SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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
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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 May 9, 1997, Georgia-Pacific Corporation had
91,489,969 shares of Common Stock outstanding.
<PAGE> 2
PART I - FINANCIAL INFORMATION
-------------------------------------------
Item 1. Financial Statements
STATEMENTS OF INCOME (Unaudited)
Georgia-Pacific Corporation and Subsidiaries
Three months
ended March 31,
-----------------
(Millions, except per share amounts) 1997 1996
- -----------------------------------------------------------------------
Net sales $3,145 $3,053
- -----------------------------------------------------------------------
Costs and expenses
Cost of sales, excluding depreciation and
cost of timber harvested, shown below 2,476 2,284
Selling, general and
administrative 291 355
Depreciation and cost of
timber harvested 230 212
Interest 122 112
Other Income (128) -
- -----------------------------------------------------------------------
Total costs and expenses 2,991 2,963
- -----------------------------------------------------------------------
Income before income taxes 154 90
Provision for income taxes 64 40
- -----------------------------------------------------------------------
Net income $ 90 $ 50
=======================================================================
Per share:
Net income $ .99 $ .55
=======================================================================
Average number of shares outstanding 91.0 90.5
=======================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE> 3
STATEMENTS OF CASH FLOWS
Georgia-Pacific Corporation and Subsidiaries
(Unaudited) Three months
ended March 31,
------------------
(Millions) 1997 1996
- -----------------------------------------------------------------------
Cash provided by (used for) operations
Net income $ 90 $ 50
Adjustments to reconcile net income to cash
provided by operations:
Depreciation 194 174
Cost of timber harvested 36 38
Other Income (128) -
Deferred income taxes 22 2
Amortization of goodwill 15 15
Stock compensation programs (13) 7
Gain on sales of assets (5) (3)
(Increase) decrease in receivables (64) 38
(Increase) decrease in inventories 11 (12)
Change in other working capital (111) (32)
Increase in taxes payable 72 21
Change in other assets and other
long-term liabilities (1) 8
- -----------------------------------------------------------------------
Cash provided by operations 118 306
- -----------------------------------------------------------------------
Cash provided by (used for) investment activities
Property, plant and equipment investments (131) (340)
Timber and timberlands purchases (36) (19)
Decrease in cash restricted for capital expenditures 11 35
Proceeds from sales of assets 48 11
Other (2) 6
- -----------------------------------------------------------------------
Cash (used for) investment activities (110) (307)
- -----------------------------------------------------------------------
Cash provided by (used for) financing activities
Proceeds from option plan exercises 4 1
Repayments of long-term debt (4) (9)
Additions to long-term debt - 1
Fees paid to issue debt - (1)
Decrease in bank overdrafts (22) (14)
Increase in commercial paper and
other short-term notes 93 70
Cash dividends paid (46) (46)
- -----------------------------------------------------------------------
Cash provided by financing activities 25 2
- -----------------------------------------------------------------------
Increase in cash 33 1
Balance at beginning of period 10 11
- -----------------------------------------------------------------------
Balance at end of period $ 43 $ 12
=======================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
BALANCE SHEETS
Georgia-Pacific Corporation and Subsidiaries
March 31, December 31,
(Millions, except shares and per share amounts) 1997 1996
- ----------------------------------------------------------------------------
ASSETS (Unaudited)
Current assets
Cash $ 43 $ 10
Receivables, less allowances of $15 and $10 1,371 959
Inventories 1,447 1,467
Deferred income tax assets 129 129
Other current assets 49 50
- ----------------------------------------------------------------------------
Total current assets 3,039 2,615
- ----------------------------------------------------------------------------
Timber and timberlands, net 1,181 1,337
- ----------------------------------------------------------------------------
Property, plant and equipment
Land, buildings, machinery and equipment, at cost 13,817 13,733
Accumulated depreciation (7,337) (7,173)
- ----------------------------------------------------------------------------
Property, plant and equipment, net 6,480 6,560
- ----------------------------------------------------------------------------
Goodwill 1,643 1,658
- ----------------------------------------------------------------------------
Other assets 906 648
- ----------------------------------------------------------------------------
Total assets $ 13,249 $12,818
============================================================================
<PAGE> 5
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank overdrafts, net $ 229 $ 251
Commercial paper and other short-term debt 1,088 645
Current portion of long-term debt 426 311
Accounts payable 564 662
Accrued compensation 161 196
Accrued interest 95 85
Other current liabilities 406 340
- ----------------------------------------------------------------------------
Total current liabilities 2,969 2,490
- ----------------------------------------------------------------------------
Long-term debt, excluding current portion 4,253 4,371
- ----------------------------------------------------------------------------
Other long-term liabilities 1,274 1,275
- ----------------------------------------------------------------------------
Deferred income tax liabilities 1,183 1,161
- ----------------------------------------------------------------------------
Commitments and contingencies
Shareholders' equity
Common stock, par value $.80; 150,000,000
shares authorized; 91,465,000 and 91,396,000
shares issued 73 73
Additional paid-in capital 1,282 1,277
Retained earnings 2,244 2,200
Long-term incentive plan deferred compensation (9) (11)
Other (20) (18)
- ----------------------------------------------------------------------------
Total shareholders' equity 3,570 3,521
- ----------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 13,249 $12,818
============================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS (Unaudited)
GEORGIA-PACIFIC CORPORATION
MARCH 31, 1997
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 except for the items discussed in Notes
3 and 4 below. Certain 1996 amounts have been reclassified to conform
with the 1997 presentation.
2. INCOME PER SHARE. Income per share is computed based on net income and
the weighted average number of common shares outstanding, net of
restricted stock. The effects of assuming issuance of common shares under
long-term incentive, stock option, and stock purchase plans were either
insignificant or antidilutive.
3. OTHER INCOME. The 1997 first quarter sale of the company's Martell
operations, which included timberlands, a sawmill, and a particleboard
mill, generated a pretax gain of $128 million ($80 million after-tax).
4. ACCOUNTS RECEIVABLE. The Corporation adopted Financial Accounting
Standards Number 125, "Accounting for Transfers and Servicing of
Financial Assets
and Extinguishments of Liabilities", in the 1997 first quarter. As a
result, the Corporation's accounts receivable sale program is accounted for
as a secured borrowing effective January 1, 1997. The $350 million of
receivables outstanding under the program and the corresponding debt are
included as current receivables and short-term debt, respectively, on the
Corporation's balance sheet. The fees associated with the program are
included in interest expense.
5. 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.
<TABLE>
<CAPTION>
Three months
ended March 31
------------------------
(Millions) 1997 1996
---------------------------------------------------------------
<S> <C> <C>
Total interest costs $ 123 $ 121
Interest capitalized (1) (9)
---------------------------------------------------------------
Interest expense $ 122 $ 112
================================================================
Interest paid $ 112 $ 106
================================================================
Income taxes paid, net of refunds $ (30) $ 17
================================================================
</TABLE>
<PAGE> 7
6. INVENTORY VALUATION. Inventories include costs of materials, labor, and
plant overhead. The Corporation uses the dollar value pool method for
computing LIFO inventories. The major components of inventories were as
follows:
<TABLE>
<CAPTION>
March 31, December 31,
(Millions) 1997 1996
---------------------------------------------------------------
<S> <C> <C>
Raw materials $ 359 $ 415
Finished goods 1,007 979
Supplies 294 295
LIFO reserve (213) (222)
---------------------------------------------------------------
Total inventories $ 1,447 $1,467
============================================================
</TABLE>
7. PROVISION FOR INCOME TAXES. The effective tax rate was 42 percent for
the three months ended March 31, 1997, and 44 percent for the three
months ended March 31, 1996. The effective tax rate for the period was
different than the statutory rates primarily because of nondeductible
goodwill amortization expense.
8. 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. Liability
insurance in effect during the last several years provides only very
limited coverage for environmental matters.
The Corporation is involved in environmental remediation activities at
approximately 200 sites, both owned by the Corporation and owned by others,
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. Of the known sites in
which it is involved, the Corporation estimates that approximately 31
percent are being investigated, approximately 43 percent are being
remediated and approximately 26 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 investigation,
remediation and monitoring 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
$63 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.
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. 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 to defend and settle
these cases to date have been substantially covered by product liability
insurance. The Corporation currently is defending claims of approximately
65,000 such plaintiffs and anticipates that additional suits will be filed
against it over the next several years. The Corporation has insurance
available in amounts which it believes are adequate to cover substantially
all of the reasonably foreseeable damages and settlement amounts arising
out of claims and suits currently pending. The Corporation has further
insurance coverage available for the disposition of suits that may be filed
against it in the future, but there can be no assurance that the amounts of
such insurance will be adequate to cover all future claims. The
Corporation has established reserves for liabilities and legal defense
costs it believes are probable and reasonably estimable with respect to
pending suits and claims and a receivable for expected insurance
recoveries.
The Corporation is defending an action in Alabama state court that seeks to
recover damages on behalf of a class of all persons currently owning
structures in the United States on which hardboard siding manufactured by
the Corporation after January 1, 1980, has been installed. The plaintiffs
allege that this hardboard siding was inadequately designed and
manufactured and as a consequence prematurely discolors and deteriorates.
They also dispute the validity and availability of the warranty issued with
the product. The plaintiffs seek unspecified compensatory and punitive
damages, declaratory relief regarding the availability of warranties,
restitution and injunctive relief. A similar case has been filed against
the Corporation and another defendant in state court in Georgia seeking to
certify a class of individuals whose mobile homes contain the Corporation's
hardboard siding. The plaintiffs seek damages in excess of $10,000 for
each purported class member.
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. Management further
believes that the ultimate outcome of such environmental matters and legal
proceedings could be material to operating results in any given quarter or
year, but will not have a material adverse affect on the long-term results
of operations, liquidity or consolidated financial position of the
Corporation.
<PAGE> 11
<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>
1997
NET SALES
Building products $1,781 57%
Pulp and paper 1,351 43
Other operations 13 -
- --------------------------------------------------------------------------------
Total net sales $3,145 100%
===============================================================================
OPERATING PROFITS
Building products $ 289 92%
Pulp and paper 20 7
Other operations 4 1
- --------------------------------------------------------------------------------
Total operating profits 313 100%
===
General corporate expense (37)
Interest expense (122)
Provision for income taxes (64)
- --------------------------------------------------------------------------------
Net income $ 90
===============================================================================
Per common share:
Net income $ .99
===============================================================================
<PAGE> 12
<CAPTION>
SALES AND OPERATING PROFITS BY INDUSTRY SEGMENT (unaudited)
Georgia-Pacific Corporation and Subsidiaries
(Dollar amounts, Third Quarter Fourth Quarter
except per share, ------------------------ ------------------------
in millions) Quarter Year-to-date Quarter Year-to-date
- --------------------------------------------------------------------------------
<S>
1997
NET SALES
Building products
Pulp and paper
Other operations
- --------------------------------------------------------------------------------
Total net sales
===============================================================================
OPERATING PROFITS
Building products
Pulp and paper
Other operations
- --------------------------------------------------------------------------------
Total operating
profits
General corporate
expense
Interest expense
Provision for
income taxes
- --------------------------------------------------------------------------------
Net income
===============================================================================
Per common share:
Net income
===============================================================================
</TABLE>
<PAGE> 13
<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>
1996
NET SALES
Building products $1,571 52% $1,896 57% $3,467 55%
Pulp and paper 1,471 48 1,416 43 2,887 45
Other operations 11 - 12 - 23 -
- --------------------------------------------------------------------------------
Total net sales $3,053 100% $3,324 100% $6,377 100%
===============================================================================
OPERATING PROFITS
Building products $ 67 28% $ 141 80% $ 208 50%
Pulp and paper 174 72 33 19 207 49
Other operations 2 - 3 1 5 1
- --------------------------------------------------------------------------------
Total operating profits 243 100% 177 100% 420 100%
=== === ===
General corporate expense (41) (38) (79)
Interest expense (112) (114) (226)
Provision for income taxes (40) (15) (55)
- --------------------------------------------------------------------------------
Income before extraordinary
item 50 10 60
Extraordinary item - loss from
early retirement of debt, net
of taxes - (5) (5)
- --------------------------------------------------------------------------------
Net income $ 50 $ 5 $ 55
===============================================================================
Per common share:
Income before extraordinary
item $ .55 $ .11 $ .66
Extraordinary item - loss from
early retirement of debt, net
of taxes - (.05) (.05)
Net income $ .55 $ .06 $ .61
===============================================================================
<PAGE> 14
<CAPTION>
SALES AND OPERATING PROFITS BY INDUSTRY SEGMENT (unaudited)
Georgia-Pacific Corporation and Subsidiaries
(Dollar amounts, Third Quarter Fourth Quarter
except per share, ------------------------ ------------------------
in millions) Quarter Year-to-date Quarter Year-to-date
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
NET SALES
Building products $ 2,040 59% $ 5,507 56% $ 1,858 58% $ 7,365 57%
Pulp and paper 1,401 41 4,288 44 1,321 41 5,609 43
Other operations 10 - 33 - 17 1 50 -
- --------------------------------------------------------------------------------
Total net sales $ 3,451 100% $ 9,828 100% $ 3,196 100% $13,024 100%
===============================================================================
OPERATING PROFITS
Building products $ 240 69% $ 448 58% $ 68 46% $ 516 56%
Pulp and paper 104 30 311 41 79 54 390 43
Other operations 4 1 9 1 (1) - 8 1
- --------------------------------------------------------------------------------
Total operating
profits 348 100% 768 100% 146 100% 914 100%
=== === === ===
General corporate
expense (53) (132) (27) (159)
Interest expense (120) (346) (113) (459)
Provision for
income taxes (76) (131) (4) (135)
- --------------------------------------------------------------------------------
Income before extraordinary
item 99 159 2 161
Extraordinary item - loss from
early retirement of debt, net
of taxes - (5) - (5)
- --------------------------------------------------------------------------------
Net income $ 99 $ 154 $ 2 $ 156
===============================================================================
Per common share:
Income before extraordinary
item $ 1.09 $ 1.75 $ .02 $ 1.78
Extraordinary item - loss
from early retirement of
debt, net of taxes - (.05) - (.06)
- --------------------------------------------------------------------------------
Net income $ 1.09 $ 1.70 $ .02 $ 1.72
===============================================================================
</TABLE>
<PAGE> 15
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
THREE MONTHS ENDED MARCH 31, 1997 COMPARED WITH 1996
The Corporation reported consolidated net sales of approximately $3.1 billion
for the three months ended March 31, 1997 and 1996. Net income for the 1997
first quarter was $90 million (99 cents per share) compared with $50 million (55
cents per share) in 1996. The 1997 results include a net after-tax gain of $80
million (88 cents per share) from the sale of the Corporation's Martell,
California, operations.
The remaining discussion refers to the "Sales and Operating Profits by
Industry Segment" table (included in PART I - ITEM 1. hereto).
The Corporation's building products segment reported net sales of $1.8 billion
and operating profits of $289 million for the first three months of 1997,
compared with net sales of $1.6 billion and operating profits of $67 million in
the 1996 comparable period. The 1997 results include a pretax gain of $128
million from the sale of the Corporation's Martell operations. Excluding the
unusual gain, return on sales increased to 11.7 percent from 4.3 percent a year
ago. Continuation of an upward trend in lumber prices contributed to the
significant increase in revenues from the comparable 1996 period, and the
previous quarter. Improved gypsum profits primarily resulted from a second
quarter 1996 acquisition as well as higher wallboard prices. Structural panels
prices were 6 percent lower than the first quarter of 1996 due to lower prices
for oriented strand board. Prices for oriented strand board and industrial wood
products remain weak due to excess industry capacity.
Operating losses for the Corporation's building products distribution division
were $33 million in the first quarter, compared with a loss of $38 million in
the first quarter of 1996 that included $17 million of restructuring charges.
The division is continuing its aggressive plan to return to profitability
through reduced overhead costs, increased sales and margins, and greater
operational efficiency. Selected financial and operating data for the building
products distribution business are shown in the table below:
Selected Distribution Division Data
(millions) 3 months ended March 31
1997 1996
Sales 983 932
Operating loss (33) (38)
Capital expenditures 13 87
Depreciation 11 7
The Corporation's pulp and paper segment reported net sales of $1.4 billion and
operating profits of $20 million in the 1997 first quarter. For the same period
in 1996, the Corporation reported net sales of $1.5 billion and operating
profits of $174 million. Return on sales decreased to 1.5 percent in 1997 from
11.8 percent in 1996, primarily due to a substantial decline in prices for most
of the Corporation's pulp and paper products. Compared with the same 1996
period, prices were 22 percent lower for market pulp, 35 percent lower for
containerboard and 17 percent lower for communication papers. While demand for
communications papers increased, lower prices offset increased volume. In
contrast, tissue profits increased from the 1996 first quarter. Shipments for
both consumer and commercial tissue products were higher.
Selling, general and administrative expenses (SG&A) for the first quarter of
1997 were $291 million, compared to $355 million for the same period in 1996, a
reduction of $64 million. The cost reduction is largely a result of a voluntary
early retirement program and overhead reduction plans implemented in 1996. The
Corporation expects full-year 1997 SG&A to be approximately $200 million lower
than in 1996.
<PAGE> 16
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities: The Corporation generated cash from operations of $118
million for the three months ended March 31, 1997 compared with $306 million a
year ago. The decrease is primarily attributable to lower operating profits and
an increase in cash used for working capital.
Investing Activities: Property, plant and equipment investments for the three
months ended March 31, 1997 were $131 million compared with $340 in the first
quarter of 1996. Expenditures in 1997 included $70 million in the pulp and paper
segment, $42 million in the building products segment, and $19 million of other
and general corporate. The Corporation expects to invest approximately $800
million in 1997, without considering the cost of any acquisitions.
On March 31, 1997, the Corporation completed the sale of its Martell,
California, assets to Sierra Pacific Industries for $308 million. Assets
included in this transaction were 127,000 acres of timberlands, a sawmill, and a
particleboard plant. The proceeds will be used to repay outstanding debt. (See
further discussion in financing activities below.)
Financing Activities: The Corporation's total recorded debt was $6.0 billion
at March 31, 1997. Total debt at December 31, 1996 was $5.9 billion, which
included $350 million under the accounts receivable sale program.
The Corporation adopted SFAS 125 "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" in the first quarter. As a
result, the Corporation's accounts receivable sale program is accounted for as a
secured borrowing effective January 1, 1997. The $350 million of receivables
outstanding under the program and the corresponding debt are included as current
receivables and short-term debt, respectively, on the Corporation's balance
sheet. The fees associated with the program are included in interest expense.
In conjunction with the sale of the Corporation's Martell, California,
operations, the Corporation received notes receivable from Sierra Pacific
Industries in the amount of $270 million. These notes are included in other
assets. In April 1997, the Corporation monetized the notes receivable through
the issuance of notes payable in a private placement. Payments received from
the notes receivable will be used to fund payments required for the notes
payable. The notes payable will be classified as "Other long-term liabilities"
on the Corporation's balance sheet. Proceeds from the issuance of the notes
payable will be used to reduce other debt by approximately $270 million in the
1997 second quarter.
At March 31, 1997, the Corporation had outstanding borrowings of $646 million
under certain Industrial Revenue Bonds. Approximately $15 million from the
issuance of these bonds is being held by trustees and is restricted for the
construction of certain capital projects. Amounts held by trustees are
classified as noncurrent assets in the accompanying balance sheet.
<PAGE> 17
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. As of March 31, 1997, $762 million of committed credit was
available in excess of all short-term borrowings outstanding under or supported
by the facility.
At March 31, 1997, the Corporation's weighted average interest rate on its total
debt was 7.7% including outstanding interest rate exchange agreements. At March
31, 1997, these interest rate exchange agreements effectively converted $496
million of floating rate obligations with a weighted average interest rate of
5.6% to fixed rate obligations with an average effective interest rate of
9.0%. These agreements have a weighted average maturity of approximately 1.8
years. As of March 31, 1997, the Corporation's total floating rate debt
exceeded related interest rate exchange agreements by $1.5 billion.
As of March 31, 1997, the Corporation had registered for sale up to $500 million
of debt securities under a shelf registration statement filed with the
Securities and Exchange Commission.
In 1997, 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: In February 1997, the Financial Accounting Standards Board issued
Financial Accounting Standard Number 128 (SFAS 128), "Earnings Per Share",
which specifies the computation, presentation, and disclosure requirements for
earnings per share. The Corporation will be required to adopt the new Standard
in the 1997 fourth quarter. All prior period earnings per share data will be
restated to conform with the provisions of SFAS 128. Based on a preliminary
evaluation of this Standard's requirements, the Corporation does not expect the
per share amounts reported under SFAS 128 to be materially different from those
calculated and presented under APB Opinion 15.
The Corporation expects to incur significant costs during the next two to three
years to address the impact of the so-called Year 2000 problem on its
information systems. The Year 2000 problem, which is common to most
corporations, concerns the inability of information systems, primarily computer
software programs, to properly recognize and process date sensitive information
as the year 2000 approaches. The Corporation has completed an assessment of the
majority of its systems and is in the process of developing a specific workplan
to address this issue. The Corporation currently believes it will be able to
modify or replace its affected systems in time to minimize any detrimental
effects on operations. While it is not possible, at present, to give an
accurate estimate of the cost of this work, the Corporation expects that such
costs may be material to the Corporation's results of operations in one or more
fiscal quarters or years, but will not have a material adverse impact on the
long-term results of operations, liquidity or consolidated financial position of
the Corporation.
Except for historical information contained herein, the foregoing statements are
forward-looking statements, the accuracy of which is subject to a number of
risks and assumptions. The Corporation's Form 10-K for the fiscal year ending
December 31, 1996, and the Corporation's Form 8-K dated October 17, 1996,
discuss such risks and assumptions and other key factors that could cause actual
results to differ materially from those expressed in such forward-looking
statements. An additional risk factor is the Corporation's ability to timely
and efficiently address the Year 2000 problem.
For a discussion of commitments and contingencies refer to Note 8 of the Notes
to Financial Statements.
<PAGE> 18
PART II - OTHER INFORMATION
---------------------------
GEORGIA-PACIFIC CORPORATION
March 31, 1997
Item 1. Legal Proceedings
The information contained in Note 8 "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.
In October 1996, the Indiana Department of Environmental Management,
on behalf of various state and federal trustees of allegedly adversely
affected natural resources, sent a notice of its intention to conduct
a natural resource damage (NRD) assessment on the Grand Calumet
River/Indiana Harbor Canal System to Georgia-Pacific and fifteen other
companies/agencies in which it was alleged that each of these sixteen
entities were potentially responsible parties for releases of
hazardous substances and oil. No explanation of how this liability was
derived has as yet been alleged. Georgia-Pacific believes that it has
several meritorious legal and factual defenses to any such NRD claim
which may arise in the future.
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.
Exhibit 99. Press Release dated March 31, 1997.
(b) No Current Reports on Form 8-K were filed by the Corporation
during the quarter ended March 31, 1997.
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 9, 1997 GEORGIA-PACIFIC CORPORATION
(Registrant)
by /s/John F. McGovern
----------------------------
John F. McGovern,
Executive Vice President -
Finance and Chief
Financial Officer
by /s/James E. Terrell
----------------------------
James E. Terrell,
Vice President and Controller
(Chief Accounting Officer)
<PAGE> 20
GEORGIA-PACIFIC CORPORATION
---------------------------
INDEX TO EXHIBITS
FILED WITH THE QUARTERLY REPORT
ON FORM 10-Q FOR THE
QUARTER ENDED MARCH 31, 1996
Number Description
- ------ -----------
11. Statements of Computation of Per Share Earnings. (1)
27. Financial Data Schedule. (1)
99. Press Release dated March 31, 1997. (1)
- -------------------------------
(1) Filed by EDGAR
EXHIBIT 11
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
STATEMENTS OF COMPUTATION OF PER SHARE EARNINGS (Unaudited)
(Millions, except per share amounts)
<TABLE>
Three Months
Ended March 31,
---------------------------
1997 1996
---- ----
<S> <C> <C>
Income
- -------------
Income before extraordinary item $ 90 $ 50
Extraordinary item, net of tax - -
-------- -------
Net income $ 90 $ 50
======== =======
Weighted Average Shares
- -----------------------
Common shares outstanding,
net of restricted stock 90,979 90,478
Add - shares assumed to
be issued under long-term
incentive (restricted stock),
stock option and stock
purchase plans at the average
market price 380 563
-------- --------
Primary shares 91,359 91,041
-------- --------
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) - 6
-------- --------
Fully diluted shares 91,359 91,047
======== =======
Income Per Share
- -----------------------
Income before extraordinary item $ .99 $ .55
Extraordinary item, net of tax - -
-------- --------
Net income $ .99 $ .55
======== =======
Income Per Share - Primary
- ---------------------------------
Income before extraordinary item $ .99 $ .55
Extraordinary item, net of tax - -
-------- --------
Net income $ .99 $ .55
======== =======
Income Per Share - Fully Diluted
- ---------------------------------------
Income before extraordinary item $ .99 $ .55
Extraordinary item, net of tax - -
-------- --------
Net income $ .99 $ .55
======== =======
</TABLE>
A single presentation of income 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 FOR THE TWELVE MONTHS ENDED
DECEMBER 31, 1996."
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 43
<SECURITIES> 0
<RECEIVABLES> 1,386
<ALLOWANCES> 15
<INVENTORY> 1,447
<CURRENT-ASSETS> 3,039
<PP&E> 13,817
<DEPRECIATION> 7,337
<TOTAL-ASSETS> 13,249
<CURRENT-LIABILITIES> 2,969
<BONDS> 4,253
0
0
<COMMON> 73
<OTHER-SE> 3,497
<TOTAL-LIABILITY-AND-EQUITY> 13,249
<SALES> 3,145
<TOTAL-REVENUES> 3,145
<CGS> 2,476
<TOTAL-COSTS> 2,476
<OTHER-EXPENSES> 230
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 122
<INCOME-PRETAX> 154
<INCOME-TAX> 64
<INCOME-CONTINUING> 90
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 90
<EPS-PRIMARY> .99
<EPS-DILUTED> .99
</TABLE>
Georgia-Pacific [Logo]
133 Peachtree Street Northeast
Atlanta, Georgia 30303
(404) 6524000
News from Georgia-Pacific
Release No. C-1389
Contacts:
Sheila Weidman
Georgia-Pacific Corp.
(404) 652-4732
Ed Bond
Sierra Pacific Industries
(916) 378-8280
March 31, 1997
GEORGIA-PACIFIC AND SIERRA PACIFIC COMPLETE TRANSACTION
FOR MARTELL OPERATIONS
ATLANTA -- Georgia-Pacific West Inc., a wholly owned subsidiary of Georgia-
Pacific Corp., and Sierra Pacific Industries today completed the previously
announced transaction in which Sierra Pacific purchased the assets of Georgia-
Pacific's Martell, Calif., operations for approximately $320 million.
Georgia-Pacific will realize an after-tax net gain of approximately $80 million
that will be reported in the company's first quarter 1997 financial results.
The proceeds will be used to repay outstanding debt. Operations in the
transaction include 127,000 acres of timberlands, a particleboard plant and a
sawmill.
`This transaction serves our shareholders well,'' A.D. "Pete" Correll,
Georgia-Pacific chairman and chief executive officer, said. "It is an example of
Georgia-Pacific's practice of continually reviewing assets to identify
appropriate restructuring or divestiture opportunities to further add value."
-more-
-2-
`This acquisition will enable Sierra Pacific to grow strategically,
enhance our product capabilities for our customers and better meet their
needs,' said A.A. "Red" Emmerson, president of Sierra Pacific. "Importantly,
it provides our company a secure and cost-effective source of timber to support
our operations."
