SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
____________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ________
Commission File Number 1 - 3506
_________
GEORGIA-PACIFIC CORPORATION
(Exact Name of Registrant as Specified in its Charter)
GEORGIA 93-0432081
(State of Incorporation) (IRS Employer Id. Number)
133 PEACHTREE STREET, N.E., ATLANTA, GEORGIA 30303
(Address of Principal Executive Offices)
(404) 652 - 4000
(Telephone Number of Registrant)
_________
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
--- ---
As of the close of business on July 31, 1995, Georgia-Pacific Corporation had
91,005,518 shares of Common Stock outstanding.
PART I - FINANCIAL INFORMATION
-------------------------------------------
Item 1. Financial Statements
STATEMENTS OF INCOME (Unaudited)
Georgia-Pacific Corporation and Subsidiaries
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
-------------- --------------
(Millions, except per share amounts) 1995 1994 1995 1994
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $3,700 $3,187 $7,177 $6,129
--------------------------------------------------------------------------------
Costs and expenses
Cost of sales 2,614 2,559 5,058 4,869
Selling, general and
administrative 363 298 713 582
Depreciation and depletion 186 185 372 370
Interest 100 113 205 234
Other income - - - (57)
--------------------------------------------------------------------------------
Total costs and expenses 3,263 3,155 6,348 5,998
--------------------------------------------------------------------------------
Income before income taxes,
extraordinary item and
accounting change 437 32 829 131
Provision for income taxes 172 18 332 61
--------------------------------------------------------------------------------
Income before extraordinary item
and accounting change 265 14 497 70
Extraordinary item - loss from
early retirement of debt,
net of taxes - - - (11)
Cumulative effect of accounting
change, net of taxes - - - (5)
--------------------------------------------------------------------------------
Net income $ 265 $ 14 $ 497 $ 54
================================================================================
Per share:
Income before extraordinary item
and accounting change $ 2.95 $ .16 $ 5.54 $ .79
Extraordinary item - loss from early
retirement of debt, net of taxes - - - (.12)
Cumulative effect of accounting
change, net of taxes - - - (.06)
--------------------------------------------------------------------------------
Net income $ 2.95 $ .16 $ 5.54 $ .61
================================================================================
Average number of shares outstanding 89.8 88.9 89.7 88.8
================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
STATEMENTS OF CASH FLOWS
Georgia-Pacific Corporation and Subsidiaries
(Unaudited)
<TABLE>
<CAPTION>
Six months
ended June 30,
-------------
(Millions) 1995 1994
--------------------------------------------------------------------------------
<S> <C> <C>
Cash provided by (used for) operations
Net income $ 497 $ 54
Adjustments to reconcile net income to cash
provided by operations:
Depreciation 349 349
Depletion 23 21
Amortization of goodwill 30 29
Stock compensation programs 45 (19)
Gain on sales of assets (4) (7)
Other income - (57)
Cumulative effect of accounting change - 5
(Increase) in receivables (249) (211)
(Decrease) in accounts receivable sale program (200) -
(Increase) in inventories (53) (20)
Change in other working capital 15 (65)
Change in deferred income tax liabilities (16) (65)
(Decrease) in taxes payable (5) (20)
Change in other assets and other
long-term liabilities 29 3
--------------------------------------------------------------------------------
Cash provided by (used for) operations 461 (3)
--------------------------------------------------------------------------------
Cash provided by (used for) investing activities
Capital expenditures
Property, plant and equipment (501) (313)
Timber and timberlands (51) (29)
--------------------------------------------------------------------------------
Total capital expenditures (552) (342)
Proceeds from sales of assets 18 212
Other (1) -
--------------------------------------------------------------------------------
Cash (used for) investing activities (535) (130)
--------------------------------------------------------------------------------
Cash provided by (used for) financing activities
Repayments of long-term debt (221) (258)
Additions to long-term debt 514 7
Fees paid to issue debt (5) -
Increase in bank overdrafts 5 27
Increase (decrease) in commercial paper and
other short-term notes (168) 407
Cash dividends paid (82) (73)
--------------------------------------------------------------------------------
Cash provided by financing activities 43 110
--------------------------------------------------------------------------------
(Decrease) in cash (31) (23)
Balance at beginning of period 53 41
--------------------------------------------------------------------------------
Balance at end of period $ 22 $ 18
================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
BALANCE SHEETS
Georgia-Pacific Corporation and Subsidiaries
<TABLE>
<CAPTION>
June 30, December 31,
(Millions, except shares and per share amounts) 1995 1994
--------------------------------------------------------------------------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets
Cash $ 22 $ 53
Receivables, less allowances of $29 and $28 1,021 566
Inventories 1,262 1,209
Deferred income tax assets 136 136
Other current assets 31 34
--------------------------------------------------------------------------------
Total current assets 2,472 1,998
--------------------------------------------------------------------------------
Timber and timberlands, net 1,389 1,363
--------------------------------------------------------------------------------
Property, plant and equipment
Land, buildings, machinery and equipment, at cost 11,939 11,500
Accumulated depreciation (6,311) (6,012)
--------------------------------------------------------------------------------
Property, plant and equipment, net 5,628 5,488
--------------------------------------------------------------------------------
Goodwill 1,743 1,773
--------------------------------------------------------------------------------
Other assets 238 242
--------------------------------------------------------------------------------
Total assets $ 11,470 $ 10,864
================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank overdrafts, net $ 217 $ 212
Commercial paper and other short-term notes 700 868
Current portion of long-term debt 13 37
Accounts payable 585 603
Accrued compensation 183 182
Other current liabilities 441 423
--------------------------------------------------------------------------------
Total current liabilities 2,139 2,325
--------------------------------------------------------------------------------
Long-term debt, excluding current portion 4,224 3,904
--------------------------------------------------------------------------------
Other long-term liabilities 844 825
--------------------------------------------------------------------------------
Deferred income tax liabilities 1,177 1,190
--------------------------------------------------------------------------------
Commitments and contingencies
Shareholders' equity
Common stock, par value $.80; 150,000,000
shares authorized; 90,770,000 and 90,466,000
shares issued 72 72
Additional paid-in capital 1,267 1,220
Retained earnings 1,797 1,382
Long-term incentive plan deferred compensation (38) (39)
Other (12) (15)
--------------------------------------------------------------------------------
Total shareholders' equity 3,086 2,620
--------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 11,470 $ 10,864
================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
NOTES TO FINANCIAL STATEMENTS (Unaudited)
GEORGIA-PACIFIC CORPORATION
JUNE 30, 1995
1. PRINCIPLES OF PRESENTATION. The interim financial information
included herein is unaudited; however, such information
reflects all adjustments which are, in the opinion of management,
necessary for a fair presentation of the Corporation's financial
position, results of operations and cash flows for the interim
periods. All such adjustments are of a normal, recurring nature.
Certain 1994 amounts have been reclassified to conform with the 1995
presentation.
2. INCOME (LOSS) PER SHARE. Income (loss) per share is computed based
on net income (loss) and the weighted average number of common
shares outstanding, net of restricted shares. The effects of
assuming issuance of common shares under long-term incentive, stock
option and stock purchase plans were either insignificant or
antidilutive.
3. ACCOUNTING CHANGE. Effective January 1, 1994, the Corporation
adopted Financial Accounting Standard Number 112 (FAS 112),
"Employers' Accounting for Postemployment Benefits." FAS 112
requires accrual-basis recognition of benefits provided by an
employer to former or inactive employees after employment but before
retirement. The adoption of FAS 112 resulted in a one-time, after-
tax charge of $5 million (6 cents per share) in the 1994 first
quarter.
4. OTHER INCOME. In the 1994 first quarter, the Corporation recorded
other pretax income of $57 million ($34 million after taxes),
primarily resulting from the sales of its roofing manufacturing and
envelope businesses.
5. EXTRAORDINARY ITEM. The Corporation called for redemption
approximately $204 million of its outstanding debt during the 1994
first quarter. As a result, an after-tax extraordinary loss of $11
million (12 cents per share) was recognized.
6. SUPPLEMENTAL DISCLOSURES - STATEMENTS OF CASH FLOWS. The cash
impact of interest and income taxes is reflected in the table below.
The effect of foreign currency exchange rate changes on cash was not
material in either period.
Six months
ended June 30,
--------------
(Millions) 1995 1994
--------------------------------------------------
Total interest costs $ 216 $ 237
Interest capitalized (11) (3)
--------------------------------------------------
Interest expense $ 205 $ 234
==================================================
Interest paid $ 218 $ 257
==================================================
Income taxes paid, net of refunds $ 350 $ 148
==================================================
7. INVENTORY VALUATION. Inventories include costs of material, labor
and plant overhead. The Corporation uses the dollar value pool
method for computing LIFO inventories. The major components of
inventories were as follows:
June 30, December 31,
(Millions) 1995 1994
----------------------------------------------------------
Raw materials $ 408 $ 390
Finished goods 846 809
Supplies 281 275
LIFO reserve (273) (265)
----------------------------------------------------------
Total inventories $1,262 $ 1,209
==========================================================
8. PROVISION FOR INCOME TAXES. The Corporation reported pretax income
of $437 million and an income tax provision of $172 million for the
three months ended June 30, 1995. The Corporation reported pretax
income of $32 million and an income tax provision of $18 million for
the three months ended June 30, 1994. The actual effective tax rate
for both periods was higher than the federal statutory rate
primarily because of nondeductible goodwill amortization expense
associated with past business acquisitions.
9. COMMITMENTS AND CONTINGENCIES. The Corporation is a party to
various legal proceedings incidental to its business and is subject
to a variety of environmental and pollution control laws and
regulations in all jurisdictions in which it operates. As is the
case with other companies in similar industries, the Corporation
faces exposure from actual or potential claims and legal proceedings
involving environmental matters. The Corporation is self-insured
for general liability claims up to $5 million per occurrence.
Liability insurance in effect during the last several years provides
coverage for environmental matters only to a limited extent.
The Corporation is involved in environmental remediation activities
at numerous sites where it has been notified that it is or may be a
potentially responsible party under the Comprehensive Environmental
Response, Compensation and Liability Act or similar state
"superfund" laws and at certain of its own properties. Of the known
sites in which it is involved, the Corporation estimates that
approximately 45 percent are being investigated, approximately 40
percent are being remediated and approximately 15 percent are being
monitored (an activity which occurs after either site investigation
or remediation has been completed). The ultimate costs to the
Corporation for the remediation of many of these sites cannot be
predicted with certainty due to the often unknown magnitude of the
pollution or the necessary cleanup, the varying costs of alternative
cleanup methods, the amount of time necessary to accomplish such
cleanups, the evolving nature of cleanup technologies and government
regulations and the inability to determine the Corporation's share
of multi-party cleanups or the extent to which contribution will be
available from other parties. The Corporation has established
reserves for environmental remediation costs for these sites in
amounts which it believes are probable and reasonably estimable.
Based on analysis of currently available information and previous
experience with respect to the cleanup of hazardous substances, the
Corporation believes that it is reasonably possible that costs
associated with these sites may exceed current reserves by amounts
that may prove insignificant or that could range, in the aggregate,
up to approximately $ 77 million. This estimate of the range of
reasonably possible additional costs is less certain than the
estimates upon which reserves are based, and in order to establish
the upper limit of such range, assumptions least favorable to the
Corporation among the range of reasonably possible outcomes were
used. In estimating both its current reserve for environmental
remediation and the possible range of additional costs, the
Corporation has not assumed it will bear the entire cost of
remediation of every site to the exclusion of other known
potentially responsible parties who may be jointly and severally
liable. The ability of other potentially responsible parties to
participate has been taken into account, based generally on the
parties' financial condition and probable contribution on a per site
basis.
In the fourth quarter of 1992, the Corporation filed suit in the
State of Washington against numerous insurance carriers for coverage
under comprehensive general liability insurance policies issued by
those carriers. The Corporation sought a declaratory judgment to
the effect that past and future environmental remediation and other
related costs with respect to certain of the sites are covered by
such policies. The Corporation has now dismissed or settled its
claims against all but two of those carriers for a total of
approximately $45 million. Approximately $30 million of this amount
has been received ($28 million of which was recorded as pretax
income in the 1995 second quarter) and the remainder is payable,
subject to certain contingencies, over approximately the next ten
years. No amounts have been recorded for the contingent payments.
The Corporation has received and responded to three comprehensive
information requests from the Environmental Protection Agency (EPA)
concerning air emissions at approximately 30 of the Corporation's
facilities which manufacture oriented strand board, medium-density
fiberboard, plywood and particleboard. On August 5, 1994, the EPA
issued a Notice of Violation (NOV) with respect to alleged
violations of certain requirements of the Clean Air Act at these
facilities relating to, among other things, alleged emissions of
volatile organic compounds from sources constructed or modified
since 1980. The Corporation expects to be able to negotiate
settlements of the allegations contained in the NOV with the EPA and
the state environmental agencies involved. Any settlements would
entail the payment of fines and agreement by the Corporation to
install air emission control equipment at certain of these
facilities.
Approximately 220 suits involving 9,160 plaintiffs are currently
pending in several state courts in Mississippi. The suits allege a
variety of torts including nuisance, trespass and infliction of
emotional distress primarily related to the alleged discharge of
dioxin into the Leaf River from a pulp mill owned by a subsidiary of
the Corporation. Three of these cases have been tried. A total of
$241,000 in compensatory damages and $4 million in punitive damages
were awarded to three plaintiffs in the first two cases (Simmons and
Ferguson) with respect to certain claims. The jury found in favor
of the Corporation with respect to a fourth plaintiff. The
Corporation appealed both judgments. On July 8, 1993, in the third
Mississippi dioxin case tried, the jury returned a verdict in favor
of the Corporation on all counts. The plaintiffs have appealed.
The Mississippi Supreme Court heard oral arguments in Simmons and
Ferguson on March 21, 1994. At August 4, 1995, no decision on these
appeals had been issued.
In early 1994 two dioxin cases pending in federal court in
Mississippi were voluntarily dismissed with prejudice by the
plaintiffs. On September 1, 1994, the state court judge to whom
almost all the remaining Mississippi dioxin cases have been assigned
lifted a stay which he had entered pending the Supreme Court's
decision in Simmons and Ferguson. None of such cases pending
against the Corporation have yet been set for trial.
Although there can be no assurances as to the ultimate outcome of
the approximately 220 suits pending against the Corporation for
alleged discharges of dioxin, based on the opinions of counsel the
Corporation believes that substantial grounds exist for reversal of
the judgments in Simmons and Ferguson, and that it has meritorious
defenses to the remaining lawsuits. Suit has been filed against the
mill's insurance carriers seeking a declaratory judgment to the
effect that these dioxin claims are covered by various insurance
policies issued to the Corporation.
The Corporation and many other companies are defendants in suits
brought in various courts around the nation by plaintiffs who allege
that they have suffered personal injury as a result of exposure to
asbestos-containing products. The Corporation currently is
defending claims of approximately 20,000 such plaintiffs and
anticipates that additional suits or claims will be filed against it
over the next several years. These suits allege a variety of lung
and other diseases based on alleged exposure to products previously
manufactured by the Corporation. In many cases the plaintiffs are
unable to demonstrate that they have suffered any compensable loss
as a result of such exposure.
The Corporation generally resolves asbestos cases by voluntary
dismissal or settlement for amounts it considers reasonable given
the facts and circumstances of each case. The amounts it has paid
in settlement have been substantially covered by product liability
insurance, and the Corporation believes that it has insurance
available in amounts adequate to cover substantially all of the
reasonably foreseeable damages and settlement amounts arising out of
claims and suits currently pending. The Corporation also
anticipates that equivalent amounts of insurance will be available
with respect to the disposition of suits and claims that may be
filed against the Corporation in the future, but there can be no
assurance in this regard. The Corporation has established reserves
for liabilities and legal defense costs for these suits and claims
in amounts it believes are probable and reasonably estimable. It
also has recorded a receivable for expected insurance recoveries
with respect to pending suits and claims.
Although the ultimate outcome of these environmental matters and
legal proceedings cannot be determined with certainty, based on
presently available information management believes that adequate
reserves have been established for probable losses with respect
thereto and that such ultimate outcome, after taking such reserves
into account, will not have a material adverse effect on the
consolidated financial position of the Corporation.
<TABLE>
<CAPTION>
SALES AND OPERATING PROFITS BY INDUSTRY SEGMENT (unaudited)
Georgia-Pacific Corporation and Subsidiaries
(Dollar amounts, except Second Quarter
per share, in millions) First --------------
Quarter Quarter Year-to-date
--------------------------------------------------------------------------------
<S> <C> <C> <C>
1995
NET SALES
Building products $1,800 52 % $1,860 50 % $3,660 51 %
Pulp and paper 1,665 48 1,829 50 3,494 49
Other operations 12 - 11 - 23 -
--------------------------------------------------------------------------------
Total net sales $3,477 100 % $3,700 100 % $7,177 100 %
================================================================================
OPERATING PROFITS
Building products $ 197 35 % $ 143 24 % $ 340 29 %
Pulp and paper 368 65 457 76 825 70
Other operations 5 - 4 - 9 1
--------------------------------------------------------------------------------
Total operating profits 570 100 % 604 100 % 1,174 100 %
=== === ===
General corporate expense (62) (55) (117)
Interest expense (105) (100) (205)
Cost of accounts
receivable sale program (11) (12) (23)
Provision for
income taxes (160) (172) (332)
--------------------------------------------------------------------------------
Net income $ 232 $ 265 $ 497
================================================================================
Per common share:
Net income $ 2.59 $ 2.95 $ 5.54
================================================================================
</TABLE>
<TABLE>
<CAPTION>
SALES AND OPERATING PROFITS BY INDUSTRY SEGMENT (unaudited)
Georgia-Pacific Corporation and Subsidiaries
(Dollar amounts, except Second Quarter
per share, in millions) First --------------
Quarter Quarter Year-to-date
--------------------------------------------------------------------------------
<S> <C> <C> <C>
1994
NET SALES
Building products $1,767 60 % $1,982 62 % $3,749 61 %
Pulp and paper 1,167 40 1,196 38 2,363 39
Other operations 8 - 9 - 17 -
--------------------------------------------------------------------------------
Total net sales $2,942 100 % $3,187 100 % $6,129 100 %
================================================================================
OPERATING PROFITS
Building products $ 247 97 % $ 218 118 % $ 465 106 %
Pulp and paper (53)(20) (40)(21) (93)(21)
Other operations 3 1 6 3 9 2
Other income 57 22 - - 57 13
--------------------------------------------------------------------------------
Total operating profits 254 100 % 184 100 % 438 100 %
=== === ===
General corporate expense (28) (31) (59)
Interest expense (121) (113) (234)
Cost of accounts
receivable sale program (6) (8) (14)
Provision for
income taxes (43) (18) (61)
--------------------------------------------------------------------------------
Income before
extraordinary item and
accounting change 56 14 70
Extraordinary item, net
of taxes (11) - (11)
Cumulative effect of accounting
change, net of taxes (5) - (5)
--------------------------------------------------------------------------------
Net income $ 40 $ 14 $ 54
================================================================================
Per common share:
Income before
extraordinary item and
accounting change $ .63 $ .16 $ .79
Extraordinary item,
net of taxes (.12) - (.12)
Accounting change,
net of taxes (.06) - (.06)
--------------------------------------------------------------------------------
Net income $ .45 $ .16 $ .61
================================================================================
</TABLE>
<TABLE>
<CAPTION>
SALES AND OPERATING PROFITS BY INDUSTRY SEGMENT (unaudited)
Georgia-Pacific Corporation and Subsidiaries
(Dollar amounts, except Third Quarter Fourth Quarter
per share, in millions) ----------------- --------------------
Quarter Year-to-date Quarter Year-to-date
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994
NET SALES
Building products $1,941 60 % $5,690 61% $1,871 56% $ 7,561 60%
Pulp and paper 1,315 40 3,678 39 1,460 44 5,138 40
Other operations 11 - 28 - 11 - 39 -
--------------------------------------------------------------------------------
Total net sales $3,267 100 % $9,396 100% $3,342 100% $12,738 100%
================================================================================
OPERATING PROFITS
Building products $ 262 75 % $ 727 93% $ 262 59% $ 989 81%
Pulp and paper 83 24 (10) (1) 181 41 171 14
Other operations 3 1 12 1 (2) - 10 -
Other income - - 57 7 - - 57 5
--------------------------------------------------------------------------------
Total operating
profits 348 100 % 786 100% 441 100% 1,227 100%
=== === === ===
General corporate
expense (78) (137) (32) (169)
Interest expense (110) (344) (109) (453)
Cost of accounts
receivable sale
program (9) (23) (10) (33)
Provision for
income taxes (64) (125) (121) (246)
--------------------------------------------------------------------------------
Income before
extraordinary item
and accounting
change 87 157 169 326
Extraordinary item,
net of taxes - (11) - (11)
Cumulative effect
of accounting
change, net of taxes - (5) - (5)
--------------------------------------------------------------------------------
Net income $ 87 $ 141 $ 169 $ 310
================================================================================
Per common share:
Income before
extraordinary item
and accounting
change $ .98 $ 1.77 $ 1.89 $ 3.66
Extraordinary item,
net of taxes - (.12) - (.12)
Accounting change,
net of taxes - (.06) - (.06)
--------------------------------------------------------------------------------
Net income $ .98 $ 1.59 $ 1.89 $ 3.48
================================================================================
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
THREE MONTHS ENDED JUNE 30, 1995 COMPARED WITH 1994
The Corporation reported consolidated net sales of $3.7 billion and net income
of $265 million ($2.95 per share) for the three months ended June 30, 1995. For
the same 1994 period, the Corporation reported consolidated net sales of $3.2
billion and net income of $14 million (16 cents per share).
The remaining discussion refers to the "Sales and Operating Profits by
Industry Segment" table and "Statements of Income" (included in Part I - Item 1.
hereto).
The building products segment reported net sales of $1.9 billion and
operating profits of $143 million for the three months ended June 30, 1995. Net
sales and operating profits were $2.0 billion and $218 million, respectively,
for the same 1994 period. Return on sales was 7.7 percent in the 1995 second
quarter compared with 11.0 percent in the 1994 second quarter.
The decrease in net sales and operating profits is primarily the result of
a decline in average prices in the second quarter compared with a year ago for
many of the Corporation's building products. Impacting the building products
business are several factors including an overall slowdown in the economy, a
decline in housing starts and an increased supply of Canadian lumber. Average
prices for softwood lumber products were approximately 11 percent below 1994
second quarter averages while average prices for the Corporation's oriented
strand board products were approximately 12 percent below 1994 second quarter
averages. Although second quarter average prices for the Corporation's plywood
products were approximately 12 percent higher than year ago levels, average
prices fell below 1995 first quarter averages. In addition, profit margins for
all lumber and structural panels continue to be impacted by the rise in wood
costs. Finally, profit margins for the distribution business have declined
primarily as a result of the decline in softwood lumber and plywood prices.
As previously disclosed in the Quarterly Report on Form 10-Q for the three
months ended June 30, 1994, the Corporation is in the process of restructuring
its building products distribution business and expects the process to be
completed within the next two to three years. In the second quarter, the
Corporation announced it would expand the restructuring in order to implement it
on a national basis. As a result, the Corporation expects to incur
restructuring expenses of approximately $120 million before the project is
completed, $45 million of which has been spent to date. The timing of the
recognition of these expenses is dependent on future events, and accordingly
could be material to the Corporation's building products segment results in any
given quarter, but are not expected to be material to the Corporation's
consolidated financial results in any quarter. Capital spending requirements
for this project are primarily related to the construction of new facilities and
systems and could exceed $400 million. Approximately $35 million of this amount
has already been spent.
The pulp and paper segment reported $1.8 billion in net sales in the 1995
second quarter, up from $1.2 billion in the same 1994 period. This segment also
reported operating profits of $457 million for this three month period compared
with an operating loss of $40 million for the same period a year ago. Return on
sales increased to 25.0 percent in the 1995 second quarter primarily as a result
of higher prices for most of the Corporation's pulp and paper products. Second
quarter average prices for market pulp were nearly double 1994 second quarter
average prices, average containerboard prices increased more than 60 percent,
communication paper prices increased more than 70 percent, and corrugated
packaging prices increased more than 30 percent compared with second quarter
1994 levels.
General corporate expense increased to $55 million for the three months
ended June 30, 1995 compared with $31 million in 1994. The majority of the
increase is attributable to compensation programs tied to the Corporation's
common stock price, which amounted to $15 million and $1 million for the
quarters ended June 30, 1995 and 1994, respectively.
For the second quarter, the Corporation's interest expense and cost of
accounts receivable sale program were a combined $112 million, a decrease of 7.4
percent compared with $121 million a year ago. Lower expense in 1995 was
primarily the result of a lower level of debt and the expiration since June 30,
1994 of $700 million in interest rate exchange agreements which had effectively
fixed the rates on a portion of the Corporation's variable rate debt.
The Corporation reported pretax income of $437 million and an income tax
provision of $172 million for the three months ended June 30, 1995. The
Corporation reported pretax income of $32 million and an income tax provision of
$18 million for the three months ended June 30, 1994. The actual effective tax
rate for both periods was higher than the federal statutory tax rate primarily
because of nondeductible goodwill amortization expense.
Selling, general and administrative expenses for the second quarter of 1995
increased 21.8 percent to $363 million from $298 million for the same 1994
period, primarily related to compensation programs tied to the Corporation's
common stock price, as well as labor and other costs associated with the
reengineering of certain operating and administrative processes.
SIX MONTHS ENDED JUNE 30, 1995 COMPARED WITH 1994
Consolidated net sales for the first half of 1995 were $7.2 billion compared
with $6.1 billion in 1994. Net income was $497 million ($5.54 per share)
compared with net income of $54 million (61 cents per share) in the 1994
comparable period. The 1994 results include a net, after-tax gain of $34
million (38 cents per share) primarily related to the sale of the Corporation's
envelope and roofing manufacturing businesses. In addition, 1994 net income
includes an $11 million (12 cents per share) after-tax loss on the early
retirement of debt and a $5 million (6 cents per share) one-time after-tax
charge for an accounting change.
The remaining discussion refers to the "Sales and Operating Profits by
Industry Segment" table and "Statements of Income" (included in Part I - Item 1.
hereto).
The building products segment reported net sales of $3.7 billion for the
six months ended June 30, 1995, a slight decrease from the first half of 1994.
Operating profits also declined to $340 million for the first six months of 1995
from $465 million in 1994. Return on sales decreased to 9.3 percent from 12.4
percent a year ago. Rising wood costs in the Corporation's softwood lumber and
plywood businesses and a decline in housing starts compared with year ago levels
have continued to affect the building products segment results. Year-to-date
average softwood lumber prices are 12 percent below averages in 1994, and
average 1995 oriented strand board prices are 9 percent below 1994 averages.
Although average plywood prices for the first half of 1995 are higher than
averages for the first half of 1994, prices have fallen during 1995 to levels
below their year-to-date averages.
The Corporation's pulp and paper segment reported net sales of $3.5 billion
and operating profits of $825 million for the six-month period ended June 30,
1995. For the same 1994 period, the segment reported net sales of $2.4 billion
and an operating loss of $93 million. The improved results in 1995 are
primarily attributable to sharply higher average prices during the first half of
1995 for most of the Corporation's pulp and paper products, compared with the
first half 1994 averages. For example, market pulp average prices nearly
doubled, corrugated packaging average prices increased nearly 35 percent, and
communication paper prices and containerboard prices increased almost 60
percent.
General corporate expense of $117 million for the six months ended June 30,
1995 nearly doubled from the 1994 year-to-date expense of $59 million. The
increase is primarily attributable to compensation programs tied to the
Corporation's common stock price, which amounted to $38 million and $(2) million
for the six months ended June 30, 1995 and 1994, respectively.
The Corporation reported a combined $228 million for interest expense and
the cost of the accounts receivable sale program for the first half of 1995, a
decrease of 8.1 percent from $248 million for the first half of 1994. The
decrease is primarily the result of the expiration since June 30, 1994 of $700
million in interest rate exchange agreements which had effectively fixed the
rates on a portion of the Corporation's variable rate debt.
The Corporation reported pretax income of $829 million and an income tax
provision of $332 million for the six months ended June 30, 1995. Excluding
asset sales, the Corporation reported pretax income before extraordinary item
and accounting change of $74 million and an income tax provision of $38 million
for the six months ended June 30, 1994. The actual effective tax rate for both
periods was higher than the federal statutory tax rate primarily because of
nondeductible goodwill amortization expense.
Selling, general and administrative expenses for the first half of 1995
increased 22.5 percent to $713 million from $582 million for the same 1994
period, primarily due to compensation programs tied to the Corporation's common
stock price, as well as labor and other costs associated with the reengineering
of certain operating and administrative processes.
Liquidity and Capital Resources
-------------------------------
Operating Activities
--------------------
The Corporation generated cash from operations of $461 million in the 1995 first
half and used cash for operations of $3 million in the same 1994 period.
Excluding the $200 million reduction in the accounts receivable sale program in
June 1995 and $37 million paid to the Internal Revenue Service in the 1994 first
quarter to settle the 1989 and 1990 tax years for the Corporation, cash provided
by operations in 1995 and 1994 was $661 million and $34 million, respectively.
The increase in cash from operations is primarily the result of higher prices in
the Corporation's pulp and paper segment for the six-month period ended June 30,
1995 compared with the first six months of 1994.
Investing Activities
--------------------
During the first half of 1995, the Corporation spent $552 million on capital
expenditures, including $238 million in the pulp and paper segment, $233 million
in the building products segment, $51 million for timber and timberlands and $30
million in other expenditures. The Corporation's total projected capital
spending for 1995 is approximately $1.2 billion.
As previously disclosed in the Corporation's Annual Report on Form 10-K for
the year ended December 31, 1994, the sales of its roofing manufacturing and
envelope businesses were completed during the first quarter of 1994. The
Corporation received after-tax cash proceeds of approximately $156 million from
these transactions.
Financing Activities
--------------------
Total debt for the Corporation, including $500 million in the accounts
receivable sale program, was $5.7 billion as of June 30, 1995, a decrease of $67
million since December 31, 1994. This includes a net reduction in commercial
paper and other short-term notes of $168 million and a reduction in the accounts
receivable sale program of $200 million, both of which were partially offset by
a net increase of $296 million in long-term debt and a net increase of $5
million in bank overdrafts.
During the 1995 second quarter, the Corporation issued $250 million of 8-
5/8% Debentures Due April 30, 2025 and $250 million of 7.70% Debentures Due June
15, 2015. In addition, the Corporation redeemed at par $200 million of its 10-
1/8% Debentures. Effective June 29, 1995, the Corporation repurchased $200
million of receivables, reducing the accounts receivable sale program from $700
million to $500 million. The program has been extended to May 21, 1996.
In the first quarter of 1994, the Corporation called for redemption
approximately $204 million in principal of its 10-1/4% Debentures Due September
15, 2018, which it redeemed in April 1994. The Corporation reported an after-
tax extraordinary loss of $11 million (12 cents per share) in the first half of
1994 as a result of this early retirement.
The Corporation has a $1.5 billion unsecured revolving credit facility
which is used for direct borrowings and as support for commercial paper and
other short-term borrowings, including bid borrowings made under that agreement.
As of June 30, 1995, $800 million of committed credit was available in excess of
all short-term borrowings outstanding under or supported by the facility.
The Corporation's weighted average interest rate on total debt as of both
June 30, 1995 and June 30, 1994 was 8.0%, including the accounts receivable sale
program and the outstanding interest rate exchange agreements.
At June 30, 1995, the Corporation had outstanding interest rate exchange
agreements which effectively converted $546 million of floating rate obligations
with a weighted average interest rate of approximately 6.3% to fixed rate
obligations with an average effective interest rate of approximately 9.2%. On
that date, the Corporation's total floating rate debt, including the accounts
receivable sale program, exceeded related interest rate exchange agreements by
approximately $1.3 billion. Interest rate exchange agreements of $400 million
expired in the first half of 1995 and another $50 million of these agreements
are due to expire in November.
On August 1, 1995, the Corporation's Board of Directors authorized
management to make purchases of the Corporation's common stock on the open
market or in private transactions. Purchases will be made from time to time
using available cash provided that total debt, including the accounts receivable
sale program, is less than $5.5 billion after funding all other cash
requirements of the Corporation.
As of June 30, 1995, the Corporation had registered for sale up to $250
million of debt securities under a shelf registration statement filed with the
Securities and Exchange Commission. On August 1, 1995, the Corporation's Board
of Directors approved the registration and sale of an additional $250 million of
debt securities.
In 1995, the Corporation expects its cash flow from operations, together
with proceeds from any asset sales and available financing sources, to be
sufficient to fund planned capital investments, pay dividends and make scheduled
debt payments.
Other
-----
For a discussion of commitments and contingencies, refer to Note 9 of the Notes
to Financial Statements.
PART II - OTHER INFORMATION
---------------------------
GEORGIA-PACIFIC CORPORATION
June 30, 1995
Item 1. Legal Proceedings
The information contained in Note 9 "Commitments and Contingencies" of the Notes
to Financial Statements filed as part of this Quarterly Report on Form 10-Q is
incorporated herein by reference.
As last reported in the Corporation's Annual Report on Form 10-K for the year
ended December 31, 1994, the Western Environmental Law Center, on behalf of the
Oregon Natural Resources Council (ONRC), filed a citizens suit against the
Corporation (ONRC v. Georgia-Pacific Corporation) in the U.S. District Court in
Oregon on February 16, 1994, alleging violations of wastewater discharge permit
limits at the Corporation's Toledo, Oregon plant. The Court approved a Consent
Decree on July 6, 1995 pursuant to which the Corporation will pay $50,000 for
environmental projects in the local area and $30,000 in attorneys fees, and
review the potential toxicity of specified water discharges from the plant.
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders of the Corporation was held on May 2, 1995.
At the annual meeting, four directors were elected, and the Corporation's 1995
Economic Value Incentive Plan, 1995 Shareholder Value Incentive Plan, 1995
Employee Stock Purchase Plan and Outside Directors Stock Plan were each
approved. Proxies for the meeting were solicited pursuant to Regulation 14A
under the Securities Exchange Act of 1934. There was no solicitation in
opposition to management's nominees for election to the Board of Directors as
listed in the related proxy statement, and all of such nominees were elected.
The results of shareholder voting on matters considered at the annual meeting
are as follows:
Election of Directors:
For Withheld
Donald V. Fites 78,407,714 445,616
Harvey C. Fruehauf, Jr. 78,445,348 407,982
David R. Goode 78,399,433 453,897
James B. Williams 78,437,881 415,449
Approval of 1995 Economic Value Incentive Plan:
For Against Abstain Non-Votes
66,304,072 3,812,614 902,135 7,834,509
Approval of 1995 Shareholder Value Incentive Plan:
For Against Abstain Non-Votes
63,072,051 7,127,749 819,020 7,834,510
Approval of 1995 Employee Stock Purchase Plan:
For Against Abstain Non-Votes
66,751,984 3,502,252 764,584 7,834,510
Approval of Outside Directors Stock Plan:
For Against Abstain Non-Votes
58,519,676 11,451,305 1,047,841 7,834,508
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 Statements of Computation of Per Share Earnings.
Exhibit 27 Financial Data Schedule.
(b) Reports on Form 8-K
The Registrant filed Current Reports on Form 8-K dated April 17,
1995, in which it reported under Item 5 - "Other Events," and
April 25, 1995 and June 9, 1995, in each of which it reported
under Item 5 - "Other Events" and Item 7 - "Financial Statements
and Exhibits."
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 7, 1995 GEORGIA-PACIFIC CORPORATION
(Registrant)
by /s/John F. McGovern
-----------------------------
John F. McGovern,
Senior Vice President -
Finance and Chief
Financial Officer
by /s/James E. Terrell
-----------------------------
James E. Terrell,
Vice President and
Controller (Chief Accounting
Officer)
GEORGIA-PACIFIC CORPORATION
---------------------------
INDEX TO EXHIBITS
FILED WITH THE QUARTERLY REPORT
ON FORM 10-Q FOR THE
QUARTER ENDED JUNE 30, 1995
Number Description
------ -----------
11 Statements of Computation of Per Share Earnings. (1)
27 Financial Data Schedule. (1)
--------------------------
(1) Filed by EDGAR
[DESCRIPTION] EPS DATA
EXHIBIT 11
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
STATEMENTS OF COMPUTATION OF PER SHARE EARNINGS (Unaudited)
(Thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income (Loss)
-------------
Income before extraordinary
item and accounting change $265,000 $ 14,000 $497,000 $70,000
Extraordinary item,net of tax - - - (11,000)
Cumulative effect of accounting
change, net of tax - - - (5,000)
-------- ------- -------- --------
Net income $265,000 $ 14,000 $497,000 $54,000
======== ======= ======== ========
Weighted Average Shares
-----------------------
Common shares outstanding,
net of restricted stock 89,761 88,850 89,690 88,776
Add - shares assumed to
be issued under long-term
incentive (restricted stock),
stock option and stock
purchase plans at the average
market price 886 641 839 781
-------- -------- -------- --------
Primary shares 90,647 89,491 90,529 89,557
-------- -------- -------- --------
Add - additional shares assumed
to be issued under long-term
incentive (restricted stock),
stock option and stock
purchase plans at quarter end
market price (if higher than
average market price) 186 - 259 -
-------- -------- -------- --------
Fully diluted shares 90,833 89,491 90,788 89,557
======== ======= ======== ========
Income (Loss) Per Share
-----------------------
Income before extraordinary
item and accounting change $ 2.95 $ .16 $ 5.54 $ .79
Extraordinary item,net of tax - - - (.12)
Cumulative effect of accounting
change, net of tax - - - (.06)
-------- -------- -------- --------
Net income $ 2.95 $ .16 $ 5.54 $ .61
======== ======= ======== ========
Income (Loss) Per Share - Primary
---------------------------------
Income before extraordinary
item and accounting change $ 2.92 $ .16 $ 5.49 $ .78
Extraordinary item, net of tax - - - (.12)
Cumulative effect of accounting
change, net of tax - - - (.06)
-------- -------- -------- --------
Net income $ 2.92 $ .16 $ 5.49 $ .60
======== ======= ======== ========
Income (Loss) Per Share - Fully Diluted
---------------------------------------
Income before extraordinary
item and accounting change $ 2.92 $ .16 $ 5.47 $ .78
Extraordinary item, net of tax - - - (.12)
Cumulative effect of accounting
change, net of tax - - - (.06)
-------- -------- -------- --------
Net income $ 2.92 $ .16 $ 5.47 $ .60
======== ======= ======== ========
</TABLE>
A single presentation of income (loss) per share is made on the Statements of
Income because the effects of assuming issuance of common shares under long-term
incentive, stock option and stock purchase plans are either antidilutive or
insignificant.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF GEORGIA-PACIFIC CORPORATION AS OF AND FOR THE THREE
MONTHS ENDED JUNE 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 22
<SECURITIES> 0
<RECEIVABLES> 1,050
<ALLOWANCES> 29
<INVENTORY> 1,262
<CURRENT-ASSETS> 2,472
<PP&E> 11,939
<DEPRECIATION> 6,311
<TOTAL-ASSETS> 11,470
<CURRENT-LIABILITIES> 2,139
<BONDS> 4,224
<COMMON> 72
0
0
<OTHER-SE> 3,014
<TOTAL-LIABILITY-AND-EQUITY> 11,470
<SALES> 7,177
<TOTAL-REVENUES> 7,177
<CGS> 5,058
<TOTAL-COSTS> 5,058
<OTHER-EXPENSES> 372
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 205
<INCOME-PRETAX> 829
<INCOME-TAX> 332
<INCOME-CONTINUING> 497
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 497
<EPS-PRIMARY> 5.49
<EPS-DILUTED> 5.47
</TABLE>
