization, as shown above and on Schedule V, with the
amounts in the statement of income follow:
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------------
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
(in thousands of dollars)
Depreciation and amortization credited
to reserves as above $ 360,240 $ 338,004 $ 282,310
Cost of timber harvested credited directly
to asset accounts 83,194 72,496 59,261
---------- ---------- ----------
$ 443,434 $ 410,500 $ 341,571
========== ========== ==========
</TABLE>
(5) For financial reporting purposes, property, plant and equipment are
depreciated on the straight-line method over the estimated service lives of
the individual assets as follows:
Land improvements 2 to 20%
Buildings 2 to 20%
Machinery and equipment 3 to 33%
Leasehold improvements are amortized over the shorter of the leases or
estimated service lives.
S-3
<PAGE>
SCHEDULE VIII
CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1993 and 1992
(in thousands of dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- ------------------------------------- ---------- -------- -------- ---------
Balance at Balance
Beginning at End
Description of Period Additions Deductions of Period
- ------------------------------------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
For the Year Ended December 31, 1993:
Included in liability accounts:
Deferred Income Tax Valuation Allowance (1) $ 39,800 $ 2,491 $ --- $ 42,291
========== ========= ========= =========
For the Year Ended December 31, 1992:
Included in liability accounts:
Deferred Income Tax Valuation Allowance (1) $ --- $ 39,800 $ --- $ 39,800
========== ========= ========= =========
</TABLE>
- -----------------------
Note:
(1) The deferred income tax valuation allowance primarily relates to general
business credit carryforwards.
S-4
<PAGE>
SCHEDULE IX
CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES
SHORT-TERM BORROWINGS
For the Years Ended December 31, 1993, 1992 and 1991
(in thousands of dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
- -------- -------- -------- -------- -------- --------
Weighted
Maximum Average Average
Weighted Amount Amount Interest
Balance Average Outstanding Outstanding Rate
Category of Aggregate at End Interest During the During the During the
Short-Term Borrowings of Period (1) Rate (1) Period (1) Period (1,2) Period (1,3)
- ---------------------- --------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
For the Year Ended December 31, 1993:
Short-term bank borrowings $ 88,258 1.4% $ 110,258 $ 95,570 1.2%
For the Year Ended December 31, 1992:
Short-term bank borrowings $ 110,113 1.1% $ 110,113 $ 88,788 1.3%
For the Year Ended December 31, 1991:
Short-term bank borrowings $ 68,029 0.6% $ 93,695 $ 76,814 1.3%
</TABLE>
- -----------------------------------
Notes:
(1) Variations in weighted average interest rates and in outstanding
balances for 1993, 1992 and 1991 are attributable to book cash
overdrafts.
(2) Average amount of short-term borrowings is determined by utilizing the
average month-end balances.
(3) Weighted average interest rate for the year is determined by dividing
average interest expense for the year by the average of month-end
short-term borrowings for the year.
S-5
<PAGE>
SCHEDULE X
CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
For the Years Ended December 31, 1993, 1992 and 1991
(in thousands of dollars)
<TABLE>
<CAPTION>
Column A Column B
- -------- ----------------------------------------
Charged to Costs and Expenses
Years Ended December 31
----------------------------------------
Item 1993 1992 1991
- ---- ---------- ---------- ----------
<S> <C> <C> <C>
Maintenance and repairs $ 465,079 $ 478,842 $ 458,513
========== ========== ==========
Real and personal property taxes $ 61,154 $ 61,005 $ 58,438
========== ========== ==========
</TABLE>
Royalties, advertising costs, and amortization of intangible assets and pre-
operating costs were not material.
S-6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To Champion International Corporation:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in Champion International
Corporation's 1993 Annual Report to Shareholders incorporated by reference in
this Form 10-K, and have issued our report thereon dated January 17, 1994. Our
audits were made for the purpose of forming an opinion on those statements taken
as a whole. The schedules listed in Item 14(b) are the responsibility of the
Company's management and are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to be
set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN & CO.
New York, N.Y.
January 17, 1994
S-7
<PAGE>
EXHIBIT INDEX
Each Exhibit is listed according to the number assigned to it in the Exhibit
Table of Item 601 of Regulation S-K. The Exhibit numbers preceded by an
asterisk (*) indicate Exhibits physically filed with this Annual Report on Form
10-K. All other Exhibit numbers indicate Exhibits filed by incorporation by
reference herein. Exhibit numbers 10.1 through 10.29, which are preceded by a
plus sign (+), are management contracts or compensatory plans or arrangements.
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
3.1 Restated Certificate of Incorporation of the Company, filed in
the State of New York on October 20, 1986 (filed by incorporation
by reference to Exhibit 3.1 to the Company's Form 10-K for the
fiscal year ended December 31, 1986, Commission File No. 1-3053).
3.2 Certificate of Amendment of Restated Certificate of Incorporation
of the Company, filed in the State of New York on July 18, 1988
(filed by incorporation by reference to Exhibit 4.1 to the
Company's Form 10-Q for the quarter ended June 30, 1988,
Commission File No. 1-3053).
3.3 Certificate of Amendment of Restated Certificate of Incorporation
of the Company, filed in the State of New York on December 6,
1989 (filed by incorporation by reference to Exhibit 4.1 to the
Company's Form 8-K dated December 14, 1989, Commission File No.
1-3053).
3.4 Certificate of Amendment of Restated Certificate of Incorporation
of the Company, filed in the State of New York on December 21,
1989 (filed by incorporation by reference to Exhibit 3.4 to the
Company's Form 10-K for the fiscal year ended December 31, 1989,
Commission File No. 1-3053).
3.5 By-Laws of the Company (filed by incorporation by reference to
Exhibit 3(ii).1 to the Company's Form 10-Q for the quarter ended
March 31, 1993, Commission File No. 1-3053).
4.1 Letter agreement dated March 29, 1991 of the Company to furnish
to the Commission upon request copies of certain instruments with
respect to long-term debt (filed by incorporation by reference to
Exhibit 4 to the Company's Form 10-K for the fiscal year ended
December 31, 1990, Commission File No. 1-3053).
4.2 Agreement dated February 2, 1994 between the Company and Loews
Corporation (filed by incorporation by reference to Exhibit 4.7
to the Company's Registration Statement on Form S-3, Commission
Registration No. 33-52123).
+10.1 Champion International Corporation 1986 Management Incentive
Program, consisting of the 1986 Stock Option Plan and the 1986
Contingent Compensation Plan (filed by incorporation by reference
to Exhibit 19.1 to the Company's Form 10-Q for the quarter ended
June 30, 1986, Commission File No. 1-3053).
+10.2 Amendment to Champion International Corporation 1986 Management
Incentive Program (filed by incorporation by reference to Exhibit
10.1 to the Company's Form 10-Q for the quarter ended March 31,
1993, Commission File No. 1-3053).
<PAGE>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
+10.3 Champion International Corporation Restricted Share Performance
Plan, as amended (filed by incorporation by reference to Exhibit
10.2 to the Company's Form 10-K for the fiscal year ended
December 31, 1989, Commission File No.1-3053).
+10.4 Champion International Corporation Management Incentive Program,
as amended, consisting of the Amended 1976 Incentive Stock Option
Plan and the Contingent Compensation Plan (filed by incorporation
by reference to Exhibit 4.3 to the Company's Registration
Statement on Form S-8, Commission Registration No. 2-77129).
+10.5 Resolutions of the Board of Directors of the Company adopted on
August 16, 1984 amending the Amended 1976 Incentive Stock Option
Plan (filed by incorporation by reference to Exhibit 10(b) to the
Company's Registration Statement on Form S-14, Commission
Registration No. 2-94030).
+10.6 Champion International Corporation Supplemental Retirement Income
Plan (filed by incorporation by reference to Exhibit 10.7 to the
Company's Form 10-K for the fiscal year ended December 31, 1989,
Commission File No. 1-3053).
+10.7 Supplemental Retirement and Death Payments Agreement dated as of
August 1, 1964, as amended by letter agreement dated January 9,
1965, between the Company and Mr. Sigler (filed by incorporation
by reference to Exhibit 10.8 to the Company's Form 10-K for the
fiscal year ended December 31, 1990, Commission File No. 1-3053).
+10.8 Restated Agreement between the Company and Mr. Sigler, as amended
as of February 19, 1987, providing certain employment, severance
and retirement arrangements (filed by incorporation by reference
to Exhibit 19.1 to the Company's Form 10-Q for the quarter ended
June 30, 1987, Commission File No. 1-3053).
+10.9 Agreement Relating to Legal Expenses dated February 19, 1987
between the Company and Mr. Sigler providing reimbursement of
certain legal expenses following a change in control of the
Company (filed by incorporation by reference to Exhibit 19.2 to
the Company's Form 10-Q for the quarter ended June 30, 1987,
Commission File No. 1-3053).
+10.10 Amendment dated as of April 21, 1988 to Restated Agreement
between the Company and Mr. Sigler as amended as of February 19,
1987 (filed by incorporation by reference to Exhibit 19.1 to the
Company's Form 10-Q for the quarter ended June 30, 1988,
Commission File No. 1-3053).
+10.11 Amendment dated as of August 18, 1988 to Restated Agreement
between the Company and Mr. Sigler as amended as of February 19,
1987 (filed by incorporation by reference to Exhibit 10.10 to the
Company's Form 10-K for the fiscal year ended December 31, 1988,
Commission File No. 1-3053).
+10.12 Amendment dated as of August 18, 1988 to Agreement Relating to
Legal Expenses dated February 19, 1987 between the Company and
Mr. Sigler (filed by incorporation by reference to Exhibit 10.11
to the Company's Form 10-K for the fiscal year ended December 31,
1988, Commission File No. 1-3053).
<PAGE>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
+10.13 Amendment dated as of September 19, 1991 to Restated Agreement
between the Company and Mr. Sigler as amended as of February 19,
1987 (filed by incorporation by reference to Exhibit 10.12 to
the Company's Form 10-K for the fiscal year ended December 31,
1991, Commission File No. 1-3053).
+10.14 Agreement dated as of August 18, 1988 between the Company and
Mr. Heist providing certain employment, severance and retirement
arrangements (filed by incorporation by reference to Exhibit
10.17 to the Company's Form 10-K for the fiscal year ended
December 31, 1988, Commission File No. 1-3053).
+10.15 Agreement Relating to Legal Expenses dated August 18, 1988
between the Company and Mr. Heist providing reimbursement of
certain legal expenses following a change in control of the
Company (filed by incorporation by reference to Exhibit 10.18 to
the Company's Form 10-K for the fiscal year ended December 31,
1988, Commission File No. 1-3053).
+10.16 Amendment dated as of September 19, 1991 to Agreement dated as
of August 18, 1988 between the Company and Mr. Heist (filed by
incorporation by reference to Exhibit 10.15 to the Company's
Form 10-K for the fiscal year ended December 31, 1991,
Commission File No. 1-3053).
+10.17 Agreement dated as of October 18, 1990 between the Company and
Mr. Nichols providing certain employment, severance and
retirement arrangements (filed by incorporation by reference to
Exhibit 10.16 to the Company's Form 10-K for the fiscal year
ended December 31, 1990, Commission File No. 1-3053).
+10.18 Agreement Relating to Legal Expenses dated October 18, 1990
between the Company and Mr. Nichols providing reimbursement of
certain legal expenses following a change in control of the
Company (filed by incorporation by reference to Exhibit 10.17 to
the Company's Form 10-K for the fiscal year ended December 31,
1990, Commission File No. 1-3053).
+10.19 Amendment dated as of September 19, 1991 to Agreement dated as
of October 18, 1990 between the Company and Mr. Nichols (filed
by incorporation by reference to Exhibit 10.18 to the Company's
Form 10-K for the fiscal year ended December 31, 1991,
Commission File No. 1-3053).
+10.20 Agreement dated as of February 19, 1987 between the Company and
Mr. Burchfield providing certain severance arrangements (filed
by incorporation by reference to Exhibit 10.15 to the Company's
Form 10-K for the fiscal year ended December 31, 1987,
Commission File No. 1-3053).
+10.21 Agreement Relating to Legal Expenses dated February 19, 1987
between the Company and Mr. Burchfield providing reimbursement
of certain legal expenses following a change in control of the
Company (filed by incorporation by reference to Exhibit 10.16 to
the Company's Form 10-K for the fiscal year ended December 31,
1987, Commission File No. 1-3053).
+10.22 Amendment dated as of April 21, 1988 to Agreement dated as of
February 19, 1987 between the Company and Mr. Burchfield (filed
by incorporation by reference to Exhibit 19.5 to the Company's
Form 10-Q for the quarter ended June 30, 1988, Commission File
No. 1-3053).
<PAGE>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
+10.23 Amendment dated as of September 19, 1991 to Agreement dated as
of February 19, 1987 between the Company and Mr. Burchfield
(filed by incorporation by reference to Exhibit 10.22 to the
Company's Form 10-K for the fiscal year ended December 31, 1991,
Commission File No. 1-3053).
+10.24 Agreement dated as of August 18, 1988 between the Company and
Mr. Olson providing certain severance arrangements (filed by
incorporation by reference to Exhibit 10.23 to the Company's
Form 10-K for the fiscal year ended December 31, 1990,
Commission File No. 1-3053).
+10.25 Agreement Relating to Legal Expenses dated August 18, 1988
between the Company and Mr. Olson providing reimbursement of
certain legal expenses following a change in control of the
Company (filed by incorporation by reference to Exhibit 10.24 to
the Company's Form 10-K for the fiscal year ended December 31,
1990, Commission File No. 1-3053).
+10.26 Amendment dated as of September 19, 1991 to Agreement dated as
of August 18, 1988 between the Company and Mr. Olson (filed by
incorporation by reference to Exhibit 10.28 to the Company's
Form 10-K for the fiscal year ended December 31, 1991,
Commission File No. 1-3053).
+10.27 Trust Agreement dated as of February 19, 1987 between the
Company and Connecticut National Bank securing certain payments
under the contracts listed as Exhibit Numbers 10.8 through
10.26, among others, following a change in control of the
Company (filed by incorporation by reference to Exhibit 19.11 to
the Company's Form 10-Q for the quarter ended June 30, 1987,
Commission File No. 1-3053).
+10.28 Amendment dated as of August 18, 1988 to Trust Agreement dated
as of February 19, 1987 between the Company and Connecticut
National Bank (filed by incorporation by reference to Exhibit
10.29 to the Company's Form 10-K for the fiscal year ended
December 31, 1988, Commission File No. 1-3053).
+10.29 Champion International Corporation Executive Life Insurance Plan
(filed by incorporation by reference to Exhibit 10.27 to the
Company's Form 10-K for the fiscal year ended December 31, 1990,
Commission File No. 1-3053).
10.30 Extract from the minutes of the meeting of the Board of
Directors of the Company held on October 18, 1979 relating to
the $50,000 of group term life insurance provided by the Company
for non-employee directors (filed by incorporation by reference
to Exhibit 10.28 to the Company's Form 10-K for the fiscal year
ended December 31, 1990, Commission File No. 1-3053).
10.31 Resolutions of the Board of Directors of the Company adopted on
September 19, 1991 relating to the compensation of directors
(filed by incorporation by reference to Exhibit 19 to the
Company's Form 10-Q for the quarter ended September 30, 1991,
Commission File No. 1-3053).
10.32 Retirement Plan for Outside Directors (filed by incorporation by
reference to Exhibit 19 to the Company's Form 10-Q for the
quarter ended September 30, 1992, Commission File No. 1-3053).
<PAGE>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
*11 Schedule showing calculation of primary earnings per common
share and fully diluted earnings per common share.
*13 Portions of the Annual Report to Shareholders of Champion
International Corporation for the fiscal year ended December 31,
1993 which are incorporated herein by reference.
*21 List of significant subsidiaries of the Company.
*23.1 Opinion and Consent of the Senior Vice President and General
Counsel of the Company.
*23.2 Consent of Arthur Andersen & Co.
*24 Power of Attorney relating to the execution and filing of this
Annual Report on Form 10-K and all amendments hereto.
28:exhibt93.10k
<PAGE>
EXHIBIT 11
CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES
CALCULATION OF PRIMARY EARNINGS (LOSS) PER COMMON SHARE AND FULLY
DILUTED EARNINGS (LOSS) PER COMMON SHARE
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
(in thousands, except per share amounts)
Primary earnings (loss) per common share (1):
Net income (loss) $ (156,243) $ (440,394) $ 40,343
Dividends on preference shares 27,750 27,750 27,750
---------- ---------- ----------
Net income (loss) applicable to common stock $ (183,993) $ (468,144) $ 12,593
========== ========== ==========
Average number of common shares outstanding 92,788 92,639 92,588
========== ========== ==========
Per share $ (1.98) $ (5.05) $ .14
========== ========== ==========
Fully diluted earnings (loss) per common share (2):
Net income (loss) applicable to common stock $ (183,993) $ (468,144) $ 12,593
Add income effect, assuming conversion of
dilutive convertible securities --- --- ---
---------- ---------- ----------
Net income (loss) on a fully diluted basis $ (183,993) $ (468,144) $ 12,593
========== ========== ==========
Average number of common shares outstanding 92,788 92,639 92,588
Add common share effect, assuming conversion of
dilutive convertible securities --- --- ---
---------- ---------- ----------
Average number of common shares outstanding on
a fully diluted basis 92,788 92,639 92,588
========== ========= ==========
Per share $ (1.98) $ (5.05) $ .14
========== ========= ==========
</TABLE>
- --------------------------
Notes:
(1) Common stock equivalents have not been included in the above
calculation since their effect is insignificant.
(2) The computation of fully diluted earnings per common share assumes
that the average number of common shares outstanding during the year
is increased by the conversion of securities having a dilutive
effect, and that net income applicable to common stock is increased
by dividends and after-tax interest on such securities.
<PAGE>
EXHIBIT 13
Paper
- --------------------------------------------------------------------------------
Years Ended December 31
<TABLE>
<CAPTION>
Net Sales (in millions of dollars) 1993 % 1992 % 1991 %
- ------------------------------------ ------ ---- ------ --- ------ ---
Product Category:
<S> <C> <C> <C> <C> <C> <C>
Printing and writing papers......... $1,830 48 $1,795 47 $1,818 47
Publication papers.................. 801 21 785 20 793 20
Newsprint........................... 342 9 318 8 368 10
Bleached kraft market pulp.......... 289 7 374 10 320 8
Milk cartons........................ 267 7 268 7 255 7
Paperboard and kraft paper.......... 192 5 194 5 195 5
Industrial products................. 69 2 70 2 73 2
Miscellaneous products.............. 28 1 31 1 30 1
------ --- ------ --- ------ ---
$3,818 100 $3,835 100 $3,852 100
====== === ====== === ====== ===
</TABLE>
1
<PAGE>
Wood Products
- -------------------------------------------------------------------------------
Years Ended December 31
<TABLE>
<CAPTION>
Net Sales (in millions of dollars) 1993 % 1992 % 1991 %
- ---------------------------------------- ------ --- ------ --- ----- ---
Product Category:
<S> <C> <C> <C> <C> <C> <C>
Lumber.................................. $ 480 38 $ 368 34 $ 288 31
Softwood plywood and waferboard......... 333 27 301 28 234 25
Logs and stumpage....................... 272 22 257 23 260 28
Sidings and industrial plywood.......... 85 7 80 7 69 7
Hardwood plywood, related sheet
and hardboard......................... 32 2 30 3 29 3
Miscellaneous products.................. 49 4 56 5 54 6
------ --- ------ --- ----- ---
$1,251 100 $1,092 100 $ 934 100
====== === ====== === ===== ===
</TABLE>
2
<PAGE>
Champion International Corporation and Subsidiaries
- -------------------------------------------------------------------------------
Consolidated Income (in thousands, except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31 1993 1992 1991
----------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Net Sales .................................... $5,068,833 $4,926,471 $4,786,403
Cost of products sold ........................ 4,709,757 4,564,637 4,331,957
Selling, general and administrative
expenses ................................... 292,684 288,463 275,262
---------- ---------- ----------
Income from Operations ....................... 66,392 73,371 179,184
Interest and debt expense (Notes 3 and 6) .... 224,658 206,295 210,527
Other (income) expense -- net (Note 10) ...... 7,410 (142,516) (109,541)
---------- ---------- ----------
Income (Loss) before Income Taxes,
Extradordinary Item and Cumulative Effect of
Accounting Changes ......................... (165,676) 9,592 78,198
Income Taxes (Benefit) (Note 11) ............. (31,222) (4,328) 37,855
---------- ---------- ----------
Income (Loss) before Extraordinary Item and
Cumulative Effect of Accounting Changes .... (134,454) 13,920 40,343
Extraordinary Item -- Loss on Early Retirement
of Debt, Net of Taxes (Note 6) ............. (14,266) --- ---
Cumulative Effect of Accounting Changes,
Net of Taxes (Notes 1, 11 and 12) .......... (7,523) (454,314) ---
---------- ---------- ----------
Net Income (Loss) ............................ $ (156,243) $ (440,394) $ 40,343
========== ========== ==========
Dividends on Preference Stock (Note 8) ....... 27,750 27,750 27,750
---------- ---------- ----------
Net Income (Loss) Applicable to Common Stock $ (183,993) $ (468,144) $ 12,593
========== ========== ==========
Average Number of Common Shares Outstanding .. 92,788 92,639 92,588
========== ========== ==========
Earnings (Loss) Per Common Share:
Income (Loss) before Extraordinary Item
and Cumulative Effect of Accounting
Changes .................................. $ (1.75) $ (.15) $ .14
Extraordinary Item -- Loss on Early
Retirement of Debt ....................... (.15) --- ---
Cumulative Effect of Accounting Changes .... (.08) (4.90) ---
---------- ---------- ----------
Net Income (Loss) .......................... $ (1.98) $ (5.05) $ .14
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
3
<PAGE>
Champion International Corporation and Subsidiaries
- -------------------------------------------------------------------------------
Consolidated Retained Earnings (in thousands, except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31 1993 1992 1991
----------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Beginning Balance........................... $2,064,120 $2,550,836 $2,561,854
Net Income (Loss)........................... (156,243) (440,394) 40,343
Redemption of Preference Stock Purchase
Rights.................................... --- --- (5,041)
Cash Dividends Declared:
$92.50 Convertible Preference Stock - $92.50
per share in 1993, 1992 and 1991.......... (27,750) (27,750) (27,750)
Common Stock -- $.20 per share in 1993, 1992
and 1991.................................. (18,592) (18,572) (18,570)
---------- ---------- ----------
Ending Balance..............................
$1,861,535 $2,064,120 $2,550,836
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
4
<PAGE>
Champion International Corporation and Subsidiaries
- -------------------------------------------------------------------------------
Consolidated Balance Sheet (in thousands of dollars)
<TABLE>
<CAPTION>
Assets December 31 1993 1992
- ------ ----------- ---------- ----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents............................. $ 55,653 $ 36,678
Short-term investments................................ 7,197 54,932
Receivables........................................... 494,426 469,846
Inventories (Note 2).................................. 469,269 479,511
Prepaid expenses...................................... 22,818 24,622
Deferred income taxes (Note 11)....................... 65,064 76,911
---------- ----------
Total Current Assets................................ 1,114,427 1,142,500
---------- ----------
Timber and Timberlands, at cost -- less cost of timber
harvested (Note 6).................................. 1,838,550 2,011,567
---------- ----------
Property, Plant and Equipment, at cost
(Notes 3, 6 and 7).................................. 8,467,756 8,218,903
Less -- Accumulated depreciation...................... 2,665,720 2,456,043
---------- ----------
5,802,036 5,762,860
---------- ----------
Other Assets and Deferred Charges..................... 387,756 464,505
---------- ----------
$9,142,769 $9,381,432
========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
5
<PAGE>
Champion International Corporation and Subsidiaries
- -------------------------------------------------------------------------------
Consolidated Balance Sheet (in thousands of dollars)
<TABLE>
<CAPTION>
Liabilities and Shareholders' Equity December 31 1993 1992
- ------------------------------------ ----------- ---------- ----------
<S> <C> <C>
Current Liabilities:
Current installments of long-term debt................ $ 88,052 $ 21,147
Short-term bank borrowings............................ 88,258 110,113
Accounts payable and accrued liabilities (Note 5)..... 591,153 646,979
Income taxes (Note 11)................................ 4,841 8,132
---------- ----------
Total Current Liabilities........................... 772,304 786,371
---------- ----------
Long-Term Debt (Note 6)............................... 3,316,165 3,290,875
---------- ----------
Other Liabilities (Notes 12 and 15)................... 672,788 637,275
---------- ----------
Deferred Income Taxes (Note 11)....................... 1,077,234 1,159,244
---------- ----------
Minority Interest in Subsidiaries..................... 54,160 48,864
---------- ----------
Commitments and Contingent Liabilities
(Notes 7, 15 and 16)................................ --- ---
---------- ----------
Preference Stock, $1.00 par value, $92.50 Cumulative
Convertible Series; 300,000 shares issued and
outstanding (redeemable at maturity for $300,000)
(Note 8)............................................ 300,000 300,000
---------- ----------
Shareholders' Equity:
Preference Stock, 8,231,431 shares authorized but
unissued (Note 8)................................... --- ---
Capital Shares (Notes 8 and 9):
Common stock, $.50 par value: 250,000,000 authorized
shares; 96,367,755 and 96,157,112 issued shares..... 48,184 48,079
Capital surplus..................................... 1,163,555 1,158,150
Retained earnings (Note 6)............................ 1,861,535 2,064,120
---------- ----------
3,073,274 3,270,349
Treasury shares, at cost (Note 8)..................... (100,233) (100,201)
Cumulative translation adjustment..................... (22,923) (11,345)
---------- ----------
2,950,118 3,158,803
---------- ----------
$9,142,769 $9,381,432
========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
6
<PAGE>
Champion International Corporation and Subsidiaries
- -------------------------------------------------------------------------------
Consolidated Cash Flows (in thousands of dollars)
<TABLE>
<CAPTION>
Years Ended December 31 1993 1992 1991
----------------------- ----------- --------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net Income (Loss).................... $ (156,243) $(440,394) $ 40,343
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Extraordinary item................. 14,266 --- ---
Cumulative effect of accounting
changes.......................... 7,523 454,314 ---
Depreciation expense............... 360,240 338,004 282,310
Cost of timber harvested........... 83,194 72,496 59,261
Gain on sale of assets............. (9,973) (103,778) (92,705)
Deferrals of pre-operating and
start-up costs................... (18,819) (16,999) (42,340)
(Increase) decrease in receivables. (28,235) (11,274) 18,514
(Increase) in inventories.......... (13,529) (4,830) (1,194)
(Increase) decrease in prepaid
expenses......................... (2,789) 5,091 5,502
(Decrease) in accounts payable and
accrued liabilities.............. (61,296) (10,263) (887)
(Decrease) increase in income taxes
payable.......................... (3,032) (1,517) 1,895
Increase (decrease) in other
liabilities...................... 21,164 (2,027) (2,252)
(Decrease) increase in deferred
income taxes..................... (26,843) (11,904) 17,197
All other -- net.................... 35,167 (9,144) 84,068
----------- --------- ----------
Net cash provided by operating
activities......................... 200,795 257,775 369,712
----------- --------- ----------
Cash flows from investing activities:
Expenditures for property, plant
and equipment.................... (475,633) (622,976) (603,668)
Timber and timberlands
expenditures..................... (130,147) (95,313) (57,801)
Purchase of investments............ (123,978) (203,424) (59,627)
Proceeds from redemption of
investments...................... 230,561 145,461 43,457
Proceeds from sales of property,
plant and equipment and timber
and timberlands.................. 304,773 174,417 130,328
All other -- net.................... (17,448) (9,096) 49,578
----------- --------- ----------
Net cash used in investing activities (211,872) (610,931) (497,733)
----------- --------- ----------
Cash flows from financing activities:
Proceeds from issuance of long-term
debt............................. 1,382,715 770,052 1,247,611
Payments of current installments of
long-term debt and long-term
debt............................. (1,307,909) (439,646) (991,320)
Cash dividends paid................ (46,334) (46,326) (67,273)
All other -- net.................... 1,580 (6,942) (7,281)
----------- --------- ----------
Net cash provided by financing
activities......................... 30,052 277,138 181,737
----------- --------- ----------
Increase (decrease) in cash and cash
equivalents........................ 18,975 (76,018) 53,716
Cash and cash equivalents:
Beginning of period................ 36,678 112,696 58,980
----------- --------- ----------
End of period...................... $ 55,653 $ 36,678 $ 112,696
=========== ========= ==========
Supplemental cash flow disclosures:
Cash paid during the year for:
Interest (net of capitalized
amounts)....................... $ 225,764 $ 201,925 $ 196,463
Income taxes (net of refunds)
(Note 11)...................... 11,867 15,181 (6,075)
</TABLE>
The accompanying notes are an integral part of this statement.
7
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 1. Summary of Significant Accounting Policies
A. Consolidation
The consolidated financial statements include the accounts of the company and
all of its domestic and foreign subsidiaries. Affiliates which are 20% to 50%
owned are reflected using the equity method of accounting, with the related
investments included in Other Assets and Deferred Charges. All significant
intercompany transactions have been eliminated.
Certain amounts have been reclassified to conform to the current year's
presentation.
B. Accounting Changes
During the fourth quarter of 1993, the company adopted, retroactive to January
1, 1993, Statement of Financial Accounting Standards ("SFAS") No. 112,
"Employers' Accounting for Postemployment Benefits" (Note 12).
During the fourth quarter of 1992, the company adopted, retroactive to January
1, 1992, SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other
than Pensions" (Note 12) and SFAS No. 109, "Accounting for Income Taxes" (Note
11).
C. Cash and Cash Equivalents
Cash and cash equivalents includes all highly liquid investments with original
maturities of three months or less. Short-term investments are investments
which mature within twelve months but which do not meet the criteria of cash
equivalents.
D. Inventories
Inventories are generally stated at the lower of average cost or market (market
approximates net realizable value), except for certain inventories of the paper
segment which are stated on the last-in, first-out (LIFO) method.
E. Capitalization and Amortization of Certain Costs
Pre-operating expenses and start-up costs incurred in connection with the
construction of major properties are deferred until such properties become
operational. These expenses and costs are then amortized over a five-year
period.
F. Fair Value of Financial Instruments
The company has, where appropriate, estimated the fair values of financial
instruments. Where these estimates approximate carrying value, no separate
disclosure of fair value is shown. The fair values of the company's long-term
debt are estimated using discounted cash flow analyses, based on the company's
incremental borrowing rates for similar types of borrowings.
8
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
G. Fixed Assets
Property, Plant and Equipment, which includes capitalized leases, is stated at
cost. Timber and Timberlands, which includes original costs, road construction
costs, and reforestation costs, such as site preparation and planting costs, is
stated at unamortized cost. Property taxes, surveying, fire control and other
forest management expenses are charged to expense as incurred. When fixed
assets are sold or retired, cost and accumulated depreciation are eliminated
from the accounts and gains or losses are recorded in income.
For financial reporting purposes, plant and equipment are depreciated using the
straight-line method over the estimated service lives of the individual assets.
Leasehold improvements are amortized over the shorter of the lives of the leases
or estimated service lives. Cost of timber harvested is based on the estimated
quantity of timber available during the growth cycle and is credited directly to
the asset accounts (Notes 3, 6 and 7).
H. Revenue Recognition
The company recognizes revenues as products are shipped.
I. Earnings Per Common Share
Primary earnings per common share are computed by dividing net income, after
deducting dividends on preference shares, by the average number of common shares
and dilutive common share equivalents outstanding during the year. The
computation of fully diluted earnings per common share assumes that the average
number of common shares and dilutive common share equivalents outstanding is
increased by the conversion of securities having a dilutive effect and that net
income applicable to common stock is increased by dividends and after-tax
interest on such securities.
J. Foreign Currency Translation
The assets and liabilities of the company's Canadian subsidiary are translated
into U.S. dollars using year-end exchange rates. The resulting translation
gains or losses are included with the cumulative translation adjustment in the
Shareholders' Equity section of the balance sheet.
Due to the high inflation rate in Brazil, the company's Brazilian subsidiary
uses the U.S. dollar as its functional currency. Except for certain items
translated at historical exchange rates, assets and liabilities are translated
using year-end exchange rates. Gains or losses from balance sheet translation
are included in net income.
Gains or losses resulting from foreign currency transactions are included in net
income.
9
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 2. Inventories
<TABLE>
<CAPTION>
December 31 (in thousands of dollars) 1993 1992
- ---------------------------------------------------- -------- --------
<S> <C> <C>
Paper, pulp and packaging products.................. $182,569 $178,944
Wood products....................................... 35,495 41,777
Logs................................................ 65,603 68,336
Pulpwood............................................ 17,152 22,712
Raw materials, parts and supplies................... 168,450 167,742
-------- --------
$469,269 $479,511
======== ========
</TABLE>
At December 31, 1993 and 1992, inventories stated using the last-in, first-out
(LIFO) method, representing approximately 22% and 17% of total inventories, were
$102,339,000 and $82,048,000, respectively. If the lower of average cost or
market method (which approximates current cost) had been utilized for
inventories carried at LIFO, inventory balances would have been increased by
$59,961,000 and $65,206,000 at December 31, 1993 and 1992, respectively.
10
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 3. Property, Plant and Equipment
<TABLE>
<CAPTION>
December 31 (in thousands of dollars) 1993 1992
- ----------- ------------------------- ----------- -----------
<S> <C> <C>
Land and land improvements............. $ 303,591 $ 273,625
Buildings.............................. 902,814 812,249
Machinery and equipment................ 7,065,628 6,370,952
Construction in progress............... 195,723 762,077
----------- -----------
8,467,756 8,218,903
Accumulated depreciation............... (2,665,720) (2,456,043)
----------- -----------
$ 5,802,036 $ 5,762,860
=========== ===========
</TABLE>
Interest capitalized into construction in progress during 1993, 1992 and 1991
was $33,784,000, $39,628,000 and $53,119,000, respectively.
11
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 4. Lines of Credit
At December 31, 1993, the company had unused U.S. lines of credit of
approximately $791 million ($559 million of which supported short-term
borrowings classified as long-term debt as discussed in Note 6) and unused
foreign lines of credit of approximately $174 million. At December 31, 1993,
interest rates on the U.S. and foreign lines were no higher than the prime rate
or its equivalent. Commitment fees of 1/4% are required on the $1,015 million
U.S. lines of credit, which are available to September 30, 1996 on a revolving
basis, at which time amounts owed, if any, become payable. Commitment fees of
no more than 1/5% are required on the $208 million foreign lines of credit.
Commitments under the credit agreements cannot be withdrawn provided the company
continues to meet required conditions.
12
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 5. Accounts Payable and Accrued Liabilities
<TABLE>
<CAPTION>
December 31 (in thousands of dollars) 1993 1992
- ------------------------------------------------------- -------- --------
<S> <C> <C>
Accounts payable....................................... $243,920 $271,928
-------- --------
Dividends payable...................................... 4,654 4,646
-------- --------
Accrued liabilities:
Payrolls and commissions............................. 104,520 107,860
Employee benefits.................................... 50,668 50,643
Interest............................................. 49,611 53,223
Taxes, other than income taxes....................... 25,462 30,955
Other................................................ 112,318 127,724
-------- --------
Total accrued liabilities....................... 342,579 370,405
-------- --------
$591,153 $646,979
======== ========
</TABLE>
13
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 6. Long-Term Debt (exclusive of current installments)
<TABLE>
<CAPTION>
December 31 (in thousands of dollars) 1993 1992
- ------------------------------------------------------- ---------- ----------
<S> <C> <C>
Secured debt, 5.1% average rate, payable
through 2012 (a)..................................... $ 39,183 $ 50,070
Unsecured debt, 6.8% average rate, payable through
2028 (b)............................................. 3,030,816 3,019,713
Lease obligations, 7.0% average rate, payable
through 2029......................................... 236,566 184,724
Timber cutting obligation.............................. --- 26,763
Other contractual obligations, 5.9% average rate,
payable through 1998................................. 9,600 9,605
---------- ----------
Total (c,d)..................................... $3,316,165 $3,290,875
========== ==========
</TABLE>
(a) Such debt is secured by certain assets with a net book value at December 31,
1993 of approximately $67 million.
(b) Unsecured debt includes borrowings payable in less than one year. The
company has the ability to refinance these borrowings under the credit
agreements discussed in Note 4. At December 31, 1993, $331 million of U.S.
commercial paper and $228 million of U.S. short-term obligations have been
classified as long-term debt since the company intends to renew or refinance
these obligations through 1994 and into future periods.
Unsecured debt at December 31, 1993 and 1992 includes $150 million of the
company's 6 1/2% convertible subordinated debentures due April 15, 2011.
The conversion rate for these debentures is 28.777 shares of the company's
common stock for each $1,000 principal amount of debentures.
(c) The annual principal payment requirements under the terms of all long-term
debt agreements for the years 1994 through 1998 are $88 million, $361
million, $919 million, $246 million and $247 million, respectively.
(d) The estimated fair value of long-term debt at December 31, 1993 was
approximately $242 million higher than carrying value due to recent declines
in interest rates.
The indentures and agreements relating to long-term debt arrangements, as well
as the company's Certificate of Incorporation, contain restrictions on the
payment of cash dividends. Under the most restrictive of these provisions,
approximately $454 million of consolidated retained earnings at December 31,
1993 is free of such restrictions.
14
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
During the fourth quarter of 1993, the company sold approximately 870,000 acres
of timberlands in Montana and its wood products facilities at Bonner and Libby,
Montana. Net cash proceeds of approximately $284 million from these sales were
used primarily to reduce long-term debt, including redemption of $77.5 million
principal amount of 10 5/8% Sinking Fund Debentures and $100 million principal
amount of 9 1/2% Sinking Fund Debentures. The company has recorded an
extraordinary loss of $23 million ($14 million net of taxes), consisting of
redemption premiums and the write-off of deferred financing costs, related to
early retirement of debt. The impact of the Montana sales on 1993 net income
was not material.
15
<PAGE>
Champion International Corporation and Subsidiaries
Notes to Financial Statements
Note 7. Commitments
<TABLE>
<CAPTION>
Future Minimum Lease Payments
-----------------------------
Capitalized Non-Cancelable
Period (in thousands of dollars) Leases Operating Leases
- --------------------------------------------- ----------- ----------------
<S> <C> <C>
1994......................................... $ 18,246 $ 22,916
1995......................................... 17,384 20,890
1996......................................... 17,328 19,043
1997......................................... 17,272 17,720
1998......................................... 17,215 15,644
Thereafter................................... 558,859 250,094
----------- ----------------
Total payments............................... 646,304 346,307
Less: Sublease rental income................ --- 73,329
----------------
Net operating lease payments................. $272,978
================
Less: Amount representing interest.......... 405,414
-----------
Present value of capitalized lease payments
($1,600 current; $239,290 long-term)....... $240,890
===========
</TABLE>
The following schedule shows the composition of total rental expense for all
operating leases:
<TABLE>
<CAPTION>
Years Ended December 31 (in thousands of dollars) 1993 1992 1991
- --------------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
Minimum rentals.................................... $25,204 $26,082 $27,734
Less: Sublease rental income...................... 573 970 1,291
------- ------- -------
$24,631 $25,112 $26,443
======= ======= =======
</TABLE>
16
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 8. Capital Shares
Redeemable Preference Stock
- ---------------------------
On December 6, 1989, the company issued 300,000 shares of Preference Stock,
$92.50 Cumulative Convertible Series, $1.00 par value ("$92.50 Preference
Stock"). In preference to shares of common stock, each share is entitled to
cumulative cash dividends of $92.50 per year and $1,000 upon liquidation. Each
share is convertible into approximately 26.3 shares of common stock and has
approximately 26.3 votes on all matters submitted to shareholders. In the event
of arrearages in $92.50 Preference Stock dividends, the company is prohibited
from declaring or paying any cash dividends on its common stock. Although
interest rates have declined since the issuance of these securities, the company
believes that their fair value does not exceed $1,150 per share plus accrued
dividends, which represents the amount at which the company has a right, except
in certain circumstances, to redeem the shares. On December 6, 1999, all
outstanding shares must be redeemed at $1,000 per share plus accrued dividends.
Except under certain circumstances, the company has the right to purchase any
securities, including common stock, owned by the original holders of the $92.50
Preference Stock before such securities are sold to third parties.
Unissued Preference Stock
- -------------------------
At December 31, 1993 and 1992, 6,731,431 preference shares for which no series
has been designated were authorized and unissued. At December 31, 1993 and 1992,
1,500,000 additional authorized and unissued shares were designated and reserved
for the issuance of the company's Preference Stock, Participating Cumulative
Series or Participating Cumulative Series B, $1.00 par value.
17
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Common Stock
- ------------
Changes in common shares during the three years ended December 31, 1993 are as
follows:
(in shares and thousands of dollars)
<TABLE>
<CAPTION>
Treasury Shares
Issued Shares (at cost)
---------------------------------- -----------------------
Par Capital
Shares Value Surplus Shares Amount
----------- -------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1990.. 96,060,347 $48,030 $1,155,850 (3,092,070) $(100,108)
Exercise of stock options..... 12,750 6 296 --- ---
Compensation plans............ 18,946 10 497 (77,912) (39)
Other......................... (2,326) (1) (4) --- ---
---------- ------- ---------- ---------- ---------
Balance at December 31, 1991.. 96,089,717 48,045 1,156,639 (3,169,982) (100,147)
Exercise of stock options..... 40,750 20 962 --- ---
Compensation plans............ 20,368 10 550 (107,563) (54)
Other......................... 6,277 4 (1) --- ---
---------- ------- ---------- ---------- ---------
Balance at December 31, 1992.. 96,157,112 48,079 1,158,150 (3,277,545) (100,201)
Exercise of stock options..... 182,950 91 4,751 --- ---
Compensation plans............ 23,078 12 639 (63,810) (32)
Other......................... 4,615 2 15 --- ---
---------- ------- ---------- ---------- ---------
Balance at December 31, 1993.. 96,367,755 $48,184 $1,163,555 (3,341,355) $(100,233)
========== ======= ========== ========== =========
</TABLE>
At December 31, 1993, common shares of the company were reserved for issue as
follows:
<TABLE>
<S> <C>
$92.50 Preference Stock....................... 7,894,737
Stock options granted or available for grant.. 8,468,650
Conversion of long-term debt.................. 4,318,695
Compensation plans............................ 2,682,361
----------
23,364,443
==========
</TABLE>
18
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 9. Stock Options
The company has granted to officers and key employees options to purchase common
shares at the market price of the shares on the date of grant. Certain options
granted to officers and to key employees are accompanied by stock appreciation
rights. The options expire ten years or ten years and 31 days from the date of
grant and generally become exercisable subsequent to a period of 12 calendar
months from date of grant.
Transactions under the plans are summarized below:
<TABLE>
<CAPTION>
Shares Option Price
---------- ----------------
<S> <C> <C>
Balance at January 1, 1991................ 2,533,375 $17.50 to $38.25
Granted.............................. 907,000 26.38 to 26.88
Exercised............................ (20,550) 17.50 to 24.13
Surrendered or canceled.............. (67,100) 22.13 to 38.25
---------
Balance at December 31, 1991.............. 3,352,725 17.50 to 38.25
Granted.............................. 606,600 27.50
Exercised............................ (78,525) 17.50 to 28.13
Surrendered or canceled.............. (96,300) 17.50 to 38.25
---------
Balance at December 31, 1992.............. 3,784,500 18.88 to 38.25
Granted.............................. 598,200 31.00
Exercised............................ (266,300) 22.13 to 31.50
Surrendered or canceled.............. (103,400) 24.00 to 38.25
---------
Balance at December 31, 1993.............. 4,013,000 $18.88 to $38.25
========= ================
Options exercisable at December 31, 1993.. 3,130,500
</TABLE>
At December 31, 1993, the stock options had an aggregate option price of
$117,796,088.
19
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 10. Other (Income) Expense -- Net
<TABLE>
<CAPTION>
Years Ended December 31
(in thousands of dollars) 1993 1992 1991
- --------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Interest income........................ $(30,135) $ (23,825) $ (27,777)
Foreign currency losses -- net......... 24,717 5,116 1,466
Minority interest in income of
subsidiaries......................... 7,288 2,856 (4,315)
Equity in net income of affiliates..... (463) (972) (1,931)
Royalty, rental and commission
income............................... (8,276) (13,950) (11,951)
Net gain on disposal of fixed assets,
timberlands and investments (a)...... (9,973) (103,778) (92,705)
Miscellaneous -- net (b)............... 24,252 (7,963) 27,672
-------- --------- ---------
$ 7,410 $(142,516) $(109,541)
======== ========= =========
</TABLE>
(a) 1992 and 1991 included gains of $107 million and $93 million, respectively,
from sales of portions of the company's West Coast timberlands, including
the 1992 sale of its wood products facility in Roseburg, Oregon.
(b) Miscellaneous - net for 1992 included income of $30 million from the
favorable resolution of certain issues in Brazil.
20
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 11. Income Taxes
The provision for income taxes includes the following components:
<TABLE>
<CAPTION>
Years Ended December 31 (in thousands of dollars) 1993 1992 1991
- --------------------------------------------------- -------- -------- -------
<S> <C> <C> <C>
Provision for income taxes currently
payable (receivable):
Federal.......................................... $(15,206) $ --- $12,720
State and local.................................. 1,680 1,820 1,800
Foreign.......................................... 9,147 5,756 6,138
-------- -------- -------
(4,379) 7,576 20,658
-------- -------- -------
Provision for deferred income taxes:
Federal.......................................... (34,005) (40,233) 16,735
State and local.................................. (8,821) (2,071) 3,500
Foreign.......................................... 15,983 30,400 (3,038)
-------- -------- -------
(26,843) (11,904) 17,197
-------- -------- -------
$(31,222) $ (4,328) $37,855
======== ======== =======
</TABLE>
Domestic and foreign income (loss) before income taxes, extraordinary item and
cumulative effect of accounting changes are as follows:
<TABLE>
<CAPTION>
Years Ended December 31 (in thousands of dollars) 1993 1992 1991
- --------------------------------------------------- --------- --------- -------
<S> <C> <C> <C>
Domestic........................................... $(250,755) $(114,450) $51,051
Foreign............................................ 85,079 124,042 27,147
--------- --------- -------
Total income before income taxes, extraordinary
item and cumulative effect of accounting
changes.......................................... $(165,676) $ 9,592 $78,198
========= ========= =======
</TABLE>
21
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Principal reasons for the variation between the effective rate and the statutory
federal income tax rate are as follows:
<TABLE>
<CAPTION>
Years Ended December 31 1993 1992 1991
- -------------------------------------------------- ------ ------ -----
<S> <C> <C> <C>
Statutory rate -- provision (benefit)............. (35.0)% 34.0 % 34.0 %
Rate difference -- foreign subsidiaries........... (1.0) 28.5 (11.5)
Foreign dividends................................. 1.3 45.7 4.2
State and local taxes, net of federal tax effect.. (2.8) (1.7) 4.5
Adjustment to prior years' income taxes........... 4.1 (106.2) ---
Amortization of excess of amounts allocated in
purchase accounting over tax basis.............. --- --- 10.0
Adjustment of purchase accounting liabilities..... (0.4) (63.7) 4.2
Statutory rate change adjustments................. 14.1 --- ---
All other -- net.................................. 0.9 18.3 3.0
------ ------ -----
Effective income tax rate......................... (18.8)% (45.1)% 48.4 %
====== ====== =====
</TABLE>
Deferred tax liabilities (assets) are composed of the following:
<TABLE>
<CAPTION>
Years Ended December 31 (in thousands of dollars) 1993 1992
- -------------------------------------------------- ---------- ----------
<S> <C> <C>
Depreciation and cost of timber harvested......... $1,671,507 $1,657,165
Capitalization of interest and deferral of
pre-operating and start-up costs (net).......... 52,362 52,929
Other............................................. 44,696 64,066
---------- ----------
Gross Liabilities.......................... 1,768,565 1,774,160
---------- ----------
Loss and other carryforwards...................... (388,780) (317,220)
Accrued liabilities and reserves.................. (181,932) (177,159)
Postretirement benefits other than pensions....... (144,044) (137,562)
Other............................................. (83,930) (99,686)
---------- ----------
Gross Assets............................... (798,686) (731,627)
---------- ----------
Valuation allowance............................... 42,291 39,800
---------- ----------
$1,012,170 $1,082,333
========== ==========
</TABLE>
22
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
As of December 31, 1993, the company had available, for U.S. income tax return
purposes, general business credit carryforwards of $53,000,000, which expire
from 2000 through 2007; net operating loss carryforwards of $558,400,000, which
expire from 2006 through 2008; and alternative minimum tax credit carryforwards
of $104,300,000, which do not expire. In addition, the company had available in
Canada net operating loss carryforwards of $5,600,000 which will expire in 1998
and investment tax credit carryforwards of $8,700,000, which expire from 1996
through 2002.
It is the company's intention to reinvest undistributed earnings of certain of
its foreign subsidiaries and thereby indefinitely postpone their remittance.
Accordingly, no provision has been made for income taxes on undistributed
earnings of $689,700,000 at December 31, 1993. Computation of the potential
deferred tax liability associated with these undistributed earnings is not
practicable.
The valuation allowance primarily relates to general business credit
carryforwards. The increase in the valuation allowance of $2,491,000 for 1993
is primarily due to uncertainty with respect to the utilization of state net
operating loss carryforwards.
In the fourth quarter of 1992, the company adopted, retroactive to January 1,
1992, SFAS No. 109. The adoption of SFAS No. 109 changed the company's method
of accounting for income taxes from the deferred method to an asset and
liability approach. The company adopted the standard using a cumulative effect
adjustment and recorded a charge to 1992 net income of $242 million ($2.61 per
share) principally as the result of changes to the tax provision for years prior
to 1988.
The effect of the adoption on 1992 results, after recording the cumulative
effect for the years prior to 1992, was to record additional pre-tax expense of
approximately $27 million, primarily as the result of an increase in
depreciation expense, and a reduction to net income of approximately $9 million.
For the year prior to adoption of SFAS No. 109, the deferred income tax
provision resulted from the following:
<TABLE>
<CAPTION>
Year Ended December 31 (in thousands of dollars) 1991
- ------------------------------------------------ --------
<S> <C>
Excess of tax over financial depreciation
expense and cost of timber harvested.............. $ 81,268
Capitalization of interest and deferral of
pre-operating and start-up costs (net) --
deductible for tax purposes as incurred........... 3,897
Provision for accrued liabilities -- deductible
for tax purposes when paid........................ (3,196)
Effect on deferred taxes of net operating loss,
general business credit and alternative
minimum tax credit carryforwards.................. (74,156)
Provision for restructuring......................... 3,345
All other - net..................................... 6,039
--------
$ 17,197
========
</TABLE>
23
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 12. Pension and Other Benefit Plans
The company and its subsidiaries have a number of noncontributory pension plans
covering substantially all employees. The plans covering salaried employees
provide pension benefits that generally are based on the employee's compensation
during the 60 months before retirement. Plans covering hourly employees
generally provide benefits of stated amounts for each year of service. The
company bases domestic pension contributions on funding standards established by
the Employee Retirement Income Security Act of 1974.
The net periodic pension cost of these plans in 1993, 1992 and 1991 included the
following:
<TABLE>
<CAPTION>
(in thousands of dollars) 1993 1992 1991
- ------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Service cost--benefits earned during the period.. $ 25,256 $ 24,257 $ 21,366
Interest cost on projected benefit obligation.... 98,667 96,248 93,152
Actual return on plan assets..................... (208,714) (105,909) (255,479)
Net amortization and deferral.................... 90,806 (3,662) 154,711
--------- --------- ---------
Net periodic pension cost........................ $ 6,015 $ 10,934 $ 13,750
========= ========= =========
Assumptions used in determining 1993, 1992 and
1991 net periodic pension cost were:
Expected long-term rate of return on assets...... 10.0% 10.0% 10.0%
Discount rate.................................... 8.3% 8.5% 9.3%
Long-term rate of increase in compensation levels 5.3% 5.5% 6.3%
</TABLE>
24
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
The accrued pension cost at December 31, 1993 and 1992 for defined benefit plans
is shown below. The measurement dates used to determine the funded status were
September 30, 1993 and 1992. Benefit obligations for 1993 and 1992 were
determined using an assumed discount rate of 7.25% and 8.25%, respectively, and
an assumed average long-term rate of increase in compensation levels of 4.25%
and 5.25%, respectively. Plan assets consist primarily of listed stocks and
bonds.
<TABLE>
<CAPTION>
Assets Exceed Accumulated Benefits
----------------------------------
1993 1992
--------------- ----------------
<S> <C> <C>
(in thousands of dollars)
- -------------------------
Actuarial present value of benefit obligations:
Vested benefit obligation.................... $1,179,538 $1,080,935
========== ==========
Accumulated benefit obligation............... $1,214,997 $1,112,708
========== ==========
Projected benefit obligation................. $1,330,228 $1,212,997
Plan assets at fair value........................ 1,362,952 1,231,022
---------- ----------
Plan assets in excess of the projected benefit
obligation..................................... 32,724 18,025
Unrecognized net (gain).......................... (43,014) (39,984)
Prior service cost not yet recognized in net
periodic pension cost.......................... 23,437 21,209
Unrecognized net transitional (asset)............ (18,369) (19,990)
---------- ----------
Pension (liability).............................. $ (5,222) $ (20,740)
========== ==========
</TABLE>
25
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Other Retiree Benefits
- ----------------------
The company provides certain health care and life insurance benefits to eligible
retired employees. Employees are generally eligible for benefits upon
retirement and completion of a specified number of years of service. These
benefit plans are unfunded.
Summary information on the company's plans providing postretirement benefits
other than pensions is as follows:
<TABLE>
<CAPTION>
December 31 (in thousands of dollars) 1993 1992
- ------------------------------------------------ -------- --------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees...................................... $308,000 $288,300
Fully eligible, active plan participants...... 42,100 52,400
Other active plan participants................ 53,500 60,000
-------- --------
Accumulated postretirement benefit obligation 403,600 400,700
Unrecognized prior service (cost) benefit....... 30,400 ---
Unrecognized net (loss)......................... (57,600) (31,900)
-------- --------
Accrued postretirement benefit obligation....... $376,400 $368,800
======== ========
</TABLE>
Net periodic postretirement benefit cost for 1993 and 1992 includes the
following components:
<TABLE>
<CAPTION>
(in thousands of dollars) 1993 1992
- --------------------------------------------- -------- --------
<S> <C> <C>
Service cost................................. $ 4,800 $ 4,300
Interest cost on accumulated postretirement
benefit obligation......................... 32,700 30,500
------- -------
Net periodic postretirement benefit cost..... $37,500 $34,800
======= =======
</TABLE>
The accumulated postretirement benefit obligation at December 31, 1993 and 1992
was determined using an assumed discount rate of 7.5% and 8.5%, respectively.
The assumed health care cost trend rate used for measurement purposes was 10%
for 1994, declining ratably to an ultimate rate of 5% over a period of eight
years.
If the health care cost trend rate assumptions were increased by 1%, the
accumulated postretirement benefit obligation as of December 31, 1993 would be
increased by approximately 10%. The effect of this change on the aggregate of
service and interest cost for 1993 would be an increase of approximately 10%.
26
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
In the fourth quarter of 1992, the company adopted, retroactive to January 1,
1992, SFAS No. 106. This statement requires that the cost of retiree benefits
other than pensions be recognized in the financial statements during the
employee's working career. The company's previous practice was generally to
expense the cost of these benefits as they were paid.
The cumulative effect of adopting SFAS No. 106 as of January 1, 1992 resulted in
an after-tax charge of $213 million ($2.30 per share) to 1992 earnings, after
reduction of approximately $126 million for income tax effects.
The effect of adoption on 1992 results, after recording the cumulative effect
for the years prior to 1992, was to recognize additional pre-tax expense of
approximately $13 million.
Postretirement benefit cost charged to expense in 1991 was $19,046,000.
Postemployment Benefits
- -----------------------
In the fourth quarter of 1993, the company adopted, retroactive to January 1,
1993, SFAS No. 112. The standard requires an accrual method of accounting for
postemployment benefits. Prior to adoption, the company was on a cash basis of
accounting for certain of these postemployment benefits. The cumulative effect
of adopting SFAS No. 112 as of January 1, 1993 resulted in an after-tax charge
of $7.5 million ($.08 per share) to 1993 earnings after reduction of
approximately $4.7 million for income taxes. The effect of adoption on 1993
results, after recording the cumulative effect, was not material.
27
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 13. Business Segments
Information about the company's operations in different businesses for the three
years ended December 31, 1993 is as follows:
<TABLE>
<CAPTION>
Timber,
Timberlands
and Wood Corporate Consolidated
(in thousands of dollars) Paper Products and Other Total
- ------------------------- ----------- ----------- --------- ------------
<S> <C> <C> <C> <C>
Net Sales to
Unaffiliated Customers:
1993..................... $3,817,579 $1,251,254 $ --- $5,068,833
1992..................... 3,834,585 1,091,886 --- 4,926,471
1991..................... 3,852,438 933,965 --- 4,786,403
Income from Operations:
1993..................... $ (133,774) $ 247,989 $(47,823) $ 66,392
1992..................... (7,490) 125,071 (44,210) 73,371
1991..................... 216,018 5,921 (42,755) 179,184
Identifiable Assets:
1993..................... $6,563,263 $2,148,921 $430,585 $9,142,769
1992..................... 6,556,177 2,344,257 480,998 9,381,432
1991..................... 6,125,084 2,046,919 483,874 8,655,877
Capital Expenditures:
1993..................... $ 417,407 $ 182,785 $ 5,588 $ 605,780
1992..................... 614,795 95,993 7,501 718,289
1991..................... 581,368 60,872 19,229 661,469
Depreciation Expense and
Cost of Timber Harvested:
1993..................... $ 358,294 $ 72,513 $ 12,627 $ 443,434
1992..................... 324,010 72,562 13,928 410,500
1991..................... 261,391 67,011 13,169 341,571
</TABLE>
The company's domestic and Canadian timber and timberlands assets and related
capital expenditures support both business segments but were not allocated to
the paper segment because identification of the specific timber and timberlands
assets associated with either segment is impossible. The timber that has been
harvested has been included at cost in the results of the business segments.
28
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Information about the company's operations in different geographic areas for the
three years ended December 31, 1993 is as follows:
<TABLE>
<CAPTION>
Corporate Consolidated
(in thousands of dollars) U.S. Canada Brazil and Other Total
- ------------------------- ----------- --------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Net Sales to
Unaffiliated Customers:
1993..................... $4,185,388 $610,947 $272,498 $ --- $5,068,833
1992..................... 4,114,609 532,623 279,239 --- 4,926,471
1991..................... 4,034,237 494,019 258,147 --- 4,786,403
Income from Operations:
1993..................... $ (18,063) $ 53,674 $ 78,604 $(47,823) $ 66,392
1992..................... (11,418) 37,778 91,221 (44,210) 73,371
1991..................... 165,818 (20,327) 76,448 (42,755) 179,184
Identifiable Assets:
1993..................... $7,454,454 $744,631 $513,099 $430,585 $9,142,769
1992..................... 7,588,478 718,695 593,261 480,998 9,381,432
1991..................... 6,878,365 780,677 512,961 483,874 8,655,877
Capital Expenditures:
1993..................... $ 486,074 $ 65,035 $ 49,083 $ 5,588 $ 605,780
1992..................... 638,392 16,974 55,422 7,501 718,289
1991..................... 585,589 18,323 38,328 19,229 661,469
Depreciation Expense and
Cost of Timber Harvested:
1993..................... $ 376,456 $ 32,513 $ 21,838 $ 12,627 $ 443,434
1992..................... 342,769 33,366 20,437 13,928 410,500
1991..................... 273,737 35,128 19,537 13,169 341,571
</TABLE>
As of December 31, 1993, net assets located outside of the United States
included in the consolidated financial statements were approximately
$760,000,000. Of this amount, $457,000,000, which includes $48,000,000 of cash
and cash equivalents and short-term investments, is owned by the company's
Brazilian subsidiary.
29
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 14. Quarterly Results of Operations (Unaudited)
<TABLE>
<CAPTION>
(in millions of dollars, except per share amounts)
- --------------------------------------------------
March 31 June 30 September 30 December 31
-------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Net Sales 1993 $1,267.0 $1,256.3 $1,245.3 $1,300.2
1992 1,200.3 1,229.6 1,259.2 1,237.4
Gross Profit 1993 $ 103.8 $ 92.5 $ 68.7 $ 94.1
1992 93.3 89.0 103.3 76.2
Income Taxes
(Benefit) (a) 1993 $ (18.7) $ (14.9) $ 4.7 $ (2.3)
1992 (10.4) (9.2) 24.5 (9.2)
Income (Loss) before
Extraordinary Item
and Cumulative
Effect of Accounting
Changes (b) 1993 $ (28.1) $ (22.3) $ (53.5) $ (30.6)
1992 (6.8) 2.0 47.6 (28.9)
Net Income (Loss) (c) 1993 $ (35.6) $ (22.3) $ (53.5) $ (44.8)
1992 (461.1) 2.0 47.6 (28.9)
Earnings (Loss) Per
Common Share before
Extraordinary Item
and Cumulative
Effect of
Accounting Changes 1993 $ (.38) $ (.31) $ (.65) $ (.41)
1992 (.15) (.05) .43 (.38)
Earnings (Loss)
Per Common Share (c) 1993 $ (.46) $ (.31) $ (.65) $ (.56)
1992 (5.05) (.05) .43 (.38)
</TABLE>
(a) Income taxes (benefit) for the three-month periods ended September 30 and
December 31, 1993 included provisions of $23 million and $11 million,
respectively, to reflect one-time adjustments to the company's deferred tax
liability.
(b) Other (income) expense - net for the three-month period ending December 31,
1993, included non-recurring pre-tax income of $10 million.
Other (income) expense - net for the three-month periods ended March 31,
June 30 and September 30, 1992 included non-recurring pre-tax income of $20
million, $26 million and $90 million, respectively, primarily from the sale
of timberlands, and
30
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
for the three-month period ended December 31, 1992 included a net charge of
$18 million related to several non-recurring items and income of $30 million
from the favorable resolution of certain issues in Brazil. The $30 million
favorable resolution was after-tax and, therefore, reduced the effective tax
rate for the period.
(c) Net income (loss) and earnings (loss) per common share for the three months
ended March 31, 1993 have been restated to include the one-time charge for
the cumulative effect of an accounting change of $8 million, or $.08 per
share, for the adoption as of January 1, 1993 of SFAS No. 112 (Note 12).
Net income (loss) and earnings (loss) per common share for the three months
ended December 31, 1993 included the after-tax charge of $14 million, or
$.15 per share, respectively, for the loss on early retirement of debt.
Net income (loss) and earnings (loss) per common share for the three months
ended March 31, 1992 included the one-time charge for the cumulative effect
of accounting changes of $454 million, or $4.90 per share, respectively, to
reflect the adoption as of January 1, 1992 of SFAS No. 106 (Note 12) and
SFAS No. 109 (Note 11).
31
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 15. Environmental Liabilities
The company has been designated as a potentially responsible party by the U.S.
Environmental Protection Agency (the "EPA") under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, and by certain
states under applicable state laws, with respect to the cleanup of hazardous
substances at several sites. In the case of many of these sites, other
potentially responsible parties also have been so designated. In addition, the
company and, in certain instances, other responsible parties have entered into
agreements with the EPA and certain states regarding the cleanup of hazardous
substances at various other locations. Also, the company is involved in the
remediation of certain other sites which are not the subject of investigation by
federal or state agencies.
The company cannot predict with certainty the total cost of such cleanups, the
company's share of the total cost of multiparty cleanups or the extent to which
contribution will be available from other parties, or the amount of time
necessary to accomplish such cleanups. However, based upon, among other things,
its previous experience with respect to the cleanup of hazardous substances as
well as the regular detailed review of known hazardous waste sites by the
company, the company has accrued $83 million at December 31, 1993, which
represents its current estimate of the probable cleanup liabilities, including
remediation and legal costs, at all known sites. This accrual does not reflect
any possible future insurance recoveries, which are not expected to be
significant, but does reflect a reasonable estimate of cost-sharing at
multiparty sites.
Although the company's probable liabilities have been accrued for currently,
hazardous substance cleanup expenditures generally are incurred over an extended
period of time, in some cases possibly more than 30 years. Annual cleanup
expenditures during the period from 1991 through 1993 were approximately $5.3
million, $6.6 million and $6.9 million, respectively.
32
<PAGE>
Champion International Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 16. Legal Proceedings
The company was a defendant in a class action which originally sought $5 billion
in damages allegedly resulting from the purported discharge of hazardous
substances, including dioxin, from the company's Canton, North Carolina mill
into the Pigeon River. In October 1992, a mistrial was declared after the jury
was unable to reach a unanimous verdict. In May 1993, the court approved a
settlement of the action providing for the payment of $6.5 million by the
company. In June 1993, the court's approval of the settlement was appealed.
The company, Simpson Pasadena Paper Company, the Gulf Coast Waste Disposal
Authority and others were defendants in two separate actions by several
individuals engaged primarily in seafood-related businesses. Each of these
actions sought unspecified damages allegedly resulting from the purported
discharge of dioxin into the Brazos River, Galveston Bay and the Neches River
from the company's Sheldon, Texas mill, the company's former mill in Pasadena,
Texas and the other defendants' mills. Each of these actions was settled for an
immaterial amount in December 1993.
The company is a defendant in a purported class action which originally sought
$500 million in damages allegedly resulting from the purported discharge of
hazardous substances, including dioxin, from the company's Pensacola, Florida
mill into Eleven Mile Creek, which flows into Perdido Bay. The plaintiffs are
now seeking not more than $50,000 for each class member. It is anticipated that
the class, if certified, will consist of approximately 1,000 members.
The company and many other corporations, municipalities and individuals are
defendants in three separate actions filed in Texas by numerous individuals.
Each of these actions seeks damages in excess of $5 billion, allegedly resulting
from the purported disposal of waste materials, including hazardous substances,
into the McGinnis Waste Disposal Site located at Hall's Bayou Ranch.
The company is vigorously defending each of the pending actions described above.
The company is also involved in other legal and administrative proceedings and
claims of various types. While any litigation contains an element of
uncertainty, management, based upon the opinion of the company's General
Counsel, presently believes that the outcome of each such proceeding or claim
which is pending or known to be threatened (including the actions described
above), or all of them combined, will not have a material adverse effect on the
company.
33
<PAGE>
Report of Independent Public Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors
of Champion International Corporation:
We have audited the accompanying consolidated balance sheet of Champion
International Corporation (a New York corporation) and subsidiaries as of
December 31, 1993 and 1992, and the related consolidated statements of income,
retained earnings and cash flows for each of the three years in the period ended
December 31, 1993. These financial statements are the responsibility of the
company'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 Champion International
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 Notes 1, 11 and 12 of Notes to Financial Statements, the
company adopted new accounting standards promulgated by the Financial Accounting
Standards Board, changing its methods of accounting for income taxes and for
postretirement benefits other than pensions, effective January 1, 1992, and
changing its method of accounting for postemployment benefits, effective January
1, 1993.
Arthur Andersen & Co.
New York, N.Y.
January 17, 1994
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Champion International Corporation and Subsidiaries
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Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
- ---------------------
Overall Annual Results
In 1993, the company incurred a loss of $156 million or $1.98 per share. This
compared with a loss of $440 million or $5.05 per share in 1992 and net income
of $40 million and earnings per share of 14 cents in 1991.
Excluding non-recurring income and expense items, an extraordinary item and the
cumulative effect of the adoption of certain new accounting standards, as
described below, results declined moderately from 1992 and significantly from
1991. Excluding all such items, the company incurred a loss of $106 million or
$1.44 per share in 1993, compared with a loss of $95 million or $1.33 per share
in 1992 and net income of $8 million and a loss per share of 20 cents in 1991.
Results for 1993 included several non-recurring income and expense items,
primarily a one-time adjustment to the company's deferred tax liability to
reflect the impact of changes during the year in the corporate income tax rates
in the United States and Canada. The net effect of all such items was to reduce
net income by approximately $28 million or 31 cents per share. Results for 1993
also included an extraordinary charge to earnings of $14 million or 15 cents per
share in connection with the redemption of certain debt. In addition, in 1993
the company adopted a new accounting standard relating to postemployment
benefits, the cumulative effect of which resulted in a charge to earnings of $8
million or 8 cents per share.
Results for 1992 included several non-recurring income and expense items,
principally sales of timberlands, the net effect of which was to add
approximately $109 million to net income or $1.18 to earnings per share. Also
in 1992, the company adopted two new accounting standards relating to income
taxes and postretirement benefits other than pensions, the cumulative effect of
which resulted in a charge to earnings of $454 million or $4.90 per share.
Results for 1991 included several non-recurring income and expense items,
primarily sales of timberlands and various litigation settlements received by
the company. The net effect of all such items was to add approximately $32
million to net income or 34 cents to earnings per share.
Significant Line Item Changes
Net sales for 1993 of $5.1 billion were up from $4.9 billion in 1992 and $4.8
billion in 1991. The improvement in sales reflected higher prices for wood
products and increased shipments of paper.
Operating income declined slightly from 1992 and substantially from 1991,
principally due to lower prices for pulp and certain of the company's paper
grades, which more than offset production and productivity gains in pulp and
paper manufacturing and significantly higher earnings in the wood products
business. In addition, as a result of increased pulp and paper production and
shipments, the aggregate cost of products sold increased substantially from 1992
and 1991.
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Interest and debt expense was higher than in 1992 and 1991 due to additional
borrowings primarily associated with the company's capital improvement program
as well as the expensing of interest that had been capitalized during the
construction of various capital projects. Other income was substantially lower
than in 1992 and 1991, principally reflecting gains from the sales of
timberlands as well as the litigation settlements in the prior years referred to
above. Also, the effective income tax rate in 1993 was unfavorable compared to
1992 and 1991 due mainly to the one-time adjustment to the company's deferred
tax liability in 1993 referred to above.
Quarterly Results
Excluding non-recurring items in each quarter, the 35-cent loss in the fourth
quarter of 1993 improved from the losses of 56 cents in the fourth quarter of
1992 and 40 cents in the third quarter of 1993. Higher earnings in the wood
products segment more than offset declines in the paper segment.
Paper Segment
The paper segment incurred an operating loss of $134 million, compared with a
loss of $7 million in 1992 and income of $216 million in 1991. A fourth quarter
1993 loss of $24 million compared with losses of $16 million in the fourth
quarter of 1992 and $22 million in the third quarter of 1993.
In general, the paper business tends to follow overall economic trends. The
decline in paper segment earnings reflected relatively weak demand attributable
to slow economic growth in the United States, combined with recessions in Europe
and Japan. For example, demand for publication papers and newsprint was
adversely affected by continued low levels of advertising in magazines and
newspapers. In addition, on the supply side, there have been significant
capacity increases in the industry in pulp and certain paper grades in recent
years. This unfavorable demand/supply relationship in 1993 resulted in lower
prices for pulp and certain of the company's paper grades, which more than
offset the paper segment's improvements in production, productivity and quality.
Results for domestic printing and writing papers declined substantially from
1992 and 1991, with a large operating loss recorded for the year. Prices for
coated papers were lower than in 1992 and 1991, while prices for uncoated papers
were even with 1992 levels but lower than in 1991. Volumes were above 1992 and
1991 levels for both coated and uncoated papers. Fourth quarter 1993 results,
while a loss, represented an improvement from the fourth quarter of 1992 and the
third quarter of 1993, due primarily to increased volumes for uncoated papers
and, as compared to the third quarter of 1993, favorable inventory valuation
adjustments. Prices for coated and uncoated papers remain weak. In the third
quarter of 1993, the No. 35 paper machine started up at the Courtland, Alabama,
mill. The No. 35 machine, when fully operational, will have an annual capacity
of 245,000 tons of uncoated free sheet paper. In mid-January 1994, a weather-
related outage occurred at the Canton, North Carolina, mill.
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Champion International Corporation and Subsidiaries
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Operating income at the Brazilian subsidiary, Champion Papel e Celulose Ltda.,
declined from 1992 but improved slightly from 1991. Prices were somewhat lower
than in 1992 but somewhat higher than in 1991. Reflecting weak overall results
at the company's U.S. operations, approximately 69% of the company's 1993
consolidated operating income, before general corporate expense, was
attributable to the Brazilian subsidiary. Fourth quarter 1993 results were
below the levels of the prior and year-ago quarters due to lower prices. New
capacity additions by various competitors in Brazil have caused a decline in
domestic prices, and the recession in Europe has caused a decline in export
prices.
Earnings for the publication papers business improved substantially from the
1992 loss, but were down significantly from the operating income in 1991.
Higher prices for coated groundwood papers, increased volumes for coated free
sheet papers, and lower purchased pulp and other operating costs were primarily
responsible for the improvement from 1992. Lower prices for coated and uncoated
groundwood grades resulted in the decline from 1991. Fourth quarter 1993
results improved significantly from the fourth quarter of 1992 and moderately
from the third quarter of 1993, principally due to higher volumes and lower
purchased pulp and other operating costs.
The operating loss for the U.S. and Canadian market pulp operations represented
a substantial decline from the operating income in 1992 and 1991. Weak demand
and excess industry capacity kept prices well below 1992 and 1991 levels. The
fourth quarter 1993 loss was significantly below the operating income in the
fourth quarter of 1992 and slightly larger than the loss in the third quarter of
1993, as the result of lower prices. Early in 1994, pulp prices began to
improve somewhat. Since the company is a net seller of pulp, overall profits
are adversely affected by lower pulp prices; however, the company's publication
papers mills and the printing and writing papers mills in Hamilton, Ohio, and
Canton, North Carolina, purchase pulp from outside suppliers and benefit from
lower pulp prices.
The sizeable 1993 operating loss for newsprint operations slightly exceeded the
loss in 1992 and substantially exceeded the small loss in 1991. Volumes and
prices for newsprint were somewhat higher than in 1992. However, this was more
than offset by lower volumes and prices for uncoated groundwood papers and
higher energy costs. Prices for newsprint and uncoated groundwood papers were
significantly below 1991 levels due to continued weak demand and excess industry
capacity. The fourth quarter 1993 loss was larger than those of the prior and
year-ago quarters due to lower prices.
Earnings for the packaging business declined from 1992 and 1991 primarily as the
result of lower prices for kraft paper and linerboard. Volumes were above 1992
and 1991 levels for both products. Fourth quarter 1993 results were down from
the fourth quarter of 1992, mainly due to lower prices for kraft paper and
linerboard. However, results improved from the third quarter of 1993, due to
price increases for both products.
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Champion International Corporation and Subsidiaries
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Wood Products Segment
For the company's wood products segment, which includes the wood-related
operations of the Canadian subsidiary, Weldwood of Canada Limited, income from
operations of $248 million improved substantially from $125 million in 1992 and
$6 million in 1991. Fourth quarter 1993 income of $57 million was up from $32
million in both the fourth quarter of 1992 and the third quarter of 1993.
The profitability of the company's U.S. and Canadian wood products operations
has improved considerably since early 1991, due primarily to supply factors such
as industry timber shortages in the United States attributable to environmental
considerations. In addition, demand has improved as housing starts in the
United States, which in 1991 had reached their lowest level in 36 years,
continued to increase in 1993.
Prices for lumber, plywood and timber were substantially higher than in 1992 and
1991. Volumes for lumber and plywood were lower than in 1992, due primarily to
the sale in the third quarter of 1992 of the Roseburg, Oregon, facility and the
fourth quarter 1993 sales of the Lumber City, Georgia, and Bonner and Libby,
Montana, facilities. However, lumber and plywood volumes improved from 1991
levels, as certain facilities which had taken downtime in 1991 due to market
conditions increased production in 1992 and 1993. Volumes for timber were lower
than in 1992 and 1991.
Labor Contracts
The company has labor agreements, which expire between 1994 and 1998, at ten of
its eleven domestic paper mills. Facilities at which labor agreements expire in
1994 include the Sheldon and Lufkin, Texas, newsprint mills and the Roanoke
Rapids, North Carolina, kraft mill. The Quinnesec, Michigan, pulp and
publication papers mill is a non-union facility.
1994 Outlook
The paper and wood products businesses are cyclical, tending to follow overall
economic trends. The supply factors that were primarily responsible for the
profitability of the wood products operations in 1993 are expected to continue
into 1994. With recent substantial improvements in production, productivity and
quality, results for the company's pulp and paper businesses in 1994 will depend
largely upon prices.
Financial Condition
- -------------------
General
The company's current ratio was 1.4 to 1 at year-end 1993, down from 1.5 to 1 at
year-end 1992 and 1991. Total debt to total capitalization was 44% at year-end
1993, as compared to 42% at year-end 1992 and 40% at year-end 1991.
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Champion International Corporation and Subsidiaries
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As discussed below, in each of 1993, 1992 and 1991, the company's net cash
provided by operating activities was not sufficient to meet the cash
requirements of its investing activities (principally capital expenditures) and
its financing activities (principally debt payments and cash dividends). Each
year the approximate difference was financed through borrowings and, in 1992,
through the use of cash and cash equivalents. In 1993, net borrowings generated
cash proceeds of $75 million, while cash and cash equivalents increased by $19
million. In 1992, net borrowings generated cash proceeds of $330 million, and
cash and cash equivalents decreased by $76 million. In 1991, net borrowings
generated cash proceeds of $256 million, while cash and cash equivalents
increased by $54 million.
Looking ahead, the company anticipates that net cash provided by operating
activities supplemented by borrowings, including borrowings under or supported
by its bank lines of credit, will be sufficient to meet the capital expenditure,
debt payment and dividend requirements of the company. With the completion of
the company's extensive capital improvement program in the third quarter of
1993, the company has reduced capital spending to levels required for routine
capital replacements, environmental compliance and incremental improvements.
Operating Activities
Net cash provided by operating activities of $201 million declined from $258
million in 1992 and $370 million in 1991. The decrease from 1992 was due
primarily to changes in certain components of working capital. The decrease
from 1991 was primarily the result of significantly lower results before non-
recurring items.
Investing Activities
Net cash used in investing activities of $212 million declined from $611 million
in 1992 and $498 million in 1991. The decrease from both prior years was due to
lower capital expenditures, higher asset sale proceeds and net proceeds from
sales of investments in marketable securities.
In 1993, the company received net proceeds of $305 million from sales of
timberlands and fixed assets, including $284 million from the sale of 870,000
acres of timberlands in Montana and the wood products facilities in Bonner and
Libby, Montana. In addition, the company received net proceeds of $107 million
from sales of investments in marketable securities. In 1992 and 1991, the
company received net proceeds of $174 million and $130 million, respectively,
primarily from sales of timberlands and the sale in 1992 of the wood products
facility in Roseburg, Oregon. The company had net expenditures of $58 million
and $16 million for investments in marketable securities in 1992 and 1991,
respectively.
The timberlands and wood products facilities sold by the company did not support
any of its pulp and paper mills. These sales reflect the company's strategy to
concentrate on the manufacture of pulp and paper.
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Champion International Corporation and Subsidiaries
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Financing Activities
Net cash provided by financing activities of $30 million was down from $277
million in 1992 and $182 million in 1991. The decline was primarily the result
of a decrease in net borrowings, which reflected the lower capital expenditures
and the asset sale and marketable securities proceeds discussed above. Long-term
debt increased by $25 million in 1993, $313 million in 1992 and $289 million in
1991.
At December 31, 1993, the company had $559 million of U.S. commercial paper and
other short-term obligations outstanding, all of which are classified as long-
term debt, down from $721 million at year-end 1992 but up from $225 million at
year-end 1991. In addition, at December 31, 1993, the company had $224 million
of notes outstanding under its U.S. bank lines of credit, up from $178 million
at year-end 1992 and $25 million at year-end 1991. Domestically, at December
31, 1993, $559 million of the company's unused bank lines of credit of $791
million supported the classification of commercial paper and other short-term
obligations as long-term debt.
During 1993, the company (i) issued $200 million of non-redeemable 7.7% notes
due in 1999, and $100 million of 7.625% debentures due in 2023 which are
redeemable beginning in 2003, (ii) borrowed $150 million through variable rate
term loans due in 1997 and (iii) borrowed $94 million through the issuance of
long-term tax-exempt bonds.
The annual principal payment requirements under the terms of all long-term debt
agreements for the years 1994 through 1998 are $88 million, $361 million, $919
million, $246 million and $247 million, respectively.
Capital Expenditures
Capital spending was $491 million in 1993, down from $611 million in 1992 and
$575 million in 1991. A significant portion of such capital spending was
devoted to the expansion and modernization project at Courtland, Alabama; the
environmental improvement and modernization project at Canton, North Carolina;
the de-inking project at Sheldon, Texas; and the construction of a new sawmill
at Hinton, Alberta, Canada.
As noted, the company completed its extensive capital improvement program in
1993. The company has no present plans for major capital projects, although
expenditures for routine capital replacements, environmental compliance and
incremental improvements will continue. The company presently anticipates that
capital spending will decline to approximately $260 million in 1994, all of
which is expected to be financed through internally generated funds.
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Champion International Corporation and Subsidiaries
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The Environment
- ---------------
Environmental Capital Expenditures
The company is subject to various federal, state and local laws and regulations
relating to the discharge of materials into the environment and to the disposal
of solid wastes. These laws and regulations require the company to obtain
permits and licenses from appropriate governmental authorities with respect to
its properties and to operate its properties in compliance with such permits and
licenses.
In order to meet the standards established by the various federal, state and
local environmental laws and regulations to which the company is subject, the
company is required to invest substantial amounts in pollution abatement
facilities. During the period from 1989 through 1993, the company spent
approximately $369 million in its domestic operations to purchase and install
systems to control the discharge of pollutants into air and water and to dispose
of solid wastes. In 1993, capital expenditures incurred for such environmental
purposes were $71 million. In view of changing environmental laws and
regulations and their interpretation, as well as the uncertainties and variables
inherent in business planning, it is not possible for the company to predict
with certainty the amount of capital expenditures to be incurred for
environmental purposes in the future. However, the company estimates that
capital expenditures for air and water pollution control systems and solid waste
disposal systems in the United States will be approximately $56 million in 1994
and $120 million in 1995. In carrying forward its environmental program, the
company will commit additional amounts for environmental purposes in years
subsequent to 1995. Preliminary estimates indicate that for the period from
1996 through 1998, capital expenditures for air and water pollution control
facilities and solid waste disposal facilities in the United States will
aggregate approximately $80 million.
In addition, as noted above, in 1993, the company completed a $285 million
environmental improvement and modernization project at its Canton, North
Carolina, paper mill.
The environmental capital expenditures described in the two preceding paragraphs
are included in the respective past and estimated 1994 capital spending amounts
set forth above under "Capital Expenditures."
Although some pollution abatement and solid waste disposal facilities produce
improvements in operating efficiency, most increase product costs without
enhancing capacity or operating efficiency. However, since other paper and
forest products companies also are subject to environmental laws and
regulations, the company does not believe that compliance with such laws and
regulations will have a material adverse effect on its competitive position.
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Proposed EPA Air and Water Regulations
In December 1993, the U.S. Environmental Protection Agency (the "EPA") proposed
regulations pursuant to the federal Clean Air Act Amendments of 1990 (the "Clean
Air Act") and the federal Water Pollution Control Act (the "Clean Water Act")
(collectively, the "Acts"). Certain additional Clean Air Act regulations are
expected to be proposed in 1994. It is anticipated that all of these
regulations will become final in 1995, with compliance required no later than
1998.
As previously reported, trace amounts of dioxin were found in the pulp, sludge
and effluent at some bleached kraft mills in the United States and Canada,
including certain of the company's mills. The proposed regulations under the
Clean Water Act provide for oxygen delignification and chlorine dioxide
substitution as the preferred technology option to reduce the potential for the
formation of dioxin in the pulp bleaching process. The company has implemented
and is continuing to implement this technology at its bleached kraft mills. If
the final regulations continue to designate oxygen delignification and chlorine
dioxide substitution as the preferred technology option, the company presently
anticipates that it will incur capital expenditures to meet the requirements of
the Clean Water Act regulations, additional to those set forth above under
"Capital Expenditures" and "Environmental Capital Expenditures," of
approximately $20 million over the period of approximately 1995 to 1998.
Assuming that the Clean Air Act regulations to be proposed in 1994 use a range
of standards currently expected by the company and that all of the regulations
pursuant to the Clean Air Act are adopted as proposed, the company presently
anticipates that it will incur capital expenditures to meet the requirements of
the Clean Air Act and state air toxics regulations, additional to those set
forth above under "Capital Expenditures" and "Environmental Capital
Expenditures," of $100 million to $200 million over the period of approximately
1995 to 1998.
Great Lakes Initiative
The company may incur capital expenditures, additional to those set forth above
under "Capital Expenditures" and "Environmental Capital Expenditures," in order
to meet the requirements of the Great Lakes Water Quality Agreement of 1978 and
the Great Lakes Critical Programs Act of 1990. Pursuant thereto, in April 1993,
the EPA issued proposed guidance to the states regarding water quality standards
for the waters of the Great Lakes and their tributaries. The company is
awaiting the issuance of implementing regulations by the environmental agencies
of the affected states in order to determine the extent of any additional costs
and the period over which they will be incurred. As a result, the company is
not yet in a position to provide a meaningful estimate of any such costs.
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Federal Executive Order
In October 1993, President Clinton issued an executive order covering the
purchase of uncoated printing and writing papers by the federal government. The
order establishes a minimum post-consumer recycled content for such paper
purchased by federal agencies of 20% commencing at the end of 1994, increasing
to 30% at the end of 1998. In addition, for certain types of such paper, the
order requires a minimum content of 50% recovered materials (i.e., waste
materials and by-products).
Although the federal government purchases less than 2% of the paper produced in
the United States, federal government procurement standards sometimes are
adopted by state and local governments and private industry. The sale of
uncoated printing and writing papers by the company to the federal government
accounts for an immaterial portion of total company sales. However, the sale of
domestic uncoated printing and writing papers by the company to all customers
accounted for approximately 15% of total company sales in 1993.
The company currently is reviewing the executive order and its possible
implications, including the extent to which additional facilities would be
required to meet its standards and the extent to which purchasers other than the
federal government are likely to adopt similar standards. The company may incur
capital expenditures, additional to those set forth above under "Capital
Expenditures" and "Environmental Capital Expenditures," to meet the recycled
content requirements of the executive order and of the marketplace generally.
However, in view of the uncertainties, the company is not yet in a position to
provide a meaningful estimate of any such costs or of the impact of the
executive order on demand for virgin market pulp produced by the company.
Hazardous Substance Cleanup
The company has been designated as a potentially responsible party by the EPA
under the Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, and by certain states under applicable state laws, with respect to the
cleanup of hazardous substances at several sites. In the case of many of these
sites, other potentially responsible parties also have been so designated. In
addition, the company and, in certain instances, other responsible parties have
entered into agreements with the EPA and certain states regarding the cleanup of
hazardous substances at various other locations. Also, the company is involved
in the remediation of certain other sites which are not the subject of
investigation by federal or state agencies. The cost of all such cleanups is
not capitalized and, accordingly, is not included in the capital expenditure
information set forth above under "Capital Expenditures" and "Environmental
Capital Expenditures."
The company cannot predict with certainty the total cost of such cleanups, the
company's share of the total cost of multiparty cleanups or the extent to which
contribution will be available from other parties, or the amount of time
necessary to accomplish such cleanups. However, based upon, among other things,
its previous experience with respect to the cleanup of hazardous substances as
well as the regular detailed review of known hazardous waste sites by the
company, the company has
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Champion International Corporation and Subsidiaries
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developed an estimate of its probable cleanup liabilities. This estimate
includes remediation and legal costs with respect to properties presently or
formerly owned or operated by the company or its predecessors as well as
properties, such as municipal or county landfills, owned and operated by third
parties to which the company or its contractor sent waste material. The company
has accrued $83 million at December 31, 1993, on a non-discounted basis, which
represents its current estimate of the probable cleanup liabilities at all known
sites. This accrual does not reflect any possible insurance recoveries, which
are not expected to be significant, but does reflect a reasonable estimate of
cost-sharing at multiparty sites.
Although the company's probable liabilities have been accrued for currently,
hazardous substance cleanup expenditures generally are incurred over an extended
period of time, in some cases possibly more than 30 years. Annual cleanup
expenditures during the period from 1991 through 1993 were approximately $5.3
million, $6.6 million and $6.9 million, respectively.
Environmental Legal Proceedings
The company was a defendant in a class action which originally sought $5 billion
in damages allegedly resulting from the purported discharge of hazardous
substances, including dioxin, from the company's Canton, North Carolina mill
into the Pigeon River. In October 1992, a mistrial was declared after the jury
was unable to reach a unanimous verdict. In May 1993, the court approved a
settlement of the action providing for the payment of $6.5 million by the
company. In June 1993, the court's approval of the settlement was appealed.
The company, Simpson Pasadena Paper Company, the Gulf Coast Waste Disposal
Authority and others were defendants in two separate actions by several
individuals engaged primarily in seafood-related businesses. Each of these
actions sought unspecified damages allegedly resulting from the purported
discharge of dioxin into the Brazos River, Galveston Bay and the Neches River
from the company's Sheldon, Texas mill, the company's former mill in Pasadena,
Texas and the other defendants' mills. Each of these actions was settled for an
immaterial amount in December 1993.
The company is a defendant in a purported class action which originally sought
$500 million in damages allegedly resulting from the purported discharge of
hazardous substances, including dioxin, from the company's Pensacola, Florida
mill into Eleven Mile Creek, which flows into Perdido Bay. The plaintiffs are
now seeking not more than $50,000 for each class member. It is anticipated that
the class, if certified, will consist of approximately 1,000 members.
The company and many other corporations, municipalities and individuals are
defendants in three separate actions filed in Texas by numerous individuals.
Each of these actions seeks damages in excess of $5 billion, allegedly resulting
from the purported disposal of waste materials, including hazardous substances,
into the McGinnis Waste Disposal Site located at Hall's Bayou Ranch.
The company is vigorously defending each of the pending actions described above.
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While any litigation contains an element of uncertainty, management, based upon
the opinion of the company's General Counsel, presently believes that the
outcome of these actions will not have a material adverse effect on the company.
Other
The industry in which the company operates is capital intensive. Due to
inflation, the company's property, plant and equipment and timber and
timberlands could not be replaced for the historical cost value at which they
are reflected in the company's financial statements. On a current cost basis,
depreciation expense and cost of timber harvested would be greater than reported
on a historical cost basis.
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<TABLE>
<CAPTION>
Eleven-Year Selected Financial Data
(in millions, except per share amounts and ratio data)
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Earnings:
Net sales.................................................... $5,069 $4,926 $4,786 $5,090 $5,163
Depreciation expense and cost of timber harvested............ 443 411 342 323 279
Provision for wood products restructuring.................... --- --- --- --- ---
Gross profit................................................. 359 362 454 800 1,048
Income from operations....................................... 66 73 179 491 769
Interest and debt expense.................................... 224 206 211 156 136
Other (income) expense -- net................................ 7 (143) (110) (85) (93)
Income (loss) before income taxes, extraordinary item and
cumulative effect of accounting changes..................... (165) 10 78 420 726
Income taxes (benefit)....................................... (31) (4) 38 197 294
Income (loss) before extraordinary item and cumulative effect
of accounting changes....................................... (134) 14 40 223 432
Extraordinary item, net of taxes............................. (14) --- --- --- ---
Cumulative effect of accounting changes, net of taxes........ (8) (454) --- --- ---
Net income (loss)............................................ (156) (440) 40 223 432
Per Common Share: *
Primary earnings (loss)...................................... $(1.98) $(5.05) $ .14 $ 2.11 $ 4.56
Fully diluted earnings (loss)................................ (1.98) (5.05) .14 2.08 4.43
Cash dividends declared...................................... .20 .20 .20 1.10 1.10
Cash dividends paid.......................................... .20 .20 .425 1.10 1.075
Shareholders' equity......................................... 31.23 33.53 39.02 39.10 38.12
Financial Position:
Current assets............................................... $1,114 $1,142 $1,162 $1,104 $1,074
Timber and timberlands -- net................................ 1,839 2,012 1,666 1,645 1,613
Property, plant and equipment -- net......................... 5,802 5,763 5,386 5,117 4,404
Other assets and deferred charges............................ 388 464 442 485 440
------ ------ ------ ------ ------
Total assets............................................... $9,143 $9,381 $8,656 $8,351 $7,531
====== ====== ====== ====== ======
Current liabilities.......................................... $ 772 $ 786 $ 794 $ 801 $ 804
Long-term debt and other liabilities......................... 3,990 3,928 3,162 2,864 2,175
Deferred income taxes........................................ 1,077 1,159 678 651 605
Minority interest in subsidiaries............................ 54 49 51 56 58
$92.50 convertible preference stock.......................... 300 300 300 300 300
Shareholders' equity......................................... 2,950 3,159 3,671 3,679 3,589
------ ------ ------ ------ ------
Total liabilities and shareholders' equity................. $9,143 $9,381 $8,656 $8,351 $7,531
====== ====== ====== ====== ======
Other Statistics:
Expenditures for property, plant and equipment............... $ 476 $ 623 $ 604 $ 959 $ 916
Timber and timberlands expenditures.......................... $ 130 $ 95 $ 58 $ 88 $ 78
U.S. timber acreage owned or controlled...................... 5.1 6.0 6.2 6.4 6.4
Common shares outstanding at year-end........................ 93 93 93 93 93
Dividends declared on preference shares...................... $ 28 $ 28 $ 28 $ 28 $ 2
Dividends declared on common shares.......................... $ 19 $ 19 $ 19 $ 102 $ 104
Current ratio................................................ 1.4 1.5 1.5 1.4 1.3
Ratio of total debt to total capitalization.................. .44:1 .42:1 .40:1 .38:1 .32:1
Return on average shareholders' equity and $92.50 convertible
preference stock before extraordinary item and cumulative
effect of accounting changes................................ (4.0)% 0.4% 1.0% 5.6% 12.2%
</TABLE>
* Primary and fully diluted earnings (loss) per share for 1993 include the
cumulative effect of an accounting change of $(.08) and extraordinary item for
early retirement of debt of $(.15).
Primary and fully diluted earnings (loss) per share for 1992 include the
cumulative effect of accounting changes of $(4.90).
46
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
1988 1987 1986 1985 1984 1983
- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
$5,129 $4,615 $4,388 $5,770 $5,121 $4,264
260 252 270 263 204 187
--- --- --- --- 220 ---
1,141 872 798 903 585 588
861 598 438 364 82 155
161 177 170 171 102 66
(30) (198) (45) (52) --- (41)
730 619 313 245 (20) 130
274 237 112 82 (14) 48
456 382 201 163 (6) 82
--- --- --- --- --- ---
--- --- --- --- --- ---
456 382 201 163 (6) 82
$ 4.80 $ 4.03 $ 2.08 $ 1.59 $ (.36) $ 1.22
4.65 3.92 2.05 1.59 (.36) 1.22
.95 .72 .52 .46 .40 .40
.90 .65 .52 .43 .40 .40
35.06 30.82 27.52 26.08 25.27 29.65
$ 986 $ 896 $ 811 $1,041 $1,681 $ 954
1,581 1,554 1,555 1,569 1,527 472
3,702 3,340 3,309 3,143 3,287 1,944
431 389 432 345 320 206
- ------ ------ ------ ------ ------ ------
$6,700 $6,179 $6,107 $6,098 $6,815 $3,576
====== ====== ====== ====== ====== ======
$ 699 $ 657 $ 734 $1,118 $1,904 $ 510
2,133 2,120 2,462 2,057 2,169 1,080
474 415 281 290 197 168
49 51 38 34 48 36
--- --- --- --- --- ---
3,345 2,936 2,592 2,599 2,497 1,782
- ------ ------ ------ ------ ------ ------
$6,700 $6,179 $6,107 $6,098 $6,815 $3,576
====== ====== ====== ====== ====== ======
$ 585 $ 340 $ 446 $ 443 $ 405 $ 202
$ 88 $ 62 $ 53 $ 43 $ 34 $ 31
6.4 6.5 6.5 6.5 6.8 3.3
95 95 94 93 93 55
$ --- $ --- $ 6 $ 15 $ 15 $ 15
$ 91 $ 69 $ 49 $ 43 $ 26 $ 22
1.4 1.4 1.1 .9 .9 1.9
.34:1 .36:1 .44:1 .42:1 .50:1 .34:1
14.5% 13.8% 7.8% 6.4% (0.3)% 4.7%
</TABLE>
47
<PAGE>
Common Stock Prices and Dividends Paid
- --------------------------------------
Quarterly sales prices for the company's common stock as reported on the
New York Stock Exchange composite tape, and quarterly dividends paid in
1993 and 1992 were:
<TABLE>
<CAPTION>
March 31 June 30 Sept. 30 Dec. 31
-------- ------- -------- -------
<S> <C> <C> <C> <C>
1993
- ----
High $33 $34 5/8 $34 1/8 $34
Low 27 1/8 29 7/8 29 1/4 28 5/8
Dividends Paid .05 .05 .05 .05
-------- ------- -------- -------
1992
- ----
High $28 7/8 $30 1/4 $27 7/8 $29 7/8
Low 23 1/2 25 1/8 23 3/4 23 7/8
Dividends Paid .05 .05 .05 .05
-------- ------- -------- -------
</TABLE>
48
<PAGE>
EXHIBIT 21
LIST OF SIGNIFICANT SUBSIDIARIES
--------------------------------
<TABLE>
<CAPTION>
Subsidiary Jurisdiction of Incorporation
- ---------- -----------------------------
<S> <C>
Champion Papel e Celulose Ltda ................. Brazil
Weldwood of Canada Limited ..................... British Columbia
</TABLE>
_________________________________
All subsidiaries of the Company other than those listed above, considered in
the aggregate as a single subsidiary, do not constitute a significant subsidiary
as of December 31, 1993.
<PAGE>
EXHIBIT 23.1
CHAMPION INTERNATIONAL CORPORATION
One Champion Plaza
Stamford, CT 06921
March 30, 1994
Champion International Corporation
One Champion Plaza
Stamford, CT 06921
Dear Sirs:
As Senior Vice President and General Counsel of Champion International
Corporation (the "Company"), I advise you as follows in connection with legal
and administrative claims and proceedings which are pending or known to be
threatened against the Company.
I call your attention to the fact that, as Senior Vice President and
General Counsel of the Company, I have general supervision of the Company's
legal affairs. In such capacity, I have reviewed litigation and claims
threatened or asserted involving the Company and have consulted with outside
legal counsel with respect thereto where I have deemed it appropriate.
On January 4, 1991, a class action was brought against the Company in state
court in Tennessee. The class consisted of all Tennessee residents who own or
lease land around Douglas Lake or along the Pigeon River. Subsequently, the
case was transferred to the United States District Court for the Eastern
District of Tennessee. While the original complaint sought $5 billion in
compensatory and punitive damages, immediately prior to trial the plaintiffs
reduced their demand to $367.9 million. The plaintiffs originally claimed
damages for both personal injury and property damage, but the personal injury
claims were dismissed. The case proceeded to trial on plaintiffs' theory that
discharges of hazardous materials, including dioxin, from the Company's
Canton, North Carolina mill had decreased property values along the river and
the lake. The trial began on September 14, 1992 and ended in a mistrial on
October 16, 1992, when the jury was unable to reach a unanimous verdict. On May
3, 1993, the court approved a settlement of the action providing for the payment
of $6.5 million by the Company. On June 1, 1993, the court's approval of the
settlement was appealed.
<PAGE>
March 30, 1994
Page 2
On July 17, 1991, an action was brought in the United States District Court
for the District of Colorado against Weldwood of Canada Limited, the Company's
85%-owned subsidiary, and fourteen other Canadian forest products companies,
purportedly on behalf of a class of United States purchasers of Canadian lumber.
The action, seeking injunctive relief and unspecified treble damages, alleged a
conspiracy by the defendants and others to fix freight charges for, and to sell
on a delivered price basis, Western Canadian softwood lumber, thereby allegedly
artificially raising, maintaining, fixing or stabilizing prices in violation of
United States antitrust laws. On January 8, 1993, the action was dismissed,
upon the motion of the defendants, for reasons of comity. On January 20, 1993,
the plaintiff filed a notice of appeal. In February 1994, the action was
settled for an immaterial amount.
On November 9, 1992, an action was brought against the Company in the
Circuit Court for Baldwin County, Alabama, purportedly on behalf of a class
consisting of all persons who own land along Perdido Bay in Florida and Alabama.
The action originally sought $500 million in compensatory and punitive damages
for personal injury, intentional infliction of emotional distress and diminution
in property value allegedly resulting from the purported discharge of hazardous
substances, including dioxin, from the Company's Pensacola, Florida mill into
Eleven Mile Creek, which flows into Perdido Bay. However, in February 1994, the
plaintiffs reduced their demand to not more than $50,000 for each class member.
It is anticipated that the class, if certified, will consist of approximately
1,000 members. The parties are currently engaged in discovery.
The Company and many other corporations, municipalities and individuals are
defendants in three separate actions filed in the District Court of Galveston
County, Texas, by numerous individuals on March 8, 1993, April 20, 1993 and May
13, 1993, respectively. Each of these actions seeks compensatory and punitive
damages in excess of $5 billion for personal injury and property damage
allegedly resulting from the purported disposal of waste materials, including
hazardous substances, into the McGinnis Waste Disposal Site located at Hall's
Bayou Ranch.
The Company is vigorously defending each of the pending actions described
above.
While any litigation contains an element of uncertainty, subject to the
foregoing, it is my opinion that the outcome of each such proceeding or claim
which is now pending or known to be threatened, or all of them combined,
including the actions described above, will not have a material adverse effect
on the Company.
<PAGE>
March 30, 1994
Page 3
I hereby consent to the reference to this opinion in the Company's Annual
Report to Shareholders for the fiscal year ended December 31, 1993, and in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993
(the "Form 10-K"), and to the filing of this opinion as an exhibit to the Form
10-K.
Very truly yours,
Marvin H. Ginsky
Senior Vice President
and General Counsel
MHG/col
28:exhibit.231
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of (a) our report dated January 17, 1994 included in Champion International
Corporation's (the "Company's") Annual Report to Shareholders for the year ended
December 31, 1993 and incorporated by reference in the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993 (the "Form 10-K") and
(b) our report dated January 17, 1994 included in the Form 10-K, into the
Company's previously filed Registration Statements on Form S-3 (Registration No.
33-51217 and No. 33-52123) and on Form S-8 (Registration No. 33-63126).
Arthur Andersen & Co.
New York, N.Y.
March 30, 1994
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
-----------------
Each of the undersigned Directors and Officers of CHAMPION INTERNATIONAL
CORPORATION (the "Company") hereby constitutes and appoints LAWRENCE A. FOX,
MARVIN H. GINSKY and ANDREW C. SIGLER his or her true and lawful attorneys-in-
fact and agents, each of them with full power to act without the others, for him
or her and in his or her name, place and stead, in any and all capacities, to
sign the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1993 and any and all amendments and other documents relating thereto, and to
file such Annual Report on Form 10-K and such amendments with all exhibits
thereto, and any and all other information and documents in connection
therewith, with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, as amended, hereby granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform any and all acts and things requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents, or any of them, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the
30th day of March, 1994.
ANDREW C. SIGLER KENWOOD C. NICHOLS
- ------------------------------------- -----------------------------------
Andrew C. Sigler Kenwood C. Nichols
Chairman of the Board, Chief Vice Chairman and Director
Executive Officer, and Director (Principal Accounting Officer)
(Principal Executive Officer)
GERALD J. BEISER
----------------------------------
Gerald J. Beiser
Senior Vice President -- Finance
(Principal Financial Officer)
<PAGE>
ROBERT A. CHARPIE
- ------------------------------------- ---------------------------------
Robert A. Charpie, Director H. Barclay Morley, Director
ALICE F. EMERSON LAWRENCE G. RAWL
- ------------------------------------- --------------------------------
Alice F. Emerson, Director Lawrence G. Rawl, Director
ALLAN E. GOTLIEB WALTER V. SHIPLEY
- ------------------------------------- --------------------------------
Allan E. Gotlieb, Director Walter V. Shipley, Director
L. C. HEIST JAMES S. TISCH
- ------------------------------------- -------------------------------
L. C. Heist, Director James S. Tisch, Director
SYBIL C. MOBLEY RICHARD E. WALTON
- ------------------------------------- ---------------------------------
Sybil C. Mobley, Director Richard E. Walton, Director
JOHN L. WEINBERG
---------------------------------
John L. Weinberg, Director
28/power.aty(p.3-4)
