<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
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OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-3053
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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
One Champion Plaza, Stamford, Connecticut 06921
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(Address of principal executive offices)
(Zip Code)
203-358-7000
----------------------------------------------------
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 31, 1994
- ---------------------------- -------------------------------
Common stock, $.50 par value 93,283,202
<PAGE>
PART I. FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements.
- ------------------------------
CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (unaudited)
(in thousands, except per share)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
----------------------- -----------------------
September 30, September 30,
---------- ---------- ---------- ----------
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales $3,852,818 $3,768,606 $1,384,740 $1,245,331
Cost of products sold 3,527,095 3,503,675 1,222,911 1,176,639
Selling, general and administrative expenses 223,719 217,735 80,806 66,803
---------- ---------- ---------- ----------
Income From Operations 102,004 47,196 81,023 1,889
Interest and debt expense 175,601 162,472 60,173 54,596
Other (income) expense - net (19,392) 17,552 (11,004) (3,888)
---------- ---------- ---------- ----------
Income (Loss) Before Income Taxes and
Cumulative Effect of Accounting Change (54,205) (132,828) 31,854 (48,819)
Income Taxes (Benefit) (Note 2) (15,238) (28,938) 8,737 4,665
---------- ---------- ---------- ----------
Income (Loss) Before Cumulative Effect of
Accounting Change (38,967) (103,890) 23,117 (53,484)
Cumulative Effect of Accounting Change,
Net of Taxes (Note 3) --- (7,523) --- ---
---------- ---------- ---------- ----------
Net Income (Loss) $ (38,967) $ (111,413) $ 23,117 $ (53,484)
========== ========== ========== ==========
Dividends on Preference Stock 20,813 20,813 6,938 6,938
========== ========== ========== ==========
Net Income (Loss) Applicable to Common Stock $ (59,780) $ (132,226) $ 16,179 $ (60,422)
========== ========== ========== ==========
Average Number of Common Shares Outstanding 92,990 92,765 93,046 92,834
========== ========== ========== ==========
Earnings (Loss) Per Common Share
(Exhibit 11):
Income (Loss) Before Cumulative Effect
of Accounting Change $ (.64) $ (1.34) $ .18 $ (.65)
========== ========== ========== ==========
Cumulative Effect of Accounting Change $ --- $ (.08) $ --- $ ---
========== ========== ========== ==========
Net Income (Loss) $ (.64) $ (1.42) $ .18 $ (.65)
========== ========== ========== ==========
Cash dividends declared $ .15 $ .15 $ .05 $ .05
========== ========== ========== ==========
</TABLE>
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
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<PAGE>
CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands of dollars)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
(unaudited)
------------- ------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 84,285 $ 55,653
Short-term investments 6,677 7,197
Receivables - net 534,564 494,426
Inventories 431,885 469,269
Prepaid expenses 30,818 22,818
Deferred income taxes 63,717 65,064
----------- -----------
Total Current Assets 1,151,946 1,114,427
----------- -----------
Timber and timberlands, at cost - less cost of
timber harvested 1,841,385 1,838,550
----------- -----------
Property, plant and equipment, at cost 8,551,506 8,467,756
Less - Accumulated Depreciation (2,916,372) (2,665,720)
----------- -----------
5,635,134 5,802,036
----------- -----------
Other assets and deferred charges 354,856 387,756
----------- -----------
Total Assets $ 8,983,321 $ 9,142,769
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Current installments of long-term debt $ 80,393 $ 88,052
Short-term bank borrowings 90,617 88,258
Accounts payable and accrued liabilities 582,664 591,153
Income taxes 21,894 4,841
----------- -----------
Total Current Liabilities 775,568 772,304
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Long-term debt 3,246,806 3,316,165
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Other liabilities 684,784 672,788
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Deferred income taxes 1,030,463 1,077,234
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Minority interest in subsidiaries 63,210 54,160
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Preference stock, $1.00 par value, $92.50 cumulative
convertible series; 300,000 shares issued and
outstanding (redeemable for $300,000) 300,000 300,000
----------- -----------
Shareholders' Equity:
Preference stock, no series, 8,231,431 shares
authorized but unissued --- ---
Capital Shares:
Common (93,212,997 and 93,026,400 shares
outstanding at September 30, 1994 and
December 31, 1993, respectively) 48,353 48,184
Capital Surplus 1,172,833 1,163,555
Retained Earnings 1,787,804 1,861,535
----------- -----------
3,008,990 3,073,274
Treasury shares, at cost (100,308) (100,233)
Cumulative translation adjustment (26,192) (22,923)
----------- -----------
Total Shareholders' Equity 2,882,490 2,950,118
----------- -----------
Total Liabilities and Shareholders' Equity $ 8,983,321 $ 9,142,769
=========== ===========
</TABLE>
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
-3-
<PAGE>
CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CASH FLOWS (unaudited)
(in thousands of dollars)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------
September 30,
----------------------
1994 1993
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net Income (Loss) $ (38,967) $(111,413)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Cumulative effect of accounting change --- 7,523
Depreciation expense 279,969 267,315
Cost of timber harvested 56,895 58,606
(Increase)/decrease in receivables (40,948) (36,751)
(Increase)/decrease in inventories 35,881 (42,237)
(Increase)/decrease in prepaid expenses (8,129) (7,341)
Increase/(decrease) in accounts payable and
accrued liabilities (7,478) 3,093
Increase/(decrease) in income taxes 17,121 (3,780)
Increase/(decrease) in other liabilities 8,079 (4,156)
Increase/(decrease) in deferred income taxes (44,019) (37,515)
All other - net 48,783 8,303
--------- ---------
Net cash provided by operating activities 307,187 101,647
--------- ---------
Cash flows from investing activities:
Expenditures for property, plant and equipment (133,946) (387,940)
Timber and timberlands expenditures (75,797) (84,814)
Purchase of investments (28,859) (116,454)
Proceeds from redemption of investments 30,216 94,100
Proceeds from sales of property, plant and equipment
and timber and timberlands 32,387 14,084
All other - net (2,030) (15,370)
--------- ---------
Net cash (used in) investing activities (178,029) (496,394)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 399,702 1,200,351
Payments of current installments of long-term debt
and long-term debt (475,555) (778,624)
Cash dividends paid (34,760) (34,747)
All other - net 10,087 2,109
--------- ---------
Net cash provided by (used in) financing activities (100,526) 389,089
--------- ---------
Increase/(decrease) in cash and cash equivalents 28,632 (5,658)
Cash and Cash Equivalents:
Beginning of period 55,653 36,678
--------- ---------
End of period $ 84,285 $ 31,020
========= =========
Supplemental cash flow disclosures:
Cash paid during the period for:
Interest (net of capitalized amounts) $ 161,445 $ 141,283
Income taxes (net of refunds) (3,016) 7,235
</TABLE>
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
-4-
<PAGE>
CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
September 30, 1994
Note 1.
The unaudited information furnished in this report reflects all adjustments
which are, in the opinion of management, necessary to present fairly a statement
of the results for the interim periods reported. All such adjustments made were
of a normal recurring nature.
Note 2.
Income Taxes (Benefit) for the three month and nine month periods ended
September 30, 1993 includes a provision of $23 million to reflect a one-time
adjustment to the company's deferred tax liability for changes in 1993 corporate
income tax rates in the United States and Canada.
Note 3.
Cumulative Effect of Accounting Change for the nine month period ended September
30, 1993 reflects the after-tax effect of adopting, retroactive to January 1,
1993, a new accounting standard for postemployment benefits.
-5-
<PAGE>
CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
- -----------------------------------------------------------------------
Results of Operations.
- ----------------------
Results of Operations
- ---------------------
Summary
The company reported net income in the third quarter of 1994 of $23 million or
18 cents per share, compared to last year's third quarter loss of $53 million or
65 cents per share and last quarter's loss of $31 million or 41 cents per share.
Excluding a non-recurring, tax-related charge discussed below, last year's third
quarter loss was $30 million or 40 cents per share.
Operating income of $81 million increased from $2 million a year ago and $4
million last quarter. Third quarter results reflected a significant improvement
in the company's paper segment due primarily to substantial price increases for
uncoated free sheet papers, pulp and newsprint, three of the company's major
grades. These price increases were attributable in part to strengthening
economies in the United States and in Europe. Operating income for the wood
products segment also improved from last year and last quarter due mainly to
higher prices for lumber and studs, particularly at the company's Canadian
subsidiary, and increased Pacific region timber stumpage sales. General
corporate expense was up from last year and last quarter primarily as the result
of the impact of a higher stock price on the value of stock appreciation rights.
Although long-term debt declined from last year and last quarter, interest and
debt expense increased somewhat, principally reflecting higher interest rates
and less capitalization of interest related to capital projects. Other (income)
expense - net improved modestly from a year ago and last quarter due in part to
currency translation gains recorded by the company's Brazilian subsidiary,
Champion Papel e Celulose Ltda., as the result of reduced inflation in Brazil.
The income tax provision for the third quarter of 1994 was favorable compared to
last year. In last year's third quarter, the company recorded a non-recurring,
non-cash charge of $23 million or 25 cents per share, to reflect the impact on
the company's deferred tax liability of changes in corporate income tax rates in
the United States and Canada.
For the first nine months, the company reported a loss of $39 million or 64
cents per share, compared to a year-ago loss, excluding the non-recurring charge
discussed above and the cumulative effect of an accounting change, of $81
million or $1.09 per share.
Paper Segment
The third quarter income from operations in the company's paper segment was $36
million, compared to losses of $22 million a year ago and $38 million last
quarter.
Break-even results for the domestic printing and writing papers business
represented a substantial improvement from the operating losses of a year ago
and last quarter. Shipments of coated and uncoated free sheet papers increased
compared to last year and last quarter. Prices for uncoated free sheet grades
were lower than last year. However, prices were higher than last quarter due to
increases implemented late in the second quarter and during the third quarter.
Additional price increases have been announced for
-6-
<PAGE>
various uncoated grades effective in the fourth quarter. Prices for coated free
sheet grades were down from last year and last quarter. Price increases for
coated free sheet papers were implemented during the third quarter, the effect
of which largely will not be reflected in results until the fourth quarter.
Maintenance outages have been scheduled at three of the four domestic printing
and writing papers mills in the fourth quarter.
Net income at the Brazilian subsidiary improved from last year and last quarter
as the result of higher domestic and export prices and slightly higher
shipments. Operating income was up from last quarter but down from last year.
The operating income decline from last year was due to the impact of lower
inflation on recorded sales prices and was approximately offset by a favorable
adjustment to the foreign currency translation gain included in other (income)
expense - net, as discussed above. Export prices continued to strengthen early
in the fourth quarter. Reflecting stronger overall results at the company's U.S.
operations, approximately 27% of the company's consolidated operating income,
before general corporate expense, in the first nine months of 1994, was
attributable to the Brazilian subsidiary.
The small operating loss for the publication papers business represented a
decline from last year's operating profit and was approximately even with last
quarter's operating loss. The decline from a year ago was due to lower prices
for all paper grades and higher purchased pulp costs. Compared to last quarter,
prices for all grades improved slightly, but this was offset by increased costs
for purchased pulp. Overall, shipments were higher than last year and last
quarter. Price increases for coated free sheet papers went into effect on
September 22.
Earnings for the company's U.S. and Canadian market pulp operations represented
a significant improvement from the operating loss of a year ago and the small
operating profit last quarter. Results reflected the impact of price increases
in the second quarter and further price increases that went into effect August
1. An additional price increase was implemented on October 1. Maintenance
outages are scheduled for all of the market pulp mills in the fourth quarter.
The operating loss for the newsprint business was a significant improvement from
the larger losses of a year ago and last quarter due primarily to higher prices.
Shipments declined slightly from last year but increased from last quarter. The
company has announced an additional discount reduction effective December 1.
Maintenance outages are scheduled at both of the newsprint mills in the fourth
quarter.
Earnings for the packaging business were up from a year ago and last quarter due
primarily to higher prices for kraft paper and linerboard. The company
implemented a price increase for certain grades of linerboard and for kraft
paper on October 1.
Wood Products Segment
The company's wood products segment, which includes the wood-related operations
of the Canadian subsidiary, Weldwood of Canada Limited, reported third quarter
income from operations of $61 million, up from $32 million a year ago and $56
million last quarter. Higher prices for lumber and studs, particularly at
Weldwood, and significantly higher timber stumpage sales in the Pacific region
primarily were responsible for the increase in earnings. Results for Weldwood's
wood-related operations were adversely affected by increased stumpage costs for
wood cut on government-owned timberlands in British Columbia. Lumber and plywood
shipments were down from last year due to the fourth quarter 1993 sale of the
company's Montana lumber and plywood operations. Compared to last quarter,
plywood shipments increased and lumber shipments declined slightly. Timber
stumpage sales for the Pacific region are expected to decline in the fourth
quarter.
The lumber mill at Klickitat, Washington, which was closed for an indefinite
period effective August 1, 1994, was permanently closed on November 6, 1994. The
annual capacity of that facility was 85 million board feet.
-7-
<PAGE>
Labor Contracts
New three year contracts are now in effect at Weldwood's British Columbia
coastal wood products operations. Efforts to reach new agreements continue at
the other Weldwood facilities where labor contracts have run past their
expiration dates: the Hinton, Alberta pulp mill and timberlands operation, the
joint venture pulp mill at Quesnel, British Columbia, and six of Weldwood's wood
products plants. Each of these facilities presently is operating under the terms
of its respective expired contract. Strike authorizations were adopted in August
1994 at five of the six affected wood products locations. The impact on Weldwood
and the company of a strike, if any, would depend on which facilities were
affected and the duration of any such strike.
Financial Condition
- -------------------
General
The company's current ratio was 1.5 to 1 at September 30, 1994 and at June 30,
1994, as compared to 1.4 to 1 at year-end 1993. Total debt to total
capitalization was 44% at September 30, 1994, as compared to 46% at June 30,
1994 and 44% at year-end 1993.
Reflecting improved results and reduced capital spending, in the first nine
months of 1994, the company's net cash provided by operating activities exceeded
the requirements of its investing activities (principally capital expenditures).
The approximate excess was used to pay dividends as well as a portion of the
company's long-term debt and to increase cash and cash equivalents. Since year-
end 1993, long-term debt has declined by $69 million, and cash and cash
equivalents have increased by $29 million. Since June 30, 1994, long-term debt
has declined by $109 million, and cash and cash equivalents have remained the
same.
In the first nine months of 1993, the company's net cash provided by operating
activities was not sufficient to meet the requirements of its investing
activities (principally capital expenditures) and its financing activities
(principally debt payments and cash dividends). The difference was financed
through borrowings and the use of cash and cash equivalents. Net borrowings
generated cash proceeds of $422 million, and cash and cash equivalents decreased
by $6 million, in the first nine months of 1993.
Operating Activities
For the first nine months, net cash provided by operating activities of $307
million increased from $102 million a year ago. The increase was due primarily
to a lower net loss, changes in certain components of working capital, including
a decrease in inventories, and lower deferrals of start-up costs associated with
major capital projects.
Investing Activities
Net cash used in investing activities of $178 million declined from $496 million
a year ago, due principally to substantially lower capital expenditures. With
the completion of the company's extensive capital improvement program in 1993,
the company has reduced capital spending to levels required for routine capital
replacements, environmental compliance and incremental improvements.
On November 7, 1994, Weldwood announced that it has agreed to sell its two
coastal British Columbia sawmills and related timber-cutting rights to
International Forest Products Limited for (Cdn) $140 million plus an additional
amount for inventories. The sale, which is subject to provincial government and
other regulatory approvals, is expected to close early in 1995. The two sawmills
have a combined annual capacity of 185 million board feet of lumber. The
agreement does not include approximately 30,000 acres of Weldwood's fee-owned
timberlands in coastal British Columbia, which it also is seeking to sell.
-8-
<PAGE>
Financing Activities
Net cash used in financing activities of $101 million compared with net cash
provided by financing activities of $389 million a year ago. Reflecting the
improved results and lower capital expenditures discussed above, long-term debt
was reduced by $69 million in the first nine months of 1994.
At September 30, 1994, the company had $421 million of U.S. commercial paper and
other short-term obligations outstanding, all of which are classified as long-
term debt, down from $606 million at June 30, 1994 and $559 million at year-end
1993. In addition, at September 30, 1994, the company had $165 million of notes
outstanding under its U.S. bank lines of credit, up from $145 million at June
30, 1994 and down from $224 million at year-end 1993. Domestically, at September
30, 1994, $421 million of the company's unused bank lines of credit of $850
million support the classification of commercial paper and other short-term
obligations as long-term debt.
On August 31, 1994, the company borrowed $88 million through the issuance of
long-term tax-exempt bonds. The net proceeds are being applied to the payment of
a portion of the costs of the construction of pollution control and solid waste
disposal facilities at the company's Pensacola, Florida mill.
The annual principal payment requirements under the terms of all long-term
agreements for the period from October 1 through December 31, 1994 are $36
million and for the years 1995 through 1998 are $259 million, $689 million, $242
million and $393 million, respectively.
Environmental Legal Proceedings
There is incorporated by reference herein the information under Item 1. Legal
-------------
Proceedings in Part II of this report.
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<PAGE>
PART II. OTHER INFORMATION
CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES
Item 1. Legal Proceedings.
- ---------------------------
As most recently reported in the company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, 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 a payment of $6.5 million by the company. On June 1, 1993, the
court's approval of the settlement was appealed, and on September 20, 1994 the
appeal was dismissed by the United States Court of Appeals for the Sixth
Circuit. On October 3, 1994, a motion for rehearing was filed.
As most recently reported in the company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, three separate actions were filed against
the company and many other corporations, municipalities and individuals 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. In August 1994, the claims of most of the
plaintiffs were settled for an immaterial amount. The company currently
anticipates that the remaining claims either will be settled for an immaterial
amount or will be dismissed.
Item 6. Exhibits and Reports on Form 8-K.
- ------------------------------------------
(a) See exhibit index following the signature page.
(b) The company filed a Current Report on Form 8-K dated October 13, 1994
reporting the issuance of a press release announcing certain unaudited
consolidated financial results of the company for the three months and
nine months ended September 30, 1994, with the consolidated statement of
income for the three months and nine months ended September 30, 1994 and
September 30, 1993 and consolidated balance sheet as of September 30, 1994
and December 31, 1993 as exhibits thereto.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the undersigned on behalf of the registrant as duly
authorized officers thereof and in their capacities as the chief accounting
officers of the registrant.
Champion International Corporation
----------------------------------
(Registrant)
Date: November 8, 1994 John M. Nimons
- ------------------------------ ----------------------------------
(Signature)
John M. Nimons
Vice President and Controller
Date: November 8, 1994 Kenwood C. Nichols
- ------------------------------ ----------------------------------
(Signature)
Kenwood C. Nichols
Vice Chairman
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<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.
10.1 - Resolutions of the Board of Directors of the company adopted on August
18, 1994 relating to the compensation of directors.
10.2 - Champion International Corporation Nonqualified Supplemental Savings
Plan.
11 - Calculation of Primary Earnings Per Common Share and Fully Diluted
Earnings Per Common Share (unaudited).
27 - Financial Data Schedule (unaudited).
-12-
<PAGE>
EXHIBIT 10.1
Resolutions of the Board of Directors of the Company adopted on
August 18, 1994 relating to the compensation of directors
---------------------------------------------------------------
RESOLVED, That, effective as of the current quarter, the fees
credited or paid, as the case may be, to each Director who is not concurrently
receiving compensation for services being rendered to the Company or any of its
subsidiaries as an officer, employee or consultant, or in any capacity other
than that of a Director, shall be a $30,000 annual retainer for serving as a
Director, $1,500 for attendance at any meeting of this Board of Directors, a
$5,000 annual retainer for serving as Chairman of any Committee of this Board of
Directors and $1,000 for attendance at any meeting of any Committee of this
Board of Directors; and
FURTHER RESOLVED, That the first full resolution appearing at page
2102 of the minutes, as adopted by this Board of Directors on September 19,
1991, is rescinded and shall have no further force and effect; and
FURTHER RESOLVED, That, except as modified by the immediately
preceding resolution, the resolutions adopted by this Board of Directors
regarding the compensation of outside Directors on September 19, 1991 (and
appearing at pages 2099 to 2102 of the minutes) shall remain in full force and
effect.
<PAGE>
EXHIBIT 10.2
CHAMPION INTERNATIONAL CORPORATION
----------------------------------
NONQUALIFIED SUPPLEMENTAL SAVINGS PLAN
--------------------------------------
INTRODUCTION
------------
Champion International Corporation hereby adopts the Champion International
Corporation Nonqualified Supplemental Savings Plan, effective as of August 1,
1994. This Plan is an unfunded deferred compensation arrangement maintained by
Champion International Corporation for the purpose of providing supplemental
retirement savings primarily for a select group of management or highly
compensated employees.
ARTICLE I - DEFINITIONS
-----------------------
1.1 "Beneficiary" means the person or persons entitled to receive the
-------------
distributions, if any, payable under the Plan upon or after a Participant's
death. Each Participant may designate a Beneficiary by filing the proper
form with the Committee. A Participant may designate one or more contingent
Beneficiaries to receive any distributions after the death of a prior
Beneficiary. A designation shall be effective upon said filing, provided
that it is so filed during such Participant's lifetime, and may be changed
from time to time by the Participant.
1.2 "Code" means the Internal Revenue Code of 1986, as amended from time to
------
time, and regulations relating thereto.
1.3 "Code Section 401(a)(17) Limitation" means the applicable compensation
------------------------------------
limitation set forth in section 401(a)(17) of the Code (as adjusted as
provided therein) (or any corresponding successor provision).
1.4 "Committee" means the Champion International Corporation Pension and
-----------
Employee Benefits Committee (or its delegate(s)) which is responsible for
the administration of this Plan in accordance with the provisions of the
Plan as set forth in this document.
1.5 "Company" means Champion International Corporation, a New York corporation,
---------
or any successor thereto, including any successor to substantially all of
its assets which adopts and assumes the Plan at the time of transfer.
1.6 "Compensation" means with respect to any Plan Year, the total of base pay,
--------------
cash bonuses, foreign service premium, and temporary disability earnings
paid to an Executive by an Employer or which would otherwise be so paid but
for a deferral election under this Plan, the Savings Plan, and/or a plan
subject to section 125 of the Code. "Compensation" shall also include any
deferred bonuses under any management incentive bonus program(s), any
"basic" 12 week interim pay under the Employer's "Special Termination
Benefits" policies for employees, and any payments under the "Sustained
Performance Incentive Program" if maintained by the Employer.
1.7 "Compensation Deferral Election" means the form described in Section 2.2 of
--------------------------------
the Plan.
<PAGE>
1.8 "Deferred Compensation Account" means the account to be established by the
-------------------------------
Company as a book reserve to reflect the amounts deferred by a Participant
and the matching contributions by the Employer under Article II, as
adjusted by earnings (or losses) under Article III.
1.9 "Effective Date" means August 1, 1994.
----------------
1.10 "Employer" means the Company, any affiliate which, with the authority of
----------
the Company, has adopted the Plan, and any successor or assignee of any of
them.
1.11 "Excess Compensation" means that portion of an Executive's Compensation
---------------------
which is in excess of the Code Section 401(a)(17) Limitation.
1.12 "Executive" means any employee of an Employer who is classified as Grade 20
-----------
to 34 by the Employer (except for any employee classified as Grade 31 or 33
but not administered as Grade 20 to 34) and whose Savings Plan Earnings in
any Plan Year exceed the applicable Code Section 401(a)(17) Limitation, and
any other employees designated by the Committee as members of the select
group of management or highly compensated employees eligible for
participation in the Plan.
1.13 "Participant" means any Executive who elects to participate in the Plan in
-------------
accordance with Article II or a person who was such at the time of his
death or termination of service and who retains, or whose Beneficiary
retains, a benefit under the Plan which has not been distributed.
1.14 "Plan" means the Champion International Corporation Nonqualified
------ -----------------------------------------------
Supplemental Savings Plan as set forth in this instrument, effective as of
-------------------------
August 1, 1994, and, as may be amended thereafter.
1.15 "Plan Year" means the calendar year, except that the first Plan Year is the
-----------
period beginning August 1, 1994 and ending December 31, 1994.
1.16 "Savings Plan" means the Champion International Corporation Savings Plan
-------------- -----------------------------------------------
#077 as in effect on the Effective Date and as subsequently amended, and
----
any successor or replacement plan for such plan.
1.17 "Savings Plan Earnings" means "Earnings" as defined in the Savings Plan
-----------------------
without giving effect to the $200,000 limitation expressed therein and
without otherwise giving effect to the Code Section 401(a)(17) Limitation.
ARTICLE II - DEFERRAL ELECTIONS AND
-----------------------------------
EMPLOYER MATCHING CONTRIBUTIONS
-------------------------------
2.1 General. Each Executive may elect to defer a part of his Excess
--------
Compensation for each Plan Year in accordance with this Article II and
thereby become a Participant under the Plan.
2.2 Compensation Deferral Election. A Participant desiring to exercise an
-------------------------------
election under Section 2.1 shall file with the Employer a Compensation
Deferral Election in such form as the Committee may prescribe. Such
election shall be irrevocable, provided however, in the event a Participant
is faced with an unforeseeable emergency (as defined in Section 4.3) during
the Plan Year, such Participant, with the approval of the Committee, may
revoke his election for the remainder of such Plan Year. A Compensation
Deferral Election shall be authorization to the Employer to defer a
percentage of the Participant's Excess Compensation and shall provide that
his Excess Compensation be reduced
-2-
<PAGE>
by a whole percentage of not less than one percent (1%) nor more than eight
percent (8%), as determined by the Participant. Notwithstanding the
foregoing, an Executive's Compensation Deferral Elections for the short
1994 Plan Year and/or for any of the Plan Years 1995 through 1997 may
specify deferral amounts in excess of 8% of his Excess Compensation for
said Plan Years so that such Executives who are elected officers on the
Effective Date may defer during said Plan Years amounts that they could
have deferred if the Plan had been in effect for calendar years 1989
through 1993 and the entire year of 1994 (whether or not they were elected
officers during any or all calendar years 1989 through 1993 or the portion
of 1994 prior to the Effective Date), or so that such Executives who are
not elected officers on the Effective Date may defer during said Plan Years
amounts that they could have deferred if the Plan had been in effect for
the 1993 calendar year and the entire year of 1994.
2.3 Time of Election. A Participant's Compensation Deferral Election must be
-----------------
delivered to the Employer prior to the beginning of each Plan Year by such
date as the Committee shall specify. Notwithstanding the foregoing, for the
short 1994 Plan Year only, a Participant may deliver his Compensation
Deferral Election to the Employer within the 30-day period following the
Effective Date, to be effective only with respect to Compensation earned in
1994 but after the date such Compensation Deferral Election is delivered to
the Employer. With respect to an employee of an Employer who becomes an
Executive during a Plan Year and who wishes to make a deferral election
under this Article II for such Plan Year, he must deliver his Compensation
Deferral Election to the Employer within the 30-day period following the
day he becomes an Executive but only with respect to Compensation earned
after the date such Compensation Deferral Election is delivered to the
Employer.
2.4 Commencement of Deferrals. A Compensation Deferral Election shall be
--------------------------
effective for the entire Plan Year to which it relates (the short 1994 Plan
Year for the initial Plan Year) but only with respect to Compensation of
the Participant earned for services rendered after the election is made in
accordance with Sections 2.2 and 2.3. Compensation deferrals pursuant to
such election shall not commence until the pay period following the pay
period in which the Participant's aggregate Compensation paid to date for
such Plan Year actually exceeds the Code Section 401(a)(17) Limitation then
in effect.
2.5 Crediting of Accounts. Excess Compensation otherwise payable to the
----------------------
Participant during the Plan Year but deferred in accordance with Section
2.2 shall be credited to the Participant's Deferred Compensation Account as
soon as administratively feasible after his Compensation is so reduced.
2.6 Matching Contributions. Each Employer shall credit matching contributions
-----------------------
to the Deferred Compensation Account of each Participant who has a deferral
election under Section 2.2 in effect for all or part of the Plan Year. The
amount of such matching contributions shall be calculated by reference to
the Participant's Compensation deferrals for the Plan Year and shall be
equal to fifty percent (50%) of the amount of the first six percent (6%) of
Excess Compensation deferred. Notwithstanding the foregoing, with respect
to Executives who for the short 1994 Plan Year and/or any of the Plan Years
1995 through 1997 make deferral elections in excess of 8% as permitted
under Section 2.2, matching contributions with respect to such excess
deferrals shall be equal to fifty percent (50%) of the amount of the first
six percent (6%) of aggregate Excess Compensation deferred for the years to
which such excess deferrals relate as provided in the fourth sentence of
Section 2.2. Matching contributions under this Section 2.6 shall be
credited to Participants' Deferred Compensation Accounts on the same
periodic basis as matching contributions are credited to participants'
accounts under the Savings Plan.
-3-
<PAGE>
ARTICLE III - CREDITING OF EARNINGS
-----------------------------------
3.1 General. Subject to Section 3.4, there shall be credited to Participants'
--------
Deferred Compensation Accounts earnings (or losses) as if such Deferred
Compensation Accounts were actually invested in the investment funds and
Company Stock Fund available under the Savings Plan as determined under
this Article III.
3.2 Investment of Participant Deferrals. With respect to that part of each
------------------------------------
Participant's Deferred Compensation Account attributable to his own
elective deferrals under Section 2.2, each Participant shall elect to have
earnings (or losses) credited to his Deferred Compensation Account from
among the investment funds made available under the Savings Plan with
respect to participant before-tax elective deferrals under said plan. Such
an election shall be made in writing, on a form provided by the Committee,
and delivered to the Employer prior to the beginning of each Plan Year by
such date as the Committee shall determine. An investment election shall be
effective for the entire Plan Year to which it relates unless modified by
the Participant during the Plan Year. Such modifications may be made
periodically on the same basis as participant investment elections under
the Savings Plan may be modified. If a Participant fails to make and
deliver an election for the following Plan Year by the date as determined
by the Committee, then his Deferred Compensation Account shall be credited
with the earnings (losses) under the investment election most recently in
effect.
3.3 Investment of Employer Matching Contributions. With respect to that part of
----------------------------------------------
each Participant's Deferred Compensation Account attributable to Employer
matching contributions under Section 2.6, the Company shall credit each
Participant's Deferred Compensation Account with earnings (or losses) as if
such matching contributions were invested in the "Company Stock Fund" under
the Savings Plan.
3.4 Crediting of Earnings. The rates of return throughout each Plan Year for
----------------------
the investment funds and Company Stock Fund referenced under Sections 3.2
and 3.3 shall be the same as the actual rates of return for said funds as
under the Savings Plan. For each Plan Year, each Participant's Deferred
Compensation Account shall be increased or decreased as if it had earned
such rates of return. Such increase or decrease shall be based on the
varying balances of the Deferred Compensation Accounts throughout the Plan
Year and shall be credited to said accounts on the same periodic basis as
investment earnings (losses) are credited to participants' accounts under
the Savings Plan.
ARTICLE IV - PLAN BENEFITS
--------------------------
4.1 Vesting. Subject to Section 8.1, a Participant's rights to that part of his
--------
Deferred Compensation Account attributable to his own elective deferrals
under Section 2.2, as adjusted for earnings (or losses) under Article III,
shall be nonforfeitable at all times. A Participant's rights to that part
of his Deferred Compensation Account attributable to the crediting of
Employer matching contributions under Section 2.6, as adjusted for earnings
(or losses) under Article III, shall become nonforfeitable on the same
basis as Employer matching contributions under the Savings Plan.
4.2 Distributions. Subject to Section 4.3, the nonforfeitable amounts
--------------
represented by a Participant's Deferred Compensation Account shall become
distributable upon the Participant's separation from service with all
Employers due to his retirement, death, disability (in accordance with the
definition of "Disability" under the Savings Plan), or other termination of
employment. At the time a Participant makes his yearly deferral election
under Article II of the Plan, he also shall elect
-4-
<PAGE>
whether the nonforfeitable amounts represented by his Deferred Compensation
Account shall commence to be paid to him as soon as administratively
feasible upon his separation from service with all Employers or as of a
later date specified by the Participant. Such an election also shall
specify whether such amounts shall be paid in a single sum cash
distribution, or in up to ten (10) annual cash installments (as well as the
amounts of such installments) payable to the Participant while living with
any remaining nonforfeitable amount in his Deferred Compensation Account
payable after his death to his Beneficiary in a single sum in accordance
with Article V.
4.3 Withdrawal for Unforeseeable Emergency. Notwithstanding the provisions of
---------------------------------------
Section 4.2 to the contrary, in the event that a Participant is faced with
an unforeseeable emergency (as defined below), the Participant may request
a withdrawal from the nonforfeitable portion of his Deferred Compensation
Account in an amount sufficient to meet such emergency. Any such withdrawal
shall be paid in a single sum distribution. For purposes of this Section
4.3, an unforseeable emergency is a severe financial hardship to the
Participant resulting from a sudden and unexpected illness or accident of
the Participant or of a dependent (as defined in section 152(a) of the
Code) of the Participant, loss of the Participant's property due to
casualty, or other similar extraordinary and unforeseeable circumstances
arising as a result of events beyond the control of the Participant. The
Committee shall determine whether the circumstances presented by the
Participant constitute an unforeseeable emergency. Such circumstances and
the Committee's determination will depend upon the facts of each case, but,
in any case, payment may not be made to the extent that such hardship is or
may be relieved: (a) through reimbursement or compensation by insurance or
otherwise, (b) by liquidation of the Participant's assets, to the extent
the liquidation of such assets would not itself cause severe financial
hardship, or (c) by cessation of his elective deferrals under this Plan.
4.4 Commencement of Payment. At the time for payment designated by the
------------------------
Participant in accordance with Section 4.2, the nonforfeitable amounts
represented by the Participant's Deferred Compensation Account, increased
by any nonforfeitable amounts due to be credited but not yet credited under
Sections 2.5 and 2.6, and decreased by any withdrawals under Section 4.3,
shall commence to be paid in a single sum distribution or in installments
as elected by the Participant in accordance with Section 4.2. If
installment payments are elected, the first annual installment shall be
payable as of the commencement date elected by the Participant under
Section 4.2 and the remaining installments shall be payable on the annual
anniversary of that commencement date. The installment payments shall be in
such amounts as elected by the Participant on his most recent yearly
election form completed prior to his separation from service or other
termination of employment. If a Participant's Deferred Compensation Account
is paid in installments, such account shall continue to be credited with
earnings (or losses) under Article III until payment of the final
installment.
ARTICLE V - DEATH BENEFIT
-------------------------
5.1 Terms. Upon the death of a Participant, any unpaid nonforfeitable amounts
------
represented by the Participant's Deferred Compensation Account, increased
by any amounts due to be credited but not yet credited under Sections 2.5
and 2.6, shall be payable to the Participant's Beneficiary in a single sum
distribution as soon as administratively feasible after the Participant's
death.
-5-
<PAGE>
ARTICLE VI - ADMINISTRATION OF PLAN
-----------------------------------
6.1 General Administration. The Committee shall be responsible for the general
-----------------------
administration of the Plan and for carrying out its provisions. The
Committee shall have full power and authority to interpret, construe and
administer the Plan.
6.2 General Powers. All provisions set forth in the Savings Plan with respect
---------------
to the administrative powers and duties of the Committee and the procedures
for filing claims shall also be applicable with respect to the Plan. The
Committee shall be entitled to rely conclusively upon all calculations,
certificates, opinions and reports furnished by any actuary, accountant,
controller, counsel or other person employed or engaged by the Committee
with respect to the Plan.
ARTICLE VII - AMENDMENT OR TERMINATION
--------------------------------------
7.1 Amendment or Termination. The Plan may be amended in whole or in part from
-------------------------
time to time, or terminated, by action of the Committee. Such termination
and any such amendment shall be binding on each Employer, Executive and
Beneficiary. Notice of such termination or amendment shall be given in
writing to each Employer, Participant and Beneficiary of a deceased
Participant.
7.2 Effect of Amendment or Termination. No amendment or termination of the Plan
-----------------------------------
shall directly or indirectly deprive any current or former Participant or
Beneficiary of all or any portion of any benefit under this Plan, payment
of which has not been made prior to the effective date of such amendment or
termination.
ARTICLE VIII - GENERAL PROVISIONS
---------------------------------
8.1 No Funding or Interest in Assets. The Plan shall at all times be entirely
---------------------------------
unfunded and no provision shall at any time be made with respect to
segregating any assets of an Employer for payment of any benefits
hereunder. No Participant or his designated Beneficiary shall acquire any
property interest in his Deferred Compensation Account or any other assets
of the Employer, their rights being limited to receiving from the Employer
deferred payments as set forth in this Plan and these rights are
conditioned upon continued compliance with the terms and conditions of this
Plan. To the extent that any Participant or Beneficiary acquires a right to
receive benefits under this Plan, such right shall be no greater than the
right of any unsecured general creditor of the Employer.
8.2 Assignment or Alienation. Except as required by law, no right of a
-------------------------
Participant or designated Beneficiary to receive payments under this Plan
shall be subject to transfer, anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation or to execution,
attachment, levy or similar process or assignment by operation of law and
any attempt, voluntary or involuntary, to effect any such action shall be
null and void and of no effect.
8.3 General Conditions. Any retirement benefit or any other benefit payable
-------------------
under the Savings Plan shall be paid solely in accordance with the terms
and conditions of the Savings Plan and nothing in this Plan shall operate
or be construed in any way to modify, amend or affect the terms and
provisions of the Savings Plan.
-6-
<PAGE>
8.4 No Guaranty of Benefits. Nothing contained in the Plan shall constitute a
------------------------
guaranty by any person that the assets of an Employer will be sufficient to
pay any benefit hereunder.
8.5 No Enlargement of Rights. No Participant or Beneficiary shall have any
-------------------------
right to a benefit under the Plan except in accordance with the terms of
the Plan. Establishment of the Plan shall not be construed to give any
Participant the right to be retained in the service of an Employer.
8.6 Construction. This Plan shall be construed under the laws of the State of
-------------
Connecticut. Article headings are for convenience only and shall not be
considered as part of the terms and provisions of the Plan. Words in the
masculine gender shall include the feminine, and the singular shall include
the plural, and vice versa, unless qualified by the context.
8.7 Withholding of Taxes. The Company shall withhold from any amounts payable
---------------------
under the Plan, all federal, state, and local taxes that the Company
determines is legally required.
8.8 Binding on Successors, Purchasers, Transferees and Assignees. The Plan
-------------------------------------------------------------
shall be binding upon any successor or successors of the Company and of any
other Employer whether by merger, consolidation, or otherwise. In the event
of the sale or transfer of substantially all of the assets of the Company
or of any other Employer to any successor, purchaser, transferee or
assignee, the Company and such other Employer each agrees that as a
condition of such sale or transfer, the successor, purchaser, transferee or
assignee shall adopt and assume the Plan at the time of the sale, transfer
or assignment including, without limitation, all obligations which have
accrued or may accrue in the future, and shall be bound by all the terms
and provisions of the Plan, and the Company and such other Employer shall
remain fully liable under the Plan. If the Company or any other Employer
assigns or otherwise transfers or attempts to delegate its duties or
responsibilities pursuant to the Plan to any party, the Company and such
other Employer each agrees that it shall remain obligated hereunder in
addition to the obligation hereunder of such party. If a merger,
consolidation, sale, or transfer is made as provided in this Section, the
provisions of this Section shall continue in full force and effect, and
thereafter for all purposes of this Section and the application thereof,
the immediate successor, purchaser, transferee or assignee and all
subsequent successors, purchasers, transferees and assignees shall be
deemed to be and shall be considered as the Company or as any other
Employer hereunder, as the case may be. No other such merger,
consolidation, sale, or transfer shall be made except in compliance with
the provisions of this Section.
IN WITNESS THEREOF, Champion International Corporation has caused this Plan to
be executed this __ day of _________, 1994.
CHAMPION INTERNATIONAL CORPORATION
By: ____________________________________
ATTEST:
____________________________________
-7-
<PAGE>
EXHIBIT 11
CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES
Calculation of Primary Earnings (Loss) Per Common Share and
Fully Diluted Earnings (Loss) Per Common Share (unaudited)
(in thousands, except per share)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
--------------------- --------------------
September 30, September 30,
--------------------- --------------------
1994 1993 1994 1993
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Primary earnings (loss) per common share:
Net Income (Loss) $ (38,967) $(111,413) $ 23,117 $ (53,484)
Dividends on Preference Shares 20,813 20,813 6,938 6,938
--------- --------- --------- ---------
Net Income (Loss) Applicable to Common
Stock $ (59,780) $(132,226) $ 16,179 $ (60,422)
========= ========= ========= =========
Average number of common shares
outstanding 92,990 92,765 93,046 92,834
========= ========= ========= =========
Per share $ (.64) $ (1.42) $ .18 $ (.65)
========= ========= ========= =========
Fully diluted earnings (loss) per common
share:
Net Income (Loss) Applicable to Common
Stock $ (59,780) $(132,226) $ 16,179 $ (60,422)
Add income effect, assuming conversion
of dilutive convertible securities --- --- --- ---
--------- --------- --------- ---------
Net income (loss) on a fully diluted
basis $ (59,780) $(132,226) $ 16,179 $ (60,422)
========= ========= ========= =========
Average number of common shares
outstanding 92,990 92,765 93,046 92,834
Add common share effect, assuming
conversion of dilutive convertible
securities --- --- --- ---
--------- --------- --------- ---------
Average number of common shares
outstanding on a fully diluted basis 92,990 92,765 93,046 92,834
========= ========= ========= =========
Per share $ (.64) $ (1.42) $ .18 $ (.65)
========= ========= ========= =========
</TABLE>
NOTE:
(1) The computation of fully diluted earnings per common share assumes that the
average number of common shares outstanding during the period 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.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Income for the nine months ended September 30, 1994,
and the Consolidated Balance Sheet as of September 30, 1994, and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 84,285
<SECURITIES> 6,677
<RECEIVABLES> 546,748
<ALLOWANCES> 12,184
<INVENTORY> 431,885
<CURRENT-ASSETS> 1,176,314
<PP&E> 10,392,891<F1>
<DEPRECIATION> (2,916,372)
<TOTAL-ASSETS> 8,983,321
<CURRENT-LIABILITIES> 775,568
<BONDS> 3,246,806
<COMMON> 48,353
300,000
0
<OTHER-SE> 2,834,137
<TOTAL-LIABILITY-AND-EQUITY> 8,983,321
<SALES> 3,852,818
<TOTAL-REVENUES> 3,852,818
<CGS> 3,527,095
<TOTAL-COSTS> 3,527,095
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 175,601
<INCOME-PRETAX> (54,205)
<INCOME-TAX> (15,238)
<INCOME-CONTINUING> (38,967)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (38,967)
<EPS-PRIMARY> (0.64)
<EPS-DILUTED> (0.64)
<FN>
<F1> Includes timber and timberlands.
</TABLE>
