Prepared by R.R. Donnelley Financial -- Amendment # 1 to Form 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Fiscal Year Ended December 29, 2001
OR
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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 |
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93-0432081 |
(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification Number) |
133 Peachtree Street, N.E.,
Atlanta, Georgia 30303
(Address of Principal Executive Offices) (Zip Code)
Registrants telephone number, including area code: (404) 652-4000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
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Name of Each Exchange on which Registered
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Georgia-Pacific CorporationGeorgia-Pacific Group Common Stock ($.80 par value) |
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New York Stock Exchange |
Premium Equity Participating Security UnitsPEPS Units |
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New York Stock Exchange |
Georgia-Pacific Group Rights to Purchase Series B Junior Preferred Stock (no par value) |
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New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the
Act: None
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
As of the close of business
on March 7, 2002, the registrant had 230,201,893 shares of Georgia-Pacific Common Stock outstanding.
The
aggregate market value of the voting stock held by non-affiliates of the registrant on March 7, 2002 (assuming, for the sole purpose of this calculation that all executive officers and directors of the registrant are affiliates) was
$6,396,717,968 for Georgia-Pacific Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Georgia-Pacific Corporations definitive Proxy Statement for use in connection with its Annual Meeting of Shareholders
scheduled to be held on May 7, 2002 are incorporated by reference in answer to Part III of this Form 10-K.
EXPLANATORY NOTE
Georgia-Pacific Corporation (the Corporation) is
filing this amendment (the Amendment) to its Annual Report on Form 10-K to include the audit report of Ernst & Young LLP on the Corporations consolidated financial statements as of December 29, 2001 and December 30, 2000 and
for the three years in the period ended December 29, 2001. Ernst & Young audited these financial statements after it replaced the Corporations previous auditor in March 2002. The audit report of Ernst & Young LLP contains an
unqualified opinion, as did the audit report of the Corporations previous auditor. Ernst & Youngs audit did not cause any restatement of the Corporations consolidated financial position or the consolidated results of its
operations, as previously filed. The Amendment includes a new Note 18, and revisions to Notes 14 and 17, to the consolidated financial statements, and revisions to Item 7: Managements Discussion and Analysis of Financial Condition and
Results of Operations. These revisions include certain information and disclosures requested by the Staff of the Securities and Exchange Commission. Except as otherwise noted, the disclosures in the Amendment are of the date of the original
filing of the Annual Report.
GEORGIA-PACIFIC CORPORATION
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended December 29, 2001
PART I
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PART II |
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PART III |
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PART I
Georgia-Pacific Corporation was organized in 1927 under the laws of the State
of Georgia.
The Corporation is engaged in five principal business operations: the manufacture of tissue products
(including bath tissue, paper towels, and napkins) and disposable tabletop products (including disposable cups, plates and cutlery); the manufacture of containerboard and packaging (including linerboard, medium, kraft and corrugated packaging); the
manufacture of bleached pulp and paper (including paper, market and fluff pulp, and bleached board) and the distribution of paper products and supplies manufactured by the Corporation or purchased from others; and the manufacture and distribution of
building products (including plywood, oriented strand board, various industrial wood products, and softwood and hardwood lumber as well as certain non-wood products including gypsum board, chemicals and other products). During 2001, the Corporation,
through its timber and timberlands business referred to as The Timber Company also engaged in the growing of timber on approximately 4.7 million acres of timberlands that the Corporation owned or leased. In 2001, these timberlands
supplied approximately 10% of the overall timber requirements of the Corporations manufacturing facilities. On October 6, 2001, the Corporation completed the spin off of The Timber Company which merged with and into Plum Creek Timber Company,
Inc. (Plum Creek) (see Note 3 of the Notes to Consolidated Financial Statements).
Among North
American producers, Georgia-Pacific ranks first in the production of tissue paper products, disposable tableware, and industrial panels; second in structural wood panels, wood bonding and industrial thermosetting resins; third in lumber products and
gypsum wallboard; fourth in containerboard, corrugated packaging and market pulp; and fifth in paper (uncoated free-sheet). The Corporations building products distribution business is the leading supplier of wholesale building products in the
United States. Georgia-Pacifics office product distribution business, Unisource Worldwide, Inc. (Unisource), is one of the largest distributors of paper and janitorial and other supplies in North America. Georgia-Pacifics
chemical business also supplies paper chemicals and tall oil based chemicals.
Most of Georgia-Pacifics
products are made of solid wood, virgin and recycled wood fiber, or wood by-products. Georgia-Pacific purchases the majority of these readily available raw materials from timber owners (such as Plum Creek), independent log merchants and brokers, and
recycled fiber brokers.
Georgia-Pacifics strategy is to improve its portfolio of businesses by divesting or
exiting non-strategic businesses, and by acquiring and investing in businesses that are high value-added and that position Georgia-Pacific closer to consumers. A key component of that strategy is improving the Corporations bath tissue, paper
towel and napkin business, which is commonly referred to as the tissue business. The Corporation believes that its acquisition of Fort James Corporation in 2000 directly facilitated that strategy. In 2001, in connection with the Corporations
redirection of its focus away from commodity-based businesses, the Corporation sold a portion of its pulp and paper assets to Domtar Inc. and divested its timber businesses by redeeming all of the outstanding shares of stock of The Timber Company
and merging its timber businesses with Plum Creek.
As the Corporation completed evaluations of its business
portfolio last year, it became increasingly convinced that separating its consumer products and packaging business and its building products business has the potential to create shareholder value. In the summer of 2001, management began working on a
plan to create separate vehicles for those businesses. Management believes there are a number of potential benefits from separating the businesses. Among them, it is believed a separation would create both a high-value-added consumer products and
packaging company with strong brands and stable cashflow and one of the strongest domestic pure-play building products companies; drive sharpened management focus and provide better performance incentives; eliminate cross-subsidies, with
each business free to use its cash flow to reinvest or distribute to shareholders as appropriate; and allow each business to develop its own appropriate strategies and capital structures.
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Georgia-Pacific operates its production facilities in four operating
segments: Consumer Products, Packaging, Bleached Pulp and Paper, and Building Products. Financial information about these operating segments is included in Note 2 of the Notes to the Consolidated Financial Statements. Operating segment descriptions
follow.
Consumer Products Segment
Georgia-Pacific is the largest North American producer of tissue products, a leading manufacturer of tissue products in Europe, and, through its Dixie business, the largest
producer of disposable tableware in North America. The segments products include a wide array of branded and private label consumer and commercial tissue products. These include bath tissue, paper towels and napkins, which are made from virgin
and recycled fibers, as well as disposable plates, cups and cutlery. Primary production of these products takes place in 27 tissue mills throughout Europe and the United States and 12 disposable tableware plants in the United States. Worldwide
tissue capacity is approximately four million tons, making this segment the worlds largest producer of tissue products. In 2001, export and foreign sales accounted for approximately $1,692 million, or 24% of segment sales. Markets for tissue
products are generally influenced by population growth, changes in per capita consumption, and levels of economic activity in a geographic market.
In March 2001, Georgia-Pacific completed the sale of 368,000 tons of tissue manufacturing capacity, associated converting facilities, and related sales and marketing functions to Svenska Cellulosa
Aktiebolaget (publ) (SCA) for approximately $850 million (see Note 3 of the Notes to Consolidated Financial Statements). The majority of this sale involved products in the commercial or away-from-home market.
Our Consumer Products segment is broken down into three divisions; North American Tissue, European Tissue, and Dixie.
North American Tissue
Georgia-Pacifics consumer products segment is the largest producer of tissue products, such as bath tissue, paper towels and napkins, in North America. The business
produces both branded and private label tissue products made from virgin and recycled fibers for the retail and commercial markets. Fourteen production and converting facilities located throughout the United States and a converting facility in
Mexico produce finished goods to serve the North American market. In 2001, North American sales accounted for approximately $4,549 million, or 74% of tissue sales.
Retail Tissue. In the retail (or at-home) channel, which accounted for approximately 67% of domestic tissue sales in 2001,
Georgia-Pacific produces both branded and private label products. The Corporations principal retail brands include Quilted Northern and Angel Soft bath tissue (the number two and three bathroom tissue brands, respectively), Brawny and Sparkle
paper towels (the number two and three paper towel brands, respectively), and six of the seven leading napkin brands including Mardi Gras napkins (the leading paper napkin brand) and Vanity Fair premium dinner napkins (the number one premium napkin
brand). Other retail brands include Sparkle paper napkins (the number three paper napkin brand), and SoftN Gentle bathroom and facial tissue, MD bath tissue, Mardi Gras towels, Zee napkins (number one on the West Coast), and Green Forest
towels and napkins.
Georgia-Pacific also supplies private label or customer brand products to some of the largest
retailers in the United States. The Corporation believes that it is the leading supplier to the United States private label towel and tissue market, with an estimated market share between 40% and 45%. Additionally, the Corporation believes it is the
leading supplier of tissue, towel and napkin products to the warehouse club channel.
Commercial
Tissue. In 2001, the other 33% of domestic tissue sales came from commercial and industrial (or away-from-home) markets through the Corporations office product distribution business (Unisource),
independent paper distributors, food service and janitorial distributors, and directly to national fast food accounts for use in restaurants, offices, factories, hospitals, schools and hotels. The Corporations principal away-from-
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home brands include proprietary dispensing systems for the Cormatic, Ultimatic and Guardian brands; Envision, the leading brand of environmentally positioned 100% recycled tissue, towel and
napkin products. With an estimated market share of approximately 39%, Georgia-Pacific believes it is now the leading producer of towel and tissue products in the United States away-from-home channel.
European Tissue
The European tissue business is a leading supplier of paper-based consumer products in many European countries. Product lines in both the retail and away-from-home markets include bathroom and facial tissue, paper towels and
napkins. Retail sales include both branded and private label products. The Corporation also markets feminine hygiene products and pharmacy supplies in select countries. These products are manufactured across Europe in 13 mills with an annual
capacity of over 946,000 tons, or are purchased from others. Eleven stand-alone converting plants strategically located throughout Europe and China supplement converting operations located at the primary production mills. The combined network
provides cost-effective market reach given the high European distribution costs and the resulting decrease in the maximum practical distribution radius from any one-mill site. In 2001, net sales for the European tissue business accounted for
approximately $1,590 million, or 26% of tissue sales.
During 2001, tissue-based products accounted for
approximately 87% of the Corporations European annual sales with the balance comprised of feminine hygiene products, ancillary products such as health care and pharmacy items, and unconverted tissue parent rolls. Georgia-Pacific sells its
tissue, towel and napkin products through both retail and away-from-home distribution channels in Europe. Approximately 75% of the Corporations European towel and tissue sales were into retail distribution channels and 25% were into
away-from-home and other channels. Sales into retail channels are supported by both branded and private label product offerings.
The Corporations principal European brands include Lotus bathroom tissue and handkerchiefs (both hold the number one position in France), Moltonel bathroom tissue (the number two tissue in France), Lotus kitchen towels (the
number one kitchen towel in the Netherlands), OKay kitchen towels (the number one kitchen towel in France), Colhogar kitchen towels and bathroom tissue (both hold number one positions in Spain), KittenSoft towels and bathroom tissue (both hold
number one positions in Ireland), EMBO bathroom tissue (the number one tissue in Finland), Tenderly bathroom tissue (the number three tissue in Italy), Delica kitchen towels and bathroom tissue (the number one towel and number two bath tissue in
Greece), Vania feminine hygiene products (the leader in France), Selpak premium tissue products (the leader in Turkey) and DemakUp cotton facial pads (the leader in Europe).
Georgia-Pacifics largest European operations are in France and the United Kingdom, which combined account for approximately 71% of its European tissue sales.
Aggregating at-home branded, private label and away-from-home production, the Corporation believes it is the largest producer of tissue products in France, Spain, Finland, Ireland, and Turkey and the second largest producer in the United Kingdom and
Greece.
Dixie
The Dixie business, with one of the best known names in disposable plates, cups and cutlery, provides a full range of products for both retail and foodservice markets. Through a twelve-plant network of
focused production facilities in North America, Dixie manufactures products for its retail and foodservice customers. The Corporations principal retail tabletop brand is Dixie, which has the largest United States retail market share for
disposable cups and plates. The Corporation believes that it is also the leading supplier of tabletop products to the warehouse club channel. Foodservice customers include distributors, restaurants, hotels, office buildings and institutions. The
Corporation believes that it is one of the largest producers of disposable cups, plates and related products for the foodservice industry. Approximately 54% of sales are into retail distribution channels and the remaining 46% are into foodservice
distribution channels. In 2001, Dixies net sales were approximately $871 million.
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Packaging Segment
The packaging segment focuses on providing packaging solutions for a wide variety of industrial customers. Its primary products include corrugated containers and
containerboard. The Corporations four containerboard mills rank fourth in North American containerboard production with a capacity of 3.7 million tons, approximately 10% of North American capacity. The segments 53 packaging plants
consume approximately 70% of the segments containerboard production; the remainder is sold to independent box converters in the United States, Latin America and Asia. One of the largest domestic producers of containerboard, the packaging
segment is the second largest supplier of containerboard to independent converters in the United States and the fourth largest supplier of corrugated containers in the United States. Markets for containerboard and packaging products are affected
primarily by changes in industry capacity, the level of industrial activity in the United States, and export markets. Containerboard exports totaled 266,000 tons during 2001 compared to 2000s level of 332,000 tons. In 2001, exports for the
packaging segment were $113 million, approximately 4% of segment net sales.
In addition to standard corrugated
containers, the segments packaging plants manufacture many specialty packaging products. These include display-ready corrugated packaging that works interchangeably with the Corporations line of returnable plastic containers, double and
triple-wall boxes, bulk bins, water-resistant packaging, and high-finish and preprinted packaging for point-of-sale displays. During 2001, Georgia-Pacific acquired the remaining interest in Color-Box, LLC, a joint venture with Chesapeake Corporation
(see Note 3 of the Notes to Consolidated Financial Statements). Color-Box is a producer of high quality litho-laminated packaging.
Bleached Pulp and Paper Segment
The bleached pulp and paper segment produces market
pulp, paper and other products at nine facilities in North America. Combined production capacity for pulp and paper is 3.8 million tons. The bleached pulp and paper segments mills are among the industrys lowest cost producers. Markets
for pulp and paper products are affected primarily by changes in industry capacity, the level of economic growth in the United States and export markets, and fluctuations in currency exchange rates. Exports from this business segment consist chiefly
of market pulp bound for Asia, Europe, and Latin America. In 2001, exports for the bleached pulp and paper segment were $1.3 billion, approximately 15% of segment sales.
Paper. Georgia-Pacific is the nations fifth largest domestic producer of paper. Also known as uncoated free-sheet, paper is used in
office copy machines and printers, commercial printing, business forms, stationery, tablets, books, envelopes, labels and checks. The bleached pulp and paper segments four uncoated free-sheet paper mills have a combined annual capacity of 1.2
million tons, approximately 8% of North American capacity. These products are sold through Unisource, our office product distribution business, other major paper distributors, office product distributors, printing equipment manufacturers, retailers
and converters. Products are sold under a variety of brand names including: Microprint, Spectrum, Eureka, GeoCycle, and Eclipse.
In August 2001, Georgia-Pacific sold its mills at Ashdown, Arkansas; Woodland, Maine; and Nekoosa and Port Edwards, Wisconsin. Combined, these facilities represented 1.3 million tons of production or 47% of the
segments white paper capacity. Additionally, the segment permanently closed paper machines at Camas, Washington resulting in the reduction of another 140,000 tons, equal to 9%, of this segments white paper capacity.
Market Pulp. Georgia-Pacific ranks eighth in the production of market pulp worldwide. The
bleached pulp and paper segment includes three pulp mills with a combined annual capacity of nearly 1.7 million tons, approximately 19% of United States capacity. These mills produce primarily Southern softwood and Northern hardwood pulps sold to
industrial users for the manufacture of many paper grades. The segment also is a major supplier of fluff pulp and other specialty pulps. Fluff pulp is used primarily in the manufacture of disposable diapers and other sanitary items.
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In August 2001, the Woodland, Maine market pulp mill, with an annual capacity of
380 thousand tons of Northern Hardwood was sold. The Corporations Bellingham, Washington mill was permanently closed in 2001.
Bleached Board. The bleached pulp and paper segment produces bleached paperboard for use in frozen food containers, food service items and other products. The combined bleached board capacities
at Naheola, Alabama and Crossett, Arkansas make Georgia-Pacific Corporation the fourth largest bleached board producer in North America.
Paper Distribution. Unisource is a leading distributor of printing and imaging paper, packaging systems, and facility and packaging supplies in North America. Unisource operates primarily in the
United States, with 24 locations in Canada and 21 in Mexico, and is a large distributor for most major paper producers in North America, including Georgia-Pacifics paper, commercial tissue and packaging businesses. Unisource operates with 16
customer service centers, 95 major distribution centers, and 59 Paper Plus retail store locations in the United States. The paper distribution business is affected by the level of economic activity in the United States, Canada and Mexico and the
pricing environment for paper and paper products.
Unisource sells and distributes high-quality printing, writing
and copying papers to printers, publishers, business forms manufacturers and direct mail firms, as well as to corporate and retail copy centers, in-plant print facilities, government institutions and other paper intensive businesses. Unisource also
sells and distributes a broad range of packaging and maintenance supplies, equipment and services (principally to manufacturers, food processors, and retailers); maintenance supplies and equipment such as carton erectors, baggers and filers as well
as films, shrink-wrap and cushioning materials; shipping room supplies such as corrugated boxes, cushioning materials, tapes and labeling; and food service supplies such as films and food wraps, food containers and disposable apparel for food
service workers. Roughly two thirds of Unisources revenue is derived from printing and imaging and one third from packaging and supplies.
The business is the exclusive national distributor of Xerox®, one of the most recognized brand names in office papers.
Building Products Segment
Georgia-Pacific is a leading manufacturer and distributor of building products in the United States. The
building products segment manufactures wood panels (including plywood, oriented strand board (OSB) and industrial panels), lumber, gypsum products, chemicals and other products. These products are manufactured at 127 facilities in the
United States, 7 plants in Canada, 2 plants in South America, and a joint venture in South Africa. These products are sold directly to industrial customers, independent dealers and wholesalers, and large building product retailers or through our
building products distribution business. The segment is the largest distributor of building products in North America.
The building products business is affected by the level of housing starts; the level of home repairs, remodeling and additions; commercial building activity; the availability and cost of financing; and changes in industry capacity.
The demand for building products tends to be stronger during the second and third quarters when weather conditions favor construction. Exports for the building products segment in 2001 were $167 million (approximately 2% of segment sales), primarily
to the Caribbean and Europe.
Wood Panels. A leading producer of structural wood
panels in the United States, Georgia-Pacific accounts for about 19% of North American capacity. The segments 16 softwood plywood plants and seven OSB plants can produce approximately 7.9 billion square feet of panels annually. With most of
these plants located in the Southeast, the business benefits from an ample supply of timber, favorable weather conditions, regional population growth, national economic growth and other factors. OSB is a structural panel made from wood strands
arranged in layers and bonded with resin. OSB serves many of the same uses as unsanded plywood including roof decking, sidewall sheathing and floor underlayment.
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Industrial Wood Products. The building products
segment leads in production of manufactured board products for industrial and construction applications. Seventeen mills manufacture hardboard, particleboard, panelboard, softboard, hardwood plywood, decorative panels and medium-density fiberboard.
Applications include furniture, cabinets, housing, retail fixtures, and other industrial products. In 2001, the segment closed its Conway, North Carolina and Superior, Wisconsin hardboard plants. The combined capacity of these facilities was 345
million square feet ( 1/8 basis) or approximately 34% of its annual hardboard capacity as of January 1,
2001.
Lumber. The third largest lumber producer in North America,
Georgia-Pacific annually manufactures about 2.5 billion board feet or approximately 4% of North American lumber production. Most of the Corporations 33 lumber mills are located in the Southern United States. Lumber products are manufactured
from Southern pine, a variety of Appalachian and Southern hardwoods, redwood, cedar, spruce, hemlock and Douglas fir. During 2001, the Corporations Idabel, Oklahoma southern pine sawmill was sold and the Varnville, South Carolina pine sawmill
was closed. The combined capacity of these facilities was 172 million board feet. Additionally, the Corporations Tioga, Pennsylvania Appalachian hardwood sawmill, with a capacity of 18 million board feet, was sold.
The building products segment ranks as one of the top producers of pressure-treated lumber in the nation. With production from 12
facilities, the segment can sell more than one billion board feet of lumber annually. Pressure treated lumber is used primarily in construction of outdoor structures such as decks, fences, bridges and playground equipment.
Demand for the building products segments engineered lumber products has increased in recent years as wood I-joists (made from
veneer, OSB and sawn lumber) have increasingly become the product of choice for floor joist applications. Laminated veneer lumber (LVL) and wood I-joists are designed to meet the precise structural performance requirements of roofing and
flooring systems. The segment produces both LVL and I-joists in two facilities.
Gypsum
Products. Georgia-Pacific operates 18 gypsum board plants throughout the United States and Canada and is one of the three largest producers of gypsum wallboard in North America, with an annual capacity of 6.5 billion
square feet. Gypsum products include wallboard, Dens specialty panels, fire-door cores, industrial plaster and joint compound. In addition, the business is substantially vertically integrated in both paper and gypsum rock, operating four recycled
gypsum paperboard mills and nine gypsum quarries/mines. Gypsum reserves are approximately 302 million recoverable tons, an estimated 49-year supply at current production rates.
In June 2001, the Corporation announced that it would close gypsum wallboard plants at Savannah, Georgia, Long Beach, California, and Winnipeg, Manitoba, Canada. The
Corporation also announced that it would indefinitely idle wallboard production lines at Acme, Texas; Sigurd, Utah; and Blue Rapids, Kansas, and reduce operations at its remaining gypsum wallboard production facilities. The plant closures and
production curtailments affect approximately 45% of the Corporations gypsum wallboard production capacity.
Chemicals. The Corporations chemical business is a leading supplier of wood bonding resins, industrial thermosetting resins, paper chemicals, and tall oil based chemicals. These chemicals and
resins are used in a variety of specialty applications, including production of wood panels, paper-making, roofing, thermal insulation, metalworking, coatings, fertilizers, and transportation. The business ships more than 4.1 billion pounds of
bonding and thermosetting resins, formaldehyde, pulp chemicals, and paper chemicals annually from 19 United States and 2 South American plants. In January 2001, the business acquired the balance of its Chilean and Argentinean joint ventures from
Masisa S.A. The business also operates through a joint venture in South Africa with Chemical Services, Ltd. In February 2001, the Corporations Hampton, South Carolina formaldehyde plant, with a capacity of 65 million pounds, was permanently
closed. In December 2001, the closure of the Houston, Texas formaldehyde plant with a capacity of 110 million pounds was announced to be effective during the first quarter of 2002.
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Building Products Distribution. The building
products distribution business is the leading domestic wholesaler of building products. It sells building products to independent dealers, industrial customers and large home improvement centers from 64 locations throughout the United States and one
in Canada. The building products distribution business provides a nationwide outlet for a significant portion of Georgia-Pacifics lumber and structural panel products. Approximately 72% of the business sales are building products
purchased from third parties. The Corporations building products distribution business believes that its geographic coverage and product breadth are unmatched in North America.
The Timber Company
On October
6, 2001, the Corporation completed the spin off of its timber and timberlands business and its merger with and into Plum Creek. Accordingly, the Corporation has terminated the registration of The Timber Company common stock with the Securities and
Exchange Commission and de-listed the stock from the New York Stock Exchange. The Timber Company has been treated as a discontinued operation in the accompanying consolidated financial statements.
Additional Information
Additional information pertaining to the Corporations businesses, including operating segments, is set forth under the captions Georgia-Pacific Corporation and SubsidiariesManagements Discussion and
Analysis and Georgia-Pacific Corporation and SubsidiariesSales and Operating Profits by Operating Segment presented in Notes 1 and 2 of the Corporations Notes to Consolidated Financial Statements, presented under Item 8 of
this Form 10-K.
Timber Resources
The principal raw material used by the Corporation is timber and wood fiber. During 2001, The Timber Company supplied 10% of the overall timber requirements of
Georgia-Pacific Groups facilities. Prior to 2001, the prices and terms of the transactions between The Timber Company and Georgia-Pacific Group were determined on an arms length basis pursuant to supply contracts put in place in 1997 at the
time of the Corporations recapitalization which created two separate classes of common stock: The Timber Group and Georgia-Pacific Group (see Note 15 of the Notes to Consolidated Financial Statements). The Corporation purchases its remaining
timber requirements from third-party land owners in the open market. No single supplier, other than The Timber Company prior to its spin off and merger with Plum Creek, supplied more than 10% of the Corporations timber requirements.
In preparation for the merger of The Timber Company and Plum Creek, Georgia-Pacific, Plum Creek and The Timber
Company negotiated a new timber supply agreement which is effective for 10 years following the completion of the merger and subject to an automatic ten year renewal period, unless either party delivers a timely termination notice. This agreement
covers four key southern timber basins: Southeast Arkansas, Mississippi, Florida and Southeast Georgia. Under the agreement, Plum Creek must offer to Georgia-Pacific specified percentages of its annual harvest, subject to absolute minimum and
maximum limitations in each basin. Georgia-Pacific can elect between 36%-51% of such annual harvest each year in Mississippi, Florida and Southeast Georgia, and between 52%-65% in Southeast Arkansas. The total annual softwood volume will range from
a minimum of 2.7 million tons to a maximum of 4.2 million tons. The prices for such timber will be negotiated at arms length between Plum Creek and Georgia-Pacific every six months.
Mineral Resources
Information
pertaining to the Corporations gypsum resources is set forth under the captions Georgia-Pacific GroupBuilding ProductsGypsum Products in this item.
Environment
Information
pertaining to environmental issues and the Corporations expenditures for pollution control facilities and equipment is set forth under the captions Georgia-Pacific Corporation and SubsidiariesManagements Discussion and
AnalysisLiquidity and Capital ResourcesInvesting Activities and Note 14 of the Notes to Consolidated Financial Statements, and is presented under Items 7 and 8 of this Form 10-K.
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Employees
Information pertaining to persons employed by the Corporation is set forth under the captions Georgia-Pacific Corporation and SubsidiariesManagements
Discussion and AnalysisLiquidity and Capital ResourcesOther, and is presented under Item 7 of this Form 10-K.
Patents, Copyrights, Licenses, Trade Secrets and Trademarks
The Corporation is the owner
of numerous patents, copyrights, trademarks, licenses and trade secrets, as well as substantial know-how and technology (herein collectively referred to as technology), relating to its products and the processes for their production, the
packages used for its products, the design and operation of various processes and equipment used in its business and certain quality assurance and financial software. The manufacturing and processing of many of the Corporations products are
among the important trade secrets of the Corporation.
The Corporation also owns numerous trademarks which are
very important to its business, especially its consumer products business. Depending on the jurisdiction, trademarks are valid as long as they are in use and/or their registrations are properly maintained and they have not been found to have become
generic. Registrations of trademarks can generally be renewed indefinitely as long as the trademarks are in use. The Corporation has registered and licenses the right to use its trademarks in conjunction with certain merchandise other than products
it manufactures. In part, the Corporations success can be attributed to the existence of its trademarks.
The geographic location and capacity of the manufacturing facilities by
segment is set forth on Exhibit 99.1 hereto which is hereby incorporated herein by this reference.
The
Corporations manufacturing and support facilities are designed according to the requirements of the products to be manufactured. Therefore, the type of construction varies from facility to facility. Management believes that its manufacturing
facilities, taken as a whole, are well maintained and generally adequate for current operations.
Utilization of a
particular facility varies based upon demand for the product. While it is not possible to measure with any degree of certainty the productive capacity of a facility, we have estimated capacity in Exhibit 99.1 which is incorporated herein by
reference thereto.
The Corporation generally owns its manufacturing and other facilities, although warehouse and
office facilities are often leased. The Corporation examines alternatives for its higher cost facilities, including modernizing, replacing or closing such facilities. The Corporation continually reviews many business opportunities and alternatives,
including possible acquisitions or sales of properties.
Information concerning the Corporations timber and
mineral resources is presented under Item 1 of this Form 10-K.
ITEM 3.
LEGAL PROCEEDINGS
Information pertaining to the Corporations Legal Proceedings is
set forth in Note 14 of the Corporations Consolidated Financial Statements which are presented under Item 8 of this Form 10-K and are incorporated herein by reference thereto.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
8
PART II
ITEM 5.
MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Georgia-Pacific common stock is listed on the New York Stock Exchange and trades under the symbol GP. As of the close of business on March 7, 2002, the closing stock price of one share of Georgia-Pacific common stock was $28.14 and
there were approximately 36,462 record holders of such stock.
Information with respect to the Market for the
Corporations Common Equity and Related Stockholder Matters is set forth in a table under the captions Selected Financial DataFinancial Position, End of Year in Note 16 of the Corporations Consolidated Financial
Statements under Item 8 of this Form 10-K, which are incorporated herein by reference thereto.
The Corporation
expects to continue to pay quarterly dividends in the amounts set forth in Note 16 of the Notes to Consolidated Financial Statements under Item 8 of this Form 10-K, which dividend information is incorporated herein by reference thereto.
On October 4, 2001 and pursuant to its 1995 Outside Directors Stock Plan (the 1995 Plan), the
Corporation issued 40,183 shares of Georgia-Pacific common stock, $0.80 par value per share, to its nonemployee directors. The shares were issued to replace shares of common stock of The Timber Company which previously had been issued under the 1995
Plan and were either exchanged or canceled in connection with the spin-off and merger of The Timber Company. Accordingly, the Corporation received no cash consideration in connection with the issuance. The issuance to the directors was exempt from
registration under the Securities Act of 1933, as amended (the Act) pursuant to Section 4(2) of the Act because it was a transaction by an issuer that did not involve a public offering.
ITEM 6.
SELECTED FINANCIAL DATA
Information with respect to Selected Financial Data for the
Corporation is set forth under the captions Selected Financial DataOperationsGeorgia-Pacific Corporation and Subsidiaries and Selected Financial DataFinancial Position, End of Year, which are presented under
Item 8 of this Form 10-K, and is incorporated herein by reference.
ITEM
7.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion summaries the significant factors affecting the results of operations and financial condition of the Corporation during the three fiscal years ended December 29, 2001. This discussion should be read in conjunction
with the Consolidated Financial Statements, Notes to Consolidated Financial Statements and Supplemental Information set forth in Item 8 of this report.
9
Georgia-Pacific Corporation manufactures and sells a wide variety of pulp and
paper products (including pulp, paper, containerboard, packaging, commercial and consumer tissue products (including bath tissue, paper towels and napkins) and disposable tabletop products (including disposable cups, plates and cutlery) and
manufactures and sells building products (including plywood, oriented strand board and industrial panels, lumber, gypsum products, chemicals and other products).
2001 Compared with 2000
The Corporation reported consolidated net sales of $25.0
billion and a net loss of $407 million for 2001, compared with net sales of $22.1 billion and net income of $505 million in 2000. Included in the 2001 results are a full year of net sales and operating profits from the Fort James operations that
were consolidated with the Corporation beginning in December 2000.
Interest expense was $1,080 million in 2001,
compared with $595 million in 2000. The increase is the result of higher debt levels, primarily related to the acquisition of Fort James, offset slightly by lower interest rates.
The Corporation reported a loss from continuing operations before income taxes of $295 million and an income tax provision of $181 million for the year ended December 29,
2001, compared with income from continuing operations before income taxes of $553 million and an income tax provision of $210 million for the year ended December 30, 2000. The effective rate in 2001 was different from the statutory rate primarily
because of nondeductible goodwill amortization expense associated with business acquisitions and because of nondeductible goodwill applicable to assets sold (see Note 3 of the Notes to Consolidated Financial Statements). The effective tax rate in
2000 was different from the statutory rate due to the utilization of state tax credits and foreign sales corporation tax benefits that more than offset nondeductible goodwill amortization expense associated with business combinations.
During 2001, the Corporation recorded a pretax charge to earnings of $350 million to cover all of its projected asbestos
liabilities and defense costs, net of insurance recoveries, through 2011 (see Note 14 of the Notes to Consolidated Financial Statements).
Beginning in the third quarter of 2001, the Corporation began reporting The Timber Company as a discontinued operation. Income from discontinued operations decreased to $70 million in 2001, compared
with $162 million in 2000. This decrease was primarily a result of a decline in both sales prices and sales volume. Included in the 2001 results was interest expense of $31 million, a $44 million pretax gain related to the sale of certain timber
assets, and a $24 million pretax charge for an insurance premium associated with the merger of the Corporations timber and timberlands business with Plum Creek (see Note 3 of the Notes to Consolidated Financial Statements).
10
The remaining discussion refers to the Selected Operating Segment
Data table below which should be read in conjunction with the more detailed segment information set forth in Note 2 of the Notes to Consolidated Financial Statements and Sales and Operating Profits by Operating Segment.
SELECTED OPERATING SEGMENT DATA
Georgia-Pacific Corporation and Subsidiaries
|
|
Year Ended
|
|
|
|
December 29, 2001
|
|
|
December 30, 2000
|
|
|
January 1, 2000
|
|
In millions |
|
|
|
|
|
|
|
|
|
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
Consumer products |
|
$ |
7,138 |
|
|
$ |
2,119 |
|
|
$ |
1,234 |
|
Packaging |
|
|
2,610 |
|
|
|
2,735 |
|
|
|
2,511 |
|
Bleached pulp and paper |
|
|
8,713 |
|
|
|
9,454 |
|
|
|
5,869 |
|
Building products |
|
|
7,784 |
|
|
|
8,723 |
|
|
|
9,689 |
|
Other* |
|
|
(1,229 |
) |
|
|
(981 |
) |
|
|
(894 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales |
|
$ |
25,016 |
|
|
$ |
22,050 |
|
|
$ |
18,409 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profits (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
Consumer products |
|
$ |
792 |
|
|
$ |
(17 |
) |
|
$ |
131 |
|
Packaging |
|
|
384 |
|
|
|
512 |
|
|
|
324 |
|
Bleached pulp and paper |
|
|
69 |
|
|
|
509 |
|
|
|
181 |
|
Building products |
|
|
150 |
|
|
|
382 |
|
|
|
1,205 |
|
Other* |
|
|
(610 |
) |
|
|
(238 |
) |
|
|
(251 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profits |
|
|
785 |
|
|
|
1,148 |
|
|
|
1,590 |
|
Interest expense |
|
|
1,080 |
|
|
|
595 |
|
|
|
426 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before income taxes |
|
|
(295 |
) |
|
|
553 |
|
|
|
1,164 |
|
Provision for income taxes |
|
|
181 |
|
|
|
210 |
|
|
|
448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
|
(476 |
) |
|
|
343 |
|
|
|
716 |
|
Income from discontinued operations, net of taxes |
|
|
70 |
|
|
|
162 |
|
|
|
400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before extraordinary item and accounting change |
|
|
(406 |
) |
|
|
505 |
|
|
|
1,116 |
|
Extraordinary item, net of taxes |
|
|
(12 |
) |
|
|
|
|
|
|
|
|
Cumulative effect of accounting change, net of taxes |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(407 |
) |
|
$ |
505 |
|
|
$ |
1,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Includes the elimination of intersegment sales. |
Consumer Products
The Corporations consumer products
segment reported net sales of $7.1 billion and operating profits of $792 million for the year ended December 29, 2001, which included net sales and operating profits from the operations of Fort James that were acquired at the end of November 2000.
Fort James results of operations were consolidated with those of the Corporation beginning in the fiscal month of December 2000. During 2000, the segment reported net sales of $2.1 billion and an operating loss of $17 million. Included in 2001
results was a one-time unusual charge of $83 million for the closure of the Bellingham, Washington pulp mill. Included in 2000 results was a one-time unusual charge of $204 million for the write-down of assets of the Corporations
away-from-home tissue business that was sold during the first quarter of 2001. Excluding these one-time charges, return on sales increased to 12% compared with 9% in 2000. The increase in 2001 operating profits was due principally to the inclusion
of a full year of operating results of the Fort James businesses and significant savings
11
from lower distribution and manufacturing costs and other synergies resulting from merging the Corporations retail tissue business with the Fort James operations.
On March 30, 2001, the Corporation announced that it would permanently close its pulp mill and associated chemical plant at Bellingham,
Washington. These operations had been temporarily closed since December 2000. The Bellingham pulp mill produced approximately 220,000 tons of pulp, including 135,000 tons of sulfite market pulp, and 260,000 tons of lignin annually. In connection
with this closure, the Corporation recorded a pretax charge to earnings in the consumer products segment of approximately $57 million for the write-off of assets, approximately $14 million for the termination of approximately 420 hourly and salaried
employees and approximately $12 million for facility closing costs. Of the $83 million total pretax charge to earnings, $79 million was charged to cost of sales, $3 million was charged to selling and distribution expense and $1 million was charged
to general and administrative expenses.
During 2002, the Corporation expects the consumer products segment to
continue to produce improved operating profits driven by sales growth and cost reduction programs associated with the Fort James acquisition. Selling prices and direct material costs are not expected to differ materially from levels experienced in
the 4th quarter of 2001.
Packaging
The Corporations packaging segment reported net sales of $2.6 billion and operating profits of $384 million for the year ended December 29, 2001, compared with net
sales of $2.7 billion and operating profits of $512 million in 2000. During 2000, the Corporation sold certain packaging assets resulting in a pre-tax gain of $25 million. Excluding this gain on asset sales, return on sales decreased to 15% from 18%
in 2000. Average selling prices decreased in 2001 for all packaging products. Average selling prices for linerboard and medium decreased 5% and 9%, respectively, and average selling prices for packaging decreased slightly. Sales volume decreased for
packaging by 4% when compared with the prior year. These decreases were offset by a slight increase in sales volume for linerboard and a $36 million cost savings year over year. The Corporation expects continued weakness in packaging markets in 2002
with gradual declines in selling prices.
During 2001 and 2000, the Corporation took market-related paper
machine slowback or downtime at its containerboard mills to avoid excess inventories, resulting in a reduction in containerboard production of approximately 274,000 tons and 271,000 tons, respectively.
Bleached Pulp and Paper
The Corporations bleached pulp and paper segment reported net sales of $8.7 billion and operating profits of $69 million for the year ended December 29, 2001. In 2000, the segment reported net
sales of $9.5 billion and operating profits of $509 million. In August 2001, the bleached pulp and paper segment sold four paper and pulp facilities and recorded a pre-tax loss of $63 million. Excluding this loss, return on sales decreased to 2%
compared with 5% for the same period a year ago. The decrease in net sales and operating profits was due primarily to a decrease in average prices for all of the Corporations bleached pulp and paper, offset somewhat by lower wood fiber and
production costs. Average selling prices for market pulp and fluff pulp decreased 27% and 13%, respectively, while paper prices decreased 5% compared with 2000 prices.
During 2001, the Corporation incurred market-related downtime at its bleached pulp and paper mills, resulting in a reduction in pulp production of 104,000 tons and in paper
production of 21,000 tons. In December 2000, the Corporation announced the permanent closure of its Kalamazoo, Michigan, paper mill and a permanent closure of a paper machine at its Nekoosa, Wisconsin, operations. In connection with the Kalamazoo
paper mill closing, the Corporation recorded a fourth quarter 2000 charge of $57 million for employee termination, asset write-down, mill closing and other costs. In 2000, the Corporation incurred market-related downtime at its pulp and paper mills
resulting in a reduction in pulp and paper production of 17,000 tons and 60,000 tons,
12
respectively. Divested operations contributed operating losses of $64 million and operating profits of $59 million to the segments 2001 and 2000 results, respectively.
The segments paper distribution business, which represents the operating results of Unisource, reported net sales of $6.2
billion and operating profits of $48 million in 2001, compared to net sales and operating profits of $6.9 billion and $158 million, respectively, in 2000. The decline in sales and operating profits for the paper distribution business is a direct
result of declining prices and volumes in the printing business.
Selling prices for the Corporations pulp
and paper products continually decreased during 2001 and ended the year at levels lower than 2000. The Corporation expects pulp selling prices to remain relatively depressed through 2002. Selling prices for paper products are expected to gradually
improve in 2002. Historically, selling prices for all of the Corporations pulp and paper products have been volatile and difficult to predict. Sales volume is also expected to decrease significantly during 2002 related to the sale of the paper
and pulp assets to Domtar in August 2001.
Building Products
The Corporations building products segment reported net sales of $7.8 billion and operating profits of $150 million for the year
ended December 29, 2001, compared with net sales of $8.7 billion and operating profits of $382 million in 2000. As a result of weak market conditions in this segment, the Corporation announced the closure of certain structural panels mills, lumber
mills, industrial wood products mills, building products distribution centers and gypsum plants and recorded one-time net charges of $88 million in 2001 related to these plant closures and asset impairments. In 2000, the Corporation recorded a
restructuring charge of approximately $8 million for asset write-offs, employee termination and facility closing costs of a gypsum facility. Excluding these unusual charges, return on sales was 3% in 2001 and 4% in 2000. The primary components of
the decrease in 2001 net sales and operating profits were 10% lower average particleboard selling prices, 20% lower average OSB selling prices and a 24% decrease in average gypsum wallboard selling prices coupled with a 10% decrease in plywood sales
volume, an 18% decrease in softwood lumber sales volume, a 15% decrease in particleboard sales volume and a 19% decrease in gypsum wallboard sales volume. These declines were slightly offset by a 15% increase in oriented strand board sales volume
and a decline in wood costs. Despite the decline in markets for the building products segment, the building products distribution business contributed $62 million of profits in 2001 compared with $20 million in 2000. The Corporation expects moderate
improvement in this segments operating profits in 2002 resulting primarily from modest improvements in selling prices for most building products and slight reductions in wood costs.
In June 2001, the Corporation announced that it would close gypsum wallboard plants at Savannah, Georgia; Long Beach, California; and Winnipeg, Manitoba, Canada. The
Corporation also announced that it would indefinitely idle wallboard production lines at Acme, Texas; Sigurd, Utah; and Blue Rapids, Kansas; and reduce operations at its remaining gypsum wallboard production facilities. The plant closures and
production curtailments affect approximately 45% of the Corporations gypsum wallboard production capacity. In connection with this announcement, the Corporation recorded a pretax charge to earnings in the building products segment of
approximately $57 million for the write-off and impairment of assets, approximately $5 million for the termination of approximately 350 hourly and salaried employees, and approximately $5 million for facility closing costs, most of which was charged
to cost of sales.
During 2001, the Corporation also announced the closure of certain structural panels mills,
lumber mills, industrial wood products mills, chemical plants and building products distribution centers. In connection with these announcements, the Corporation recorded a pretax charge to earnings in the building products segment of approximately
$14 million for the write-off and impairment of assets, approximately $16 million for the termination of approximately 900 hourly and salaried employees, and approximately $5 million for facility closing costs, most of which was charged to cost of
sales.
13
Other
The operating loss for the Other nonreportable segment, which includes some miscellaneous businesses, unallocated corporate operating expenses and the
elimination of profit on intersegment sales, increased by $372 million to a loss of $610 million in 2001 from a loss of $238 million in 2000. This increase was primarily the result of the $350 million charge recorded in the fourth quarter of 2001
for projected asbestos liabilities through the year 2011, net of anticipated insurance recoveries (See Note 14 of the Notes to Consolidated Financial Statements).
During 2001, the Corporation recorded pension expense of $9.2 million and made pension contributions of $13.3 million for its solely administered plans. Because of lower
than expected returns on pension plan assets and a lower discount rate used to value the pension liabilities, the Corporation estimates its pension expense and pension contributions for its solely administered plans will increase to approximately
$133 million and $98.4 million, respectively, in 2002.
Liquidity and Capital Resources
During 2001, the Corporation reduced debt by approximately $3.3 billion. The main factors contributing to the debt reduction were proceeds
from asset sales of $2.3 billion ($1.9 billion after taxes), the reduction of $0.6 billion of debt assumed by Plum Creek when the Corporations timber and timberlands business were merged into Plum Creek, and nearly $0.8 billion of cash from
operations and other resources. The Corporation also paid approximately $133 million for acquisitions and the remaining ownership in various businesses during 2001. In 2002, the Corporation expects its cash flow from operations and financing
activities (including proceeds from a successful Premium Equity Participating Security Units (PEPS Units) remarketing) to be sufficient to fund planned capital investments, pay dividends and make scheduled debt repayments. If the
Corporations 2002 cash flows are significantly less than expected or if the Corporation is unsuccessful in remarketing the PEPS Units, the Corporation could be required to draw down funds from available credit facilities. The following
discussion provides further details of the Corporations liquidity and capital resources.
Operating
Activities
The Corporation generated cash from operations of $1,482 million during 2001 and $1,556
million in 2000. The decrease in cash provided by operations in 2001 was primarily a result of the net lower operating results in the building products, packaging and bleached pulp and paper segments, offset somewhat by a reduction in overall
working capital requirements. Increased interest costs also contributed to the decrease in cash generated from operations.
Investing Activities
During 2001, capital expenditures for property, plant and equipment
were $739 million compared with $909 million in 2000. Expenditures in 2001 included $114 million in the building products segment, $2 million in the discontinued timber segment, $78 million in the packaging segment, $149 million in the bleached pulp
and paper segment, $337 million in the consumer products segment, and $59 million of other and general corporate. In 2002, the Corporation expects to make capital expenditures for property, plant and equipment of approximately $720 million.
During 2001, the Corporation invested $88 million for pollution control and abatement. The Corporations
2002 capital expenditure budget currently includes approximately $49 million for environment-related projects. Certain other capital projects being undertaken primarily for improving financial returns or safety will also include expenditures for
pollution control.
14
On April 15, 1998, the United States Environmental Protection Agency promulgated
a set of regulations known as the Cluster Rule that establishes new requirements for air emissions and wastewater discharges from pulp and paper mills. The Cluster Rule requires pulp and paper mills to become elemental chlorine free in
the pulp bleaching process. The Corporation estimates that it will make capital expenditures up to approximately $543 million through April 2006 in order to comply with the Cluster Rules requirements. Of that total, approximately $425 million
was spent through 2001 and an additional $21 million is expected to be spent in 2002. The work performed in 2001 essentially completed the projects required during the first three years of the Cluster Rule. Remaining expenditures are for air
emissions controls under MACT II regulations (to be completed by January 2004) and the MACT I regulations (to be completed by April 2006). Air regulations under the Cluster Rule are called MACT regulations, with MACT I regulations representing rules
regarding pulping and bleaching and MACT II regulations representing rules regarding combustion sources.
Investments to purchase timberlands (including purchases of timberlands by The Timber Company prior to its spin off and merger with Plum Creek) totaled $31 million in 2001 compared with $59 million in 2000.
At the end of November 2000, the Corporation completed a tender offer pursuant to which it purchased each outstanding share of common
stock of Fort James Corporation for $29.60 per share in cash and 0.2644 shares of Georgia-Pacific common stock. The Corporation is paying cash and issuing Georgia-Pacific shares as the untendered Fort James shares are delivered to the
Corporations exchange agent for cancellation. Through December 29, 2001, the Corporation had paid approximately $6,186 million in cash ($46 million of which was paid during 2001) and issued approximately 53.9 million shares of Georgia-Pacific
common stock (0.2 million shares of which were issued during 2001) valued at $1,485 million for such shares. The fair value of the Georgia-Pacific common shares was determined based on the average trading prices of Georgia-Pacific common stock for
the two trading days before and after July 16, 2000 (the date of the announcement of the Fort James acquisition). The Corporation expects to pay an additional $7 million in cash and issue approximately 57,000 shares valued at $2 million for Fort
James common stock that had not been tendered as of December 29, 2001. In addition, the Corporation assumed $3.3 billion of Fort James debt in the acquisition.
During 2001, the Corporation acquired the remaining 46% interest it did not previously own in Color-Box, LLC, a joint venture with Chesapeake Corporation for approximately $59 million. The results of
operations of this joint venture were consolidated with those of the Corporation beginning in July 2001. The Corporation has accounted for this acquisition using the purchase method to record a new cost basis for the additional share of assets
acquired and liabilities assumed. During the first quarter of 2000, the Corporation contributed certain packaging assets with a net book value of $34 million to this joint venture. In exchange for these assets, the Corporation received a 54 %
interest in the joint venture. This investment in the joint venture was accounted for under the equity method until July 2001 because the joint venture partner had substantive participating rights.
During the first quarter of 2001, the Corporation acquired the remaining ownership of two chemical joint ventures for approximately $26
million. The results of operations of these chemical businesses were consolidated with those of the Corporation beginning in February 2001. The Corporation has accounted for these acquisitions using the purchase method to record a new cost basis for
assets acquired and liabilities assumed.
On August 7, 2001, the Corporation completed the sale of a portion of
its paper and pulp assets to Domtar Inc. for $1.65 billion in cash. The assets involved in this transaction were the Corporations stand-alone uncoated free sheet paper mills at Ashdown, Arkansas; Nekoosa and Port Edwards, Wisconsin; and
Woodland, Maine, as well as associated pulp facilities. The Corporation used the net proceeds of approximately $1.53 billion ($1.14 billion after taxes) to repay debt. In connection with this sale, the Corporation recorded a pretax loss of $63
million in the third quarter of 2001 in the bleached pulp and paper segment. This loss was reflected in Other loss on the accompanying consolidated statements of income. In addition, the Corporation recorded a provision for income taxes of $197
million, principally applicable to $630 million of non-deductible goodwill related to the assets sold.
15
Pursuant to a consent decree executed with the United States Department of
Justice in connection with the Fort James acquisition, the Corporation sold a portion of its away-from-home tissue manufacturing assets (formerly Georgia-Pacific Tissue) to SCA for approximately $850 million. The sale was completed on March 2, 2001,
with net proceeds of approximately $581 million ($660 million after tax benefit) used to repay debt. In the fourth quarter of 2000, the Corporation recorded a pretax loss of $204 million in the consumer products segment for the write-down of these
assets to their net realizable value; accordingly, no significant gain or loss was recognized upon completion of the sale in 2001.
On October 6, 2001, the Corporation completed the spin off of its timber and timberland business and its merger with and into Plum Creek. In accordance with the merger agreement, shareholders of The Timber Company received
1.37 shares of Plum Creek stock for each share of The Timber Company stock. This transaction was valued at approximately $3.4 billion.
The transaction was originally conditioned on the receipt of a private letter ruling from the Internal Revenue Service (the Service) that the transaction would be tax-free to the Corporation and to the
shareholders of The Timber Company. In June 2001, the Corporation and Plum Creek amended the original merger agreement and determined to effect the merger upon receipt of opinions from tax counsel that the spin off of The Timber Company from the
Corporation and the subsequent merger with Plum Creek would be tax-free to the Corporation and to the shareholders of The Timber Company. The Service notified the companies on June 12, 2001, that it had decided not to issue the private letter ruling
based on its belief that the companies had failed to carry the high burden of proof of business purpose necessary for the transaction to receive such an advance ruling. This high burden of proof, which is more stringent than the legal standards
applicable to the audit process or any judicial proceeding, pertains only to advance rulings. Based on discussions with the Service and the advice of legal counsel, the companies believe the transaction will not be taxable to the Corporation or the
shareholders of The Timber Company. As an added measure to reduce the uncertainty concerning possible tax risks associated with the transaction, the Corporation obtained up to $500 million in tax liability insurance.
During 2001, the Corporation sold various assets including two lumber mills, industrial wood products property, certain paper
distribution assets, timber assets and corporate aircraft for a total of $202 million in cash and recognized a pretax gain of $70 million. Of the total gain recognized, $44 million related to the sale of certain timber assets associated with The
Timber Company and was included in income from discontinued operations in the accompanying consolidated statements of income, with the remainder reflected in other losses, net.
Financing Activities
The
Corporations senior management has established the parameters of the Corporations financial policies, which have been approved by the Board of Directors. These include balancing the Corporations debt and equity to keep its weighted
average cost of capital low while retaining the flexibility needed to ensure that the Corporation can meet its financial obligations when or before they come due and to finance attractive business opportunities. Historically the Corporation has set
debt targets based on the cash generating capability of the Corporation under various business scenarios. The Corporation experiences variances in its cash flow from period to period and various statistical methods are utilized to reasonably
estimate possible deviations in estimated future cash flows.
The Corporation maintains a high portion of its debt
as long-term at fixed interest rates. The Corporation intends to manage the maturities of its long-term debt so that no more than $500 million matures in any one year and if it does then the sum of the maturities of any two consecutive years does
not exceed $1 billion. Generally, the Corporation seeks to have 75% of its aggregate debt at fixed rates so as to minimize exposure to fluctuating interest rates. Short-term debt is used in modest proportions and generally for seasonal working
capital variations and/or financing some of its accounts receivable. The Corporation utilizes bank credits for temporary short and/or intermediate term financing usually bridging known or expected events. Additionally, the Corporation maintains
committed, available borrowing capacity to allow for seasonal, timing, or unexpected needs. Currently, unused capacity exceeds $1.4 billion.
The Corporation intends to review its aggregate debt objective to achieve greater flexibility to finance growth and investment opportunities. The Corporation may determine that a lower debt target than
its cash flow and its variances otherwise would justify is appropriate.
16
The Corporations total debt, excluding senior deferrable notes,
decreased by $3,340 million to $12,214 million at December 29, 2001 from $15,554 million at December 30, 2000. The decrease was primarily due to the Corporation utilizing cash generated from the sale of assets and cash flow from operations. The Plum
Creek merger (see Note 3 of the Notes to Consolidated Financial Statements) also reduced outstanding borrowings under the credit facilities by $646 million. At December 29, 2001, the weighted average interest rate on the Corporations total
debt, excluding senior deferrable notes and including outstanding interest rate exchange agreements, was 6.70%.
The Corporation had commitments totaling $1.3 billion and CN $95 million (approximately $59 million) under its United States and Canadian accounts receivable secured borrowing programs, respectively, of which $1.2 billion and CN $95
million was outstanding under these programs at December 29, 2001. Of the $1.3 billion in the United States program, $400 million will expire in September 2002 and the remaining $900 million expires in December 2002. The Canadian program expires in
May 2004. The Corporation expects to renew these agreements prior to expiration. The receivables outstanding under these programs and the corresponding debt are included as Receivables and Commercial paper and other short-term
notes, respectively, on the accompanying consolidated balance sheets. All accounts receivable programs are accounted for as secured borrowings. As collections reduce previously pledged interests, new receivables may be pledged.
On November 1, 2001, the Corporation issued $27 million of 6.375% fixed rate industrial revenue bonds, due November 1, 2026. On
October 24, 2001, the Corporation also replaced $28 million of its variable rate industrial revenue bonds, due October 1, 2007, with $28 million of 4.875% fixed rate industrial revenue bonds due October 1, 2007.
The Corporation consolidated a $10 million variable rate industrial revenue bond due September 1, 2021, in connection with acquiring
ownership of Color-Box (see Note 3 of the Notes to Consolidated Financial Statements). On June 25, 2001, the Corporation also redeemed $42 million of its 7.9% fixed rate industrial revenue bonds, due October 1, 2005, and issued $42 million of 6.5%
fixed rate industrial revenue bonds due June 1, 2031.
On May 3, 2001, the Corporation replaced $1.5 billion
of its Capital Markets Bridge Facility by issuing $500 million of 7.5% Notes Due May 15, 2006, $600 million of 8.125% Notes Due May 15, 2011, and $400 million of 8.875% Notes Due May 15, 2031. The $10.4 million underwriting fee associated with the
transaction is being amortized over the term of the notes.
On March 15, 2001, the Corporation redeemed $300
million of its 6.235% Senior Notes Due March 15, 2011 and recorded an extraordinary loss of approximately $12 million (net of taxes of $7 million).
In October 2000, the Corporation negotiated several new unsecured financing facilities totaling $5,400 million with terms ranging from 6 to 18 months and an unsecured revolving credit facility totaling
$3,750 million with a term of 5 years. The proceeds from these unsecured facilities were used to partially finance the Fort James acquisition, and for ongoing working capital and other general corporate requirements of the Corporation. During 2001,
proceeds from the sale of assets (see Note 3 of the Notes to Consolidated Financial Statements), the merger of the Corporations timber and timberland business with Plum Creek (see Note 3 of the Notes to Consolidated Financial Statements),
increases in the accounts receivable secured borrowing program, and the issuance on May 3, 2001 of notes (described above) were used to reduce the unsecured financing facilities.
17
The Corporations amounts outstanding under the credit agreements include
the following:
|
|
December 29, 2001
|
|
In millions |
|
|
|
Commitments: |
|
|
|
|
Multi-Year Revolving Credit Facility |
|
$ |
3,750 |
|
Capital Markets Bridge Facility |
|
|
925 |
|
|
|
|
|
|
Credit facilities available |
|
|
4,675 |
|
|
|
|
|
|
Amounts Outstanding: |
|
|
|
|
Letter of Credit Agreements |
|
|
(265 |
) |
Money Markets, average rate of 2.8% |
|
|
(90 |
) |
Multi-Year Revolving Credit Facility due November 2005, average rate of 3.7% |
|
|
(1,935 |
) |
Capital Markets Bridge Facility due August 2002, average rate of 3.9% |
|
|
(925 |
) |
|
|
|
|
|
Total credit balance |
|
|
(3,215 |
) |
|
|
|
|
|
Total credit available * |
|
$ |
1,460 |
|
|
|
|
|
|
* |
|
At December 29, 2001, the Corporation was limited to $717 million of available credit pursuant to certain restrictive debt covenants and its outstanding debt
balance at December 29, 2001. This limitation on available credit will be reduced as the Corporation pays down debt. |
Borrowings under the agreements bear interest at competitive market rates. These interest rates may be adjusted according to a rate grid based on the Corporations long-term debt ratings. Fees
associated with these revolving credit facilities include a facility fee of 0.2% per annum on the aggregate commitments of the lenders as well as up-front fees totaling $5.5 million and $34 million as of December 29, 2001 and December 30, 2000,
respectively. The fees are being amortized over the term of the agreements. Fees and margins may also be adjusted according to a pricing grid based on the Corporations long-term debt ratings. At December 29, 2001 and December 30, 2000, $3,215
million and $7,700 million, respectively, was borrowed under the credit agreements at a weighted-average interest rate of 3.4% and 7.9%, respectively. Amounts outstanding under the revolving credit facilities are included in Commercial paper
and other short-term notes and Long-term debt, excluding current portion on the accompanying consolidated balance sheets.
In connection with the acquisition of Fort James during 2000, the Corporation assumed debt totaling $3.3 billion, including $927 million of short-term debt, $141 million (including premium) of
capital leases, $197 million of industrial revenue bonds, $1,642 million of notes, $218 million (net of discount) of Euro-denominated bonds and $156 million of European debt. Shortly after the acquisition, all of the commercial paper was
replaced by borrowings issued under the Corporations revolving credit facilities. The Corporation subsequently fully and unconditionally guaranteed all of Fort James publicly held debt issued pursuant to an Indenture with The Bank of New
York, as trustee, dated as of November 1, 1991, as amended by a first supplemental Indenture dated as of September 19, 1997 and second supplemental Indenture dated as of February 19, 2001.
In order to finance a portion of the Unisource acquisition in July 1999, the Corporation issued 17,250,000 of 7.5% PEPS Units for $862.5 million. Each PEPS Unit
consists of a purchase contract that obligates the holder to purchase shares of Georgia-Pacific common stock for $50 on or prior to August 16, 2002 and a senior deferrable note of the Corporation due August 16, 2004. The amount of shares purchased
per PEPS Unit will be based on the average closing price of Georgia-Pacific common stock over a 20-day trading period ending August 13, 2002. Assuming an average stock price of less than or equal to $47.375 per share, the Corporation expects to
issue approximately 18.2 million shares of Georgia-Pacific common stock in 2002. Each purchase contract yields interest of 0.35% per year, paid quarterly, on the $50 stated amount of the PEPS Unit. Each senior deferrable note yields interest of
7.15% per year, paid quarterly, until August 16, 2002. The terms of the PEPS offering include a remarketing of the senior deferrable notes on August 16, 2002 that, if successfully completed, would generate $862.5 million for repayment of debt. The
interest rate will be reset at a rate that will be equal to or greater than 7.15%. Management is considering certain other financing activities that could include issuance of
18
different securities to replace these senior deferrable notes prior to their scheduled remarketing. The liability related to the PEPS Units is classified as Senior deferrable notes on
the accompanying consolidated balance sheets.
In December 2001, the Corporation amended its restrictive covenants
under the unsecured financing facilities to require a maximum leverage ratio (funded indebtedness, excluding senior deferrable notes, to net worth plus funded indebtedness) of 72.50% on December 29, 2001, March 30, 2002 and June 29, 2002; 70.00% on
September 28, 2002, December 28, 2002 and March 29, 2003; 67.50% on June 28, 2003 and September 27, 2003; and 65.00% on January 3, 2004 and thereafter. The restrictive covenants also require a minimum interest coverage ratio (earnings before
interest, taxes, depreciation and amortization, EBITDA, to interest charges) of 2.25 to 1.00 on December 29, 2001, March 30, 2002, June 29, 2002 and September 28, 2002; 2.50 to 1.00 on December 28, 2002 and March 29, 2003; 2.75 to 1.00
on June 28, 2003 and September 27, 2003; and 3.00 to 1.00 on January 3, 2004 and thereafter. In addition, the restrictive covenants require a minimum net worth that changes quarterly and a maximum debt level of $13,065 million. The Corporation was
in compliance with its debt covenants as of December 29, 2001 with a leverage ratio of 71.35%, an interest coverage ratio of 2.59 to 1.00, and a debt balance of $12,214 million. The $17.9 million fee associated with amending the restrictive
covenants is being amortized over the term of the financing facilities.
In 1999, the Corporation entered into a
financing arrangement to enhance the return of the deposit made in connection with a 1995 sale-leaseback transaction by issuing NZ$724 million of 5.74% Debentures Due April 5, 2005 that were legally defeased with deposits of an equal amount. Because
they were legally defeased, generally accepted accounting principles do not require the debentures and related deposits to be reflected on the Corporations consolidated balance sheets. Accordingly, the Corporation has not reflected the
debentures or the related deposits on the accompanying consolidated balance sheets.
In conjunction with the sale
of 194,000 acres of the Corporations California timberlands in 1999, the Corporation received notes from the purchaser in the amount of $397 million. These notes were monetized on October 25, 2000, through the issuance of commercial paper
secured by the notes. Net proceeds of $342 million from this monetization were used to reduce debt allocated to The Timber Company. Proceeds from the notes received from the purchaser will be used to fund payments required for the notes payable. The
notes receivable and notes payable are reflected in Other assets and Other long-term liabilities, respectively, on the accompanying consolidated balance sheets. In conjunction with the sale of 440,000 acres of the
Corporations Maine timberlands in 1999, the Corporation received notes from the purchaser in the amount of $51 million. These notes were monetized through the issuance of notes payable in a private placement with the proceeds used to reduce
debt allocated to The Timber Company. Proceeds from the notes received from the purchaser will be used to fund payments required for the notes payable. The notes receivable and notes payable are reflected in Other assets and Other
long-term liabilities, respectively, on the accompanying consolidated balance sheets. Additionally, in connection with the sale of 127,000 acres of the Corporations California timberlands in 1997, the Corporation received notes from the
purchaser in the amount of $270 million. The Corporation monetized these notes receivable through the issuance of notes payable in a private placement. The notes receivable are included in Other assets and the notes payable are included
as Other long-term liabilities on the accompanying consolidated balance sheets.
The
Corporations senior management establishes the parameters of the Corporations financial risk, which have been approved by the Corporations Board of Directors. Hedging interest rate exposure through the use of swaps and options and
hedging foreign exchange exposure through the use of forward contracts are specifically contemplated to manage risk in keeping with managements policy. Derivative instruments, such as swaps, forwards, options or futures, which are based
directly or indirectly upon interest rates, currencies, equities and commodities, may be used by the Corporation to manage and reduce the risk inherent in price, currency and interest rate fluctuations.
The Corporation does not utilize derivatives for speculative purposes. Derivatives are transaction specific so that a specific debt
instrument, contract or invoice determines the amount, maturity and other specifics of the hedge. Counterparty risk is limited to institutions with long-term debt ratings of A or better.
19
The following table presents principal (or notional) amounts and related weighted
average interest rates by year of expected maturity for the Corporations debt obligations and interest rate exchange agreements as of December 29, 2001. For obligations with variable interest rates, the tables set forth payout amounts based on
current rates and do not attempt to project future interest rates.
As of December 29, 2001
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
Thereafter
|
|
|
Total
|
|
|
Fair Value December 29, 2001
|
|
(In millions, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper and other short-term Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,359 |
|
|
$ |
1,359 |
|
|
$ |
1,359 |
|
Average interest rates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.5 |
% |
|
|
2.5 |
% |
|
|
2.5 |
% |
Credit facilities |
|
$ |
925 |
|
|
|
|
|
|
|
|
|
|
$ |
1,935 |
|
|
|
|
|
|
|
|
|
|
$ |
2,860 |
|
|
$ |
2,860 |
|
Average interest rates |
|
|
3.9 |
% |
|
|
|
|
|
|
|
|
|
|
3.6 |
% |
|
|
|
|
|
|
|
|
|
|
3.7 |
% |
|
|
3.7 |
% |
Notes and debentures |
|
$ |
462 |
|
|
$ |
580 |
|
|
$ |
336 |
|
|
$ |
4 |
|
|
$ |
600 |
|
|
$ |
4,700 |
|
|
$ |
6,682 |
|
|
$ |
6,679 |
|
Average interest rates |
|
|
8.9 |
% |
|
|
6.7 |
% |
|
|
6.7 |
% |
|
|
4.7 |
% |
|
|
7.5 |
% |
|
|
8.4 |
% |
|
|
7.8 |
% |
|
|
7.8 |
% |
Euro-denominated Bonds |
|
|
|
|
|
|
|
|
|
$ |
266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
266 |
|
|
$ |
257 |
|
Average interest rates |
|
|
|
|
|
|
|
|
|
|
4.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.8 |
% |
|
|
6.6 |
% |
Revenue bonds |
|
$ |
75 |
|
|
$ |
3 |
|
|
$ |
31 |
|
|
$ |
21 |
|
|
|
|
|
|
$ |
739 |
|
|
$ |
869 |
|
|
$ |
833 |
|
Average interest rates |
|
|
1.9 |
% |
|
|
5.2 |
% |
|
|
2.0 |
% |
|
|
5.6 |
% |
|
|
|
|
|
|
5.6 |
% |
|
|
5.2 |
% |
|
|
5.8 |
% |
Capital leases |
|
$ |
5 |
|
|
$ |
5 |
|
|
$ |
6 |
|
|
$ |
7 |
|
|
$ |
7 |
|
|
$ |
96 |
|
|
$ |
126 |
|
|
$ |
148 |
|
Average interest rates |
|
|
12.0 |
% |
|
|
11.6 |
% |
|
|
2.5 |
% |
|
|
2.3 |
% |
|
|
10.8 |
% |
|
|
10.8 |
% |
|
|
10.0 |
% |
|
|
8.0 |
% |
European Debt |
|
$ |
22 |
|
|
$ |
24 |
|
|
$ |
23 |
|
|
$ |
11 |
|
|
$ |
11 |
|
|
$ |
46 |
|
|
$ |
137 |
|
|
$ |
137 |
|
Average interest rates |
|
|
6.8 |
% |
|
|
6.7 |
% |
|
|
6.2 |
% |
|
|
4.9 |
% |
|
|
4.7 |
% |
|
|
3.6 |
% |
|
|
6.1 |
% |
|
|
6.7 |
% |
Other loans |
|
$ |
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
8 |
|
|
$ |
8 |
|
Average interest rates |
|
|
4.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.6 |
% |
|
|
3.7 |
% |
Senior deferrable notes |
|
|
|
|
|
|
|
|
|
$ |
863 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
863 |
|
|
$ |
889 |
|
Average interest rates |
|
|
|
|
|
|
|
|
|
|
7.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.2 |
% |
|
|
3.6 |
% |
Total debt maturity |
|
$ |
1,497 |
|
|
$ |
612 |
|
|
$ |
1,525 |
|
|
$ |
1,978 |
|
|
$ |
618 |
|
|
$ |
6,940 |
|
|
|
|
|
|
|
|
|
Notional amount of interest rate exchange Agreements (variable to fixed) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest rate paid (fixed) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest rate received (variable) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional amount of interest rate exchange Agreements (fixed to variable) |
|
$ |
1,657 |
|
|
$ |
300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,957 |
|
|
$ |
(51 |
) |
Average interest rate paid (fixed) |
|
|
5.9 |
% |
|
|
5.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.9 |
% |
|
|
5.9 |
% |
Average interest rate received (variable) |
|
|
2.5 |
% |
|
|
3.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.7 |
% |
|
|
2.7 |
% |
Notional amount of interest rate exchange Agreements (rate collar) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
47 |
|
|
|
|
|
|
|
|
|
|
$ |
47 |
|
|
$ |
2 |
|
Average interest rate cap |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.5 |
% |
|
|
|
|
|
|
|
|
|
|
7.5 |
% |
|
|
7.5 |
% |
Average interest rate floor |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.5 |
% |
|
|
|
|
|
|
|
|
|
|
5.5 |
% |
|
|
5.5 |
% |
The Corporation has the intent to refinance commercial paper and
other short-term notes as they mature. Therefore, maturities of these obligations are reflected as cash flows expected to be made after 2006. At December 29, 2001, the Corporation did not have commercial paper outstanding.
The following table presents commitment amounts by year of expected expiration for the Corporations lines of credit, standby letters
of credit agreements and noncancelable contracts (including operating leases).
As of December 29, 2001
|
|
2002
|
|
2003
|
|
2004
|
|
2005
|
|
2006
|
|
Thereafter
|
|
Total
|
(In millions) |
|
|
Lines of credit |
|
$ |
1 |
|
$ |
|
|
$ |
1 |
|
$ |
|
|
$ |
1 |
|
$ |
|
|
|
$ 3 |
Standby Letters of Credit |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
191 |
|
$ |
191 |
Noncancelable Contracts* |
|
$ |
333 |
|
$ |
264 |
|
$ |
219 |
|
$ |
192 |
|
$ |
175 |
|
$ |
356 |
|
$ |
1,539 |
* |
|
Noncancelable contracts including operating leases. |
The Corporation has the intent to renew the Standby Letters of Credit where appropriate as they mature, therefore, the obligations do not have a definite maturity date.
20
At December 29, 2001, the Corporation had interest rate exchange agreements that
effectively converted $1,957 million of floating rate obligations with a weighted average interest rate of 2.7% to fixed rate obligations with an average effective interest rate of approximately 5.9%. Of the $1,957 million, the Corporation had $457
million of these floating rate obligations outstanding at December 30, 2000. These agreements increased interest expense by $29 million for the year ended December 29, 2001, and decreased interest expense by $1 million for the year ended December
30, 2000. The agreements had a weighted-average maturity of approximately seven months at December 29, 2001.
At
December 29, 2001, the Corporation also had interest rate exchange agreements (a collar) that effectively capped $47 million of floating rate obligations to a maximum interest rate of 7.5% and established a minimum interest rate on such obligations
of 5.5%. The Corporations interest expense is unaffected by this agreement when the market interest rate falls within this range. There was an immaterial effect on the Corporations interest expense for 2001 and 2000 related to these
agreements. The agreements had a weighted-average maturity of approximately four years at December 29, 2001.
The
Corporations debt portfolio is sensitive to changes in interest rates. Interest rate changes would result in gains or losses in the market value of the Corporations debt portfolio due to differences in market interest rates and the rates
at inception of the debt agreements. Based on the Corporations indebtedness at December 29, 2001, a 100 basis point interest rate change would impact the fair value of the debt portfolio by $444 million.
The Corporations international operations create exposure to foreign currency exchange rate risks. At December 29, 2001, the
Corporation had outstanding approximately $238 million (net of discount) of Euro-denominated bonds which were designated as a hedge against its net investment in Europe. The use of this financial instrument allows the Corporation to reduce its
overall exposure to exchange rate movements, since the gains and losses on this instrument substantially offsets losses and gains on the assets, liabilities and transactions being hedged.
Since 1991, the Argentine peso has been pegged to the US dollar at a rate of one Argentine peso to one US dollar. In January 2002, the Argentine government announced its
intent to create a dual currency system with an official fixed exchange rate of 1.4 pesos to 1 US dollar for import and export transactions, and a free floating exchange rate for other transactions. The Corporation has a
small investment in Argentina, for which the effect of this devaluation of the Argentine peso was insignificant.
The Corporation has entered into a commodity swap, the fair value of which was $9.5 million at December 29, 2001 (see Note 9 of the Notes to Consolidated Financial Statements).
As of December 29, 2001, the Corporation had $1.5 billion of debt and equity securities available for issuance under a shelf registration statement filed with the
Securities and Exchange Commission in 2000.
Prior to 1996, the Corporation sold certain assets for $354 million
and agreed to lease the assets back from the purchaser over a period of 30 years. Under the agreement with the purchaser, the Corporation agreed to maintain a deposit (initially in the amount of $322 million) that, together with interest earned
thereon, was expected to be sufficient to fund the Corporations lease obligation, including the repurchase of assets at the end of the term. This transaction was accounted for as a financing arrangement. At the inception of the agreement, the
Corporation recorded on its balance sheet an asset for the deposit from the sale of $305 million and a liability for the lease obligation of $346 million. The sale of these assets to Domtar in 2001 (see Note 3 of the Notes to Consolidated Financial
Statements) required the Corporation to repurchase these assets from the lessor. Accordingly, the lessor and the Corporation agreed to a deferred payment arrangement essentially under the same terms as the original lease obligation. The Corporation
agreed to maintain the original deposit under its existing terms and create a second deposit. The sum of these deposits (approximately $400 million at December 29, 2001) approximates the deferred payment amount. A legal right of set off exists
between the deferred payment amount owed and the deposits and, accordingly, the Corporation has recorded these transactions net in the accompanying consolidated balance sheets as Other long-term liabilities.
21
During 2000, the Corporation purchased on the open market approximately 1.7
million shares of Georgia-Pacific stock at an aggregate price of $62 million ($36.47 average per share). The Corporation also purchased on the open market approximately 3.3 million shares of The Timber Company stock at an aggregate price of $78
million ($23.64 average per share), all of which were held as treasury stock at December 30, 2000.
At the
end of November 2000, the Corporation acquired Fort James (as described above and in Note 3 of the Notes to Consolidated Financial Statements) and issued 21.5 million shares of Georgia-Pacific treasury stock and 32.2 million newly issued shares of
Georgia-Pacific stock as part of that transaction. During 2001, the Corporation issued an additional 190,000 shares of Georgia-Pacific Stock as part of this transaction. The Corporation does not hold any Georgia-Pacific stock as treasury stock as of
December 29, 2001.
The Corporation received proceeds from stock option exercises of $165 million and $26 million
in 2001 and 2000, respectively.
During 2001 and 2000, the Corporation paid dividends totaling $175 million and
$166 million, respectively.
As discussed above, Georgia-Pacifics strategy is to improve its portfolio of
businesses by divesting or exiting non-strategic businesses, and by acquiring and investing in businesses that are high value-added and that position Georgia-Pacific closer to consumers. A key component of that strategy is improving the
Corporations bath tissue, paper towel and napkin business which is commonly referred to as the tissue business. The Corporation believes that its acquisition of Fort James Corporation in 2000 directly facilitated that strategy. In 2001, in
connection with the Corporations redirection of its focus away from commodity-based businesses, the Corporation sold a portion of its pulp and paper assets to Domtar Inc. and divested its timber and timberlands business by redeeming all of the
outstanding shares of The Timber Company stock and merging its timber and timberlands business with Plum Creek.
As the Corporation completed evaluations of its business portfolio last year, it became increasingly convinced that separating its consumer products and packaging business and its building products business has the potential to
create shareholder value. In the summer of 2001, management began working on a plan to create separate vehicles for those businesses. Management believes there are a number of potential benefits from separating the businesses. Among them, it is
believed a separation would create both a high-value-added consumer products and packaging company with strong brands and stable cashflow and one of the strongest domestic pure-play building products companies; drive sharpened management
focus and provide better performance incentives; eliminate cross-subsidies, with each business free to use it cash flow to reinvest or distribute to shareholders as appropriate; and allow each business to develop its own appropriate strategies and
capital structures.
Other
The Corporation employs approximately 75,000 people, approximately 28,000 of whom are members of unions. The Corporation considers its relationship with its employees to be
good. Fifty-five union contracts are subject to negotiation and renewal in 2002, including seven at large facilities.
On January 1, 1999, eleven of the fifteen members of the European Union (the Participating Countries) established fixed conversion rates between their existing sovereign currencies (the Legacy Currencies) and
a single new currency (the Euro). For a three-year transition period, transactions can be conducted in both the Euro and the Legacy Currencies but all corporate transactions and records must legally be maintained in Euros effective
January 1, 2002. The adoption of the Euro will affect a multitude of financial systems and business applications. The Corporation has operations in seven of the Participating Countries, which adopted the Euro effective January 2001, and has product
sales in ten of the Participating Countries. The Corporations European businesses affected by the Euro conversion have established plans to address the information system issues and the potential business implications of converting to a common
currency. As of December 29, 2001, the
22
Corporations core financial information technology systems were capable of processing Euro-denominated transactions. The impact of converting to the Euro was immaterial 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. 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, or that any injuries they have incurred in fact resulted from exposure to the Corporations
products.
The Corporations asbestos liabilities relate primarily to joint systems products manufactured by
Bestwall Gypsum Company that contained asbestos fiber. The Corporation acquired Bestwall in 1965, and discontinued using asbestos in the manufacture of these products in 1977.
The following table presents information about the approximate number of the Corporations asbestos claims during the past three years and the most recent quarterly
period:
|
|
Quarter Ended
|
|
Year Ended
|
|
|
December 29, 2001
|
|
December 29, 2001
|
|
December 30, 2000
|
|
January 1, 2000
|
Claims Filed 1 |
|
6,700 |
|
39,700 |
|
55,600 |
|
29,100 |
Claims Resolved 2 |
|
6,800 |
|
30,900 |
|
46,000 |
|
22,000 |
Claims Unresolved at End of Period |
|
62,200 |
|
62,200 |
|
53,400 |
|
43,800 |
1 |
|
Claims Filed includes all asbestos claims for which service has been received and/or a file has been opened by the Corporation. |
2 |
|
Claims Resolved includes asbestos claims which have been settled or dismissed or which are in the process of being settled or dismissed based upon agreements or
understandings in place with counsel for the claimants. |
In addition, Fort James Corporation, a wholly owned
subsidiary of the Corporation, currently is defending approximately 1,000 asbestos premises liability claims.
As of December 31, 2001, the Corporation had either settled, had dismissed or was in the process of finalizing the settlement of a total of approximately 235,000 asbestos claims. The Corporation generally settles asbestos claims for
amounts it considers reasonable given the facts and circumstances of each claim. Substantially all of the amounts it has paid to date for settled claims, and anticipates paying for pending claims, have been covered by product liability insurance.
The amounts not covered by such insurance have been immaterial to date. In the future, the Corporation expects that the percentage of its asbestos liabilities to be reimbursed by its insurers will decrease as it begins to make use of layers of
insurance coverage in which there are some insolvent carriers and with respect to which there are various allocation and coverage issues. The annual average settlement payment per asbestos claimant has fluctuated up and down during the three year
period ended December 29, 2001, and management of the Corporation expects such fluctuations to continue in the future based upon, among other things, the number and type of claims settled in a particular period and the jurisdictions in which such
claims arose.
In the late Fall of 2001, the Corporation retained National Economic Research
Associates (NERA) and Peterson Consulting, nationally-recognized consultants in asbestos liability and insurance, to work with the Corporation to project the amount, net of insurance, that the Corporation would pay for its asbestos-related
liabilities and defense costs through 2011.
The methodology employed by NERA to project the Corporations
asbestos-related liabilities and defense costs included: 1) an analysis of the population likely to have been exposed or claim exposure to products manufactured by the Corporation; 2) the use of epidemiological studies to estimate the number of
people who might allege exposure to the Corporations products that would be likely to develop asbestos-related diseases in each year between 2002 and 2011; 3) an analysis of the Corporations recent claims history to estimate likely
filing rates for these diseases for the period 2002 through 2011; 4) an analysis of the Corporations currently pending asbestos claims; and 5) an analysis of the Corporations historical asbestos settlements and defense costs to develop
average settlement values and defense costs, which varied by disease type and the nature of claim, to determine an estimate of costs likely to be associated with currently pending and projected asbestos claims
23
through 2011. Based upon its analysis, NERA projected that the Corporations total, undiscounted asbestos liabilities, including defense costs, over the next 10 years will be less than $1
billion (including payments related to the approximately 62,200 claims currently pending).
NERAs projection
was based on historical data supplied by the Corporation and publicly available studies. NERA concluded that, based on the latency periods of asbestos-related diseases (both cancers and non-cancers), the peak incidence of such diseases occurred
prior to 2002. It expects, based on the last dates of manufacture of asbestos-containing products in the United States, that the number of new diagnoses of asbestosis and other non-cancerous diseases will drop beginning in 2001. It also cites annual
surveys of the National Cancer Institutes that show the annual incidence of mesothelioma (a cancer frequently associated with asbestos exposure) began to decline in the mid-1990s. NERA expects these factors, as well as the advancing age of the
allegedly exposed population, its movement away from work centers as its members retire, and NERAs view that many asbestos claims filed in the 1990s were based in part on mass screenings of possibly-exposed individuals, will result in the
number of claims filed against the Corporation for asbestos-related injuries beginning to decline in 2002.
Using
NERAs projection, Peterson Consulting and the Corporation then conducted an analysis to determine the amount of insurance that it is probable that the Corporation will recover during this ten year period. In conducting such analysis, Peterson
Consulting and the Corporation reviewed the Corporations existing insurance arrangements and agreements, engaged in discussions with counsel to the Corporation, analyzed publicly available information bearing on the credit worthiness of the
Corporations various insurers and employed such insurance allocation methodologies as the Corporation and Peterson Consulting believed appropriate to ascertain the probable insurance recoveries for asbestos liabilities through 2011. The
analysis took into account self-insurance reserves, policy exclusions, liability caps and gaps in the Corporations coverage, as well as insolvencies among certain of the Corporations insurance carriers.
Based on the analysis of NERA and Peterson Consulting, the Corporation has established reserves for the probable and reasonably estimable
liabilities and defense costs it believes it will pay through 2011, and has also established receivables for the insurance recoveries that are deemed probable. The Corporation has recorded the reserves for the asbestos liabilities as Other
current liabilities and Other long-term liabilities and the related insurance recoveries as Other current assets and Other assets in the accompanying consolidated balance sheets. For the fourth quarter 2001,
the Corporation recorded a pre-tax charge to earnings of $350 million to cover all of the projected asbestos liabilities and defense costs, net of expected insurance recoveries, it expects to pay through 2011. This charge principally covers
the share of such costs which the Corporation expects to incur because of the insolvencies of certain insurance companies which wrote a part of the Corporations product liability insurance in prior years. The charge is not due to exhaustion of
the Corporations total product liability insurance for asbestos liabilities, and the Corporation believes that the majority of its asbestos-related liabilities and defense costs during the next ten years will be recovered from its insurance
carriers. The insurance receivable recorded by the Corporation does not assume any recovery from insolvent carriers, and assumes that those carriers which are currently solvent will continue to be solvent throughout the period of NERAs
projection. However, there can be no assurances that these assumptions will be correct. Substantially all of the insurance recoveries deemed probable are from insurance companies rated A- (excellent) or better by A.M. Best Company. No more than 21%
of such insurance recoveries are from any one company, though several of the insurers are under common control. The Corporation also has significant additional insurance coverage which it expects to be available for asbestos liabilities and defense
costs it may incur after 2011.
The analyses of NERA and Peterson Consulting are based on their best judgment and
that of the Corporation. However, projecting future events, such as the number of new claims to be filed each year, the average cost of resolving each such claim, coverage issues among layers of insurers and the continuing solvency of various
insurance companies is subject to many uncertainties which could cause the actual liabilities and insurance recoveries to be higher or lower than those projected and/or recorded. Consequently, there can be no assurance these projected liabilities
will be accurate, or that the probable insurance recoveries will be realized.
In light of the uncertainties
inherent in making long term projections, the Corporation has determined that the ten year period through 2011 is the most reasonable time period for projecting asbestos liabilities and defense
24
costs and probable insurance recoveries and, accordingly, the charge to earnings does not include either asbestos liabilities or insurance recoveries for any period past 2011.
Given the uncertainties associated with projecting matters into the future and numerous other factors outside the control
of the Corporation, the Corporation believes that it is reasonably possible that it may incur asbestos liabilities for the period through 2011 and beyond in an amount in excess of the NERA projection. Based on currently available data and upon the
analysis of NERA and Peterson Consulting, the Corporation does not believe that it is reasonably possible that any such excess asbestos liabilities will be material to the Corporation. While it is reasonably possible that such excess liabilities
could be material to operating results in any given quarter or year, the Corporation does not believe that it is reasonably possible that such excess liabilities would have a material adverse effect on the long-term results of operations, liquidity
or consolidated financial position of the Corporation.
The Corporation is involved in environmental
remediation activities at approximately 170 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 (PRP) under the United States Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA) or similar state superfund laws. Of the known sites in which it is involved, the Corporation estimates that approximately 45% are being investigated,
approximately 30% are being remediated and approximately 25% are being monitored (an activity that 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 nature and 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 governmental regulations, and the inability to determine the Corporations share of multiparty cleanups or the extent to which contribution will be available from other
parties, all of which factors are taken into account to the extent possible in estimating the Corporations liabilities. The Corporation has established reserves for environmental remediation costs for these sites that it believes are probable
and reasonably able to be estimated. To the extent that the Corporation is aware of unasserted claims, considers them probable, and can estimate their potential costs, the Corporation includes appropriate amounts in the reserves.
Based on analyses of currently available information and previous experience with respect to the cleanup of hazardous
substances, the Corporation believes 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 $121 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 PRPs who may be jointly and severally liable. The ability of other PRPs to participate has been taken into account, based generally on their financial condition and probable contribution on a per-site basis.
Presented below is the activity in the Corporations environmental liability account for the latest
three years.
in millions
|
|
2001
|
|
|
2000
|
|
|
1999
|
|
Beginning balance |
|
$ |
120 |
|
|
$ |
57 |
|
|
$ |
47 |
|
Expense charged to earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
Related to previously existing matters |
|
|
2 |
|
|
|
29 |
|
|
|
22 |
|
Related to new matters |
|
|
|
|
|
|
1 |
|
|
|
3 |
|
Amounts related to acquisitions/(divestitures): |
|
|
|
|
|
|
|
|
|
|
|
|
Amounts assumed by others in divestitures |
|
|
|
|
|
|
|
|
|
|
|
|
Original purchase price allocations |
|
|
|
|
|
|
49 |
|
|
|
1 |
|
Changes in purchase price allocations |
|
|
207 |
|
|
|
|
|
|
|
|
|
Payments |
|
|
(21 |
) |
|
|
(16 |
) |
|
|
(16 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
308 |
|
|
$ |
120 |
|
|
$ |
57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
Expense charged to earnings in the above table includes amounts accrued for
new matters and changes in existing estimates. Payments represent amounts paid in full or partial settlement or for environmental studies and similar costs.
Critical Accounting Policies
A summary of the
Corporations significant accounting policies are included in Note 1 to the Consolidated Financial Statements. Management believes that the consistent application of these policies enables the Corporation to provide readers of the financial
statements with useful and reliable information about the Corporations operating results and financial condition. The following are accounting policies that management believes are most important to the portrayal of the Corporations
financial condition and results and require managements most difficult, subjective, or complex judgments.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Judgments and
assessments of uncertainties are required in applying the Corporations accounting policies in many areas. For example, key assumptions are particularly important when determining amounts allocated to identifiable intangible assets in a
business combination and in developing the Corporations projected liabilities for pension and other postretirement benefits. Other areas in which significant uncertainties exist include, but are not limited to, projected costs to be incurred
in connection with environmental and legal matters. The Corporation recognizes a liability for environmental remediation and legal indemnification and defense costs when it believes it is probable a liability has been incurred and the amount can be
reasonably estimated. The liabilities are developed based on currently available information and reflect the participation of other potentially responsible parties, depending on the parties financial condition and probable contribution. The
accruals are recorded at undiscounted amounts and are reflected as liabilities on the accompanying consolidated balance sheets. The Corporation also has insurance that covers losses on certain environmental claims and records a receivable to the
extent that the realization of the insurance is deemed probable. This receivable is recorded at undiscounted amounts and is reflected as assets in the accompanying consolidated balance sheets.
In addition, management uses judgment in assessing goodwill, and other long-lived assets for impairment. The Corporation amortizes costs in excess of fair value of
net assets of businesses acquired using the straight-line method over a period not to exceed 40 years. The Corporation reviews the recorded value of its goodwill annually, or sooner if events or changes in circumstances indicate that the carrying
amount may exceed fair value. Recoverability is then determined by comparing the undiscounted net cash flows of the assets to which the goodwill applies to the net book value, including goodwill, of those assets. Goodwill, net of amortization,
totaled $8.3 billion at December 29, 2001 and represented 31% of total assets. The Corporation assesses its long-lived assets other than goodwill for impairment whenever facts and circumstances indicate that the carrying amount may not be fully
recoverable. To analyze recoverability, the Corporation projects undiscounted net future cash flows over the remaining life of such assets. If these projected cash flows are less than the carrying amount, an impairment would be recognized, resulting
in a write-down of assets with a corresponding charge to earnings. The impairment loss is measured based upon the difference between the carrying amount and the fair value of the assets.
Accounting Standards Changes
In July 2001, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations (SFAS No. 141), and SFAS No. 142, Goodwill and Other Intangible Assets (SFAS
No. 142). SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS No. 142 requires that entities assess the fair value of the net assets underlying all acquisition
related goodwill on a reporting unit basis effective beginning in fiscal year 2002. When the fair value is less than the related carrying value, entities are required to reduce the amount of goodwill. Reductions are made retroactive to the beginning
of fiscal year 2002. SFAS No. 142 also requires that entities discontinue amortization of all purchased goodwill, including amortization of goodwill recorded in past business combinations. The Corporation has determined its reporting units to be the
following: structural panels, lumber,
26
industrial wood products, gypsum, chemical, building products distribution, packaging, bleached pulp and paper, paper distribution, North American towel and tissue, Dixie and European towel and
tissue. Management is evaluating the effect of this statement on each of these reporting units. As of December 29, 2001, the Corporation had acquisition related goodwill of $8.3 billion, net of accumulated amortization. Beginning in 2002, the
Corporation will no longer be amortizing acquisition related goodwill. In 2001 and 2000, goodwill amortization expense aggregated $235 million and $86 million, respectively.
In July 2001, the FASB also issued SFAS No. 143, Accounting for Asset Retirement Obligations (SFAS No. 143). SFAS No. 143 requires entities to record the
fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity capitalizes the cost by increasing the carrying amount of the related long-lived asset. Over
time, the liability is accreted to its present value each period and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, the entity either settles the obligation for the amount recorded or
incurs a gain or loss. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. Management is evaluating the effect of this statement on the Corporations results of operations and financial position.
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No.
144). SFAS No. 144 supersedes FASB statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of (SFAS No. 121), and the accounting and reporting provisions of APB Opinion
No. 30, Reporting the Results of OperationsReporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions (Opinion 30) for the disposal of a
segment of a business (as previously defined in Opinion 30). The FASB issued SFAS No. 144 to establish a single accounting model, based on the framework established in SFAS No. 121, for long-lived assets to be disposed of by sale. SFAS No. 144
broadens the presentation of discontinued operations in the income statement to include a component of an entity (rather than a segment of a business). A component of an entity comprises operations and cash flows that can be clearly distinguished,
operationally and for financial reporting purposes, from the rest of the entity. SFAS No. 144 also requires that discontinued operations be measured at the lower of the carrying amount or fair value less cost to sell. SFAS No. 144 is effective for
fiscal years beginning after December 15, 2001 and should be applied prospectively.
For a discussion of
commitments and contingencies, see Note 14 of the Notes to Consolidated Financial Statements.
2000 Compared with 1999
The Corporation reported consolidated net sales of $22.1 billion and net income of $505 million for 2000,
compared with net sales of $18.4 billion and net income of $1,116 million in 1999. Included in 2000 are $528 million of net sales from the Fort James operations acquired during 2000. The 1999 results included pretax gains of $355 million ($215
million after taxes) from the sales of the Corporations timberlands located in California, Maine and New Brunswick, Canada. The factors contributing to the decrease in 2000 net income are described below.
Income from discontinued operations decreased to $162 million in 2000 compared with $400 million in 1999. Included in the 1999 results
was the $215 million after tax gain for timberland sales discussed above. The decrease in income from discontinued operations is primarily due to a 6% decrease in sawtimber prices and a 21% decrease in harvest volumes.
Interest expense was $595 million in 2000, compared with $426 million in 1999. The increase is the result of higher debt levels primarily
related to the acquisition of Fort James and higher average interest rates.
The Corporation reported income from
continuing operations before income taxes of $553 million and an income tax provision of $210 million for the year ended December 30, 2000, compared with income from
27
continuing operations before income taxes of $1,164 million and an income tax provision of $448 million for the year ended January 1, 2000. The effective income tax rate was 38% in both 2000 and
1999.
Consumer Products
The Corporations consumer products segment reported net sales of $2.1 billion and an operating loss of $17 million for the year ended December 30, 2000, which
included net sales and operating profits of $528 million and $34 million, respectively, from the operations of Fort James that were acquired at the end of November 2000. Fort James results of operations were consolidated with those of the
Corporation beginning in the fiscal month of December 2000. 1999 net sales and operating profits were $1.2 billion and $131 million, respectively. Included in 2000 results was a one-time charge of $204 million for the write-down of assets of the
Georgia-Pacific Tissue away-from-home tissue business that was sold during the first quarter of 2001. Excluding this one-time charge, 2000 operating profits were $187 million and return on sales decreased to 9% compared with 11% in 1999. The
increase in 2000 operating profits was due principally to 7% higher average selling prices and to a full year of the Wisconsin Tissue operations, which were combined with those of the Corporations commercial tissue business beginning on
October 3, 1999, when the Georgia-Pacific Tissue joint venture was formed. These increases were offset somewhat by higher energy and wood fiber costs.
Packaging
The Corporations packaging segment
reported net sales of $2.7 billion and operating profits of $512 million for the year ended December 30, 2000, compared with net sales of $2.5 billion and operating profits of $324 million in 1999. During 2000, the Corporation sold certain packaging
assets resulting in a pre-tax gain of $25 million. Excluding this gain on asset sales, return on sales increased to 18% from 13% in 1999. Average selling prices increased in 2000 and ended the year above 1999 levels despite softening demand in the
fourth quarter. Average selling prices for linerboard and medium increased 21% and 31%, respectively, while average selling prices for packaging increased 12%.
During 2000 and 1999, the Corporation took market-related paper machine slowback or downtime at its containerboard mills to avoid excess inventories, resulting in a reduction in containerboard
production of approximately 271,000 tons and 30,000 tons, respectively.
Bleached Pulp and Paper
The Corporations bleached pulp and paper segment reported net sales of $9.5 billion and operating
profits of $509 million for the year ended December 30, 2000, compared with net sales of $5.9 billion and operating profits of $181 million in 1999. Return on sales increased to 5% compared with 3% for the same period a year ago. The increase in net
sales and operating profits was due primarily to an increase in average selling prices for all of the Corporations bleached pulp and paper products, offset somewhat by higher wood fiber and production costs. Average selling prices for pulp and
paper during 2000 were approximately 35% and 10%, respectively, above 1999 prices.
During 2000, the Corporation
incurred market-related downtime at its bleached pulp and paper mills, resulting in a reduction in pulp production of 17,000 tons and in paper production of 60,000 tons. In December 2000, the Corporation announced the permanent closure of its
Kalamazoo, Michigan, paper mill and a permanent closure of a paper machine at its Nekoosa, Wisconsin, operations. In connection with the Kalamazoo paper mill closure, the Corporation recorded a fourth quarter 2000 charge of $57 million for employee
termination, asset write-down, mill closure and other costs. In 1999, the Corporation incurred market-related downtime at its pulp and paper mills resulting in a reduction in pulp and paper production of 311,000 tons and 17,000 tons, respectively.
28
Building Products
The Corporations building products segment reported net sales of $8.7 billion and operating profits of $382 million for the year ended December 30, 2000,
compared with net sales of $9.7 billion and operating profits of $1,205 million in 1999. Return on sales was 4% in 2000 and 12% in 1999. The primary components of the decrease in 2000 sales and operating profits were 16% lower average plywood
selling prices, 17% lower average softwood lumber selling prices, 18% lower average oriented strand board selling prices and a 12% decrease in average gypsum selling prices coupled with a 23% decrease in gypsum sales volume. Because of weak market
conditions in this segment, the Corporation temporarily suspended production at three structural panels mills and 12 lumber mills during the latter part of 2000. In addition, the Corporation permanently closed the Grand Rapids East, Michigan, gypsum
plant in September 2000, and recorded a restructuring charge of approximately $8 million for asset write-off, employee termination and facility closing costs.
Other
The operating loss for the Other
nonreportable segment, which includes some miscellaneous businesses, unallocated corporate operating expenses and the elimination of profit on intersegment sales, decreased by $13 million to a loss of $238 million in 2000 from a loss of $251 million
in 1999. This decrease was primarily the result of last-in, first-out (LIFO) inventory valuation adjustments.
Factors
That May Affect Future Results
Some of the matters discussed in this Form 10-K and the accompanying Annual
Review concerning, among other things, the business outlook, anticipated financial and operating results, strategies, contingencies and contemplated transactions of the Corporation, constitute forward-looking statements and are based upon
managements expectations and beliefs concerning future events. There can be no assurance that these events will occur or that the Corporations results will be as estimated. In some cases, the forward-looking statements contained in this
Form 10-K and the accompanying Annual Review can be identified by terminology such as may, will, should, expects, plans, anticipates, believes, or
estimates, or the negative of these terms or other comparable terminology.
Forward-looking statements
are only predictions. Therefore, readers are cautioned not to place undue reliance on these forward-looking statements, which are based on information known today and speak only as of the date of the filing of this Form 10-K. Moreover, in the
future, the Corporation, through its senior management team, may make additional or different forward-looking statements about the matters described in this document. The Corporation undertakes no obligation to publicly revise any of these
forward-looking statements to reflect changes in the facts or information on which they are based or any events or circumstances occurring after the date hereof. Actual events or future results may differ materially as a result of the following
factors, as well as other factors described elsewhere in this Form 10-K, or in the Corporations other SEC filings, including the Corporations Form 8-K, dated October 17, 1996, and Form 8-K, dated January 24, 2002, which are incorporated
herein by this reference.
The following factors, which the Corporation cautions are not exclusive, are described
in accordance with the provisions of the Private Securities Litigation Reform Act of 1995, which encourages companies to disclose these factors.
1. The Corporation has substantial indebtedness.
As described in this Form
10-K and the accompanying Annual Review, the Corporation has substantial indebtedness. The Corporations ability to meet its debt service obligations and to repay its outstanding indebtedness will depend in part on cash from operations and in
part on cash produced by divestitures of some of the Corporations businesses. There can be no assurance that such divestitures will be consummated, or, if
29
consummated, that the price and terms of such divestitures will be advantageous to the Corporation. Further, there can be no assurance that the Corporations businesses will be able to
generate sufficient cash flows from operations, as they are subject to general economic, business, financial, competitive, legislative, regulatory and other factors beyond the Corporations control.
The Corporations level of indebtedness has important consequences, including limiting the Corporations ability to invest
operating cash flow to expand its business, to capitalize on business opportunities and to react to competitive pressures or adverse changes in governmental regulation, because it must dedicate a substantial portion of these cash flows to service
its debt. In addition, the Corporation could, under certain circumstances that management believes are unlikely to occur, be unable to refinance or obtain additional financing because of market conditions, its high levels of debt and the debt
restrictions under its current debt agreements.
In May 2002, Moodys Investors Service
(Moodys) downgraded, from investment grade to non-investment grade, the Corporations senior unsecured notes, which Moodys currently rates as Baa1, and the Corporations commercial paper currently carries a
Non-Prime short-term rating. The Corporation cannot ensure that any rating will not be lowered or withdrawn entirely by a rating agency if, in its judgment, circumstances in the future so warrant. Changes in market conditions could mean that this
downgrade, or a future downgrade, if it were to occur, could result in the Corporation experiencing difficulties in borrowing on terms as favorable as the Corporation was able to achieve previously.
2. Execution of Transformation Strategy.
Prior to developing the plan to separate the Corporation into two independent companies, the Corporations long-term strategy had been to improve its portfolio of businesses by divesting or
exiting non-strategic businesses, and by acquiring and expanding businesses which are high value-added and that position the Corporation closer to its customers. If the Corporation terminates the separation plan, it may resume execution of this
transformation strategy. See Note 18 to the consolidated financial statements contained herein.
The
Corporations long-term strategy is to improve its portfolio of businesses by divesting or exiting non-strategic businesses, and by acquiring and expanding businesses which are high value-added and that position Georgia-Pacific closer to its
customers. A key to this transformation will be the Corporations tissue business, which was expanded significantly with the acquisition of Fort James Corporation in late 2000. Although the Corporation believes that it has a strong cost
position, superior manufacturing expertise and excellent brands, this business faces competition from established companies that may have more experience or expertise in marketing, advertising and brand management than the Corporation currently has.
To succeed, the Corporation must continue to develop brand recognition and loyalty, product quality and performance, price, marketing and distribution capabilities. Aggressive reaction by competitors may lead to increased advertising and promotional
spending by the Corporation in order to maintain market share in this segment as well as others. In addition, to successfully achieve its strategy the Corporation will need to rely heavily on the development and introduction of new products and
product line extensions as a means of achieving and/or maintaining leadership in various product categories.
3. Competition and Volatility of Commodity Businesses.
The Corporation
faces intense competition from both large international and small domestic producers in most of its businesses. However, operating results are particularly volatile for the Corporations building products and pulp and paper businesses because
most of these products are commodities, for which price is the principal competitive factor. The Corporation cannot control such factors as decreasing demand from customers or increasing supply from competitors, both of which cause price decreases
for such products which adversely affects the Corporations net sales, operating income and cash flows.
30
4. Costs Associated with Environmental Compliance and Remediation and Litigation.
As more fully discussed under Note 14 of the Corporations Consolidated Financial Statements which are
presented under Item 8 of this Form 10-K, the Corporations operations are subject to significant regulation by federal, state and local environmental and safety authorities. The costs of compliance with existing and new regulatory schemes
could require significant capital expenditures that would decrease the amount of funds available for investment in other areas of the Corporations operations. For example, the United States Environmental Protection Agency has recently issued
new air emission regulations, known as MACT or Maximum Achievable Control Technology regulations. The costs of compliance with these regulations and additional or supplementary regulations cannot be definitively quantified and there can
be no assurance that the costs of such compliance will not be material to the Corporations results of operations in certain reporting periods. In addition, the costs of remediating known environmental sites, as described in Note 14 of the
Corporations Consolidated Financial Statements, in some instances has been significant and remediation of future sites could also be significant. There can be no assurance that the final remediation costs will equal currently estimated costs
or that additional sites will not require significant remediation expenses.
The Corporation is subject to
litigation risks that are similar to other Corporations of its size and complexity in an increasingly litigious environment. While the Corporation does not believe that any of these matters will be material to its long term financial status, as
disclosed under Item 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsOther and Note 14 of the Corporations Consolidated Financial Statements, certain litigation related matters may
be material to the Corporations results of operations in certain reporting periods.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Quantitative and
Qualitative Disclosure about Market Risk information for the Corporation required by this Item set forth under the caption Georgia-Pacific Corporation and SubsidiariesManagements Discussion and AnalysisLiquidity and Capital
ResourcesFinancing Activities under Item 7 of this Form 10-K is incorporated herein by reference thereto.
ITEM
8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
|
|
Page
|
Financial Statements |
|
|
|
|
32 |
|
|
33 |
|
|
34 |
|
|
35 |
|
|
36 |
|
|
37 |
|
|
38 |
|
|
39 |
Supplemental Information: |
|
|
|
|
99 |
|
|
101 |
|
|
103 |
|
|
104 |
31
Georgia-Pacific Corporation and Subsidaries
Management of Georgia-Pacific Corporation is responsible for the preparation, integrity, and fair
presentation of the consolidated financial statements and the estimates and judgments upon which certain amounts in the financial statements are based. Management is also responsible for preparing the other financial information included in the
annual report on Form 10-K. In our opinion, the accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States, and the other financial information in the annual report on Form
10-K is consistent with the financial statements.
Management is also responsible for establishing and
maintaining a system of internal control over financial reporting, which encompasses policies, procedures, and controls directly related to, and designed to provide reasonable assurance as to, the reliability of the published financial statements.
An independent assessment of the system is performed by the Corporations internal audit staff in order to confirm that the system is adequate and operating effectively. The Corporations independent auditors also consider certain elements
of the internal control system in order to determine their auditing procedures for the purpose of expressing an opinion on the financial statements. Management has considered any significant recommendations regarding the internal control system that
have been brought to its attention by the internal audit staff or independent public accountants and has taken steps it deems appropriate to maintain a cost-effective internal control system. The Audit Committee of the Board of Directors, consisting
of independent directors, provides oversight to the financial reporting process. The Corporations internal auditors and independent auditors meet regularly with the Audit Committee to discuss financial reporting and internal control issues and
have full and free access to the Audit Committee.
There are inherent limitations in the effectiveness of any
system of internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even an effective internal control system can provide only reasonable assurance with respect to financial statement
preparation. Furthermore, the effectiveness of an internal control system can vary over time due to changes in conditions.
Management believes that as of December 29, 2001, the internal control system over financial reporting is adequate and effective in all material respects.
JAMES E. TERRELL
Vice President and Controller
DANNY W. HUFF
Executive Vice PresidentFinance and Chief Financial Officer
A.D. CORRELL
Chairman, Chief Executive Officer and President
January 23, 2002
32
Board of Directors, Georgia-Pacific Corporation:
We have audited the accompanying consolidated balance sheets of Georgia-Pacific Corporation (a Georgia corporation) and
subsidiaries as of December 29, 2001 and December 30, 2000 and the related consolidated statements of income, shareholders equity, comprehensive income, and cash flows for each of the three years in the period ended December 29, 2001. Our
audits also included the financial statement schedule listed in the index at Item 14(a). These financial statements and schedule are the responsibility of the Corporations management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing
standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Georgia-Pacific Corporation and subsidiaries at December 29, 2001 and December 30, 2000 and the consolidated results
of their operations and their cash flows for each of the three years in the period ended December 29, 2001, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
As discussed in Note 9 to the financial statements, in 2001, the Corporation changed its method of accounting for derivative financial instruments.
Atlanta, Georgia
May 16, 2002
33
CONSOLIDATED STATEMENTS OF INCOME
|
|
Year Ended
|
|
|
December 29, 2001
|
|
|
December 30, 2000
|
|
January 1, 2000
|
In millions, except per share amounts |
|
|
|
|
|
|
|
Net sales |
|
$ |
25,016 |
|
|
$ |
22,050 |
|
$ |
18,409 |
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
19,404 |
|
|
|
17,359 |
|
|
14,417 |
Selling and distribution |
|
|
2,025 |
|
|
|
1,600 |
|
|
818 |
Depreciation and amortization |
|
|
1,343 |
|
|
|
910 |
|
|
815 |
General and administrative |
|
|
1,072 |
|
|
|
856 |
|
|
765 |
Interest |
|
|
1,080 |
|
|
|
595 |
|
|
426 |
Other losses, net |
|
|
387 |
|
|
|
177 |
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
25,311 |
|
|
|
21,497 |
|
|
17,245 |
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before income taxes |
|
|
(295 |
) |
|
|
553 |
|
|
1,164 |
Provision for income taxes |
|
|
181 |
|
|
|
210 |
|
|
448 |
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
|
(476 |
) |
|
|
343 |
|
|
716 |
Income from discontinued operations, net of taxes |
|
|
70 |
|
|
|
162 |
|
|
400 |
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before extraordinary loss and accounting change |
|
|
(406 |
) |
|
|
505 |
|
|
1,116 |
Extraordinary loss from early retirement of debt, net of taxes |
|
|
(12 |
) |
|
|
|
|
|
|
Cumulative effect of accounting change, net of taxes |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(407 |
) |
|
$ |
505 |
|
$ |
1,116 |
|
|
|
|
|
|
|
|
|
|
|
Georgia-Pacific Group |
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
$ |
(476 |
) |
|
$ |
343 |
|
$ |
716 |
Extraordinary loss, net of taxes |
|
|
(12 |
) |
|
|
|
|
|
|
Cumulative effect of accounting change, net of taxes |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(477 |
) |
|
$ |
343 |
|
$ |
716 |
|
|
|
|
|
|
|
|
|
|
|
Basic per share: |
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
$ |
(2.09 |
) |
|
$ |
1.95 |
|
$ |
4.17 |
Extraordinary loss, net of taxes |
|
|
(0.05 |
) |
|
|
|
|
|
|
Cumulative effect of accounting change, net of taxes |
|
|
0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(2.10 |
) |
|
$ |
1.95 |
|
$ |
4.17 |
|
|
|
|
|
|
|
|
|
|
|
Diluted per share: |
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
$ |
(2.09 |
) |
|
$ |
1.94 |
|
$ |
4.07 |
Extraordinary loss, net of taxes |
|
|
(0.05 |
) |
|
|
|
|
|
|
Cumulative effect of accounting change, net of taxes |
|
|
0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(2.10 |
) |
|
$ |
1.94 |
|
$ |
4.07 |
|
|
|
|
|
|
|
|
|
|
|
Average number of shares outstanding: |
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
227.6 |
|
|
|
175.8 |
|
|
171.8 |
Diluted |
|
|
227.6 |
|
|
|
176.9 |
|
|
175.9 |
|
|
|
|
|
|
|
|
|
|
|
The Timber Company |
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of taxes |
|
$ |
70 |
|
|
$ |
162 |
|
$ |
400 |
|
|
|
|
|
|
|
|
|
|
|
Basic per common share |
|
$ |
0.86 |
|
|
$ |
2.01 |
|
$ |
4.75 |
|
|
|
|
|
|
|
|
|
|
|
Diluted per common share |
|
$ |
0.86 |
|
|
$ |
2.00 |
|
$ |
4.73 |
|
|
|
|
|
|
|
|
|
|
|
Average number of shares outstanding: |
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
81.0 |
|
|
|
80.7 |
|
|
84.1 |
Diluted |
|
|
81.7 |
|
|
|
81.1 |
|
|
84.6 |
The accompanying notes are an integral part of these consolidated
financial statements.
34
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
Year Ended
|
|
|
|
December 29, 2001
|
|
|
December 30, 2000
|
|
|
January 1, 2000
|
|
In millions |
|
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(407 |
) |
|
$ |
505 |
|
|
$ |
1,116 |
|
Adjustments to reconcile net (loss) income to cash provided by operations, excluding the effects of
acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative effect of accounting change, net of taxes |
|
|
(11 |
) |
|
|
|
|
|
|
|
|
Depreciation |
|
|
1,079 |
|
|
|
819 |
|
|
|
752 |
|
Deferred income taxes |
|
|
(109 |
) |
|
|
82 |
|
|
|
73 |
|
Amortization of goodwill and intangibles |
|
|
267 |
|
|
|
96 |
|
|
|
69 |
|
Other loss |
|
|
387 |
|
|
|
177 |
|
|
|
4 |
|
Gain on sale of Canadian, Maine and California timberlands |
|
|
|
|
|
|
|
|
|
|
(355 |
) |
Decrease (increase) in receivables |
|
|
265 |
|
|
|
183 |
|
|
|
(206 |
) |
Decrease (increase) in inventories |
|
|
203 |
|
|
|
(20 |
) |
|
|
(244 |
) |
Increase in accounts payable |
|
|
23 |
|
|
|
17 |
|
|
|
51 |
|
Change in other working capital |
|
|
(240 |
) |
|
|
8 |
|
|
|
(133 |
) |
Decrease in taxes payable |
|
|
(26 |
) |
|
|
(178 |
) |
|
|
(2 |
) |
Change in other assets and other long-term liabilities |
|
|
(43 |
) |
|
|
(27 |
) |
|
|
96 |
|
Tax benefit on stock benefit plans |
|
|
23 |
|
|
|
4 |
|
|
|
24 |
|
Other, net |
|
|
71 |
|
|
|
(110 |
) |
|
|
27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by operations |
|
|
1,482 |
|
|
|
1,556 |
|
|
|
1,272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment investments |
|
|
(739 |
) |
|
|
(909 |
) |
|
|
(723 |
) |
Timber and timberland purchases |
|
|
(31 |
) |
|
|
(59 |
) |
|
|
(78 |
) |
Acquisitions |
|
|
(133 |
) |
|
|
(6,142 |
) |
|
|
(1,658 |
) |
Proceeds from sales of assets |
|
|
2,311 |
|
|
|
422 |
|
|
|
104 |
|
Other |
|
|
(66 |
) |
|
|
(63 |
) |
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used for) investing activities |
|
|
1,342 |
|
|
|
(6,751 |
) |
|
|
(2,326 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of long-term debt |
|
|
(2,631 |
) |
|
|
(123 |
) |
|
|
(579 |
) |
Additions to long-term debt |
|
|
631 |
|
|
|
5,937 |
|
|
|
624 |
|
Fees paid to issue debt |
|
|
(39 |
) |
|
|
(38 |
) |
|
|
(35 |
) |
(Decrease) increase in bank overdrafts |
|
|
(94 |
) |
|
|
14 |
|
|
|
(18 |
) |
(Decrease) increase in commercial paper and other short-term notes |
|
|
(690 |
) |
|
|
(300 |
) |
|
|
661 |
|
Senior deferrable notes |
|
|
|
|
|
|
|
|
|
|
863 |
|
Common stock repurchased |
|
|
|
|
|
|
(140 |
) |
|
|
(388 |
) |
Proceeds from option plan exercises |
|
|
165 |
|
|
|
26 |
|
|
|
116 |
|
Cash dividends paid |
|
|
(175 |
) |
|
|
(166 |
) |
|
|
(170 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (used for) provided by financing activities |
|
|
(2,833 |
) |
|
|
5,210 |
|
|
|
1,074 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) increase in cash |
|
|
(9 |
) |
|
|
15 |
|
|
|
20 |
|
Balance at beginning of year |
|
|
40 |
|
|
|
25 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year |
|
$ |
31 |
|
|
$ |
40 |
|
|
$ |
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
35
CONSOLIDATED BALANCE SHEETS
|
|
December 29, 2001
|
|
|
December 30, 2000
|
|
In millions, except shares and per share amounts |
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
31 |
|
|
$ |
40 |
|
|
|
|
|
|
|
|
|
|
Receivables, less allowances of $39 and $34, respectively |
|
|
2,352 |
|
|
|
2,704 |
|
|
|
|
|
|
|
|
|
|
Inventories |
|
|
|
|
|
|
|
|
Raw materials |
|
|
628 |
|
|
|
655 |
|
Finished goods |
|
|
1,537 |
|
|
|
1,868 |
|
Supplies |
|
|
504 |
|
|
|
548 |
|
LIFO reserve |
|
|
(157 |
) |
|
|
(178 |
) |
|
|
|
|
|
|
|
|
|
Total inventories |
|
|
2,512 |
|
|
|
2,893 |
|
|
|
|
|
|
|
|
|
|
Deferred income tax assets |
|
|
101 |
|
|
|
176 |
|
Net assets of discontinued operations |
|
|
|
|
|
|
145 |
|
Other current assets |
|
|
464 |
|
|
|
449 |
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
5,460 |
|
|
|
6,407 |
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
|
|
|
|
|
|
Land and improvements |
|
|
612 |
|
|
|
653 |
|
Buildings |
|
|
2,197 |
|
|
|
2,532 |
|
Machinery and equipment |
|
|
15,502 |
|
|
|
17,353 |
|
Construction in progress |
|
|
532 |
|
|
|
624 |
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, at cost |
|
|
18,843 |
|
|
|
21,162 |
|
Accumulated depreciation |
|
|
(9,051 |
) |
|
|
(9,378 |
) |
|
|
|
|
|
|
|
|
|
Total property, plant and equipment, net |
|
|
9,792 |
|
|
|
11,784 |
|
|
|
|
|
|
|
|
|
|
Goodwill, net |
|
|
8,265 |
|
|
|
8,985 |
|
|
|
|
|
|
|
|
|
|
Other assets |
|
|
2,847 |
|
|
|
2,242 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
26,364 |
|
|
$ |
29,418 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Commercial paper and other short-term notes |
|
$ |
2,284 |
|
|
$ |
2,327 |
|
Current portion of long-term debt |
|
|
572 |
|
|
|
232 |
|
Accounts payable |
|
|
1,630 |
|
|
|
1,808 |
|
Accrued compensation |
|
|
300 |
|
|
|
430 |
|
Other current liabilities |
|
|
1,024 |
|
|
|
879 |
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
5,810 |
|
|
|
5,676 |
|
|
|
|
|
|
|
|
|
|
Long-term debt, excluding current portion |
|
|
9,358 |
|
|
|
12,355 |
|
|
|
|
|
|
|
|
|
|
Senior deferrable notes |
|
|
863 |
|
|
|
863 |
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities |
|
|
3,582 |
|
|
|
2,647 |
|
|
|
|
|
|
|
|
|
|
Deferred income tax liabilities |
|
|
1,846 |
|
|
|
2,155 |
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
Shareholders equity: |
|
|
|
|
|
|
|
|
Common stock |
|
|
184 |
|
|
|
182 |
|
Georgia-Pacific Group, par value $0.80; 400,000,000 shares authorized; 230,095,000 shares and 224,844,000 shares issued
and outstanding at December 29, 2001 and December 30, 2000, respectively |
|
|
|
|
|
|
|
|
The Timber Company, par value $0.80; 250,000,000 shares authorized; 94,571,000 shares issued at December 30,
2000 |
|
|
|
|
|
|
|
|
Treasury stock, at cost |
|
|
|
|
|
|
(330 |
) |
14,387,000 shares of The Timber Company common stock at December 30, 2000 |
|
|
|
|
|
|
|
|
Additional paid-in capital |
|
|
2,521 |
|
|
|
2,427 |
|
Retained earnings |
|
|
2,321 |
|
|
|
3,463 |
|
Long-term incentive plan deferred compensation |
|
|
(3 |
) |
|
|
(4 |
) |
Accumulated other comprehensive loss |
|
|
(118 |
) |
|
|
(16 |
) |
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
4,905 |
|
|
|
5,722 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
26,364 |
|
|
$ |
29,418 |
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial
statements.
36
CONSOLIDATED STATEMENTS OF SHAREHOLDERS
EQUITY
|
|
Year Ended
|
|
|
|
December 29, 2001
|
|
|
December 30, 2000
|
|
|
January 1, 2000
|
|
In millions, except shares in thousands and per share amounts |
|
|
|
Common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
182 |
|
|
$ |
155 |
|
|
$ |
150 |
|
Common stock issued: |
|
|
|
|
|
|
|
|
|
|
|
|
Stock option plans and directors plan |
|
|
4 |
|
|
|
1 |
|
|
|
3 |
|
Employee stock purchase plans |
|
|
1 |
|
|
|
|
|
|
|
2 |
|
Common stock issued for acquisitions |
|
|
|
|
|
|
26 |
|
|
|
|
|
Spin-off of The Timber Company |
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
|
184 |
|
|
|
182 |
|
|
|
155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury stock: |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
|
(330 |
) |
|
|
(880 |
) |
|
|
(492 |
) |
Common stock repurchased |
|
|
|
|
|
|
(140 |
) |
|
|
(388 |
) |
Treasury stock issued for acquisition |
|
|
|
|
|
|
690 |
|
|
|
|
|
Spin-off of The Timber Company |
|
|
330 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
|
|
|
|
|
(330 |
) |
|
|
(880 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital: |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
|
2,427 |
|
|
|
1,510 |
|
|
|
1,331 |
|
Common stock issued: |
|
|
|
|
|
|
|
|
|
|
|
|
Stock option plans and directors plan |
|
|
149 |
|
|
|
153 |
|
|
|
155 |
|
Employee stock purchase plans |
|
|
35 |
|
|
|
|
|
|
|
53 |
|
Common stock issued for acquisitions |
|
|
5 |
|
|
|
764 |
|
|
|
|
|
Spin-off of The Timber Company |
|
|
(95 |
) |
|
|
|
|
|
|
|
|
Stock issuance costs |
|
|
|
|
|
|
|
|
|
|
(29 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
|
2,521 |
|
|
|
2,427 |
|
|
|
1,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
|
3,463 |
|
|
|
3,124 |
|
|
|
2,178 |
|
Net (loss) income |
|
|
(407 |
) |
|
|
505 |
|
|
|
1,116 |
|
Spin-off of The Timber Company |
|
|
(560 |
) |
|
|
|
|
|
|
|
|
Cash dividends declared (Georgia-Pacific Group, $0.50, per common share for each of the three years presented; The
Timber Company, $0.75 per common share for 2001 and $1.00 per share for both 2000 and 1999) |
|
|
(175 |
) |
|
|
(166 |
) |
|
|
(170 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
|
2,321 |
|
|
|
3,463 |
|
|
|
3,124 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term incentive plan deferred compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
|
(4 |
) |
|
|
(2 |
) |
|
|
|
|
Common stock issued under long-term incentive plan, net |
|
|
1 |
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
|
(3 |
) |
|
|
(4 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
|
(16 |
) |
|
|
(32 |
) |
|
|
(43 |
) |
Activity, net of taxes |
|
|
(102 |
) |
|
|
16 |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
|
(118 |
) |
|
|
(16 |
) |
|
|
(32 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
$ |
4,905 |
|
|
$ |
5,722 |
|
|
$ |
3,875 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Georgia-Pacific Group common stock shares issued and outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance, common stock issued |
|
|
224,844 |
|
|
|
191,983 |
|
|
|
186,564 |
|
Common stock issued: |
|
|
|
|
|
|
|
|
|
|
|
|
Stock option plans and directors plan |
|
|
3,550 |
|
|
|
570 |
|
|
|
3,982 |
|
Employee stock purchase plans |
|
|
1,511 |
|
|
|
|
|
|
|
1,397 |
|
Long-term incentive plan |
|
|
|
|
|
|
92 |
|
|
|
40 |
|
Common stock issued for acquisitions |
|
|
190 |
|
|
|
32,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, common stock issued |
|
|
230,095 |
|
|
|
224,844 |
|
|
|
191,983 |
|
Common stock repurchased and held in treasury |
|
|
|
|
|
|
(21,501 |
) |
|
|
(19,776 |
) |
Treasury stock issued for acquisition |
|
|
|
|
|
|
21,501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, common stock outstanding |
|
|
230,095 |
|
|
|
224,844 |
|
|
|
172,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Timber Company common stock shares issued and outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance, common stock issued |
|
|
94,571 |
|
|
|
93,904 |
|
|
|
92,785 |
|
Common stock issued: |
|
|
|
|
|
|
|
|
|
|
|
|
Stock option plans and directors plan |
|
|
2,081 |
|
|
|
667 |
|
|
|
421 |
|
Employee stock purchase plans |
|
|
17 |
|
|
|
|
|
|
|
698 |
|
Spin-off of The Timber Company |
|
|
(96,669 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, common stock issued |
|
|
|
|
|
|
94,571 |
|
|
|
93,904 |
|
Common stock repurchased and held in treasury |
|
|
|
|
|
|
(14,387 |
) |
|
|
(11,053 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, common stock outstanding |
|
|
|
|
|
|
80,184 |
|
|
|
82,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial
statements.
37
CONSOLIDATED STATEMENTS OF COMPREHENSIVE
(LOSS) INCOME
|
|
Year Ended
|
|
|
|
December 29, 2001
|
|
|
December 30, 2000
|
|
|
January 1, 2000
|
|
In millions |
|
|
|
Net (loss) income |
|
$ |
(407 |
) |
|
$ |
505 |
|
|
$ |
1,116 |
|
Other comprehensive (loss) income before taxes |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
(29 |
) |
|
|
24 |
|
|
|
11 |
|
Derivative instruments |
|
|
(50 |
) |
|
|
|
|
|
|
|
|
Minimum pension liability adjustment |
|
|
(75 |
) |
|
|
2 |
|
|
|
7 |
|
Income tax benefit (expense) related to items of other comprehensive income |
|
|
52 |
|
|
|
(10 |
) |
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive (loss) income |
|
$ |
(509 |
) |
|
$ |
521 |
|
|
$ |
1,127 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial
statements.
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
The Corporation, a Georgia corporation, is broadly engaged in five business operations: the manufacture and distribution of building products (including plywood, oriented
strand board, various industrial wood products, and softwood and hardwood lumber as well as certain nonwood products including gypsum board, chemicals and other products); the manufacture of containerboard and packaging (including linerboard,
medium, kraft and corrugated packaging); the manufacture of bleached pulp and paper (including paper, market pulp, and bleached board) and the distribution of paper products and supplies manufactured by the Corporation or purchased from others; and
the manufacture of tissue products (including bath tissue, paper towels, and napkins) and disposable tabletop products (including disposable cups, plates and cutlery). Prior to October 6, 2001, the Corporation also engaged in the growing of timber
on approximately 4.7 million acres of timberlands that the Corporation owned or leased. In 2001, these timberlands supplied approximately 10% of the overall timber requirements of the Corporations manufacturing facilities. On October 6, 2001,
the Corporation completed the spin off of The Timber Company and its merger with and into Plum Creek Timber Company, Inc. (Plum Creek) (see Note 3).
Basis of Presentation
On December 16, 1997, shareholders
of the Corporation approved the creation of two classes of common stock intended to reflect separately the performance of the Corporations manufacturing and timber businesses (the Letter Stock Recapitalization). The
Corporations Articles of Incorporation were amended and restated to (i) create a new class of stock designated as Georgia-Pacific CorporationTimber Group common stock, $0.80 par value per share (The Timber Company stock),
consisting of 250 million authorized shares; (ii) redesignate each authorized share of the Corporations common stock, $0.80 par value per share (the Existing Common Stock) as, and convert each share into, one share of Georgia-Pacific
CorporationGeorgia-Pacific Group common stock (now two shares of Georgia-Pacific Group common stock after giving effect to the May 14, 1999 two-for-one stock split), $0.80 par value per share (Georgia-Pacific Group stock); (iii)
increase the number of shares of Georgia-Pacific Group stock authorized for issuance from 150 million shares to 400 million shares; and (iv) authorize the distribution of one share of The Timber Company stock for each outstanding share of
Georgia-Pacific Group stock.
The Corporations manufacturing and former timber businesses are referred to
herein as the Georgia-Pacific Group and The Timber Company, respectively, or collectively as the groups.
The Georgia-Pacific Group is a manufacturer and distributor of building products and pulp and paper products. The Georgia-Pacific Group also includes a procurement function that is responsible for
purchasing timber and wood fiber for all the Corporations manufacturing facilities. The Timber Company was engaged primarily in the growing and selling of timber. After the spin off of The Timber Company and its merger with and into Plum Creek
on October 6, 2001, the Corporation is comprised solely of Georgia-Pacific Group.
Principles of Consolidation
The consolidated financial statements include the accounts of the Corporation and its wholly owned domestic
and foreign subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. The equity method of accounting is used for investments in companies where the Corporation has a 20% to 50% ownership interest. The
equity method of accounting is also used in instances where the Corporation may have an ownership interest greater than 50% and the investing partner has significant participation rights.
39
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Discontinued Operations
On October 6, 2001, the Corporation completed the spin off of The Timber Company and its merger with and into Plum Creek (see Note 3). The results of the Timber Company are
reported as Income from discontinued operations, net of taxes in the accompanying consolidated statements of income.
Financial Activities
At June 30, 1997, $1.0 billion of the Corporations total debt
was allocated to The Timber Company for financial reporting purposes, and the balance of the Corporations total debt was allocated to the Georgia-Pacific Group. The Corporations debt was allocated between the groups based upon a number
of factors including expected future cash flows, volatility of earnings, and the ability to pay debt service and dividends. In addition, the Corporation considered certain measures of creditworthiness, such as coverage ratios and various tests of
liquidity, as a means of ensuring that each group could continue to pay debt service during a business downcycle. Management believed that such allocation was equitable and reasonable.
In connection with the spin off of The Timber Company and its merger with and into Plum Creek, Plum Creek assumed $646 million of debt previously allocated to The Timber
Company. The debt of each group bore interest at a rate equal to the weighted average interest rate of all the Corporations debt calculated on a quarterly basis. This weighted average interest rate excluded the interest on the senior
deferrable notes. Management believes that this method of allocation of the cost of debt was equitable and provided a reasonable estimate of the cost attributable to the groups.
Each groups debt increased or decreased by the amount of any net cash generated by, or required to fund, the groups operating activities, investing activities,
dividend payments, share repurchases and other financing activities. Interest was charged to each group in proportion to the respective amount of each groups debt. Changes in the cost of the Corporations debt were reflected in
adjustments to the weighted average interest cost of such debt.
Allocation of Shared Services
A portion of the Corporations shared General and administrative expenses (such as executive management,
human resources, legal, accounting and auditing, tax, treasury, strategic planning and information systems support) had been allocated to each group based upon identification of such services specifically used by each group. Where determinations
based on specific usage alone were impracticable, other methods and criteria were used that management believed were equitable and provided a reasonable estimate of the cost attributable to each group. These methods consisted of allocating costs
based on (i) number of employees of each group, (ii) percentage of office space of each group and (iii) estimated percentage of staff time allocable to each group. The total of these allocations was $369 million, $280 million and $251 million in
2001, 2000 and 1999, respectively. It is not practicable to provide a detailed estimate of the expenses that would be recognized if either group were a separate legal entity.
Allocation of Employee Benefits
A portion of the Corporations employee benefit costs, including pension and postretirement health care and life insurance benefits, had been allocated to each group. The pension cost related to their participation in the
Corporations noncontributory defined benefit pension plan, and other employee benefit costs related to their participation in the Corporations postretirement health care and life insurance benefit plans, were actuarially determined based
on the number of their employees and an allocable share of the plan assets and were calculated in accordance with SFAS No. 87, Employers Accounting for Pensions, and SFAS No. 106, Employers Accounting for Postretirement
Benefits Other Than Pensions, respectively. Management believes such method of allocation was equitable and provided a reasonable estimate of the costs attributable to each group.
40
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES(Continued)
Since plan assets were not segregated into separate accounts or
restricted to providing benefits to employees of either group, assets of the Corporations employee benefit plans may have been used to provide benefits to employees of both the Georgia-Pacific Group and The Timber Company. Plan assets have
been allocated to the groups based on the percentage of their projected benefit obligations to the plans total projected benefit obligations.
Allocation of Federal and State Income Taxes
The federal
income taxes of the Corporation and the subsidiaries that own assets allocated between the groups were determined on a consolidated basis. Consolidated federal income tax provisions and related tax payments or refunds were allocated between the
groups based principally on the taxable income and tax credits directly attributable to each group. Such allocations reflected each groups contribution (positive or negative) to the Corporations consolidated federal taxable income and
the consolidated federal tax liability and tax credit position. Tax benefits that could not be used by the group generating those benefits, but could be used on a consolidated basis, were credited to the group that enabled the use of such benefits.
Had the groups filed separate tax returns, the provision for income taxes and net income for each group would not have significantly differed from the amounts reported on the groups statements of income for the years ended December 29, 2001,
December 30, 2000 and January 1, 2000. However, the amounts of current and deferred taxes and taxes payable or refundable allocated to each group on the historical financial statements may have differed from those that would have been allocated had
the groups filed separate income tax returns.
Depending on the tax laws of the respective jurisdictions, state
and local income taxes were calculated on either a consolidated or combined basis or on a separate corporation basis. State income tax provisions and related tax payments or refunds determined on a consolidated or combined basis were allocated
between the groups based on their respective contributions to such consolidated or combined state taxable incomes. State and local income tax provisions and related tax payments that are determined on a separate corporation basis were allocated
between the groups in a manner designed to reflect the respective contributions of the groups to the Corporations separate state or local taxable income.
Dividends
For purposes of the historical financial
statements of the Georgia-Pacific Group and The Timber Company, for periods prior to 1999, all dividends declared and paid by the Corporation were evenly allocated between the groups. Management believes that such method of allocation was equitable
and provides a reasonable estimate of the dividends that would have been declared and paid in respect of each class of common stock. The amount of earnings available for payment of dividends on Georgia-Pacific Group stock and on The Timber Company
stock (i.e., the available dividend amounts) on any date was the amount in excess of the minimum amount necessary for the particular group to be able to pay its debts as they become due in the usual course of business.
Stock Split
On May 4, 1999, the Board declared a two-for-one split of the Georgia-Pacific Groups stock in the form of a special dividend to shareholders of record on May 14, 1999. The special dividend was paid as one share of
Georgia-Pacific Group stock for each such share outstanding on June 3, 1999. A total of 95,126,911 additional shares were issued in conjunction with the stock split. The Georgia-Pacific Groups par value of $0.80 remained unchanged. As a
result, $76 million of shareholders equity was reclassified from Additional paid-in capital to Common stock. All historical share and per share amounts have been restated to reflect retroactively the stock split.
41
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES(Continued)
Revenue Recognition
The Corporation recognizes revenue when the following criteria are met: persuasive evidence of an agreement exists, delivery has occurred
or services have been rendered, the Corporations price to the buyer is fixed and determinable, and collectibility is reasonably assured. Delivery is not considered to have occurred until the customer takes title and assumes the risks and
rewards of ownership. The timing of revenue recognition is largely dependent on shipping terms. Revenue is recorded at the time of shipment for terms designated at f.o.b. (free on board) shipping point. For sales transactions designated f.o.b.
destination, revenue is recorded when the product is delivered to the customers delivery site. The Corporation does not recognize revenue from bill and hold transactions until the product is delivered to the customers delivery site (for
sales with terms of f.o.b. destination) or until the product is shipped to the customer (for sales with terms of f.o.b. shipping point).
Foreign Currency Translation
The functional currency for most international
subsidiaries is the local currency for the country in which the subsidiaries own their primary assets. The translation of the applicable currencies into United States dollars is performed for balance sheet accounts using current exchange rates in
effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period. Any related translation adjustments are recorded directly in other comprehensive income. Foreign currency transaction
gains (losses) are reflected in the Consolidated Statements of Income and were not material.
Income Per Share
Basic earnings per share are computed based on net income and the weighted average number of common shares
outstanding. Diluted earnings per share reflect the assumed issuance of common shares under long-term incentive, stock option and stock purchase plans, and pursuant to the terms of the Premium Equity Participating Security Units (PEPS
Units) (see Note 7). The computation of diluted earnings per share does not assume conversion or exercise of securities that would have an antidilutive effect on earnings per share. Amounts are computed for each class of common stock based on
the separate earnings attributed to each of the respective businesses.
42
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Earnings Per Share
|
|
Georgia-Pacific Group Year
Ended
|
|
|
|
December 29, 2001
|
|
|
December 30, 2000
|
|
|
January 1, 2000
|
|
In millions, except shares and per share amounts |
|
|
|
|
|
|
|
|
|
Basic and diluted income available to Shareholders (numerator): |
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
$ |
(476 |
) |
|
$ |
343 |
|
|
$ |
716 |
|
Extraordinary loss from early retirement of debt, net of taxes |
|
|
(12 |
) |
|
|
|
|
|
|
|
|
Cumulative effect of accounting change, net of taxes |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(477 |
) |
|
$ |
343 |
|
|
$ |
716 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares (denominator): |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
227,590,185 |
|
|
|
175,835,279 |
|
|
|
171,807,884 |
|
Dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
|
* |
|
|
872,380 |
** |
|
|
3,677,295 |
*** |
Employee stock purchase plans |
|
|
|
|
|
|
191,945 |
|
|
|
438,630 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assuming conversion |
|
|
227,590,185 |
|
|
|
176,899,604 |
|
|
|
175,923,809 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share amounts: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
$ |
(2.09 |
) |
|
$ |
1.95 |
|
|
$ |
4.17 |
|
Extraordinary loss, net of taxes |
|
|
(0.05 |
) |
|
|
|
|
|
|
|
|
Cumulative effect of accounting change, net of taxes |
|
|
0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(2.10 |
) |
|
$ |
1.95 |
|
|
$ |
4.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
$ |
(2.09 |
) |
|
$ |
1.94 |
|
|
$ |
4.07 |
|
Extraordinary loss, net of taxes |
|
|
(0.05 |
) |
|
|
|
|
|
|
|
|
Cumulative effect of accounting change, net of taxes |
|
|
0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(2.10 |
) |
|
$ |
1.94 |
|
|
$ |
4.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Timber Company Year
Ended
|
|
|
|
December 29, 2001
|
|
|
December 30, 2000
|
|
|
January 1, 2000
|
|
In millions, except shares and per share amounts |
|
|
|
|
|
|
|
|
|
Basic and diluted income available to Shareholders (numerator): |
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of taxes |
|
$ |
70 |
|
|
$ |
162 |
|
|
$ |
400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares (denominator): |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
80,960,667 |
|
|
|
80,705,171 |
|
|
|
84,138,673 |
|
Dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
785,449 |
|
|
|
408,905 |
|
|
|
426,423 |
# |
Employee stock purchase plans |
|
|
|
|
|
|
1,936 |
|
|
|
40,508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assuming conversion |
|
|
81,746,116 |
|
|
|
81,116,012 |
|
|
|
84,605,604 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share amounts: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic per common share |
|
$ |
0.86 |
|
|
$ |
2.01 |
|
|
$ |
4.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted per common share |
|
$ |
0.86 |
|
|
$ |
2.00 |
|
|
$ |
4.73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Options to purchase 20,151,717 shares of Georgia-Pacific Group stock at prices ranging from $9.59 to $91.58 per share were outstanding during 2001, as were PEPS
Units to purchase Georgia-Pacific Group stock. However, these were not included in the computation of diluted earnings per share because the Corporation reported a loss for the year and inclusion of such shares would have had an antidilutive effect.
|
** |
|
Options to purchase 5,474,098 shares of Georgia-Pacific Group stock at prices ranging from $31.57 to $91.58 per share were outstanding during 2000, as were PEPS
Units to purchase Georgia-Pacific Group stock. However, these were not included in the computation of diluted earnings per share because the options exercise price and the PEPS Unit purchase contract price were greater than the average market
price of the common shares. |
43
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
*** |
|
Options to purchase 176,490 shares of Georgia-Pacific Group stock at prices ranging from $43.58 to $91.58 per share were outstanding during 1999, as were PEPS
Units to purchase Georgia-Pacific Group stock. However, these were not included in the computation of diluted earnings per share because the options exercise price and the PEPS Unit purchase contract price were greater than the average market
price of the common shares. |
# |
|
Options to purchase 1,004,000 shares of The Timber Company stock at $25.13 per share were outstanding during 1999 but were not included in the computation of
diluted earnings per share because the options exercise price was greater than the average market price of the common shares. |
Inventory Valuation
Inventories are valued at the lower of
year-to-date average cost or market and include the costs of materials, labor and manufacturing overhead. The LIFO dollar value pool method was used to determine the cost of approximately 61% and 64% of inventories at December 29, 2001 and December
30, 2000, respectively.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Lease obligations for which the Corporation assumes or retains substantially all the
property rights and risks of ownership are capitalized. Replacements of major units of property are capitalized, and the replaced properties are retired. Replacements of minor components of property, and repair and maintenance costs, are charged to
expense as incurred. Planned shutdown maintenance costs are charged to earnings ratably during the year.
Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Useful lives are 25 years for land improvements, 20 to 45 years for buildings, and 3 to 20 years for machinery and
equipment. Upon retirement or disposition of assets, cost and accumulated depreciation are removed from the related accounts and any gain or loss is included in other losses, net on the accompanying statements of income.
The Corporation capitalizes incremental costs that are directly associated with the development of software for internal
use. Amounts are amortized over five years beginning when the assets are placed in service. The net book value of such capitalized costs was $21 million in 2001, $48 million in 2000, and $66 million in 1999. Amounts are included as Property,
plant and equipment on the accompanying consolidated balance sheets.
The Corporation capitalizes
interest on projects when construction takes considerable time and entails major expenditures. Such interest is charged to the property, plant and equipment accounts and amortized over the approximate lives of the related assets. Interest
capitalized, expensed and paid was as follows:
|
|
Year Ended
|
|
|
|
December 29, 2001
|
|
|
December 30, 2000
|
|
|
January 1, 2000
|
|
In millions |
|
|
|
|
|
|
|
|
|
Total interest costs |
|
$ |
1,091 |
|
|
$ |
606 |
|
|
$ |
432 |
|
Interest capitalized |
|
|
(11 |
) |
|
|
(11 |
) |
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
$ |
1,080 |
|
|
$ |
595 |
|
|
$ |
426 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
1,112 |
|
|
$ |
628 |
|
|
$ |
473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Landfills and Lagoons
The Corporation accrues for landfill closure costs including waste treatment, storage or disposal over the periods that benefit from the
use of the landfill and accrues for lagoon clean-out costs over the useful period between clean-outs.
44
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Identifiable Intangible Assets
The Corporation amortizes identifiable intangible assets such as patents, trademarks, and tradenames using the straight-line method over
their estimated useful lives of up to 40 years. Amortization expense for identifiable intangible assets was $32 million and $10 million in 2001 and 2000, respectively. Accumulated amortization at December 29, 2001 and December 30, 2000 was $42
million and $10 million, respectively.
Impairment of Long-Lived Assets Other Than Goodwill
The Corporation assesses its long-lived assets other than goodwill for impairment whenever facts and circumstances indicate
that the carrying amount may not be fully recoverable. To analyze recoverability, the Corporation projects undiscounted net future cash flows over the remaining life of such assets. If these projected cash flows are less than the carrying amount, an
impairment would be recognized, resulting in a write-down of assets with a corresponding charge to earnings. The impairment loss is measured based upon the difference between the carrying amount and the fair value of the assets.
Goodwill
The Corporation amortizes costs in excess of fair value of net assets of businesses acquired using the straight-line method over a period not to exceed 40 years. The Corporation reviews the recorded value of its goodwill
annually, or sooner if events or changes in circumstances indicate that the carrying amount may exceed fair value. Recoverability is then determined by comparing the undiscounted net cash flows of the assets to which the goodwill applies to the net
book value, including goodwill, of those assets.
Amortization expense was $235 million, $86 million and $69
million in 2001, 2000, and 1999, respectively. Accumulated amortization at December 29, 2001 and December 30, 2000 was $936 million and $701 million, respectively.
Shipping and Handling Costs
The Corporation classifies the majority of shipping and handling costs as cost of sales. However, certain shipping and handling costs are classified as selling and distribution expenses. Shipping and handling costs included in
selling and distribution expenses were $658 million, $521 million and $352 million in 2001, 2000, and 1999, respectively.
Advertising Costs
Advertising costs are expensed as incurred.
Environmental and Legal Matters
The Corporation recognizes a liability for environmental remediation and legal indemnification and defense costs when it believes it is probable a liability has been incurred and the amount can be
reasonably estimated. The liabilities are developed based on currently available information and reflect the participation of other potentially responsible parties, depending on the parties financial condition and probable contribution. The
accruals are recorded at undiscounted amounts and are reflected as liabilities on the accompanying consolidated balance sheets. The Corporation also has insurance that covers losses on certain environmental claims and records a receivable to the
extent that the realization of the insurance is deemed probable. These receivables are recorded at undiscounted amounts and are reflected as assets in the accompanying consolidated balance sheets.
Environmental costs are generally capitalized when the costs improve the condition of the property or the costs prevent or mitigate future
contamination. All other costs are expensed.
45
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
Accounting Standards Changes
In July 2001, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 141,
Business Combinations (SFAS No. 141), and SFAS No. 142, Goodwill and Other Intangible Assets (SFAS No. 142). SFAS No. 141 requires that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001. SFAS No. 142 requires that entities assess the fair value of the net assets underlying all acquisition related goodwill on a reporting unit basis effective beginning in 2002. When the fair value is less than the
related carrying value, entities are required to reduce the amount of goodwill. Reductions are made retroactive to the beginning of fiscal year 2002. SFAS No. 142 also requires that entities discontinue amortization of all purchased goodwill,
including amortization of goodwill recorded in past business combinations. The Corporation has determined its reporting units to be the following: structural panels, lumber, industrial wood products, gypsum, chemical, building products distribution,
packaging, bleached pulp and paper, paper distribution, North American towel and tissue, Dixie and European towel and tissue. Management is evaluating the effect of this statement on these reporting units. As of December 29, 2001, the Corporation
had acquisition related goodwill of $8.3 billion, net of accumulated amortization. Beginning in 2002, the Corporation will no longer be amortizing acquisition related goodwill. Had the corporation discontinued amortization of goodwill beginning in
fiscal year 1999, operating results for fiscal years 2001, 2000 and 1999 would have been as follows:
|
|
Year Ended
|
|
|
December 29, 2001
|
|
|
December 30, 2000
|
|
January 1, 2000
|
|
|
(in millions, except per share data) |
(Loss) income from continuing operations, as reported |
|
$ |
(476 |
) |
|
$ |
343 |
|
$ |
716 |
Add back: goodwill amortization |
|
|
235 |
|
|
|
86 |
|
|
69 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted (loss) income from continuing operations |
|
$ |
(241 |
) |
|
$ |
429 |
|
$ |
785 |
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income as reported |
|
$ |
(477 |
) |
|
$ |
343 |
|
$ |
716 |
Add back: goodwill amortization |
|
|
235 |
|
|
|
86 |
|
|
69 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income |
|
$ |
(242 |
) |
|
$ |
429 |
|
$ |
785 |
|
|
|
|
|
|
|
|
|
|
|
Georgia-Pacific Group |
|
|
|
|
|
|
|
|
|
|
Basic earnings per share: |
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations, as reported |
|
$ |
(2.09 |
) |
|
$ |
1.95 |
|
$ |
4.17 |
Add back: goodwill amortization |
|
|
1.03 |
|
|
|
.49 |
|
|
.40 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted (loss) income from continuing operations |
|
$ |
(1.06 |
) |
|
$ |
2.44 |
|
$ |
4.57 |
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share: |
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations, as reported |
|
$ |
(2.09 |
) |
|
$ |
1.94 |
|
$ |
4.07 |
Add back: goodwill amortization |
|
|
1.03 |
|
|
|
.49 |
|
|
.39 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted (loss) income from continuing operations |
|
$ |
(1.06 |
) |
|
$ |
2.43 |
|
$ |
4.46 |
|
|
|
|
|
|
|
|
|
|
|
In July 2001, the FASB also issued SFAS No. 143, Accounting
for Asset Retirement Obligations (SFAS No. 143). SFAS No. 143 requires entities to record the fair value of a liability for an asset retirement obligation
46
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
in the period in which it is incurred. When the liability is initially recorded, the entity capitalizes the cost by increasing the carrying amount of the related long-lived asset. Over time, the
liability is accreted to its present value each period and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, the entity either settles the obligation for the amount recorded or incurs a
gain or loss. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. Management is evaluating the effect of this statement on the Corporations results of operations and financial position.
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No.
144). SFAS No. 144 supersedes FASB statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of (SFAS No. 121), and the accounting and reporting provisions of APB Opinion
No. 30, Reporting the Results of OperationsReporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions (Opinion 30) for the disposal of a
segment of a business (as previously defined in Opinion 30). The FASB issued SFAS No. 144 to establish a single accounting model, based on the framework established in SFAS No. 121, for long-lived assets to be disposed of by sale. SFAS No. 144
broadens the presentation of discontinued operations in the income statement to include a component of an entity (rather than a segment of a business). A component of an entity comprises operations and cash flows that can be clearly distinguished,
operationally and for financial reporting purposes, from the rest of the entity. SFAS No. 144 also requires that discontinued operations be measured at the lower of the carrying amount or fair value less cost to sell. SFAS No. 144 is effective for
fiscal years beginning after December 15, 2001 and should be applied prospectively.
Change in Fiscal Year
In April 1999, the Corporation determined to change its fiscal year from December 31 to end on the Saturday
closest to December 31. Additionally, the Corporation reports its quarterly periods on a 13-week basis ending on a Saturday. The impact of one additional day on the year ended January 1, 2000 was not material. There was no transition period on which
to report.
Reclassifications
Certain 2000 and 1999 amounts have been reclassified to conform with the 2001 presentation. In 2001, the Corporation began classifying bank overdrafts as accounts payable.
Total bank overdrafts at December 29, 2001 and December 30, 2000 were $199 million and $293 million, respectively.
NOTE
2. OPERATING SEGMENT INFORMATION
The Corporation has four reportable operating
segments: consumer products, packaging, bleached pulp and paper, and building products.
|
|
|
The consumer products segment produces and sells retail and away-from-home tissue and the Dixie line. |
|
|
|
The packaging segment produces and sells linerboard, medium, kraft and corrugated packaging. |
|
|
|
The bleached pulp and paper segment produces paper, market pulp, and bleached board. The distribution division of the bleached pulp and paper segment sells and
distributes high-quality printing, writing and copying papers and a broad range of packaging and maintenance supplies, equipment and services. |
|
|
|
Manufactured products in the building products segment consist primarily of wood panels (plywood, oriented strand board, hardboard and particleboard), lumber,
gypsum products and chemicals. The distribution business of the building products segment sells a wide range of building products
|
47
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
manufactured by the Corporation or purchased from others. This segment of the business is primarily affected by the level of housing starts; the level of repairs, remodeling and additions;
industrial markets; commercial building activity; the availability and cost of financing; and changes in industry capacity. |
Markets for these segments are affected primarily by changes in industry capacity, the level of economic growth in United States and export markets, and fluctuations in currency exchange rates.
The accounting policies of the segments are primarily the same as those described in the summary of significant
accounting policies. The Corporation evaluates performance based on profit or loss from operations before interest and income taxes (i.e., operating profit or loss).
The Corporation accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices.
The Corporations reportable segments are strategic business units that offer different products and services. They are
managed separately because each business has different customers and requires different production processes.
The
Other nonreportable segment includes some miscellaneous businesses, unallocated corporate operating expenses, and the elimination of intersegment sales and related profits.
The Corporation has a large and diverse customer base, which includes some customers located in foreign countries. No single unaffiliated customer accounted for more than
10% of total sales in any year during the three years ended December 29, 2001. Sales to foreign markets in 2001, 2000 and 1999 were 13%, 10% and 7%, respectively. These sales were primarily to customers in Canada, Europe, Asia and Latin America.
Information on operations in United States and foreign markets is as follows:
Revenues*
|
|
Year Ended
|
|
|
December 29, 2001
|
|
December 30, 2000
|
|
January 1, 2000
|
In millions |
|
|
|
|
|
|
United States |
|
$ |
21,724 |
|
$ |
19,937 |
|
$ |
17,052 |
Foreign countries |
|
|
3,292 |
|
|
2,113 |
|
|
1,357 |
|
|
|
|
|
|
|
|
|
|
Total net sales |
|
$ |
25,016 |
|
$ |
22,050 |
|
$ |
18,409 |
|
|
|
|
|
|
|
|
|
|
* |
|
Revenues are attributed to countries based on location of customer. |
Long lived assets located in the United States and abroad were valued at $8.1 billion and $1.7 billion, respectively as of December 29, 2001 and were $10.4 billion and $1.4
billion, respectively, at December 30, 2000. Prior to the acquisition of Fort James in November 2000 (see Note 3), a substantial portion of the Corporations foreign revenues was derived from the sale of United Statesproduced products
abroad. Therefore, assets located outside the United States as of January 1, 2000 were not material.
48
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The following summarizes certain financial information by segment:
|
|
Consumer Products
|
|
|
Packaging
|
|
Bleached Pulp and Paper
|
|
Building Products
|
|
All Other
|
|
|
Consolidated
|
In millions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to unaffiliated customers |
|
$ |
6,992 |
|
|
$ |
2,482 |
|
$ |
8,492 |
|
$ |
7,049 |
|
$ |
1 |
* |
|
$ |
25,016 |
Intersegment sales |
|
|
146 |
|
|
|
128 |
|
|
221 |
|
|
735 |
|
|
(1,230 |
)** |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales |
|
$ |
7,138 |
|
|
$ |
2,610 |
|
$ |
8,713 |
|
$ |
7,784 |
|
$ |
(1,229 |
) |
|
$ |
25,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss) |
|
$ |
792 |
|
|
$ |
384 |
|
$ |
69 |
|
$ |
150 |
|
$ |
(610 |
)*** |
|
$ |
785 |
Depreciation and amortization |
|
|
608 |
|
|
|
174 |
|
|
336 |
|
|
202 |
|
|
23 |
|
|
|
1,343 |
Property, plant and equipment investments |
|
|
337 |
|
|
|
78 |
|
|
149 |
|
|
114 |
|
|
61 |
|
|
|
739 |
Timber and timberland purchases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 |
|
|
|
31 |
Acquisitions |
|
|
46 |
|
|
|
61 |
|
|
|
|
|
26 |
|
|
|
|
|
|
133 |
Assets |
|
|
16,059 |
|
|
|
2,367 |
|
|
3,822 |
|
|
3,185 |
|
|
931 |
|
|
|
26,364 |
2000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to unaffiliated customers |
|
$ |
2,054 |
|
|
$ |
2,646 |
|
$ |
9,387 |
|
$ |
7,961 |
|
$ |
2 |
* |
|
$ |
22,050 |
Intersegment sales |
|
|
65 |
|
|
|
89 |
|
|
67 |
|
|
762 |
|
|
(983 |
)** |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales |
|
$ |
2,119 |
|
|
$ |
2,735 |
|
$ |
9,454 |
|
$ |
8,723 |
|
$ |
(981 |
) |
|
$ |
22,050 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss) |
|
$ |
(17 |
) |
|
$ |
512 |
|
$ |
509 |
|
$ |
382 |
|
$ |
(238 |
)*** |
|
$ |
1,148 |
Depreciation and amortization |
|
|
162 |
|
|
|
172 |
|
|
355 |
|
|
204 |
|
|
17 |
|
|
|
910 |
Property, plant and equipment investments |
|
|
243 |
|
|
|
112 |
|
|
227 |
|
|
268 |
|
|
59 |
|
|
|
909 |
Timber and timberland purchases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59 |
|
|
|
59 |
Acquisitions |
|
|
6,140 |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
6,142 |
Assets |
|
|
15,610 |
|
|
|
2,421 |
|
|
6,416 |
|
|
3,497 |
|
|
1,474 |
# |
|
|
29,418 |
1999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to unaffiliated customers |
|
$ |
1,195 |
|
|
$ |
2,446 |
|
$ |
5,844 |
|
$ |
8,921 |
|
$ |
3 |
* |
|
$ |
18,409 |
Intersegment sales |
|
|
39 |
|
|
|
65 |
|
|
25 |
|
|
768 |
|
|
(897 |
)** |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales |
|
$ |
1,234 |
|
|
$ |
2,511 |
|
$ |
5,869 |
|
$ |
9,689 |
|
$ |
(894 |
) |
|
$ |
18,409 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss) |
|
$ |
131 |
|
|
$ |
324 |
|
$ |
181 |
|
$ |
1,205 |
|
$ |
(251 |
)*** |
|
$ |
1,590 |
Depreciation and amortization |
|
|
67 |
|
|
|
157 |
|
|
309 |
|
|
208 |
|
|
74 |
|
|
|
815 |
Property, plant and equipment investments |
|
|
138 |
|
|
|
92 |
|
|
165 |
|
|
285 |
|
|
43 |
|
|
|
723 |
Timber and timberland purchases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78 |
|
|
|
78 |
Acquisitions |
|
|
755 |
|
|
|
23 |
|
|
829 |
|
|
51 |
|
|
|
|
|
|
1,658 |
Assets |
|
|
1,603 |
|
|
|
2,461 |
|
|
6,435 |
|
|
3,626 |
|
|
1,380 |
# |
|
|
15,505 |
* |
|
Amounts include net sales from miscellaneous businesses. |
** |
|
Elimination of intersegment sales. |
*** |
|
Includes some miscellaneous businesses, unallocated corporate operating expenses and the elimination of profit on intersegment sales. Amounts in 2001 include a
charge of $350 million for expenditures, net of anticipated insurance recoveries, for projected asbestos liabilities through 2011. |
# |
|
Includes net assets of discontinued operations. |
49
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Reconciliation to Net (Loss) Income
|
|
Year Ended
|
|
|
December 29, 2001
|
|
|
December 30, 2000
|
|
January 1, 2000
|
In millions |
|
|
|
|
|
|
|
Total operating profit |
|
$ |
785 |
|
|
$ |
1,148 |
|
$ |
1,590 |
Interest expense |
|
|
1,080 |
|
|
|
595 |
|
|
426 |
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before income taxes |
|
|
(295 |
) |
|
|
553 |
|
|
1,164 |
Provision for income taxes |
|
|
181 |
|
|
|
210 |
|
|
448 |
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
|
(476 |
) |
|
|
343 |
|
|
716 |
Income from discontinued operations, net of taxes |
|
|
70 |
|
|
|
162 |
|
|
400 |
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before extraordinary item and accounting change |
|
|
(406 |
) |
|
|
505 |
|
|
1,116 |
Extraordinary loss from early extinguishment of debt, net of taxes |
|
|
(12 |
) |
|
|
|
|
|
|
Cumulative effect of accounting change, net of taxes |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(407 |
) |
|
$ |
505 |
|
$ |
1,116 |
|
|
|
|
|
|
|
|
|
|
|
NOTE 3. ACQUISITIONS AND DIVESTITURES
|
|
On August 7, 2001, the Corporation completed the sale of a portion of its paper and pulp assets to Domtar Inc. for $1.65 billion in cash. The assets involved in
this transaction were the Corporations stand-alone uncoated fine paper mills at Ashdown, Arkansas; Nekoosa and Port Edwards, Wisconsin; and Woodland, Maine, as well as associated pulp facilities. The Corporation used the net proceeds of
approximately $1.53 billion ($1.14 billion after taxes) to repay debt. In connection with this sale, the Corporation recorded a pretax loss of $63 million in the third quarter of 2001 in the bleached pulp and paper segment. This loss was reflected
in Other losses, net on the accompanying consolidated statements of income. In addition, the Corporation recorded a provision for income taxes of $197 million principally applicable to $630 million of non-deductible goodwill related to
the assets sold. |
|
|
On October 6, 2001, the Corporation completed the spin off of The Timber Company and its merger with and into Plum Creek. In accordance with the merger
agreement, shareholders of The Timber Company received 1.37 shares of Plum Creek stock for each share of The Timber Company stock. This transaction, which included the assumption by Plum Creek of $646 million of the Corporations debt, was
valued at approximately $3.4 billion. Plum Creek assumed a 10-year timber supply agreement between the Corporation and The Timber Company. |
The transaction was originally conditioned on the receipt of a private letter ruling from the Internal Revenue Service (the Service) that the transaction would be tax-free to the
Corporation and to the shareholders of The Timber Company. In June 2001, the Corporation and Plum Creek amended the original merger agreement and determined to effect the merger upon receipt of opinions from tax counsel that the spin off of The
Timber Company from the Corporation and the subsequent merger with Plum Creek would be tax-free to the Corporation and to the shareholders of The Timber Company. The Service notified the companies on June 12, 2001, that it had decided not to issue
the private letter ruling based on its belief that the companies had failed to carry the high burden of proof of business purpose necessary for the transaction to receive such an advance ruling. This high burden of proof, which is more stringent
than the legal standards applicable to the audit process or any judicial proceeding, pertains only to advance rulings. Based on discussion with the Service and the advice of legal counsel, the companies believe the transaction will not be taxable to
the Corporation or the shareholders of The Timber Company. As an added measure to reduce the uncertainty
50
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
concerning any possible tax risks associated with the transaction, the Corporation obtained up to $500 million in tax liability insurance.
The Timber Company has been treated as a discontinued operation in the accompanying consolidated financial statements. The components of net assets of discontinued
operations are as follows:
In millions |
|
December 30, 2000
|
|
Timber and timberlands |
|
$ |
1,220 |
|
Other assets |
|
|
399 |
|
Debt |
|
|
(640 |
) |
Other liabilities |
|
|
(834 |
) |
|
|
|
|
|
Net assets of discontinued operations |
|
$ |
145 |
|
|
|
|
|
|
Operating results of the discontinued operation were as follows:
In millions |
|
Dec. 29, 2001
|
|
|
Dec. 30, 2000
|
|
|
Jan. 1, 2000
|
|
Net sales |
|
$ |
293 |
|
|
$ |
394 |
|
|
$ |
526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
$ |
129 |
|
|
$ |
259 |
|
|
$ |
657 |
|
Provision for income taxes |
|
|
(59 |
) |
|
|
(97 |
) |
|
|
(257 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operation |
|
$ |
70 |
|
|
$ |
162 |
|
|
$ |
400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2001, the Corporation sold various assets including two lumber mills, industrial wood products property, certain paper distribution assets, timber assets
and corporate aircraft for a total of $202 million in cash and recognized a pretax gain of $70 million. Of the total gain recognized, $44 million related to the sale of certain timber assets associated with The Timber Company and was included in
Income from discontinued operations, net of taxes in the accompanying consolidated statements of income with the remainder reflected in Other losses, net. |
|
|
During the first quarter of 2001, the Corporation acquired the remaining ownership of two chemical joint ventures for approximately $26 million. The results of
operations of these chemical businesses were consolidated with those of the Corporation beginning in February 2001. The Corporation has accounted for these acquisitions using the purchase method to record a new cost basis for assets acquired and
liabilities assumed. |
|
|
At the end of November 2000, the Corporation completed a tender offer pursuant to which it purchased each outstanding share of common stock of Fort James
Corporation (Fort James) for $29.60 per share in cash and 0.2644 shares of Georgia-Pacific common stock. The Corporation is paying cash and issuing Georgia-Pacific shares as the untendered Fort James shares are delivered to the
Corporations exchange agent for cancellation. Through December 29, 2001, the Corporation had paid approximately $6,186 million in cash ($46 million of which was paid during 2001) and issued approximately 53.9 million shares of Georgia-Pacific
common stock (0.2 million shares of which were issued during 2001) valued at $1,485 million for such shares. The fair value of the Georgia-Pacific common shares was determined based on the average trading prices of Georgia-Pacific common stock for
the two trading days before and after July 16, 2000 (the date of the announcement of the Fort James acquisition). The Corporation expects to pay an additional $7 million in cash and issue approximately 57,000 shares valued at $2 million for Fort
James common stock that had not been tendered as of December 29, 2001. In addition, the Corporation assumed $3.3 billion of Fort James debt in the acquisition. |
Fort James results of operations were consolidated with those of the Corporation beginning in December 2000. The Corporation has accounted for this business
combination using the purchase method to record a new cost basis for assets acquired and liabilities assumed. The difference between the purchase price and the
51
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
fair value of the assets acquired and liabilities assumed was recorded as goodwill and is being amortized over 40 years. The allocation of net cash paid for the Fort James acquisition is
summarized as follows:
In millions |
|
|
|
Current assets |
|
$ |
1,784 |
|
Property, plant and equipment |
|
|
4,618 |
|
Other noncurrent assets |
|
|
486 |
|
Intangible assets other than goodwill |
|
|
714 |
|
Goodwill |
|
|
6,804 |
|
Liabilities |
|
|
(6,620 |
) |
Common stock issued and value of stock options converted |
|
|
(1,600 |
) |
|
|
|
|
|
Net cash paid for Fort James |
|
$ |
6,186 |
|
|
|
|
|
|
The following unaudited pro forma financial data has been prepared
assuming that the acquisition of Fort James and related financings were consummated on January 1, 1999. This pro forma financial data is presented for informational purposes and is not indicative of the operating results that would have occurred had
the acquisition been consummated on January 1, 1999, nor does it include adjustments for expected synergies, cost savings or consistent application of accounting methods. Accordingly, this pro forma data is not necessarily indicative of future
operations.
In millions, except per share amounts |
|
Year Ended
|
|
|
December 30, 2000
|
|
January 1, 2000
|
Georgia-Pacific Corporation: |
|
|
|
|
|
|
Net sales |
|
$ |
28,294 |
|
$ |
25,080 |
Income from continuing operations |
|
|
118 |
|
|
577 |
Net income |
|
|
280 |
|
|
1,145 |
Georgia-Pacific Group data: |
|
|
|
|
|
|
Net sales |
|
$ |
28,294 |
|
$ |
25,080 |
Income from continuing operations |
|
|
118 |
|
|
577 |
Net income |
|
|
118 |
|
|
745 |
Basic income per share from continuing operations |
|
|
0.52 |
|
|
2.53 |
Diluted income per share from continuing operations |
|
|
0.51 |
|
|
2.49 |
Basic earnings per share |
|
|
0.52 |
|
|
3.31 |
Diluted earnings per share |
|
|
0.51 |
|
|
3.25 |
The Timber Companys results of operations were not impacted
by the Fort James transaction.
|
|
Effective October 3, 1999, the Corporation and Chesapeake completed a previously announced agreement to create Georgia-Pacific Tissue, a joint venture in which
the two companies combined certain parts of their tissue businesses. The Corporation contributed substantially all the assets of its away-from-home tissue business to the joint venture. The Corporation controlled and managed the joint venture and
owned 95% of its equity. Chesapeake contributed the assets of its Wisconsin Tissue business to the joint venture, in which it had a 5% equity interest after receipt of an initial cash distribution of approximately $755 million.
|
The results of the Wisconsin Tissue operations were combined with the Corporations commercial tissue
business beginning on October 3, 1999, when the Georgia-Pacific Tissue joint venture was formed. The Corporation accounted for this transaction using the purchase method to record a new cost basis for assets acquired by the joint venture and
liabilities assumed by the joint venture. The difference between the allocated values and the fair market value of the assets acquired and liabilities assumed by the joint venture
52
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
was recorded as goodwill and was being amortized over 40 years. The allocation of the values of the Wisconsin Tissue assets acquired by the joint venture was as follows:
In millions |
|
|
|
Current assets |
|
$ |
102 |
|
Property, plant and equipment |
|
|
638 |
|
Goodwill |
|
|
284 |
|
Liabilities and value of stock options converted |
|
|
(269 |
) |
|
|
|
|
|
Net cash distribution to Wisconsin Tissue |
|
$ |
755 |
|
|
|
|
|
|
Pursuant to a consent decree executed with the United States
Department of Justice in connection with the Fort James acquisition, the Corporation sold a portion of its away-from-home tissue manufacturing assets (formerly Georgia-Pacific Tissue) to SCA for approximately $850 million. The sale was completed on
March 2, 2001, with net proceeds of approximately $581 million ($660 million after tax benefit) used to repay debt. In the fourth quarter of 2000, the Corporation recorded a pretax loss of $204 million in the consumer products segment for the
write-down of these assets to their net realizable value; accordingly, no significant gain or loss was recognized upon completion of the sale in 2001.
|
|
During the first quarter of 2000, the Corporation contributed certain packaging assets with a net book value of $34 million to a joint venture. In exchange for
these assets, the Corporation retained a 54 percent interest in the joint venture. This investment in the joint venture was accounted for under the equity method until July 2001 because the joint venture partner had substantive participating rights.
|
In July 2001, the Corporation acquired an additional 27 percent interest in this joint venture
for approximately $35 million. In November 2001, the Corporation acquired the remaining 19 percent interest in the joint venture for approximately $24 million. The results of operations of this joint venture were consolidated with those of the
Corporation beginning in July 2001. The Corporation has accounted for this acquisition using the purchase method to record a new cost basis for the additional share of assets acquired and liabilities assumed.
|
|
At the end of the second quarter of 1999, the Corporation, through its wholly owned subsidiary Atlanta Acquisition Corp., completed a tender offer for all the
outstanding shares of common stock of Unisource, the largest independent marketer and distributor of printing and imaging paper and supplies in North America, and acquired 90.7% of the then outstanding shares of Unisource. On July 6, 1999, Atlanta
Acquisition Corp. was merged with and into Unisource and, by virtue of such merger, shares of Unisource that were not tendered to the Corporation (other than shares held by Unisource and the Corporation and its subsidiaries) were converted into the
right to receive $12.00 per Unisource share in cash, subject to dissenters rights. The Corporation is paying for such untendered shares as they are delivered to the exchange agent for cancellation. Through December 30, 2000, the Corporation
had paid approximately $831 million for all Unisource shares, $2 million of which was paid during 2000. In addition, the Corporation assumed $785 million of Unisource debt in the acquisition. |
53
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Unisources results of operations were consolidated with those of the Corporation beginning July 4,
1999. The Corporation has accounted for this transaction using the purchase method to record a new cost basis for assets acquired and liabilities assumed. The difference between the purchase price and the fair market value of the assets acquired and
liabilities assumed was recorded as goodwill and is being amortized over 40 years. The allocation of the purchase price of the acquisition is summarized as follows:
In millions |
|
|
|
Current assets |
|
$ |
1,207 |
|
Property, plant and equipment |
|
|
219 |
|
Other noncurrent assets |
|
|
27 |
|
Goodwill |
|
|
753 |
|
Liabilities and value of stock options converted |
|
|
(1,375 |
) |
|
|
|
|
|
Net cash paid for Unisource |
|
$ |
831 |
|
|
|
|
|
|
The following unaudited pro forma financial data has been prepared
assuming that the acquisition of Unisource and related financings were consummated on January 1, 1999. This pro forma financial data is presented for informational purposes and is not necessarily indicative of the operating results that would have
occurred had the acquisition been consummated on January 1, 1999, nor does it include adjustments for expected synergies or cost savings. Accordingly, this pro forma data is not necessarily indicative of future operations.
|
|
Year Ended January 1, 2000
|
In millions, except per share amounts |
|
|
Georgia-Pacific Corporation: |
|
|
|
Net sales |
|
$ |
21,615 |
Income before extraordinary item |
|
|
1,109 |
Net income |
|
|
1,109 |
Georgia-Pacific Group data: |
|
|
|
Net sales |
|
$ |
21,434 |
Income before extraordinary item |
|
|
709 |
Net income |
|
|
709 |
Basic income before extraordinary item per share |
|
|
4.12 |
Diluted income before extraordinary item per share |
|
|
4.03 |
Basic earnings per share |
|
|
4.12 |
Diluted earnings per share |
|
|
4.03 |
The Timber Companys results of operations are not impacted by
the Unisource transaction.
|
|
During 2000, the Corporation sold certain packaging assets resulting in a pre-tax gain of $25 million. |
|
|
In addition, during 1999, the Corporation completed the acquisition of a packaging plant, four treated lumber facilities, a chemical business and lumber
transportation assets for a total consideration of approximately $74 million in cash. The results of operations of the packaging plant and treated lumber facilities were consolidated with those of the Corporation beginning in the second quarter of
1999. The operating results of the chemical business and lumber transportation assets were consolidated with those of the Corporation beginning in the third and fourth quarters, respectively, of 1999. The Corporation has accounted for these business
combinations using the purchase method to record a new cost basis for assets acquired and liabilities assumed. |
54
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
|
During the second quarter of 1999, the Corporation sold approximately 390,000 acres of timberlands in New Brunswick, Canada and approximately 440,000 acres of
timberlands in Maine for approximately $92 million and recognized a pretax gain of $84 million ($50 million after taxes). This gain is reflected in Income from discontinued operations, net of taxes on the accompanying consolidated
statements of income. In conjunction with the sale of its Maine timberlands, the Corporation received notes from the purchaser in the amount of $51 million. In November 1999, the Corporation monetized these notes through the issuance of notes
payable in a private placement. The Corporation will use proceeds from the notes received from the purchaser to fund payments required for the notes payable. The notes receivable are classified as Other assets and the notes payable are
classified as Other long-term liabilities on the accompanying consolidated balance sheets. |
|
|
In December 1999, the Corporation sold approximately 194,000 acres of redwood and Douglas fir timberlands in Northern California for approximately $397 million
and recognized a pretax gain of $271 million ($165 million after taxes). This gain is reflected in Income from discontinued operations, net of taxes on the accompanying consolidated statements of income. |
In conjunction with the sale of its California timberlands, the Corporation received notes from the purchaser of $397 million.
These notes are fully secured by a standby letter of credit with an unaffiliated third-party financial institution. In October 2000, the Corporation monetized these notes through the issuance of commercial paper secured by the notes. The net
proceeds of $342 million from this monetization were used to reduce debt allocated to The Timber Company. The notes receivable are classified as Other assets and the commercial paper is classified as Other long-term
liabilities on the accompanying consolidated balance sheets.
NOTE 4. RESTRUCTURING AND ASSET IMPAIRMENTS
|
|
In connection with overall weak market conditions in the wallboard market due to excess capacity in the industry, the Corporation announced in June 2001
that it would close gypsum wallboard plants at Savannah, Georgia; Long Beach, California; and Winnipeg, Manitoba, Canada. The Corporation also announced that it would indefinitely idle wallboard production lines at Acme, Texas; Sigurd, Utah; and
Blue Rapids, Kansas; and reduce operations at its remaining gypsum wallboard production facilities. The plant closures and production curtailments affect approximately 45% of the Corporations gypsum wallboard production capacity. In connection
with this announcement, the Corporation recorded a pretax charge to earnings in the building products segment of approximately $57 million for the write-off and impairment of assets, approximately $5 million for the termination of approximately 350
hourly and salaried employees, and approximately $5 million for facility closing costs, most of which was charged to cost of sales. The fair value of impaired assets was determined using the present value of expected future cash flows or the
expected net realizable value. The carrying value of the assets for which the impairment was recorded, subsequent to the writedown, was approximately $35 million at June 2001. In addition, due to the excess capacity in the wallboard market, the
Corporation does not expect a decrease in sales as a result of the closure of the facilities. During 2001, 234 employees were terminated and approximately $3 million of the reserve was used to pay termination benefits. The following table provides a
rollforward of these reserves through December 29, 2001. |
Type of Cost |
|
Liability Established June 2001
|
|
Usage
|
|
|
Liability Balance at December 29, 2001
|
In millions |
|
|
|
|
|
|
|
Employee termination |
|
$ |
5 |
|
$ |
(3 |
) |
|
$ |
2 |
Facility closing costs |
|
|
5 |
|
|
(1 |
) |
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
10 |
|
$ |
(4 |
) |
|
$ |
6 |
|
|
|
|
|
|
|
|
|
|
|
55
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
|
On March 30, 2001, the Corporation announced that it would permanently close its pulp mill and associated chemical plant at Bellingham, Washington. This
decision was based on the age of the facility and the extraordinarily high energy costs on the West Coast in late 2000 and because diesel generators and other power alternatives were not cost effective at this facility. These operations had been
temporarily closed since December 2000. The Bellingham pulp mill produced approximately 220,000 tons of pulp, including 135,000 tons of sulfite market pulp, and 260,000 tons of lignin annually. In connection with this closure the Corporation
recorded a pretax charge to earnings in the consumer products segment of approximately $57 million for the write-off and impairment of assets, approximately $14 million for the termination of approximately 420 hourly and salaried employees and
approximately $12 million for facility closing costs. Of the $83 million total pretax charge to earnings, $79 million was charged to cost of sales, $3 million was charged to selling and distribution expense and $1 million was charged to general and
administrative expenses. The carrying value of the assets for which the impairment was recorded, subsequent to the writedown, was approximately $5 million at March 30, 2001. The plant lost approximately $4 million in 2001. During 2001, 410 employees
were terminated and approximately $14 million of the reserve was used to pay termination benefits. The following table provides a rollforward of these reserves through December 29, 2001: |
Type of Cost
|
|
Liability Established During 2001
|
|
Usage
|
|
|
Liability Balance at December 29, 2001
|
In millions |
|
|
|
|
|
|
|
Employee termination |
|
$ |
14 |
|
$ |
(14 |
) |
|
$ |
|
Facility closing costs |
|
|
12 |
|
|
(11 |
) |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
26 |
|
$ |
(25 |
) |
|
$ |
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
In connection with the acquisition of Fort James, the Corporation recorded liabilities totaling approximately $78 million for employee termination costs
relating to approximately 960 hourly and salaried employees. In addition, the Corporation recorded liabilities of approximately $26 million for the closure of the Camas, Washington tissue mill and $35 million primarily for lease and contract
termination costs at administrative facilities that have been or will be closed in California, Connecticut, Illinois, Virginia and Wisconsin. During 2001, approximately 605 employees were terminated and approximately $55 million of the reserve was
used to pay termination benefits. The remaining employee terminations and Camas facility closing activities (primarily demolition activities) are expected to be completed in 2002. The leases and contracts at the administrative facilities expire
through 2012. The following table provides a rollforward of these reserves from December 30, 2000 through December 29, 2001: |
Type of Cost |
|
Liability Balance at December 30, 2000
|
|
Additions
|
|
Usage
|
|
|
Liability Balance at December 29, 2001
|
In millions |
|
|
|
|
|
|
|
|
|
Employee termination |
|
$ |
30 |
|
$ |
48 |
|
$ |
(55 |
) |
|
$ |
23 |
Facility closing costs |
|
|
|
|
|
61 |
|
|
(3 |
) |
|
|
58 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
30 |
|
$ |
109 |
|
$ |
(58 |
) |
|
$ |
81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
|
During 2001, the Corporation announced the closure of certain structural panels mills, lumber mills, industrial wood products mills, chemical plants and
building products distribution centers. The closures were based on the fact that the facilities utilized outdated technology compared to the Companys other plants which placed them at an operating disadvantage to the Corporations other
facilities. In connection with these announcements, the Corporation recorded a pretax charge to earnings in the building products segment of approximately $14 million for the write-off and impairment of assets, approximately $16 million for the
termination of approximately 900 hourly and salaried employees, and approximately $5 million for facility closing costs, most of which was charged to cost of sales. The fair value of impaired assets was determined using the present value of expected
future cash flows or the expected net realizable value. The carrying value of the assets for which the impairment was recorded, subsequent to the writedown, was approximately $2 million. The Corporation does not expect these closures to impact
sales, as other plants will be able to absorb the reduced capacity. During 2001, approximately 670 employees were terminated and approximately $11 million of the reserve was used to pay termination benefits. The following table provides a
rollforward of these reserves through December 29, 2001: |
Type of Cost |
|
Liability Additions During 2001
|
|
Usage
|
|
|
Balance December 29, 2001
|
In millions |
|
|
|
|
|
|
|
Employee termination |
|
$ |
16 |
|
$ |
(11 |
) |
|
$ |
5 |
Facility closing costs |
|
|
5 |
|
|
(4 |
) |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
21 |
|
$ |
(15 |
) |
|
$ |
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2000, the Corporation announced the closure of the Grand Rapids East, Michigan, gypsum plant and the Kalamazoo, Michigan, paper mill. This decision was
determined due to the age of the facilities and the relatively higher cost of materials and electricity as compared to plants in other parts of the Corporation. In connection with these closures, the Corporation recorded a pretax charge to earnings
totaling $7 million for the termination of approximately 325 salaried and hourly employees, $25 million for the write-off of assets and $12 million for facility closing costs. The carrying value of the assets for which impairment was recorded,
subsequent to the writedown, was approximately $15 million. The Corporation does not expect these closures to impact sales, as other plants will be able to absorb the reduced capacity. During 2001 and 2000, approximately 40 employees and 284
employees were terminated, respectively. During the second quarter of 2001, the Corporation reversed $2 million of reserves for facility closing costs that were no longer needed. The following table provides information related to these liabilities:
|
Type of Cost |
|
Balance December 30, 2000
|
|
Usage
|
|
|
Reversal of Reserves
|
|
|
Balance December 29, 2001
|
In millions |
|
|
|
|
|
|
|
|
|
|
Employee termination |
|
$ |
7 |
|
$ |
(6 |
) |
|
$ |
|
|
|
$ |
1 |
Facility closing costs |
|
|
10 |
|
|
(1 |
) |
|
|
(2 |
) |
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
17 |
|
$ |
(7 |
) |
|
|
(2 |
) |
|
$ |
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In connection with the acquisition of Unisource in the second quarter of 1999, the Corporation recorded liabilities totaling approximately $50 million for
employee termination (relating to approximately 1,170 hourly and salaried employees) and relocation costs, and $22 million for closing costs of 48 facilities.
|
57
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
During 2001, 151 employees were terminated as part of this program. The following table provides a rollforward of the reserve for restructuring from December 30, 2000 through December 29, 2001:
|
Type of Cost |
|
Balance December 30, 2000
|
|
Usage
|
|
|
Liability Balance at December 29, 2001
|
In millions |
|
|
|
|
|
|
|
Employee termination |
|
$ |
3 |
|
$ |
(3 |
) |
|
$ |
|
Facility closing costs |
|
|
5 |
|
|
(4 |
) |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
8 |
|
$ |
(7 |
) |
|
$ |
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
In connection with the formation of the Georgia-Pacific Tissue joint venture, the Corporation completed an organizational restructuring of the sales, marketing,
administrative and manufacturing support activities for its tissue business, which resulted in the elimination of approximately 300 salaried and hourly positions. The Corporation reserved approximately $5 million for termination and relocation costs
of Wisconsin Tissue employees. This $5 million liability was included as part of the purchase price of the Wisconsin Tissue assets. In addition, the Corporation recorded provisions totaling approximately $2 million for the termination and relocation
of employees of the Corporation, which were charged to earnings in 1999. As a result of these programs, approximately 80 employees were terminated and approximately $2 million of the termination and relocation reserve was used in 1999. During 2000,
the remaining employees were terminated or relocated and all the related reserve was used. |
NOTE
5. RECEIVABLES
The Corporation has a large, diversified customer base, which includes
some customers located in foreign countries. The Corporation closely monitors extensions of credit and has not experienced significant losses related to its receivables. In addition, a portion of the receivables from foreign sales is covered by
confirmed letters of credit to help ensure collectibility.
The Corporation had commitments totaling $1.3 billion
and CN $95 million (approximately $59 million) under its United States and Canadian accounts receivable secured borrowing programs, respectively, of which $1.2 billion and CN $95 million was outstanding under these programs at December 29, 2001. Of
the $1.3 billion in the United States program, $400 million will expire in September 2002 and the remaining $900 million expires in December 2002. The Canadian program expires in May 2004. The Corporation expects to renew these agreements prior to
expiration. The receivables outstanding under these programs and the corresponding debt are included as Receivables and Commercial paper and other short-term notes, respectively, on the accompanying consolidated balance
sheets. All such programs are accounted for as secured borrowings. As collections reduce previously pledged interests, new receivables may be pledged.
A portion of the cost of the accounts receivable secured borrowing programs is based on the creditors level of investment and borrowing costs. The total cost of the programs, which was $41
million in 2001, $63 million in 2000 and $36 million in 1999, is included in interest expense on the accompanying statements of income.
Under the accounts receivable secured borrowing programs, the maximum amount of the creditors investment is subject to change based on the level of eligible receivables and restrictions on concentrations of
receivables.
58
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
NOTE 6. INDEBTEDNESS
The Corporations indebtedness includes the following:
|
|
December 29, 2001
|
|
|
December 30, 2000
|
|
In millions |
|
|
|
|
|
|
Debentures, average rate of 8.6%, payable through 2029 |
|
$ |
3,582 |
|
|
$ |
3,582 |
|
Notes, average rates of 7.5% and 7.0%, payable through 2031 |
|
|
3,100 |
|
|
|
2,094 |
|
Credit facilities, average rates of 3.6% and 7.9%, payable through 2005 |
|
|
1,935 |
|
|
|
5,900 |
|
Revenue bonds,average rates of 5.2% and 5.7%, payable through 2031 |
|
|
869 |
|
|
|
832 |
|
Euro-denominated bonds, average rate of 4.8%, payable through 2004 |
|
|
266 |
|
|
|
283 |
|
European Debt, average rates of 6.1% and 7.2%, payable through 2012 |
|
|
137 |
|
|
|
141 |
|
Capital leases, average rates of 10.0% and 10.2%, payable through 2016 |
|
|
126 |
|
|
|
138 |
|
Other loans, average rates of 4.6% and 7.1%, payable through 2002 |
|
|
8 |
|
|
|
7 |
|
Less: unamortized net discount |
|
|
(93 |
) |
|
|
(118 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
9,930 |
|
|
|
12,859 |
|
Less: long-term portion of debt |
|
|
9,358 |
|
|
|
12,627 |
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt |
|
|
572 |
|
|
|
232 |
|
Commercial paper and other short-term notes, average rates of 2.5% and 7.0% |
|
|
1,359 |
|
|
|
1,295 |
|
Credit facilities, average rates of 3.9% and 8.0% |
|
|
925 |
|
|
|
1,400 |
|
|
|
|
|
|
|
|
|
|
Total short-term debt |
|
|
2,856 |
|
|
|
2,927 |
|
|
|
|
|
|
|
|
|
|
Total debt |
|
$ |
12,214 |
|
|
$ |
15,554 |
|
|
|
|
|
|
|
|
|
|
Georgia-Pacific Groups portion of Corporation debt: |
|
|
|
|
|
|
|
|
Short-term debt |
|
|
|
|
|
$ |
2,559 |
|
Long-term debt, excluding current portion |
|
|
|
|
|
|
12,355 |
|
|
|
|
|
|
|
|
|
|
Georgia-Pacific Groups total debt |
|
|
|
|
|
$ |
14,914 |
|
|
|
|
|
|
|
|
|
|
*The Timber Companys portion of Corporation debt: |
|
|
|
|
|
|
|
|
Short-term debt |
|
|
|
|
|
$ |
368 |
|
Long-term debt, excluding current portion |
|
|
|
|
|
|
272 |
|
|
|
|
|
|
|
|
|
|
*The Timber Companys total debt |
|
|
|
|
|
$ |
640 |
|
|
|
|
|
|
|
|
|
|
Weighted average interest rate on Corporation debt at year-end |
|
|
6.7 |
% |
|
|
7.7 |
% |
* |
|
The Corporation completed the spin off of The Timber Company on October 6, 2001 (see Note 3). |
For additional information regarding financial instruments, see Notes 7 and 8.
The scheduled maturities of the Corporations long-term debt for the next five years are as follows: $572 million in 2002, $612 million in 2003, $662 million in 2004,
$43 million in 2005 and $618 million in 2006.
Notes and Debentures
In connection with the acquisition of Fort James in November 2000, the Corporation assumed $1,642 million of
notes, $26 million of which matured in December 2000. The Corporation subsequently fully and unconditionally guaranteed all of Fort James publicly held debt issued pursuant to an Indenture with the Bank of New York, as trustee, dated as of
November 1, 1991, as amended by a first supplemental Indenture dated as of September 19, 1997 and second supplemental Indenture dated as of February 19, 2001. The Corporation had outstanding borrowings of approximately $6,682 million and $5,676
million under certain notes and debentures, including notes totaling $1,179 million and $1,680 from the Fort James acquisition for December 29, 2001 and December 30, 2000, respectively.
59
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
During 2001, the Corporation replaced $1.5 billion of its Capital
Markets Bridge Facility by issuing $500 million of 7.5% Notes Due May 15, 2006, $600 million of 8.125% Notes Due May 15, 2011, and $400 million of 8.875% Notes Due May 15, 2031. The $10.4 million underwriting fee associated with the transaction is
being amortized over the term of the notes. During 2001, the Corporation also redeemed $300 million of its 6.235% Senior Notes Due March 15, 2011 and recorded an after-tax extraordinary loss of approximately $12 million (net of taxes of $7 million).
Euro-Denominated Bonds
In connection with the acquisition of Fort James, the Corporation assumed $218 million (net of discount) of Euro-denominated bonds. These bonds totaled $238 million (net of
discount) and $242 million (net of discount) at December 29, 2001 and December 30, 2000, respectively.
European Debt
In connection with the acquisition of Fort James, the Corporation assumed
$156 million of European debt. The Corporations European debt decreased by approximately $4 million to $137 million at December 29, 2001 from $141 million at December 30, 2000.
Revenue Bonds
At December
29, 2001 and December 30, 2000, the Corporation had outstanding borrowings of approximately $869 million and $832 million, respectively, under certain industrial revenue bonds. During 2001, the Corporation issued $27 million of 6.375% fixed rate
industrial revenue bonds due November 1, 2026. In addition, the Corporation replaced $28 million of its variable rate industrial revenue bonds, due October 1, 2007, with $28 million of 4.87% fixed rate industrial revenue bonds due October 1, 2007.
The Corporation also consolidated a $10 million variable rate industrial revenue bond, due September 1, 2021, in connection with acquiring ownership of Color-Box (see Note 3) and redeemed $42 million of its 7.9% fixed rate industrial revenue bonds,
due October 1, 2005, and issued $42 million of 6.5% fixed rate industrial revenue bonds due June 1, 2031, for a lower fixed rate bond. In connection with the acquisition of Fort James, the Corporation assumed $197 million of industrial revenue
bonds.
Capital Leases and Other Loans
The Corporation had outstanding borrowings of approximately $145 million and $152 million under capital leases (including premium) and other loans, at December 29, 2001 and
December 30, 2000, respectively. In connection with the acquisition of Fort James, the Corporation assumed $141 million (including premium) of capital leases during 2000.
Revolving Credit Facilities
In October 2000, the Corporation negotiated several new unsecured financing facilities totaling $5,400 million with terms ranging from six to 18 months and an unsecured revolving credit facility totaling $3,750 million with a term of
5 years. The proceeds under these unsecured facilities were used to partially finance the Fort James acquisition and for ongoing working capital and other general corporate requirements of the Corporation. During 2001, proceeds from the sale of
assets (see Note 3); the spin off of The Timber Company and its merger with and into Plum Creek (see Note 3); increases in the accounts receivable secured borrowing
60
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
programs; and the issuance of notes reduced the unsecured financing facilities. The Corporations amounts outstanding under the credit agreements include the following:
|
|
December 29, 2001
|
|
In millions |
|
|
|
Commitments: |
|
|
|
|
Multi-Year Revolving Credit Facility |
|
$ |
3,750 |
|
Capital Markets Bridge Facility |
|
|
925 |
|
|
|
|
|
|
Credit facilities available |
|
|
4,675 |
|
|
|
|
|
|
Amounts Outstanding: |
|
|
|
|
Letter of Credit Agreements |
|
|
(265 |
) |
Money Markets, average rate of 2.8% |
|
|
(90 |
) |
Multi-Year Revolving Credit Facility due November 2005, average rate of 3.7% |
|
|
(1,935 |
) |
Capital Markets Bridge Facility due August 2002, average rate of 3.9% |
|
|
(925 |
) |
|
|
|
|
|
Total credit balance |
|
|
(3,215 |
) |
|
|
|
|
|
Total credit available* |
|
$ |
1,460 |
|
|
|
|
|
|
* |
|
At December 29, 2001, the Corporation was limited to $717 million of available credit pursuant to certain restrictive debt covenants and its outstanding debt
balance at December 29, 2001. This limitation on available credit will be reduced as the Corporation pays down debt. |
Borrowings under the agreements bear interest at competitive market rates. These interest rates may be adjusted according to a rate grid based on the Corporations long-term debt ratings. Fees
associated with these revolving credit facilities include a facility fee of 0.2% per annum on the aggregate commitments of the lenders as well as up-front fees totaling $5.5 million and $34 million as of December 29, 2001 and December 30, 2000,
respectively. The fees are being amortized over the term of the agreements. Fees and margins may also be adjusted according to a pricing grid based on the Corporations long-term debt ratings. At December 29, 2001 and December 30, 2000, $3,215
million and $7,700 million, respectively, was borrowed under the credit agreements at a weighted-average interest rate of 3.4% and 7.9%, respectively. Amounts outstanding under the revolving credit facilities are included in Commercial paper
and other short-term notes and Long-term debt, excluding current portion on the accompanying consolidated balance sheets.
In December 2001, the Corporation amended its restrictive covenants under the unsecured financing facilities to require a maximum leverage ratio (funded indebtedness, excluding senior deferrable notes,
to net worth plus funded indebtedness) of 72.50% on December 29, 2001, March 30, 2002 and June 29, 2002; 70.00% on September 28, 2002, December 28, 2002 and March 29, 2003; 67.50% on June 28, 2003 and September 27, 2003; and 65.00% on January 3,
2004 and thereafter. The restrictive covenants also require a minimum interest coverage ratio (earnings before interest, taxes, depreciation and amortization EBITDA to interest charges) of 2.25 to 1.00 on December 29, 2001, March 30,
2002, June 29, 2002 and September 28, 2002; 2.50 to 1.00 on December 28, 2002 and March 29, 2003; 2.75 to 1.00 on June 28, 2003 and September 27, 2003; and 3.00 to 1.00 on January 3, 2004 and thereafter. In addition, the restrictive covenants
require a minimum net worth that changes quarterly and a maximum debt level of $13,065 million. The Corporation was in compliance with its debt covenants as of December 29, 2001 with a 71.35% leverage ratio, a 2.59 to 1.00 interest coverage ratio,
and a debt balance of $12,214 million. The $17.9 million fee associated with amending the restrictive covenants is being amortized over the term of the financing facilities.
61
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Commercial Paper and Other Short-Term Notes
These borrowings are classified as current liabilities, although all or a portion may be refinanced on a long-term basis in
2002. In connection with the acquisition of Fort James, the Corporation assumed $927 million of short-term debt, all of which was replaced by commercial paper issued by the Corporation in the fourth quarter of 2000.
Other
At December 29, 2001, the amount of long-term debt secured by property, plant and equipment was not material.
Prior to 1996, the Corporation sold certain assets for $354 million and agreed to lease the assets back from the purchaser over a period of 30 years. Under the agreement with the purchaser, the Corporation agreed to maintain a
deposit (initially in the amount of $322 million) that, together with interest earned thereon, was expected to be sufficient to fund the Corporations lease obligation, including the repurchase of assets at the end of the term. This transaction
was accounted for as a financing arrangement. At the inception of the agreement, the Corporation recorded on its balance sheet an asset for the deposit from the sale of $305 million and a liability for the lease obligation of $346 million.
The sale of these assets to Domtar in 2001 (see Note 3) required the Corporation to repurchase these assets from
the lessor. Accordingly, the lessor and the Corporation agreed to a deferred payment arrangement essentially under the same terms as the original lease obligation. The Corporation agreed to maintain the original deposit under its existing terms and
create a second deposit. The sum of these deposits (approximately $400 million at December 29, 2001) approximates the deferred payment amount. A legal right of set off exists between the deferred payment amount owed and the deposits and,
accordingly, the Corporation has recorded these transactions net in the accompanying consolidated balance sheets as Other long-term liabilities.
In 1999, the Corporation entered into a financing arrangement to enhance the return of the deposit made in connection with the sale-leaseback transaction discussed above by issuing NZ$724 million of
5.74% Debentures Due April 5, 2005 that were legally defeased with deposits of an equal amount. Because they were legally defeased, generally accepted accounting principles do not require the debentures and related deposits to be reflected on the
Corporations consolidated balance sheets. Accordingly, the Corporation has not reflected the debentures or the related deposits on the accompanying consolidated balance sheets.
In conjunction with the sale of 194,000 acres of the Corporations California timberlands in 1999, the Corporation received notes from the purchaser in the amount of
$397 million. These notes were monetized on October 25, 2000, through the issuance of commercial paper secured by the notes. Net proceeds of $342 million from this monetization will be used to reduce debt allocated to The Timber Company. Proceeds
from the notes received from the purchaser were used to fund payments required for the notes payable. In conjunction with the sale of 440,000 acres of the Corporations Maine timberlands in 1999, the Corporation received notes from the
purchaser in the amount of $51 million. These notes were monetized through the issuance of notes payable in a private placement with the proceeds used to reduce debt allocated to The Timber Company. Proceeds from the notes received from the
purchaser will be used to fund payments required for the notes payable. The notes receivable and notes payable are reflected in Other assets and Other long-term liabilities, respectively, on the accompanying consolidated
balance sheets. In connection with the sale of 127,000 acres of the Corporations California timberlands in 1997, the Corporation received notes from the purchaser in the amount of $270 million. The Corporation monetized these notes receivable
through the issuance of notes payable in a private placement. The notes receivable are included in Other assets and the notes payable are included as Other long-term liabilities on the accompanying consolidated balance
sheets.
62
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
As of December 29, 2001, the Corporation had $1.5 billion of debt and
equity securities available for issuance under a shelf registration statement filed with the Securities and Exchange Commission in 2000.
NOTE 7. SENIOR DEFERRABLE NOTES
In order to finance a portion of
the Unisource acquisition in July 1999, the Corporation issued 17,250,000 of 7.5% PEPS Units for $862.5 million. Each PEPS Unit consists of a purchase contract that obligates the holder to purchase shares of Georgia-Pacific common stock for $50 on
or prior to August 16, 2002 and a senior deferrable note of the Corporation due August 16, 2004. The amount of shares purchased per PEPS Unit will be based on the average closing price of Georgia-Pacific common stock over a 20-day trading period
ending August 13, 2002. Assuming an average stock price of less than $47.375 per share, the Corporation expects to issue approximately 18.2 million shares of Georgia-Pacific common stock in 2002. Each purchase contract yields interest of 0.35% per
year, paid quarterly, on the $50 stated amount of the PEPS Unit. Each senior deferrable note yields interest of 7.15% per year, paid quarterly, until August 16, 2002. The terms of the PEPS offering include a remarketing of the senior deferrable
notes on August 16, 2002 that, if successfully completed, would generate $862.5 million for repayment of debt. The interest rate will be reset at a rate that will be equal to or greater than 7.15%. Management is considering certain other financing
activities that could include issuance of different securities to replace these senior deferrable notes prior to their scheduled remarketing. The liability related to the PEPS Units is classified as Senior deferrable notes on the
accompanying consolidated balance sheets.
NOTE 8. FINANCIAL INSTRUMENTS
The carrying amount (net of discounts and premiums) and estimated fair value of the Corporations financial instruments are as
follows:
|
|
December 29, 2001
|
|
|
December 30, 2000
|
|
|
|
Carrying Amount
|
|
Fair Value
|
|
|
Carrying Amount
|
|
Fair Value
|
|
In millions |
|
|
|
|
|
|
|
|
|
|
Commercial paper, credit facilities and short-term notes (Note 6) |
|
$ |
4,219 |
|
$ |
4,219 |
|
|
$ |
8,595 |
|
$ |
8,595 |
|
Notes and debentures (Note 6) |
|
|
6,682 |
|
|
6,679 |
|
|
|
5,676 |
|
|
5,105 |
|
Euro denominated bonds (Note 6) |
|
|
266 |
|
|
257 |
|
|
|
283 |
|
|
252 |
|
Revenue bonds (Note 6) |
|
|
869 |
|
|
833 |
|
|
|
832 |
|
|
778 |
|
Capital leases (Note 6) |
|
|
126 |
|
|
148 |
|
|
|
138 |
|
|
140 |
|
European debt (Note 6) |
|
|
137 |
|
|
137 |
|
|
|
141 |
|
|
141 |
|
Other loans (Note 6) |
|
|
8 |
|
|
8 |
|
|
|
7 |
|
|
7 |
|
Senior deferrable notes (Note 7) |
|
|
863 |
|
|
889 |
|
|
|
863 |
|
|
871 |
|
Investments in marketable securities |
|
|
81 |
|
|
81 |
|
|
|
44 |
|
|
44 |
|
Interest rate exchange agreements (floating to fixed) |
|
|
* |
|
|
|
|
|
|
* |
|
|
|
|
Interest rate exchange agreements (fixed to floating) |
|
|
* |
|
|
(51 |
) |
|
|
* |
|
|
(1 |
) |
Notes receivable from sale of timberlands |
|
|
674 |
|
|
755 |
|
|
|
673 |
|
|
651 |
|
Notes payable from monetizations |
|
|
659 |
|
|
746 |
|
|
|
659 |
|
|
645 |
|
* |
|
The Corporations balance sheets at December 29, 2001 and December 30, 2000 included accrued interest payable (receivable) of $11.4 million and ($.3)
million, respectively, related to these interest rate exchange agreements. |
63
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Commercial Paper, Credit Facilities and Short-Term Notes
The carrying amounts approximate fair value because of the short maturity of these instruments.
Notes and Debentures
The fair value of notes and debentures was estimated primarily by calculating the present value of anticipated cash flows. The discount rate used was an estimated borrowing rate for similar debt
instruments with like maturities.
Euro-Denominated Bonds and European Debt
The fair value of Euro-denominated bonds and European debt was estimated primarily by obtaining quotes from brokers for these and similar
issues. For Euro-denominated bonds and European debt for which there are no quoted market prices, the fair value was estimated by calculating the present value of anticipated cash flows. The discount rate used was an estimated borrowing rate for
similar debt instruments with like maturities.
Revenue Bonds, Capital Leases, Senior Deferrable Notes and
Other Loans
The fair value of revenue bonds, capital leases, senior deferrable notes and other loans was
estimated by calculating the present value of anticipated cash flows. The discount rate used was an estimated borrowing rate for similar debt instruments with like maturities.
Investments in Marketable Securities
The fair value of investments in marketable securities was based on quoted market prices.
Notes Receivable and Notes Payable
The fair value of notes receivable and notes payable
was estimated by calculating the present value of anticipated cash flows. The discount rate used was an estimated borrowing rate for similar debt instruments with like maturities.
Interest Rate Exchange Agreements
The Corporation has used interest rate swap agreements in the normal course of business to manage and reduce the risk inherent in interest rate fluctuations.
The Corporation uses interest rate swap arrangements to manage its exposure to interest rate changes. Such arrangements are considered hedges of specific borrowings, and
differences paid and received under the swap arrangements are recognized as adjustments to interest expense. Under these agreements, the Corporation makes payments to counterparties at fixed interest rates and in turn receives payments at variable
rates. The Corporation entered into interest rate exchange agreements in prior years to protect against the increased cost associated with a rise in interest rates.
At December 29, 2001, the Corporation had interest rate exchange agreements that effectively converted $1,957 million of floating rate obligations with a weighted average
interest rate of 2.7% to fixed rate obligations with an average effective interest rate of approximately 5.9%. Of the $1,957 million, the Corporation had $457 million of these floating rate obligations outstanding at December 30, 2000. These
agreements increased
64
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
interest expense by $29 million for the year ended December 29, 2001, and decreased interest expense by $1 million for the year ended December 30, 2000. The agreements had a weighted-average
maturity of approximately seven months at December 29, 2001.
At December 29, 2001, the Corporation also had
interest rate exchange agreements (a collar) that effectively capped $47 million of floating rate obligations to a maximum interest rate of 7.5% and established a minimum interest rate on such obligations of 5.5%. The Corporations interest
expense is unaffected by this agreement when the market interest rate falls within this range. There was an immaterial effect on the Corporations interest expense for 2001 and 2000 related to these agreements. The agreements had a
weighted-average maturity of approximately four years at December 29, 2001.
The estimated fair value of the
Corporations interest rate exchange agreements at both December 29, 2001 and December 30, 2000 comprised of a $51 million liability and $1 million asset, respectively. The liability and asset balance represent the estimated amount the
Corporation could have paid or received upon termination of the agreements. The fair value at December 29, 2001 and December 30, 2000 was estimated by calculating the present value of anticipated cash flows. The discount rate used was an estimated
borrowing rate for similar debt instruments with like maturities.
The Corporation may be exposed to losses in the
event of nonperformance of counterparties but does not anticipate such nonperformance.
NOTE 9. DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES
Effective December 31, 2000, the Corporation adopted Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, and, accordingly, all derivatives are recognized on the balance sheet at their fair value. As a result of adopting SFAS
133, the Corporation recorded an after-tax cumulative effect of accounting change credit of $11 million (net of taxes of $6 million) and an $2 million transition adjustment (net of taxes of $1 million) in other comprehensive loss. On the date a
derivative contract is entered into, the Corporation designates the derivative as either (1) a fair value hedge, (2) a cash flow hedge, (3) the hedge of a net investment in a foreign operation or (4) a non-designated derivative instrument. The
Corporation engages primarily in derivatives classified as cash flow hedges, and changes in the fair value of highly effective derivatives are recorded in accumulated other comprehensive income (loss). The Corporation also participates in some
derivatives that are classified as non-designated derivative instruments and a hedge in the net investment of certain European operations. Changes in the fair value of the non-designated derivative instruments and any ineffectiveness in cash flow
hedges are reported in current period earnings. Changes in fair value of the hedge in the net investment of certain European operations are recorded in accumulated other comprehensive loss.
The Corporation formally documents all relations between hedging instruments and the hedged items, as well as its risk-management objectives and strategy for
undertaking various hedge transactions. The Corporation formally assesses, both at the hedges inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the
hedged items.
Cash Flow Hedges: The Corporation uses interest rate agreements in
the normal course of business to manage and reduce the risk inherent in interest rate fluctuations. Interest rate swap agreements are considered hedges of specific borrowings and differences paid and received under the swap arrangements are
recognized as adjustments to interest expense. Such contracts had a total notional amount of $1,830 million at December 29, 2001. The fair market value of such contracts was a liability of $46 million at December 29, 2001.
65
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
With each type of cash flow hedge, the settlement of the forecasted transaction will result in the
reclassification into earnings of gains and losses that are reported in accumulated other comprehensive loss. As of December 29, 2001, approximately $32 million of deferred losses on derivative instruments included in accumulated other comprehensive
loss are expected to be reclassified to earnings during the next twelve months. These losses are primarily related to the floating-to-fixed interest rate swap agreements and are due to the significant decrease in interest rates during the current
year.
Hedge of the net investment in a foreign operation: At December 29, 2001, the
Corporation had outstanding approximately $238 million (net of discount) of Euro-denominated bonds which were designated as a hedge against its net investment in Europe.
Non-designated/ineffective derivative instruments: The Corporation has two foreign currency interest rate swap agreements that were assumed in
the acquisition of Fort James. These agreements do not qualify for hedge accounting. Included in the cumulative effect of accounting change is a pre-tax loss of $1 million relating to the fair value of these agreements. The fair value of these
agreements at December 29, 2001 was approximately $1 million. The Corporation also has three interest rate swaps that, during the third quarter, were no longer highly effective in offsetting changes in cash flows of the borrowings hedged. The
notional amount of these instruments was $127 million. At December 29, 2001, the fair market value of these three instruments was approximately $5 million.
During 2000, the Corporation entered into a derivative agreement in connection with the sale of certain packaging assets whereby the Corporation has guaranteed a certain margin on the buyers
production. This derivative agreement expires in 2005. This agreement does not qualify for hedge accounting because the buyers production does not qualify as a hedged item in accordance with SFAS No. 133. The Corporation also entered into
certain commodity swap agreements to offset the gain on the aforementioned derivative agreement. The net fair value of these derivative agreements was $17.3 million (pre-tax) at December 30, 2000 and is included in the cumulative effect of
accounting change. Effective December 28, 2001, the Corporation terminated the offsetting commodity agreements. The termination was effective with the counter-partys bankruptcy filing. As of December 29, 2001, the fair market value of the
original derivative agreement was $9.5 million.
The Corporations senior management establishes the
parameters of the Corporations financial risk, which have been approved by the Corporations Board of Directors. Hedging interest rate exposure through the use of swaps and options and hedging foreign exchange exposure through the use of
forward contracts are specifically contemplated to manage risk in keeping with managements policy. Derivative instruments, such as swaps, forwards, options or futures, which are based directly or indirectly upon interest rates, currencies,
equities and commodities, may be used by the Corporation to manage and reduce the risk inherent in price, currency and interest rate fluctuations.
The Corporation does not utilize derivatives for speculative purposes. Derivatives are transaction specific so that a specific debt instrument, contract or invoice determines the amount, maturity and
other specifics of the hedge. Counterparty risk is limited to institutions with long-term debt ratings of A or better.
66
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
NOTE 10. INCOME TAXES
Following is a summary of (loss) income from continuing operations before income taxes for United States and foreign operations:
|
|
Year Ended
|
|
|
December 29, 2001
|
|
|
December 30, 2000
|
|
January 1, 2000
|
In millions |
|
|
|
|
|
|
|
United States |
|
$ |
(452 |
) |
|
$ |
465 |
|
$ |
1,016 |
Foreign |
|
|
157 |
|
|
|
88 |
|
|
148 |
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before income taxes |
|
$ |
(295 |
) |
|
$ |
553 |
|
$ |
1,164 |
|
|
|
|
|
|
|
|
|
|
|
The provision for income taxes includes income taxes currently
payable and those deferred because of temporary differences between the financial statement and tax bases of assets and liabilities. The provision (benefit) for income taxes consists of the following:
|
|
Year Ended
|
|
|
|
December 29, 2001
|
|
|
December 30, 2000
|
|
January 1, 2000
|
|
In millions |
|
|
|
|
|
|
|
|
Current income taxes: |
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
252 |
|
|
$ |
153 |
|
$ |
410 |
|
State |
|
|
25 |
|
|
|
3 |
|
|
76 |
|
Foreign |
|
|
36 |
|
|
|
18 |
|
|
21 |
|
Deferred income taxes: |
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
(121 |
) |
|
|
35 |
|
|
(50 |
) |
State |
|
|
(19 |
) |
|
|
|
|
|
(9 |
) |
Foreign |
|
|
8 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
$ |
181 |
|
|
$ |
210 |
|
$ |
448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid, net of refunds |
|
$ |
246 |
|
|
$ |
425 |
|
$ |
620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid during 2001 are net of approximately $3
million in state income tax refunds, $98 million in federal income tax refunds, and $3 million in foreign income tax refunds. Income taxes paid during 2000 are net of approximately $8 million in state income tax refunds. No provision for income
taxes has been made for $608 million of undistributed earnings of certain of the Corporations foreign subsidiaries and affiliates which have been indefinitely reinvested. It is not practicable to determine the amount of United States income
tax which would be payable if such undistributed foreign earnings were repatriated because any United States taxes payable on such repatriation would be offset, in part, by foreign tax credits.
The Internal Revenue Service is currently conducting audits of various federal income tax returns for the years 1997 and 1998. All related payments for completed
federal income tax audits have been made.
67
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The federal statutory income tax rate was 35%. The provision for
income taxes is reconciled to the federal statutory amounts as follows:
|
|
Year Ended
|
|
|
|
December 29, 2001
|
|
|
December 30, 2000
|
|
|
January 1, 2000
|
|
In millions |
|
|
|
|
|
|
|
|
|
(Benefit) provision for income taxes computed at the federal statutory tax rate |
|
$ |
(103 |
) |
|
$ |
194 |
|
|
$ |
407 |
|
State income taxes, net of federal benefit |
|
|
(8 |
) |
|
|
10 |
|
|
|
47 |
|
Foreign income taxes, net of federal benefit |
|
|
(15 |
) |
|
|
|
|
|
|
|
|
Write off and amortization of nondeductible goodwill |
|
|
304 |
|
|
|
33 |
|
|
|
25 |
|
Foreign sales corporation |
|
|
(5 |
) |
|
|
(19 |
) |
|
|
(25 |
) |
Other |
|
|
8 |
|
|
|
(8 |
) |
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
$ |
181 |
|
|
$ |
210 |
|
|
$ |
448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of the net deferred income tax liabilities are
as follows:
|
|
Year Ended
|
|
|
|
December 29, 2001
|
|
|
December 30, 2000
|
|
In millions |
|
|
|
|
|
|
Deferred income tax assets: |
|
|
|
|
|
|
|
|
Compensation related accruals |
|
$ |
504 |
|
|
$ |
413 |
|
Other accruals and reserves |
|
|
367 |
|
|
|
97 |
|
Other |
|
|
48 |
|
|
|
58 |
|
|
|
|
|
|
|
|
|
|
|
|
|
919 |
|
|
|
568 |
|
Valuation allowance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
919 |
|
|
|
568 |
|
|
|
|
|
|
|
|
|
|
Deferred income tax liabilities: |
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
(2,034 |
) |
|
|
(2,437 |
) |
Timber and timberlands |
|
|
(203 |
) |
|
|
(2 |
) |
Other |
|
|
(427 |
) |
|
|
(108 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(2,664 |
) |
|
|
(2,547 |
) |
|
|
|
|
|
|
|
|
|
Deferred income tax liabilities, net |
|
$ |
(1,745 |
) |
|
$ |
(1,979 |
) |
|
|
|
|
|
|
|
|
|
Included on the balance sheets: |
|
|
|
|
|
|
|
|
Deferred income tax assets* |
|
$ |
101 |
|
|
$ |
176 |
|
Deferred income tax liabilities** |
|
|
(1,846 |
) |
|
|
(2,155 |
) |
|
|
|
|
|
|
|
|
|
Deferred income tax liabilities, net |
|
$ |
(1,745 |
) |
|
$ |
(1,979 |
) |
|
|
|
|
|
|
|
|
|
* |
|
Net of current liabilities of $75 million at December 29, 2001 and $30 million at December 30, 2000. |
** |
|
Net of long-term assets of $579 million at December 29, 2001 and $364 million at December 30, 2000. |
68
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
NOTE 11. RETIREMENT PLANS
Defined Benefit Pension Plans
Most of the Corporations employees participate in noncontributory defined benefit pension plans. These include plans that are administered solely by the Corporation and union-administered
multiemployer plans. The Corporations funding policy for solely administered plans is based on actuarial calculations and the applicable requirements of federal law. Contributions to multiemployer plans are generally based on negotiated labor
contracts.
Benefits under the majority of plans for hourly employees (including multiemployer plans) are
primarily related to years of service. The Corporation has separate plans for salaried employees and officers under which benefits are primarily related to compensation and years of service. The officers plan and certain salaried employee
plans are not funded and are nonqualified for federal income tax purposes.
Plan assets consist principally of
common stocks (55%), bonds (18%), mortgage securities (4%), interests in limited partnerships (19%), cash equivalents (3%) and real estate (1%). At December 29, 2001 and December 30, 2000, $476 million and $538 million, respectively, of non-current
prepaid pension cost was included in Other assets on the accompanying balance sheets. Accrued pension liability of $272 million and $161 million at December 29, 2001 and December 30, 2000, respectively, was included in Other
long-term liabilities on the accompanying balance sheets.
Pursuant to the provisions of SFAS No. 87,
intangible assets of $108 million and $2 million were recorded as of December 29, 2001 and December 30, 2000, respectively, in order to recognize the required minimum liability.
69
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The following tables set forth the change in projected benefit obligation and the change in plan assets for
the solely administered plans:
|
|
December 29, 2001
|
|
|
December 30, 2000
|
|
In millions |
|
|
|
|
|
|
Change in projected benefit obligation: |
|
|
|
|
|
|
|
|
Projected benefit obligation at beginning of year |
|
$ |
3,704 |
|
|
$ |
2,014 |
|
Service cost |
|
|
163 |
|
|
|
121 |
|
Interest cost |
|
|
270 |
|
|
|
160 |
|
Acquisitions |
|
|
2 |
|
|
|
1,515 |
|
Curtailments |
|
|
(2 |
) |
|
|
|
|
Participant contributions |
|
|
3 |
|
|
|
1 |
|
Plan amendments |
|
|
9 |
|
|
|
4 |
|
Actuarial (gains) losses |
|
|
(21 |
) |
|
|
2 |
|
Foreign currency exchange rate changes |
|
|
(6 |
) |
|
|
7 |
|
Benefits paid |
|
|
(256 |
) |
|
|
(120 |
) |
|
|
|
|
|
|
|
|
|
Projected benefit obligation at end of year |
|
$ |
3,866 |
|
|
$ |
3,704 |
|
|
|
|
|
|
|
|
|
|
Change in plan assets: |
|
|
|
|
|
|
|
|
Fair value of assets at beginning of year |
|
$ |
4,508 |
|
|
$ |
2,613 |
|
Actual return on plan assets |
|
|
(546 |
) |
|
|
101 |
|
Acquisitions/Divestitures |
|
|
(5 |
) |
|
|
1,895 |
|
Participant contributions |
|
|
3 |
|
|
|
1 |
|
Employer contributions |
|
|
13 |
|
|
|
10 |
|
Foreign currency exchange rate changes |
|
|
(6 |
) |
|
|
8 |
|
Benefits paid |
|
|
(256 |
) |
|
|
(120 |
) |
|
|
|
|
|
|
|
|
|
Fair value of assets at end of year |
|
$ |
3,711 |
|
|
$ |
4,508 |
|
|
|
|
|
|
|
|
|
|
The funded status and the amounts recognized on the accompanying
balance sheets for the solely administered plans are set forth in the following table:
|
|
December 29, 2001
|
|
|
December 30, 2000
|
|
In millions |
|
|
|
|
|
|
Funded status (under) over |
|
$ |
(155 |
) |
|
$ |
804 |
|
Employer contributions |
|
|
2 |
|
|
|
1 |
|
Unrecognized actuarial loss (gain) |
|
|
469 |
|
|
|
(494 |
) |
Unrecognized prior service cost |
|
|
69 |
|
|
|
68 |
|
Unrecognized net (asset) obligation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net prepaid benefit cost |
|
$ |
385 |
|
|
$ |
379 |
|
|
|
|
|
|
|
|
|
|
Amounts recognized on the balance sheets consist of: |
|
|
|
|
|
|
|
|
Prepaid pension cost |
|
$ |
476 |
|
|
$ |
538 |
|
Accrued pension liability |
|
|
(272 |
) |
|
|
(161 |
) |
Intangible asset |
|
|
108 |
|
|
|
2 |
|
Accumulated other comprehensive income |
|
|
73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized |
|
$ |
385 |
|
|
$ |
379 |
|
|
|
|
|
|
|
|
|
|
70
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The projected benefit obligation, accumulated benefit obligation and
fair value of plan assets for plans with accumulated benefit obligations in excess of plan assets were $2,980 million, $2,954 million and $2,687 million, respectively, as of December 29, 2001 and $348 million, $263 million and $189 million,
respectively, as of December 30, 2000.
Net periodic pension cost for solely administered and union-administered
pension plans included the following:
|
|
Year Ended
|
|
|
|
December 29, 2001
|
|
|
December 30, 2000
|
|
|
January 1, 2000
|
|
In millions |
|
|
|
|
|
|
|
|
|
Service cost of benefits earned |
|
$ |
163 |
|
|
$ |
121 |
|
|
$ |
97 |
|
Interest cost on projected benefit obligation |
|
|
270 |
|
|
|
160 |
|
|
|
126 |
|
Expected return on plan assets |
|
|
(414 |
) |
|
|
(262 |
) |
|
|
(208 |
) |
Amortization of gains |
|
|
(19 |
) |
|
|
(33 |
) |
|
|
(11 |
) |
Amortization of prior service cost |
|
|
9 |
|
|
|
9 |
|
|
|
9 |
|
Contributions to multiemployer pension plans |
|
|
8 |
|
|
|
4 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost (income) |
|
$ |
17 |
|
|
$ |
(1 |
) |
|
$ |
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following assumptions were used for United States and Canadian
pension plans:
|
|
Year Ended
|
|
|
|
December 29, 2001
|
|
|
December 30, 2000
|
|
|
January 1, 2000
|
|
Discount rate used to determine the projected benefit obligation |
|
7.0 |
% |
|
7.5 |
% |
|
7.5 |
% |
Rate of increase in future compensation levels used to determine the projected benefit obligation |
|
5.7 |
% |
|
5.6 |
% |
|
5.7 |
% |
Expected long-term rate of return on plan assets used to determine net periodic pension cost |
|
9.5 |
% |
|
9.5 |
% |
|
9.5 |
% |
The following assumptions were used for the European pension plans:
|
|
Year Ended December 29, 2001
|
|
|
Year Ended December 30, 2000
|
|
Discount rate used to determine the projected benefit obligation |
|
6.00 |
% |
|
6.00 |
% |
Rate of increase in future compensation levels used to determine the projected benefit obligation |
|
4.25 |
% |
|
4.25 |
% |
Expected long-term rate of return on plan assets used to determine net periodic pension cost |
|
7.25 |
% |
|
7.25 |
% |
On April 14, 1997, a class action lawsuit alleging claims under the
Employee Retirement Income Security Act of 1974 (ERISA) was filed against the Corporation and the Georgia-Pacific Corporation Salaried Employees Retirement Plan (the Plan) (together, the Defendants) in the United
States District Court for the Northern District of Georgia, seeking recovery of alleged underpayments of lump-sum benefits, together with interest, attorneys fees, and costs. After the District Court granted the Defendants motion for
summary judgment in March 1999, the United States Court of Appeals for the Eleventh Circuit reversed the District Courts ruling in August 2000 and remanded the case for further proceedings, holding that the terms of the Plan required a
calculation of lump-sum benefits that could result in additional payments to members of the class. In September 2000, the Defendants filed a petition for rehearing and rehearing en banc with the Eleventh Circuit, which was denied. The Defendants
also filed a petition for certiorari to the United States Supreme Court in January 2001, which was denied. In March 2002, at the conclusion of the summary judgment briefing process on remand, the District Court issued an Order granting in part and
denying in part the summary judgment motions of
71
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
both the Plaintiff class and the Defendants. In addition, the Order remanded some issues to the Plan administrator for interpretation and specified that the parties must file another proposed
Order implementing the rulings of the initial Order within a certain time period. The Corporation has determined that, in all likelihood, damages will be awarded to the Plaintiff class. In that case, the Plan will be required to make additional
payments to members of the class, which may in turn affect the Corporations net periodic pension cost and obligation to fund the Plan over time. The Corporation has identified a minimum amount of additional benefits the Plan likely will be
required to pay, which should not result in a material impact on the Corporations funding obligation or results of operations. However, beyond this minimum, it is impossible to determine with any certainty the amount, if any, the Plan will be
required to pay. In the event that damages above the minimum amount are awarded, it could have a material effect on the Corporations net periodic pension cost and funding obligation. The Defendants are engaged in discussions and negotiations
with the Plaintiff class for purposes of submitting a proposed Order to the Court in accordance with the mandate of the March 2002 Order.
Defined Contribution Plans
The Corporation sponsors several defined contribution
plans to provide eligible employees with additional income upon retirement. The Corporations contributions to the plans are based on employee contributions and compensation. The Corporations contributions totaled $89 million in 2001, $65
million in 2000 and $62 million in 1999.
Health Care and Life Insurance Benefits
The Corporation provides certain health care and life insurance benefits to certain eligible retired employees. Benefits, eligibility and
cost-sharing provisions for hourly employees vary by location and/or bargaining unit. Generally, the medical plans pay a stated percentage of most medical expenses, reduced for any deductible and payments made by government programs and other group
coverage. The plans are funded through trusts established for the payment of active and retiree benefits. The Corporation contributes to the trust in the amounts necessary to fund current obligations of the plans.
In 1991, the Corporation began transferring its share of the cost of post-age 65 health care benefits to future salaried retirees. The
Corporation reduced the percentage of the cost of post-age 65 benefits that it pays on behalf of salaried employees who retire in each of the years 1995 through 1999 and no longer pays any of the post-age 65 cost for salaried employees who retire
after 1999. The Corporation has continued to share the pre-age 65 cost with future retirees.
Salaried and
non-bargaining hourly employees of the former Fort James Corporation leaving after 1999 are generally eligible for retiree health care benefits if they terminate after age 55 with 10 years of service and participated in the Fort James Retiree
Medical Savings Account (RMSA) Plan. After October 1, 2001, these employees are eligible for retiree health care benefits under the Georgia-Pacific retiree medical plan. The RMSA plan requires retirees to pay the full cost of the pre-65
and post-65 plans. Under the Georgia-Pacific plan, the Corporation shares the pre-65 plan cost with future retirees once their RMSA account is exhausted.
72
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The following tables set forth the change in accumulated
postretirement benefit obligation and the amounts recognized on the accompanying balance sheets:
|
|
December 29, 2001
|
|
|
December 30, 2000
|
|
In millions |
|
|
|
|
|
|
Change in accumulated postretirement benefit obligation: |
|
|
|
|
|
|
|
|
Accumulated benefit obligation at beginning of year |
|
$ |
868 |
|
|
$ |
437 |
|
Service cost |
|
|
8 |
|
|
|
9 |
|
Interest cost |
|
|
52 |
|
|
|
32 |
|
Acquisitions |
|
|
1 |
|
|
|
412 |
|
Curtailments |
|
|
(7 |
) |
|
|
1 |
|
Plan changes |
|
|
(109 |
) |
|
|
|
|
Actuarial losses (gains) |
|
|
29 |
|
|
|
(4 |
) |
Change in assumptions |
|
|
34 |
|
|
|
16 |
|
Benefits paid |
|
|
(69 |
) |
|
|
(35 |
) |
|
|
|
|
|
|
|
|
|
Accumulated postretirement benefit obligation at end of year |
|
$ |
807 |
|
|
$ |
868 |
|
|
|
|
|
|
|
|
|
|
Funded status (under) |
|
$ |
(807 |
) |
|
$ |
(868 |
) |
Unrecognized actuarial gain |
|
|
(6 |
) |
|
|
(67 |
) |
Unrecognized prior service cost |
|
|
(63 |
) |
|
|
11 |
|
Unrecognized net (asset) obligation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net accrued benefit cost |
|
$ |
(876 |
) |
|
$ |
(924 |
) |
|
|
|
|
|
|
|
|
|
Amounts recognized on the balance sheets consist of: |
|
|
|
|
|
|
|
|
Prepaid benefit cost |
|
$ |
|
|
|
$ |
|
|
Accrued benefit liability |
|
|
(876 |
) |
|
|
(924 |
) |
|
|
|
|
|
|
|
|
|
Net amount recognized |
|
$ |
(876 |
) |
|
$ |
(924 |
) |
|
|
|
|
|
|
|
|
|
Net periodic postretirement benefit cost included the following
components:
|
|
Year Ended
|
|
|
|
December 29, 2001
|
|
|
December 30, 2000
|
|
|
January 1, 2000
|
|
In millions |
|
|
|
|
|
|
|
|
|
Service cost of benefits earned |
|
$ |
8 |
|
|
$ |
9 |
|
|
$ |
8 |
|
Interest cost on accumulated postretirement benefit obligation |
|
|
52 |
|
|
|
32 |
|
|
|
26 |
|
Amortization of prior service (credit) cost |
|
|
(10 |
) |
|
|
|
|
|
|
1 |
|
Amortization of gains |
|
|
|
|
|
|
(1 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic postretirement benefit cost |
|
$ |
50 |
|
|
$ |
40 |
|
|
$ |
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In connection with the sale of a portion of the its paper and pulp
assets to Domtar Inc. (see Note 3), the Corporation recognized a curtailment gain of approximately $31 million which was reflected in the pretax loss on the sale.
For measuring the expected accumulated postretirement benefit obligation, annual rates of increase in per capita claims cost for its pre-age 65 and age 65 and older claims
were assumed to be 10.5% and 11.5%, respectively, for 2001 and 7.5% and 10%, respectively, for 2000. A single annual rate of increase in the per capita claims cost of 7% was assumed for 1999. For 2001 and 2000, the rates were assumed to decrease
gradually to 5.5% in 2006 and 5.0% in 2007, respectively, and remain at that level thereafter.
For measuring the
2000 expected accumulated postretirement benefit obligation for the former Fort James, a 7.5%, 10.0% and 12.0% annual rate of increase in the per capita claims cost was assumed for pre-age 65, age 65 and older medical coverage and age 65 and older
prescription drug coverage, respectively.
73
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The weighted average discount rate used in determining the
accumulated postretirement benefit obligation was 6.5% at December 29, 2001, 7.0% at December 30, 2000 and 7.0% at January 1, 2000.
If the annual health care cost trend rate were increased by 1%, the accumulated postretirement benefit obligation would have increased by 8% as of December 29, 2001, 10% as of December 30, 2000 and January 1, 2000. The
effect of this change on the aggregate of service and interest costs would be an increase of 9% for 2001, 12% for 2000 and 12% for 1999.
If the annual health care cost trend rate were decreased by 1%, the accumulated postretirement benefit obligation would have decreased by 7% as of December 29, 2001, 8% as of December 30, 2000 and 9% as of January 1, 2000.
The effect of this change on the aggregate of service and interest costs would be a decrease of 8% for 2001, 10% for 2000 and 11% for 1999.
NOTE 12. COMMON AND PREFERRED STOCK
The Corporations
authorized capital stock consists of (i) 10 million shares of Preferred Stock and 25 million shares of Junior Preferred Stock, of which no shares were issued at December 29, 2001 and December 30, 2000, and (ii) 400 million shares of Georgia-Pacific
common stock of which 230,095,000 shares and 224,844,000 shares were issued at December 29, 2001 and December 30, 2000, respectively. At December 30, 2000, 250 million shares of The Timber Company common stock were authorized, of which 94,571,000
shares were issued.
At December 29, 2001, the following authorized shares of common stock were reserved for
issue:
PEPS Units |
|
18,205,650 |
2000 Fort James conversions |
|
6,960,931 |
2000 Employee Stock Purchase Plan |
|
7,038,702 |
1999 Unisource conversions |
|
321,540 |
1999 Wisconsin Tissue conversions |
|
22,702 |
1997 Long-Term Incentive Plan |
|
15,353,957 |
1995 Outside Directors Stock Plan |
|
276,746 |
1995 Shareholder Value Incentive Plan |
|
4,525,786 |
|
|
|
Common stock reserved |
|
52,706,014 |
|
|
|
1997 Long-Term Incentive Plans
The Corporation reserved 16,000,000 shares of Georgia-Pacific Group stock (the Georgia-Pacific Group Plan) for issuance under
the 1997 Long-Term Incentive Plan. The Georgia-Pacific Group Plan authorizes grants of stock options, restricted stock and performance awards.
Under the Georgia-Pacific Group Plan, options covering 2,938,500 shares; 34,000 shares; 27,600 shares; 2,848,060 shares; 2,412,955; and 2,027,800 shares were granted on January 29, March 2 and July 29,
1998, January 28, 1999, January 21, 2000, and January 29, 2001, respectively. These grants have a 10-year term and vest ratably over a three-year period. In addition, performance share awards covering 96,000 shares and 40,800 shares were both
granted on January 28, 1999 and awarded on January 21, 2000 and January 29, 2001, respectively. At the time performance shares were awarded, the average of the high and low market value of the stock was added to common stock and additional paid-in
capital and was deducted from shareholders equity
74
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(long-term incentive plan deferred compensation) in the accompanying financial statements. The long-term incentive plan deferred
compensation of $3.2 million and $1.2 million at the award date is being amortized over the vesting (restriction) period, which is five years.
Employee Stock Purchase Plan
The Corporation reserved
8,550,000 shares of Georgia-Pacific Group stock under the 2000 Employee Stock Purchase Plan (the 2000 Purchase Plan), which offers employees the right to subscribe for shares of the Georgia-Pacific Group at a subscription price equal to
90% of the lower of the average price per share on the first day or the last day of the purchase period. The purchase period for the initial one-year period began on July 1, 2000 and ended on June 30, 2001. The Corporation issued 1,511,298 shares of
Georgia-Pacific Group stock at a purchase price of $24.10 for the initial one-year period. The 2000 Purchase Plan was extended, and the next purchase period began on July 1, 2001 and ends on June 30, 2002. If the 2000 Purchase Plan is extended, the
Plan Administrator will set the next purchase period for the plan year 2002. An employee may terminate his or her subscription at any time before he or she pays the full price of the shares subscribed and will receive in cash the full amount
withheld, without interest.
1995 Outside Directors Stock Plan
The Corporation reserved 400,000 shares of Georgia-Pacific Group stock and 200,000 shares of The Timber Company stock for issuance under
the 1995 Outside Directors Stock Plan (the Directors Plan), which provides for the issuance of shares of common stock to nonemployee directors of the Corporation on a restricted basis. Each nonemployee director was issued 625 and 647
restricted shares of Georgia-Pacific Group stock in 2001 and 2000, respectively.
As a result of The Timber
Company spin-off and merger with Plum Creek, 33,212 restricted shares of The Timber Company were exchanged or canceled and 40,183 restricted shares of Georgia-Pacific were issued.
Effective May 6, 1997, accrual of additional retirement benefits under the Corporations retirement program for directors ceased, and the accrued benefits of each of
the current nonemployee directors (the present value of which totaled $1,303,889 as of May 6, 1997) were converted into a grant of an equivalent number of shares of restricted stock under the Directors Plan. The total number of shares issued related
to this conversion was 15,702.
Employee Stock Option Plans
The 1995 Shareholder Value Incentive Plan (the SVIP) provides for the granting of stock options having a term of either
5½ or 10 years to officers and key employees. Under the amended and restated SVIP, no further grants may be made under the plan. Options having a term of 10 years become exercisable in 9½ years unless certain performance targets tied to
the Corporations common stock performance are met, in which case the holder could exercise such options after 3, 4 or 5 years from the grant date. Options having a term of 5½ years may be exercised only if such performance targets are met
in the third, fourth or fifth year after such grant date. At the time options are exercised, the exercise price is payable in cash or by surrender of shares of common stock already owned by the optionee. All shares were vested as of February 2000.
Unisource Conversions
In connection with the acquisition of Unisource as described in Note 3, the Corporation converted certain stock options awarded under a former Unisource stock option plan
(Unisource stock options) into Georgia-Pacific Group stock options. The conversion was intended to ensure that the aggregate intrinsic value of the Unisource stock options was preserved and the ratio of the exercise price per Unisource
stock option to the
75
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
market value per share of Georgia-Pacific Group stock was not reduced. Unisource stock options to purchase 2,633,459 shares had original grant dates ranging from November 10, 1994 through May 19,
1999 with a 10-year term, and vest ratably over three-year and five-year periods. These Unisource stock options were converted into options to purchase 629,648 shares of Georgia-Pacific Group stock at prices ranging from $31.88 to $91.58 per share.
The vesting provisions and option periods of the original grants remained the same following such conversion. The value of these options at the acquisition date was $9.4 million and was included as part of the purchase price paid for Unisource
The Corporation also issued 40,152 restricted shares of Georgia-Pacific Group stock under the 1997 Long-Term
Incentive Plan to two former Unisource officers who became officers of the Corporation. Each officer was issued 20,076 restricted shares of Georgia-Pacific Group stock. At the time restricted shares were awarded, the average of the high and low
market value of the stock was added to common stock and additional paid-in capital and was deducted from shareholders equity (long-term incentive plan deferred compensation) on the accompanying financial statements. The long-term incentive
plan deferred compensation of $2 million is being amortized over the vesting (restriction) periods of one, two and three years.
Wisconsin Tissue Conversions
In connection with the formation of Georgia-Pacific Tissue as
described in Note 3, the Corporation converted certain outstanding stock options awarded under a Chesapeake stock option plan (Chesapeake stock options) into Georgia-Pacific Group stock options. The conversion was intended to ensure that
the aggregate intrinsic value of the Chesapeake stock options was preserved and the ratio of the exercise price per Chesapeake stock option to the market value per share of Georgia-Pacific Group stock was not reduced. Chesapeake stock options to
purchase 172,250 shares had original grant dates ranging from August 11, 1997 through April 16, 1999, with a vesting period of three years and a 10-year term.
These Chesapeake stock options were converted into options to purchase 92,960 shares of Georgia-Pacific Group stock at prices ranging from $36.20 to $50.36 per share. The vesting provisions and option
periods of the original grants remained the same following such conversion. The stock options total value of $1.3 million was included in the asset purchase price on the date the Corporation formed Georgia-Pacific Tissue.
Fort James Conversions
In connection with the acquisition of Fort James as described in Note 3, the Corporation converted certain stock options awarded under a former Fort James stock option plan (Fort James stock
options) into Georgia-Pacific Group stock options. The conversion was intended to ensure that the aggregate intrinsic value of the Fort James stock options was preserved and the ratio of the exercise price per Fort James stock option to the
market value per share of Georgia-Pacific Group stock was not reduced. Fort James stock options to purchase 7,399,316 shares had original grant dates ranging from February 11, 1991 through August 15, 2000 with a 10-year term. These Fort James stock
options were converted into options to purchase 10,348,501 shares of Georgia-Pacific Group stock at prices ranging from $9.59 to $36.76 per share. The options became fully vested as of the acquisition date with the same option period of the original
grants. The value of these options at the acquisition date was $120 million and was included as part of the purchase price paid for Fort James.
The Corporation also converted 15,000 Fort James stock appreciation rights to receive cash into 20,981 Georgia-Pacific Rights with prices of $17.61 and $28.06. The rights became fully vested as of the
acquisition date and maintained their original option dates of February 11, 2000 and January 6, 1999 with a 10 year term. The related compensation expense is being recorded based on changes in the quoted market price of the underlying stock until
the rights are exercised or expire.
76
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
2001 Long-Term Appreciation Plan
The Corporation reserved 2,600,000 stock appreciation rights (SARs) for issuance under the 2001 Long-Term Appreciation Plan (the LTAP). The LTAP
provides for the granting of SARs to key employees of the Corporation. Benefits paid under this plan will be made in cash, not common stock. During 2001, the Corporation issued 2.35 million SARs under the LTAP with an exercise price of $29.47 each.
The SAR exercise price was based on the underlying fair value of Georgia-Pacific Group common stock at the grant date. The SARs vest over three years. Compensation expense for the SARs is based on the difference between the current fair market value
of Georgia-Pacific Group common stock and the fair market value at the date of grant. Compensation expense recorded in 2001 related to these SARs was deminimus.
PEPS Units
Each PEPS Unit consists of a purchase contract
that obligates the holder to purchase shares of Georgia-Pacific common stock for $50 on or prior to August 16, 2002 and a senior deferrable not of the Corporation due August 16, 2004 (see Note 7). The amount of shares purchased per PEPS Unit will be
based on the average closing price of Georgia-Pacific common stock over a 20-day trading period ending August 13, 2002. Assuming an average stock price of less than $47.375 per share, the Corporation expects to issue approximately 18.2 million
shares of Georgia-Pacific common stock in 2002. Accordingly, the Corporation has reserved the full number of shares of Georgia-Pacific common stock issuable under the PEPS Units.
77
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Additional information relating to the Corporations existing
employee stock options is as follows:
|
|
Year Ended December 29,
|
|
|
2001
|
|
2001
|
|
|
Georgia-Pacific Group
|
|
The Timber Company
|
|
|
Shares
|
|
|
Weighted Average Exercise Price
|
|
Shares
|
|
|
Weighted Average Exercise Price
|
Options outstanding at December 31, 2000 |
|
22,522,345 |
|
|
$ |
28.53 |
|
4,909,699 |
|
|
$ |
22.46 |
Options granted/converted |
|
2,027,800 |
|
|
|
29.47 |
|
(2,806,737 |
) |
|
|
22.71 |
Options exercised/surrendered |
|
(3,503,152 |
) |
|
|
23.71 |
|
(2,086,679 |
) |
|
|
22.13 |
Options canceled |
|
(895,276 |
) |
|
|
40.84 |
|
(16,283 |
) |
|
|
21.85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at December 29, 2001 |
|
20,151,717 |
|
|
|
29.05 |
|
|
|
|
|
|
Options available for grant at December 29, 2001 |
|
6,885,449 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reserved shares |
|
27,037,166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at December 29, 2001 |
|
18,449,373 |
|
|
|
24.71 |
|
|
|
|
|
|
Option prices per share: |
|
|
|
|
|
|
|
|
|
|
|
|
Granted/converted |
|
$29 |
|
|
|
|
|
$21-$25 |
|
|
|
|
Exercised/surrendered |
|
$9-$33 |
|
|
|
|
|
$21-$25 |
|
|
|
|
Canceled |
|
$9-$92 |
|
|
|
|
|
$21-$25 |
|
|
|
|
|
|
Options outstanding by exercise price: |
Georgia-Pacific Group |
|
|
|
|
|
$9.59-$12.62 |
|
154,956 |
|
$ |
10.58 |
Average remaining life |
|
1.9 years |
|
|
|
$12.71-$14.89 |
|
157,728 |
|
$ |
14.33 |
Average remaining life |
|
2.0 years |
|
|
|
$14.91-$16.23 |
|
39,365 |
|
$ |
15.61 |
Average remaining life |
|
2.8 years |
|
|
|
$16.58-$18.29 |
|
1,136,443 |
|
$ |
17.61 |
Average remaining life |
|
4.7 years |
|
|
|
$18.52-$18.96 |
|
217,551 |
|
$ |
18.90 |
Average remaining life |
|
3.7 years |
|
|
|
$19.35-$20.11 |
|
11,772 |
|
$ |
19.73 |
Average remaining life |
|
4.3 years |
|
|
|
$22.03-$24.63 |
|
358,466 |
|
$ |
24.22 |
Average remaining life |
|
4.8 years |
|
|
|
$24.76-$27.10 |
|
5,983,089 |
|
$ |
26.38 |
Average remaining life |
|
5.6 years |
|
|
|
$27.23-$30.78 |
|
7,235,874 |
|
$ |
28.67 |
Average remaining life |
|
6.1 years |
|
|
|
$31.57-$41.59 |
|
4,668,287 |
|
$ |
36.47 |
Average remaining life |
|
6.8 years |
|
|
|
$43.58-$61.63 |
|
26,024 |
|
$ |
50.71 |
Average remaining life |
|
4.8 years |
|
|
|
$63.73-$91.58 |
|
162,162 |
|
$ |
67.73 |
Average remaining life |
|
4.9 years |
|
|
|
78
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
|
Year Ended December 30,
|
|
|
2000
|
|
2000
|
|
|
Georgia-Pacific Group
|
|
The Timber Company
|
|
|
Shares
|
|
|
Weighted Average Exercise Price
|
|
Shares
|
|
|
Weighted Average Exercise Price
|
Options outstanding at January 1, 2000 |
|
10,788,269 |
|
|
$ |
29.97 |
|
4,967,650 |
|
|
$ |
22.33 |
Options granted/converted |
|
12,740,475 |
|
|
|
27.39 |
|
624,250 |
|
|
|
22.50 |
Options exercised/surrendered |
|
(561,407 |
) |
|
|
22.15 |
|
(659,601 |
) |
|
|
21.56 |
Options canceled |
|
(444,992 |
) |
|
|
39.70 |
|
(22,600 |
) |
|
|
22.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at December 30, 2000 |
|
22,522,345 |
|
|
|
28.53 |
|
4,909,699 |
|
|
|
22.46 |
Options available for grant at December 30, 2000 |
|
7,738,885 |
|
|
|
|
|
2,164,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reserved shares |
|
30,261,230 |
|
|
|
|
|
7,073,899 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at December 30, 2000 |
|
17,650,283 |
|
|
|
26.35 |
|
4,052,772 |
|
|
|
22.30 |
Option prices per share: |
|
|
|
|
|
|
|
|
|
|
|
|
Granted/converted |
|
$9-$42 |
|
|
|
|
|
$23 |
|
|
|
|
Exercised/surrendered |
|
$9-$50 |
|
|
|
|
|
$21-$25 |
|
|
|
|
Canceled |
|
$26-$92 |
|
|
|
|
|
$21-$25 |
|
|
|
|
|
|
Year Ended January 1,
|
|
|
2000
|
|
2000
|
|
|
Georgia-Pacific Group
|
|
The Timber Company
|
|
|
Shares
|
|
|
Weighted Average Exercise Price
|
|
Shares
|
|
|
Weighted Average Exercise Price
|
Options outstanding at January 1, 1999 |
|
11,696,183 |
|
|
$ |
27.03 |
|
5,553,850 |
|
|
$ |
22.26 |
Options granted/converted |
|
3,570,668 |
|
|
|
36.09 |
|
950 |
|
|
|
22.56 |
Options exercised/surrendered |
|
(3,974,803 |
) |
|
|
26.89 |
|
(417,150 |
) |
|
|
21.58 |
Options canceled |
|
(503,779 |
) |
|
|
28.70 |
|
(170,000 |
) |
|
|
21.70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at January 1, 2000 |
|
10,788,269 |
|
|
|
29.97 |
|
4,967,650 |
|
|
|
22.33 |
Options available for grant at January 1, 2000 |
|
3,111,688 |
|
|
|
|
|
1,288,450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reserved shares |
|
13,899,957 |
|
|
|
|
|
6,256,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at January 1, 2000 |
|
2,952,766 |
|
|
|
30.20 |
|
2,972,400 |
|
|
|
22.32 |
Option prices per share: |
|
|
|
|
|
|
|
|
|
|
|
|
Granted/converted |
|
$32-$92 |
|
|
|
|
|
$23 |
|
|
|
|
Exercised/surrendered |
|
$26-$37 |
|
|
|
|
|
$21-$23 |
|
|
|
|
Canceled |
|
$26-$32 |
|
|
|
|
|
$21-$23 |
|
|
|
|
Shareholder Rights Plan
On December 16, 1997, shareholders approved an amended and restated Shareholder Rights Plan (the Rights Agreement) pursuant to
which preferred stock purchase rights (the Rights) are issued on each outstanding share of Georgia-Pacific Group stock (a Georgia-Pacific Group Right), which will entitle the holders thereof to purchase shares of Series B
Junior Preferred Stock under the conditions specified in the Rights Agreement.
The Rights will expire on December
31, 2007, unless earlier redeemed by the Corporation or extended. The Rights would be exercisable only if a person or group acquires 15% or more of the total voting rights of all then
79
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
outstanding shares of common stock of the Corporation or commences a tender offer that would result in such person or group beneficially owning 15% or more of the total voting rights of all then
outstanding shares of common stock of the Corporation. In such event, each Right would entitle the holder to purchase from the Corporation one one-hundredth of a share of Series B Junior Preferred Stock (a Series B Unit) at a purchase
price of $175 (the Series B Unit Purchase Price), subject to adjustment.
Thereafter, in the event one
of several specified events (generally involving transactions by an acquirer in the Corporations common stock or a business combination involving the Corporation) occurs, each Georgia-Pacific Group Right will entitle its holder to purchase,
for the Series B Unit Purchase Price, a number of shares of common stock of such entity or purchaser with a market value equal to twice the applicable purchase price. Because of the nature of the dividend, liquidation and voting rights of each class
of Junior Preferred Stock related to the Rights, the economic value of one Series B Unit should approximate the economic value of one share of Georgia-Pacific Group stock.
Capital Stock
The Corporation
does not hold any Georgia-Pacific Group stock in Treasury as of December 29, 2001 and December 30, 2000.
During
2000, the Corporation purchased on the open market approximately 1.7 million shares of Georgia-Pacific stock at an aggregate price of $62 million ($36.47 average per share). The Corporation also purchased on the open market approximately 3.3 million
shares of The Timber Company stock at an aggregate price of $78 million ($23.64 average per share), all of which were held as treasury stock at December 30, 2000.
At the end of November 2000, the Corporation acquired Fort James (as described above and in Note 3 of the Notes to Consolidated Financial Statements) and issued 21.5
million shares of Georgia-Pacific treasury stock and 32.2 million newly issued shares of Georgia-Pacific stock as part of that transaction. During 2001, the Corporation issued an additional 190,000 shares of Georgia-Pacific Stock as part of this
transaction.
80
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Other
The Corporation has elected to continue to account for its stock-based compensation plans under APB Opinion No. 25 and disclose pro forma effects of the plans on net
income and earnings per share as provided by SFAS No. 123. Accordingly, because the fair market value on the date of grant was equal to the exercise price, no compensation cost has been recognized for the Fort James stock options, Unisource stock
options, Chesapeake stock options, the SVIP, the Georgia-Pacific Group Plan, The Timber Company Plan or the 2000 Purchase Plan. Had compensation cost for these plans been determined based on the fair value at the grant dates in 2001, 2000 or 1999
under the plan consistent with the method of SFAS No. 123, the pro forma net income and earnings per share would have been as follows:
|
|
Year Ended
|
|
|
December 29, 2001
|
|
|
December 30, 2000
|
|
January 1, 2000
|
In millions, except per share amounts |
|
|
|
|
|
|
|
Georgia-Pacific Corporation |
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
|
|
|
|
|
|
|
|
|
As reported |
|
$ |
(407 |
) |
|
$ |
505 |
|
$ |
1,116 |
Pro forma |
|
|
(439 |
) |
|
|
467 |
|
|
1,079 |
Georgia-Pacific Group |
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
|
|
|
|
|
|
|
|
|
As reported |
|
|
(477 |
) |
|
|
343 |
|
|
716 |
Pro forma |
|
|
(507 |
) |
|
|
308 |
|
|
685 |
Net (loss) income per share* |
|
|
|
|
|
|
|
|
|
|
As reported |
|
|
(2.10 |
) |
|
|
1.95 |
|
|
4.17 |
Pro forma |
|
|
(2.23 |
) |
|
|
1.75 |
|
|
3.99 |
The Timber Company |
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of taxes |
|
|
|
|
|
|
|
|
|
|
As reported |
|
|
70 |
|
|
|
162 |
|
|
400 |
Pro forma |
|
|
68 |
|
|
|
159 |
|
|
394 |
Income from discontinued operations, net of taxes per share* |
|
|
|
|
|
|
|
|
|
|
As reported |
|
|
0.86 |
|
|
|
2.01 |
|
|
4.75 |
Pro forma |
|
|
0.84 |
|
|
|
1.97 |
|
|
4.68 |
* |
|
Represents basic earnings per share. Pro forma diluted per share amounts were ($2.23) and $0.83 in 2001, $1.74 and $1.96 in 2000 and $3.89 and $4.66 in 1999 for
the Georgia-Pacific Group and The Timber Company, respectively. |
The fair-value-based method of
accounting for stock-based compensation plans under SFAS No. 123 recognizes the value of options granted as compensation cost over the options vesting period and has not been applied to options granted prior to January 1, 1995. Accordingly,
the resulting pro forma compensation cost is not representative of what compensation cost will be in future years.
81
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Following are the weighted average assumptions used in connection
with the Black-Scholes option pricing model to estimate the fair value of options granted in 2001, 2000 and 1999:
|
|
Year Ended
|
|
|
|
December 29, 2001
|
|
|
December 30, 2000
|
|
|
January 1, 2000
|
|
|
|
Options
|
|
|
ESPP*
|
|
|
Options
|
|
|
ESPP*
|
|
|
Options
|
|
Georgia-Pacific Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-free interest rate |
|
5.2 |
% |
|
3.6 |
% |
|
6.7 |
% |
|
6.1 |
% |
|
4.9 |
% |
Expected dividend yield |
|
1.7 |
% |
|
1.5 |
% |
|
1.2 |
% |
|
1.9 |
% |
|
1.1 |
% |
Expected life |
|
7 years |
|
|
1 year |
|
|
10 years |
|
|
1 year |
|
|
7 years |
|
Expected volatility |
|
0.47 |
|
|
0.47 |
|
|
0.42 |
|
|
0.42 |
|
|
0.46 |
|
Option forfeiture rate |
|
5.0 |
% |
|
7.3 |
% |
|
3.0 |
% |
|
7.3 |
% |
|
3.0 |
% |
The Timber Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-free interest rate |
|
|
|
|
|
|
|
6.7 |
% |
|
6.1 |
% |
|
4.9 |
% |
Expected dividend yield |
|
|
|
|
|
|
|
4.4 |
% |
|
4.5 |
% |
|
4.4 |
% |
Expected life |
|
|
|
|
|
|
|
10 years |
|
|
1 year |
|
|
9 years |
|
Expected volatility |
|
|
|
|
|
|
|
0.38 |
|
|
0.38 |
|
|
0.32 |
|
Option forfeiture rate |
|
|
|
|
|
|
|
3 |
% |
|
8.6 |
% |
|
3 |
% |
* |
|
Employee Stock Purchase Plan |
The weighted average grant date fair value per share of Georgia-Pacific Group options granted during the year using the Black-Scholes option pricing model was $15.46, $23.26 and $16.97 for 2001, 2000 and 1999, respectively.
The weighted average grant date fair value per share of The Timber Company options granted during the year using the Black-Scholes option pricing model was $7.35 for 2000 and $7.89 for 1999. The weighted average grant date fair value per share of
shares subscribed under the 2000 Purchase Plan was $8.01 and $6.13 for Georgia-Pacific Group in 2001 and 2000, respectively. The weighted average grant date fair value per share of shares subscribed under the 2000 Purchase Plan was $4.34 for The
Timber Company in 2000.
NOTE 13. OTHER COMPREHENSIVE LOSS
The Corporations accumulated other comprehensive loss includes the following:
|
|
Foreign Currency Items
|
|
|
Derivative Instruments
|
|
|
Minimum Pension Liability Adjustment
|
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
In millions |
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2000 |
|
$ |
(29 |
) |
|
$ |
|
|
|
$ |
(3 |
) |
|
$ |
(32 |
) |
Activity, net of taxes |
|
|
15 |
|
|
|
|
|
|
|
1 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 30, 2000 |
|
|
(14 |
) |
|
|
|
|
|
|
(2 |
) |
|
|
(16 |
) |
Activity, net of taxes |
|
|
(29 |
) |
|
|
(30 |
) |
|
|
(43 |
) |
|
|
(102 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 29, 2001 |
|
$ |
(43 |
) |
|
$ |
(30 |
) |
|
$ |
(45 |
) |
|
$ |
(118 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 14. COMMITMENTS AND CONTINGENCIES
Total rental expense was approximately $206.7 million, $167.2 million and $117.4 million in 2001, 2000 and 1999, respectively.
82
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
At December 29, 2001, total commitments of the Corporation under long-term, noncancelable contracts,
including operating leases, were as follows:
In millions |
|
|
2002 |
|
$ |
333 |
2003 |
|
|
264 |
2004 |
|
|
219 |
2005 |
|
|
192 |
2006 |
|
|
175 |
After 2006 |
|
|
356 |
|
|
|
|
|
|
$ |
1,539 |
|
|
|
|
ENVIRONMENTAL MATTERS
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 170 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 (PRP) under the United States Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) or similar state superfund laws. Of the known sites in which it is
involved, the Corporation estimates that approximately 45% are being investigated, approximately 30% are being remediated and approximately 25% are being monitored (an activity that 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 nature and 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 governmental regulations, and the inability to determine the Corporations share of
multiparty cleanups or the extent to which contribution will be available from other parties, all of which factors are taken into account to the extent possible in estimating the Corporations liabilities. The Corporation has established
reserves for environmental remediation costs for these sites that it believes are probable and reasonably able to be estimated. To the extent that the corporation is aware of unasserted claims, considers them probable, and can estimate their
potential costs, the Corporation includes appropriate amounts in the reserves.
Based on analyses of
currently available information and previous experience with respect to the cleanup of hazardous substances, the Corporation believes 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 $121 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 PRPs who may be jointly and severally liable. The ability of other PRPs to participate has been taken into
account, based generally on their financial condition and probable contribution on a per-site basis.
83
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Presented below is the activity in the Corporations
environmental liability account for the last three years.
in millions
|
|
2001
|
|
|
2000
|
|
|
1999
|
|
Beginning balance |
|
$ |
120 |
|
|
$ |
57 |
|
|
$ |
47 |
|
Expense charged to earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
Related to previously existing matters |
|
|
2 |
|
|
|
29 |
|
|
|
22 |
|
Related to new matters |
|
|
|
|
|
|
1 |
|
|
|
3 |
|
Amounts related to acquisitions/(divestitures): |
|
|
|
|
|
|
|
|
|
|
|
|
Amounts assumed by others in divestitures |
|
|
|
|
|
|
|
|
|
|
|
|
Original purchase price allocations |
|
|
|
|
|
|
49 |
|
|
|
1 |
|
Changes in purchase price allocations |
|
|
207 |
|
|
|
|
|
|
|
|
|
Payments |
|
|
(21 |
) |
|
|
(16 |
) |
|
|
(16 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
308 |
|
|
$ |
120 |
|
|
$ |
57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expense charged to earnings in the above table includes
amounts accrued for new matters and changes in existing estimates. Payments represent amounts paid in full or partial settlement or for environmental studies and similar costs.
KALAMAZOO RIVER SUPERFUND SITE
The Corporation is implementing an Administrative Order by Consent (AOC) entered into with the Michigan Department of Natural Resources and the United States Environmental Protection Agency (United States EPA)
regarding an investigation of the Kalamazoo River Superfund Site. The Kalamazoo River Superfund Site is comprised of 35 miles of the Kalamazoo River, three miles of Portage Creek and a number of operable units in the form of landfills, waste
disposal areas and impoundments. The Corporation became a PRP for the site in December 1990 by signing the AOC. There are two other named PRPs at this time. The contaminant of concern is polychlorinated biphenyls (PCBs) in the river
sediments and residuals in the landfills and waste disposal areas.
A draft Remedial
Investigation/Feasibility Study (RI/FS) for the Kalamazoo River was submitted to the State of Michigan on October 30, 2000 by the Corporation and other PRPs. The draft RI/FS evaluated five remedial options ranging from no action to total
dredging of the river and off-site disposal of the dredged materials. In February 2001, the PRPs, at the request of the State of Michigan, also evaluated nine additional potential remedies. The cost for these remedial options ranges from $0 to $2.5
billion. The draft RI/FS recommends a remedy involving stabilization of over twenty miles of riverbank and long-term monitoring of the riverbed. The total cost for this remedy is approximately $73 million. It is unknown over what time frame these
costs will be paid out. The United States EPA has recently taken over management of the RI/FS and is evaluating the proposed remedy. The Corporation cannot predict what impact or change will result from the United States EPAs assuming
management of the site.
The Corporation is paying 50% of the costs for the river portion of the RI/FS
investigation based on an interim allocation. This 50% interim allocation includes the share assumed by Fort James prior to its acquisition by the Corporation. Several other companies have been identified by government agencies as PRPs, and all but
one is believed to be financially viable. The Corporation is currently engaged in cost recovery litigation against two other parties, and has identified several more parties that it believes have some share of liability for the river.
The Corporation, as part of implementing the AOC, has investigated the closure of two disposal areas which are
contaminated with PCBs. The cost to remediate one of the disposal areas, the King Highway Landfill, was approximately $9 million. The remediation of that area is essentially complete and the Corporation is waiting for
84
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
final approval of the closure from the State of Michigan. A 30-year post-closure care period will begin upon receipt of closure approval. Expenditures accrued for post-closure care will be made
over the following 30 years. The Corporation is solely responsible for closure and post closure care of the King Highway Landfill.
It is anticipated that the cost for closure of the second disposal area, the Willow Boulevard/A Site landfill, will be approximately $8 million. The Corporation is still negotiating the final closure
agreement with the State of Michigan. It is anticipated these costs will be paid out over the next five years, and for post-closure care for 30 years following certification of the closure. The Corporation is solely responsible for closure and
post-closure care of the Willow Boulevard portion of the landfill and the Corporation is sharing investigation costs for the A Site portion of the landfill with Millennium Holdings on an equal basis. A final determination as to how closure and
post-closure costs for the A Site will be allocated between the Corporation and Millennium Holdings has not been made, however, the Corporations share should not exceed 50%.
The Corporation has spent approximately $27.0 million on the Kalamazoo River Superfund Site through December 29, 2001 broken down as follows:
Site
|
|
(in millions)
|
River |
|
$13.8 |
King Highway |
|
8.7 |
A Site |
|
1.7 |
Willow Blvd. |
|
2.8 |
|
|
|
|
|
$27.0 |
|
|
|
All such amounts were charged to earnings.
The reserve for the Kalamazoo River Superfund Site is based on the assumption that the banks stabilization remedy will be
selected as the final remedy by the United States EPA and the State of Michigan, and that the costs of the remedy would be shared by several other PRPs. Based on analyses of currently available information and previous experience with respect to the
cleanup of hazardous substances, the Corporation believes that the reserves are adequate; however, it is reasonably possible that costs associated with the Kalamazoo River Superfund Site may exceed current reserves by amounts that may prove
insignificant or that could range, in the aggregate, up to approximately $70 million.
FOX RIVER SITE
The Fox River site in Wisconsin is comprised of 39 miles of the Fox River and Green Bay. The site was nominated by the
United States EPA (but never finally designated) as a Superfund Site due to contamination of the river by PCBs through wastewater discharged from the recycling of carbonless copy paper from 1953-1971. The Corporation became a PRP through its
acquisition of Fort James.
In October 2001, the Wisconsin Department of Natural Resources
(WDNR) and the United States EPA released for public comment a draft RI/FS study and proposed remedial action plan (PRAP) for the Fox River and Green Bay. The draft sets forth a proposed remedy with an estimated total cost of
$308 million. The Corporation provided comments on this plan to the relevant agencies in January 2002. Those comments questioned the WDNRs assumed costs for dredging, because information from other remediation dredging projects indicated costs
per cubic yard of material dredged were significantly higher than those used by WDNR. The Corporation and other PRPs also questioned the need to dredge the amount of sediment called for by the
85
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
proposed remedy. The Corporation believes that other alternatives involving substantially less dredging would meet the risk reduction goals of WDNR. The final cleanup alternative to be selected
and implemented, the costs of that alternative, and the Corporations share of such costs, are unknown at this time.
Six other companies have been identified by the government as PRPs, most of which are believed to be financially viable. The Corporation, under an interim allocation, is paying 30 percent of costs incurred by the PRPs in
analyzing and responding to the various agency reports, including the RI/FS and PRAP. The Corporation believes its ultimate liability will be less than 30 percent. It is unknown over what time frame these costs will be paid out.
The Corporations reserve for the Fox River site is based on the assumptions that the volume of sediment to be dredged
will be less than the amount discussed in the PRAP, that the cost per cubic yard of sediment removed will be several times higher, as well as the Corporations estimate of its ultimate share of such liability. Based on analyses of currently
available information and previous experience with respect to the cleanup of hazardous substances, the Corporation believes that its reserve is adequate; however, it is reasonably possible that costs associated with the site may exceed current
reserves by amounts that may prove insignificant or that could range, in the aggregate, up to approximately $15 million.
The Corporation has spent approximately $27.9 million from 1995 to December 29, 2001 on the Fox River site, some of which was spent by Fort James prior to its acquisition by the Corporation. All such amounts were charged to earnings.
In October 2000, the United States Fish and Wildlife Service (FWS) released for public
comment its Restoration and Compensation Determination Plan for natural resource damages to the Lower Fox River and Green Bay. Fort James has entered into an agreement with the WDNR and the FWS that would settle claims for natural resource damages
under CERCLA, the Federal Water Pollution Control Act, and state law for approximately $12.5 million. The Corporation has paid approximately $8.7 million of this amount. The agreement will be effective when entered by a Federal District Court in
Wisconsin later this year. The $12.5 million to be paid under this agreement is separate and apart from any costs related to remediation of the Fox River site.
In 1999 the Corporation and Chesapeake Corporation formed a joint venture to which a Chesapeake subsidiary, Wisconsin Tissue Mills, Inc., contributed tissue mills and other
assets located along the Fox River. Wisconsin Tissue is one of the PRPs for the Fox River site. Chesapeake and Wisconsin Tissue specifically retained all liabilities arising from Wisconsin Tissues status as a PRP, and indemnified the
Corporation and the joint venture against these liabilities. In 2001 the Corporation (having acquired all of Chesapeakes interest) sold this joint venture to Svenska Cellulosa Aktiebolaget (publ) (SCA) and indemnified SCA and the
joint venture against all environmental liabilities (including all liabilities arising from the Fox River site for which Wisconsin Tissue is ultimately responsible) arising prior to the closing of the SCA sale. As part of the agreement pursuant to
which the Corporation acquired Chesapeakes interest in the joint venture, Chesapeake specifically agreed that the Corporation would retain Chesapeakes prior indemnification for such liabilities.
WHATCOM WATERWAY SUPERFUND SITE
The Whatcom Waterway is a Federal channel located adjacent to the Corporations pulp and papermill in Bellingham, Washington. The State declared the Whatcom Waterway a Superfund site due to
historical contamination of sediments with woody debris, phenolics and mercury. On March 6, 1995, the Washington Department of Ecology named the Corporation as a Potentially Liable Party (PLP) in the case. The State is presently
preparing to name other PLPs in the case.
86
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
An RI/FS completed by the Corporation identified a preferred
remedial alternative comprised of a combination of dredging, capping and habitat restoration with a total estimated cost of $23 million. It is anticipated these costs will be paid out over the next 5 to 10 years. The Corporation has completed
construction requirements of a combined interim remedial action and habitat restoration of a portion of the site. Environmental monitoring of this portion of the site is ongoing. The reserve for the Whatcom Waterway site is based on the assumptions
that the $23 million proposed remedy involving limited dredging and capping will be selected by the State of Washington as the final remedy and that the cost of the remedy will be shared among a small group of PLPs.
The Corporation has spent approximately $2.9 million through December 29, 2001 on the Whatcom Waterway site, all of which was charged
to earnings.
The Corporation is finalizing a settlement for alleged violations of an air permit at Ft.
Bragg, California. The allegations involve the burning of demolition wood waste as a fuel source in its three boilers. The parties have agreed to a tentative settlement in the amount of $250,000.
ASBESTOS LITIGATION
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, or that any injuries they have incurred in fact resulted from exposure to the Corporations products.
The Corporations asbestos liabilities relate primarily to joint systems products manufactured by Bestwall Gypsum Company that contained asbestos fiber. The Corporation acquired Bestwall in 1965, and discontinued using
asbestos in the manufacture of these products in 1977.
The following table presents information about the
approximate number of the Corporations asbestos claims during the past three years and the most recent quarterly period:
|
|
Quarter Ended
|
|
Year Ended
|
|
|
December 29, 2001
|
|
December 29, 2001
|
|
December 30, 2000
|
|
January 1, 2000
|
Claims Filed 1 |
|
6,700 |
|
39,700 |
|
55,600 |
|
29,100 |
Claims Resolved 2 |
|
6,800 |
|
30,900 |
|
46,000 |
|
22,000 |
Claims Unresolved at End of Period |
|
62,200 |
|
62,200 |
|
53,400 |
|
43,800 |
1 |
|
Claims Filed includes all asbestos claims for which service has been received and/or a file has been opened by the Corporation. |
2 |
|
Claims Resolved includes asbestos claims which have been settled or dismissed or which are in the process of being settled or dismissed based upon agreements or
understandings in place with counsel for the claimants. |
In addition, Fort James Corporation, a wholly owned
subsidiary of the Corporation, currently is defending approximately 1,000 asbestos premises liability claims.
As of December 31, 2001, the Corporation had either settled, had dismissed or was in the process of settling a total of approximately 235,000 asbestos claims. The Corporation generally
settles asbestos claims for amounts it considers reasonable given the facts and circumstances of each claim. Substantially all of the amounts it has paid to date for settled claims, and anticipates paying for pending claims, have been covered by
product liability insurance. The amounts not covered by such insurance have been immaterial to date. In the future, the Corporation expects that the percentage of its asbestos liabilities to be reimbursed by its insurers will decrease as it begins
to make use of layers of insurance coverage in which there are some insolvent carriers and with respect
87
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
to which there are various allocation and coverage issues. The annual average settlement payment per asbestos claimant has fluctuated up and down during the three year period ended December 29,
2001, and management of the Corporation expects such fluctuations to continue in the future based upon, among other things, the number and type of claims settled in a particular period and the jurisdictions in which such claims arose.
In the late Fall of 2001, the Corporation retained National Economic Research Associates (NERA) and Peterson
Consulting, nationally-recognized consultants in asbestos liability and insurance, to work with the Corporation to project the amount, net of insurance, that the Corporation would pay for its asbestos-related liabilities and defense costs through
2011.
The methodology employed by NERA to project the Corporations asbestos-related liabilities and defense
costs included: 1) an analysis of the population likely to have been exposed or claim exposure to products manufactured by the Corporation; 2) the use of epidemiological studies to estimate the number of people who might allege exposure to the
Corporations products that would be likely to develop asbestos-related diseases in each year between 2002 and 2011; 3) an analysis of the Corporations recent claims history to estimate likely filing rates for these diseases for the
period 2002 through 2011; 4) an analysis of the Corporations currently pending asbestos claims; and 5) an analysis of the Corporations historical asbestos settlements and defense costs to develop average settlement values and defense
costs, which varied by disease type and the nature of claim, to determine an estimate of costs likely to be associated with currently pending and projected asbestos claims through 2011. Based upon its analysis, NERA projected that the
Corporations total, undiscounted asbestos liabilities, including defense costs, over the next 10 years will be less than $1 billion (including payments related to the approximately 62,200 claims currently pending).
NERAs projection was based on historical data supplied by the Corporation and publicly available studies. NERA concluded that, based
on the latency periods of asbestos-related diseases (both cancers and non-cancers), the peak incidence of such diseases occurred prior to 2002. It expects, based on the last dates of manufacture of asbestos-containing products in the United States,
that the number of new diagnoses of asbestosis and other non-cancerous diseases will drop beginning in 2001. It also cites annual surveys of the National Cancer Institutes that show the annual incidence of mesothelioma (a cancer frequently
associated with asbestos exposure) began to decline in the mid-1990s. NERA expects these factors, as well as the advancing age of the allegedly exposed population, its movement away from work centers as its members retire, and NERAs view that
many asbestos claims filed in the 1990s were based in part on mass screenings of possibly-exposed individuals, will result in the number of claims filed against the Corporation for asbestos-related injuries beginning to decline in 2002.
Using NERAs projection, Peterson Consulting and the Corporation reviewed the Corporations
existing insurance arrangements and agreements, engaged in discussions with counsel to the Corporation, analyzed publicly available information bearing on the credit worthiness of the Corporations various insurers and employed such insurance
allocation methodologies as the Corporation and Peterson Consulting believed appropriate to ascertain the probable insurance recoveries for asbestos liabilities through 2011. The analysis took into account self- insurance reserves, policy
exclusions, liability caps and gaps in the Corporations coverage, as well as insolvencies among certain of the Corporations insurance carriers. Although the Corporation and Peterson Consulting believe these assumptions are appropriate,
there are other assumptions that could have been employed that would have resulted in materially lower insurance recovery projections.
Based on the analysis of NERA and Peterson Consulting, the Corporation has established reserves for the probable and reasonably estimable liabilities and defense costs it believes it will pay through
2011, and has also established receivables for the insurance recoveries that are deemed probable. The Corporation has recorded the reserves for the asbestos liabilities as Other current liabilities and Other long-term
liabilities and the related insurance recoveries as Other current assets and Other assets in the accompanying consolidated balance sheets. For the fourth quarter 2001, the Corporation recorded a pre-tax charge to
earnings of $350 million to
88
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
cover all of the projected asbestos liabilities and defense costs, net of expected insurance recoveries, it expects to pay through 2011. This charge principally covers the share of such costs
which the Corporation expects to incur because of the insolvencies of certain insurance companies which wrote a part of the Corporations product liability insurance in prior years. The charge is not due to exhaustion of the Corporations
total product liability insurance for asbestos liabilities, and the Corporation believes that the majority of its asbestos-related liabilities and defense costs during the next ten years will be recovered from its insurance carriers. The insurance
receivable recorded by the Corporation does not assume any recovery from insolvent carriers, and assumes that those carriers which are currently solvent will continue to be solvent throughout the period of NERAs projection. However, there can
be no assurances that these assumptions will be correct. Substantially all of the insurance recoveries deemed probable are from insurance companies rated A- (excellent) or better by A.M. Best Company. No more than 21% of such insurance recoveries
are from any one company, though several of the insurers are under common control. The Corporation also has significant additional insurance coverage which it expects to be available for asbestos liabilities and defense costs it may incur after
2011.
The analyses of NERA and Peterson Consulting are based on their best judgment and that of the Corporation.
However, projecting future events, such as the number of new claims to be filed each year, the average cost of resolving each such claim, coverage issues among layers of insurers and the continuing solvency of various insurance companies is subject
to many uncertainties which could cause the actual liabilities and insurance recoveries to be higher or lower than those projected and/or recorded. Consequently, there can be no assurance these projected liabilities will be accurate, or that the
probable insurance recoveries will be realized.
In light of the uncertainties inherent in making long term
projections, the Corporation has determined that the ten year period through 2011 is the most reasonable time period for projecting asbestos liabilities and defense costs and probable insurance recoveries and, accordingly, the charge to earnings
does not include either asbestos liabilities or insurance recoveries for any period past 2011.
Given
the uncertainties associated with projecting matters into the future and numerous other factors outside the control of the Corporation, the Corporation believes that it is reasonably possible that it may incur asbestos liabilities for the period
through 2011 and beyond in an amount in excess of the NERA projection. Based on currently available data and upon the analysis of NERA and Peterson Consulting, the Corporation does not believe that it is reasonably possible that any such excess
asbestos liabilities will be material to the Corporation. While it is reasonably possible that such excess liabilities could be material to operating results in any given quarter or year, the Corporation does not believe that it is reasonably
possible that such excess liabilities would have a material adverse effect on the long-term results of operations, liquidity or consolidated financial position of the Corporation.
OTHER LITIGATION
In August 1995, Fort
James, at the time a publicly held corporation, transferred certain assets and liabilities of its communications paper and food packaging businesses to two newly formed companies, Crown Vantage, Inc. (CV), (a wholly-owned subsidiary of
Fort James) and CVs subsidiary Crown Paper Co. (CP). CP then entered into a $350 million credit facility with certain banks and issued $250 million face amount of senior subordinated notes. Approximately $483 million in proceeds
from these financings were transferred to Fort James in payment for the transferred assets and other consideration. CV also issued to Fort James a pay-in-kind note with a face amount of $100 million. CV shares were then spun off to the Fort James
shareholders and CV operated these businesses as a stand-alone company beginning in August 1995.
In March 2001 CP
and CV filed for bankruptcy. Various creditors have indicated that the borrowings made by CP and CV, and the payments to Fort James for the assets transferred to CV and CP, caused those companies to become insolvent, and that the transfer of such
assets therefore was a fraudulent conveyance. In April 2001, Fort James filed suit against CP and CV in Federal Bankruptcy Court in Oakland, California seeking a
89
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
declaratory judgment that the transactions did not involve any fraudulent conveyance and that other parties and actions were the cause of the bankruptcy of CV and CP. In September 2001, CV filed
suit against Fort James asserting, among other claims, that the transactions described above constituted fraudulent conveyances and seeking unspecified damages. Fort James does not believe that any of its actions in establishing CV or CP involved a
fraudulent conveyance or caused the bankruptcy of those companies, and it intends to defend itself vigorously.
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
effect on the long-term results of operations, liquidity or consolidated financial position of the Corporation.
NOTE
15. RELATED-PARTY TRANSACTIONS
For all periods prior to the merger of the
Corporations timber and timberland business with Plum Creek (see Note 3), timber had been transferred from the Corporations timberlands at prices intended to reflect fair market prices based on prices paid by independent purchasers and
sellers for similar kinds of timber.
During the second quarter of 1998, Georgia-Pacific Group and The Timber
Company revised the operating policy, which they had agreed to in 1997, with respect to sales of timber by The Timber Company to the Georgia-Pacific Group. This revised policy was implemented on July 1, 1999 and remained in effect through 2000.
Under the policy, The Timber Company was required to offer 70% of its projected annual harvest in Southeast Arkansas and Mississippi, and 80% of its projected annual harvest in most of its other Southern forests, to Georgia-Pacific Group, and
Georgia-Pacific Group was required to purchase not less than 50% nor more than 70% of the projected annual harvests in Southeast Arkansas and Mississippi, and not less than 60% nor more than 80% of the projected annual harvest in other Southern
forest basins. The provisions of the policy were intended to cause prices paid by Georgia-Pacific Group for timber sold by The Timber Company to reflect market prices in particular forests, to allow Georgia-Pacific Group more flexibility in
purchasing wood from third parties, and to allow The Timber Company flexibility in the timing of sales of its annual harvest on the open market.
In 2000, Georgia-Pacific Group and The Timber Company negotiated a new ten year timber supply agreement which became effective January 1, 2001 and was subject to an automatic ten year renewal period,
unless either party delivers a timely termination notice. This agreement covers four key southern timber basins: Southeast Arkansas, Mississippi, Florida, and Southeast Georgia. Under the agreement, The Timber Company must offer to Georgia-Pacific
Group specified percentages of its annual harvest, subject to absolute minimum and maximum limitations in each basin. Georgia-Pacific Group can elect between 36% and 51% of The Timber Companys annual harvest each year in Mississippi, Florida
and Southeast Georgia, and between 52% and 65% in Southeast Arkansas. The total annual volume ranged from a minimum of 3.3 million tons to a maximum of 4.2 million tons. The prices for such timber will be negotiated at arms length between
The Timber Company and Georgia-Pacific Group every six months, and will be set by third party arbitration if the parties cannot agree.
In 2000 The Timber Company also entered into a ten year supply contract to deliver 50 million board feet annually of Douglas fir and Western Hemlock sawtimber to Georgia-Pacific Groups sawmills at Coos Bay and
Philomath, Oregon as well as 68 thousand green tons of pulpwood to Georgia-Pacific Groups Toledo pulp mill and Coos Bay sawmill. Prices were based on prevailing market prices with recourse to arbitration if the parties do not agree that the
pricing formula reflects market prices. In connection with the merger of the Corporations
90
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
timber and timberland business with and into Plum Creek in 2001, the timber supply agreement and the supply contract was replaced with new agreements on substantially the same terms between the
Corporation and certain subsidiaries of Plum Creek.
The Corporation is a 50% partner in a joint venture
(GA-MET) with Metropolitan Life Insurance Company (Metropolitan). GA-MET owns and operates the Corporations main office building in Atlanta, Georgia. The Corporation accounts for its investment in GA-MET under the
equity method.
At December 29, 2001, GA-MET had an outstanding mortgage loan payable to Metropolitan in the
amount of $137 million. The note bears interest at 9.5%, requires monthly payments of principal and interest through 2011, and is secured by the land and building owned by the joint venture. In the event of foreclosure, each partner has severally
guaranteed payment of one-half of any shortfall of collateral value to the outstanding secured indebtedness. Based on the present market conditions and building occupancy, the likelihood of any obligation to the Corporation with respect to this
guarantee is considered remote.
NOTE 16. UNAUDITED SELECTED QUARTERLY FINANCIAL DATA
|
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
|
|
|
2001
|
|
|
2000
|
|
2001
|
|
2000
|
|
2001
|
|
|
2000
|
|
2001
|
|
|
2000
|
|
In millions, except per share Amounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
6,317 |
|
|
$ |
5,519 |
|
$ |
6,603 |
|
$ |
5,589 |
|
$ |
6,306 |
|
|
$ |
5,432 |
|
$ |
5,790 |
|
|
$ |
5,510 |
|
Gross profit (net sales minus cost of sales) |
|
|
1,254 |
|
|
|
1,246 |
|
|
1,497 |
|
|
1,237 |
|
|
1,501 |
|
|
|
1,138 |
|
|
1,360 |
|
|
|
1,070 |
|
(Loss) income before extraordinary loss and accounting change |
|
|
(114 |
) |
|
|
234 |
|
|
65 |
|
|
240 |
|
|
(167 |
) |
|
|
162 |
|
|
(190 |
) |
|
|
(131 |
) |
Net (loss) income |
|
|
(115 |
) |
|
|
234 |
|
|
65 |
|
|
240 |
|
|
(167 |
) |
|
|
162 |
|
|
(190 |
) |
|
|
(131 |
) |
Georgia-Pacific Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per Share |
|
$ |
0.125 |
|
|
$ |
0.125 |
|
$ |
0.125 |
|
$ |
0.125 |
|
$ |
0.125 |
|
|
$ |
0.125 |
|
$ |
0.125 |
|
|
$ |
0.125 |
|
Basic per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before extraordinary loss and accounting change |
|
|
(0.60 |
) |
|
|
1.13 |
|
|
0.13 |
|
|
1.21 |
|
|
(0.80 |
) |
|
|
0.76 |
|
|
(0.81 |
) |
|
|
(0.98 |
) |
Net (loss) income |
|
|
(0.60 |
) |
|
|
1.13 |
|
|
0.13 |
|
|
1.21 |
|
|
(0.80 |
) |
|
|
0.76 |
|
|
(0.81 |
) |
|
|
(0.98 |
) |
Diluted per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before extraordinary loss and accounting change |
|
|
(0.60 |
) |
|
|
1.11 |
|
|
0.13 |
|
|
1.20 |
|
|
(0.80 |
) |
|
|
0.76 |
|
|
(0.81 |
) |
|
|
(0.98 |
) |
Net (loss) income |
|
|
(0.60 |
) |
|
|
1.11 |
|
|
0.13 |
|
|
1.20 |
|
|
(0.80 |
) |
|
|
0.76 |
|
|
(0.81 |
) |
|
|
(0.98 |
) |
The Timber Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per Share |
|
|
0.25 |
|
|
|
0.25 |
|
|
0.25 |
|
|
0.25 |
|
|
0.25 |
|
|
|
0.25 |
|
|
|
|
|
|
0.25 |
|
Basic per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations |
|
|
0.27 |
|
|
|
0.49 |
|
|
0.45 |
|
|
0.42 |
|
|
0.18 |
|
|
|
0.40 |
|
|
(0.04 |
) |
|
|
0.70 |
|
Diluted per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations |
|
|
0.27 |
|
|
|
0.49 |
|
|
0.44 |
|
|
0.42 |
|
|
0.18 |
|
|
|
0.40 |
|
|
(0.04 |
) |
|
|
0.69 |
|
Price range of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Georgia-Pacific Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
$ |
33.50 |
|
|
$ |
51.94 |
|
$ |
36.38 |
|
$ |
44.50 |
|
$ |
37.65 |
|
|
$ |
30.13 |
|
$ |
35.37 |
|
|
$ |
32.00 |
|
Low |
|
|
26.56 |
|
|
|
31.69 |
|
|
27.27 |
|
|
25.69 |
|
$ |
25.76 |
|
|
|
21.88 |
|
|
25.39 |
|
|
|
19.31 |
|
The Timber Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
|
32.40 |
|
|
|
25.63 |
|
|
36.00 |
|
|
25.75 |
|
|
39.70 |
|
|
|
32.00 |
|
|
36.19 |
|
|
|
31.19 |
|
Low |
|
|
27.85 |
|
|
|
20.75 |
|
|
28.45 |
|
|
21.63 |
|
|
31.30 |
|
|
|
21.56 |
|
|
32.20 |
|
|
|
25.94 |
|
91
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
NOTE 17. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Fort James is an issuer of certain securities registered under the Securities Act of 1933, thus
subjecting it to reporting requirements under Section 15(d) of the Securities Exchange Act of 1934. The following condensed consolidating financial information is presented in lieu of consolidated financial statements for Fort James because the
securities are fully and unconditionally guaranteed by the Corporation:
Consolidating Statement of Income
For the Year Ended December 29, 2001
|
|
Georgia-Pacific Corp.
|
|
|
Non-Guarantor Subsidiaries
|
|
|
Fort James Corp.
|
|
|
Consolidating Adjustments
|
|
|
Consolidated Amounts
|
|
In millions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
9,595 |
|
|
$ |
11,271 |
|
|
$ |
6,629 |
|
|
$ |
(2,479 |
) |
|
$ |
25,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
8,159 |
|
|
|
9,257 |
|
|
|
4,467 |
|
|
|
(2,479 |
) |
|
|
19,404 |
|
Selling and distribution |
|
|
463 |
|
|
|
983 |
|
|
|
579 |
|
|
|
|
|
|
|
2,025 |
|
Depreciation and amortization |
|
|
491 |
|
|
|
320 |
|
|
|
532 |
|
|
|
|
|
|
|
1,343 |
|
General and administrative |
|
|
494 |
|
|
|
284 |
|
|
|
294 |
|
|
|
|
|
|
|
1,072 |
|
Interest |
|
|
760 |
|
|
|
85 |
|
|
|
235 |
|
|
|
|
|
|
|
1,080 |
|
Other loss (income), including equity income in affiliates |
|
|
38 |
|
|
|
51 |
|
|
|
|
|
|
|
298 |
|
|
|
387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
10,405 |
|
|
|
10,980 |
|
|
|
6,107 |
|
|
|
(2,181 |
) |
|
|
25,311 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before income taxes |
|
|
(810 |
) |
|
|
291 |
|
|
|
522 |
|
|
|
(298 |
) |
|
|
(295 |
) |
Provision (benefit) for income taxes |
|
|
(395 |
) |
|
|
336 |
|
|
|
240 |
|
|
|
|
|
|
|
181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
|
(415 |
) |
|
|
(45 |
) |
|
|
282 |
|
|
|
(298 |
) |
|
|
(476 |
) |
(Loss) income from discontinued operations, net of taxes |
|
|
(3 |
) |
|
|
73 |
|
|
|
|
|
|
|
|
|
|
|
70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before extraordinary item and accounting change |
|
|
(418 |
) |
|
|
28 |
|
|
|
282 |
|
|
|
(298 |
) |
|
|
(406 |
) |
Extraordinary loss from early retirement of debt, net of taxes |
|
|
|
|
|
|
|
|
|
|
(12 |
) |
|
|
|
|
|
|
(12 |
) |
Cumulative effect of accounting change, net of taxes |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(407 |
) |
|
$ |
28 |
|
|
$ |
270 |
|
|
$ |
(298 |
) |
|
$ |
(407 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
92
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Consolidating Statement of Income
For the Year Ended December 30, 2000
|
|
Georgia-Pacific Corp.
|
|
|
Non-Guarantor Subsidiaries
|
|
Fort James Corp.
|
|
|
Consolidating Adjustments
|
|
|
Consolidated Amounts
|
In millions |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
12,327 |
|
|
$ |
14,299 |
|
$ |
592 |
|
|
$ |
(5,168 |
) |
|
$ |
22,050 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
10,750 |
|
|
|
11,373 |
|
|
404 |
|
|
|
(5,168 |
) |
|
|
17,359 |
Selling and distribution |
|
|
447 |
|
|
|
1,065 |
|
|
88 |
|
|
|
|
|
|
|
1,600 |
Depreciation and amortization |
|
|
460 |
|
|
|
395 |
|
|
55 |
|
|
|
|
|
|
|
910 |
General and administrative |
|
|
509 |
|
|
|
335 |
|
|
12 |
|
|
|
|
|
|
|
856 |
Interest |
|
|
504 |
|
|
|
67 |
|
|
24 |
|
|
|
|
|
|
|
595 |
Other loss (income), including equity income in affiliates |
|
|
(707 |
) |
|
|
201 |
|
|
(1 |
) |
|
|
684 |
|
|
|
177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
11,963 |
|
|
|
13,436 |
|
|
582 |
|
|
|
(4,484 |
) |
|
|
21,497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes |
|
|
364 |
|
|
|
863 |
|
|
10 |
|
|
|
(684 |
) |
|
|
553 |
Provision (benefit) for income taxes |
|
|
(142 |
) |
|
|
342 |
|
|
10 |
|
|
|
|
|
|
|
210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
506 |
|
|
|
521 |
|
|
|
|
|
|
(684 |
) |
|
|
343 |
(Loss) Income from discontinued operations, net of taxes |
|
|
(1 |
) |
|
|
163 |
|
|
|
|
|
|
|
|
|
|
162 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
505 |
|
|
$ |
684 |
|
$ |
|
|
|
$ |
(684 |
) |
|
$ |
505 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Consolidating Statement of Cash Flows
For the Year Ended December 29, 2001
|
|
Georgia-Pacific Corp.
|
|
|
Non-Guarantor Subsidiaries
|
|
|
Fort James Corp.
|
|
|
Consolidating Adjustments
|
|
|
Consolidated Amounts
|
|
In millions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used for) operations |
|
$ |
168 |
|
|
$ |
335 |
|
|
$ |
678 |
|
|
$ |
301 |
|
|
$ |
1,482 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment investments |
|
|
(276 |
) |
|
|
(176 |
) |
|
|
(287 |
) |
|
|
|
|
|
|
(739 |
) |
Timber and timberlands purchases |
|
|
|
|
|
|
(31 |
) |
|
|
|
|
|
|
|
|
|
|
(31 |
) |
Acquisitions |
|
|
|
|
|
|
(87 |
) |
|
|
(46 |
) |
|
|
|
|
|
|
(133 |
) |
Proceeds from sales of assets |
|
|
184 |
|
|
|
2,127 |
|
|
|
|
|
|
|
|
|
|
|
2,311 |
|
Other |
|
|
10 |
|
|
|
(48 |
) |
|
|
(28 |
) |
|
|
|
|
|
|
(66 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used for) investing activities |
|
|
(82 |
) |
|
|
1,785 |
|
|
|
(361 |
) |
|
|
|
|
|
|
1,342 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in debt |
|
|
(2,100 |
) |
|
|
(183 |
) |
|
|
(501 |
) |
|
|
|
|
|
|
(2,784 |
) |
Net change in intercompany payable |
|
|
2,061 |
|
|
|
(1,950 |
) |
|
|
190 |
|
|
|
(301 |
) |
|
|
|
|
Common stock repurchased |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from option plan exercises |
|
|
165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
165 |
|
Fees paid to issue debt |
|
|
(38 |
) |
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
(39 |
) |
Cash dividends paid |
|
|
(175 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(175 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (used for) financing activities |
|
|
(87 |
) |
|
|
(2,133 |
) |
|
|
(312 |
) |
|
|
(301 |
) |
|
|
(2,833 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) increase in cash |
|
|
(1 |
) |
|
|
(13 |
) |
|
|
5 |
|
|
|
|
|
|
|
(9 |
) |
Balance at beginning of year |
|
|
1 |
|
|
|
31 |
|
|
|
8 |
|
|
|
|
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year |
|
$ |
|
|
|
$ |
18 |
|
|
$ |
13 |
|
|
$ |
|
|
|
$ |
31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Consolidating Statement of Cash Flows
For the Year Ended December 30, 2000
In millions |
|
Georgia-Pacific Corp.
|
|
|
Non-Guarantor Subsidiaries
|
|
|
Fort James Corp.
|
|
|
Consolidating Adjustments
|
|
|
Consolidated Amounts
|
|
Cash provided by (used for) operations |
|
$ |
527 |
|
|
$ |
1,484 |
|
|
$ |
(35 |
) |
|
$ |
(420 |
) |
|
$ |
1,556 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment investments |
|
|
(535 |
) |
|
|
(335 |
) |
|
|
(39 |
) |
|
|
|
|
|
|
(909 |
) |
Timber and timberlands purchases |
|
|
|
|
|
|
(59 |
) |
|
|
|
|
|
|
|
|
|
|
(59 |
) |
Acquisitions |
|
|
(6,140 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
(6,142 |
) |
Proceeds from sales of assets |
|
|
35 |
|
|
|
387 |
|
|
|
|
|
|
|
|
|
|
|
422 |
|
Other |
|
|
6 |
|
|
|
(48 |
) |
|
|
(21 |
) |
|
|
|
|
|
|
(63 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash used for investing activities |
|
|
(6,634 |
) |
|
|
(57 |
) |
|
|
(60 |
) |
|
|
|
|
|
|
(6,751 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in debt |
|
|
7,622 |
|
|
|
(1,152 |
) |
|
|
(942 |
) |
|
|
|
|
|
|
5,528 |
|
Net change in intercompany payable |
|
|
(1,200 |
) |
|
|
(265 |
) |
|
|
1,045 |
|
|
|
420 |
|
|
|
|
|
Common stock repurchased |
|
|
(140 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(140 |
) |
Proceeds from option plan exercises |
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26 |
|
Fees paid to issue debt |
|
|
(34 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
(38 |
) |
Cash dividends paid |
|
|
(166 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(166 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (used for) provided by financing activities |
|
|
6,108 |
|
|
|
(1,421 |
) |
|
|
103 |
|
|
|
420 |
|
|
|
5,210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash |
|
|
1 |
|
|
|
6 |
|
|
|
8 |
|
|
|
|
|
|
|
15 |
|
Balance at beginning of year |
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year |
|
$ |
1 |
|
|
$ |
31 |
|
|
$ |
8 |
|
|
$ |
|
|
|
$ |
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Consolidating Balance Sheet
As of December 29, 2001
|
|
Georgia-Pacific Corp.
|
|
Non-Guarantor Subsidiaries
|
|
|
Fort James Corp.
|
|
Consolidating Adjustments
|
|
|
Consolidated Amounts
|
In millions |
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
|
|
$ |
18 |
|
|
$ |
13 |
|
$ |
|
|
|
$ |
31 |
Receivables, less allowances |
|
|
35 |
|
|
1,642 |
|
|
|
675 |
|
|
|
|
|
|
2,352 |
Inventories |
|
|
781 |
|
|
809 |
|
|
|
922 |
|
|
|
|
|
|
2,512 |
Deferred income tax assets |
|
|
34 |
|
|
(5 |
) |
|
|
72 |
|
|
|
|
|
|
101 |
Other current assets |
|
|
1,039 |
|
|
228 |
|
|
|
104 |
|
|
(907 |
) |
|
|
464 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
1,889 |
|
|
2,692 |
|
|
|
1,786 |
|
|
(907 |
) |
|
|
5,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment, net |
|
|
3,169 |
|
|
2,195 |
|
|
|
4,428 |
|
|
|
|
|
|
9,792 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill, net |
|
|
761 |
|
|
877 |
|
|
|
6,627 |
|
|
|
|
|
|
8,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets |
|
|
13,788 |
|
|
1,788 |
|
|
|
872 |
|
|
(13,601 |
) |
|
|
2,847 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
19,607 |
|
$ |
7,552 |
|
|
$ |
13,713 |
|
$ |
(14,508 |
) |
|
$ |
26,364 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS
EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt |
|
$ |
2,052 |
|
$ |
619 |
|
|
$ |
185 |
|
$ |
|
|
|
$ |
2,856 |
Accounts payable |
|
|
602 |
|
|
526 |
|
|
|
502 |
|
|
|
|
|
|
1,630 |
Other current liabilities |
|
|
849 |
|
|
289 |
|
|
|
635 |
|
|
(449 |
) |
|
|
1,324 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
3,503 |
|
|
1,434 |
|
|
|
1,322 |
|
|
(449 |
) |
|
|
5,810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, excluding current portion |
|
|
7,562 |
|
|
137 |
|
|
|
1,659 |
|
|
|
|
|
|
9,358 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior deferrable notes |
|
|
863 |
|
|
|
|
|
|
|
|
|
|
|
|
|
863 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities |
|
|
2,522 |
|
|
2,698 |
|
|
|
1,703 |
|
|
(3,341 |
) |
|
|
3,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax liabilities |
|
|
252 |
|
|
568 |
|
|
|
1,026 |
|
|
|
|
|
|
1,846 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders/invested equity |
|
|
4,905 |
|
|
2,715 |
|
|
|
8,003 |
|
|
(10,718 |
) |
|
|
4,905 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
19,607 |
|
$ |
7,552 |
|
|
$ |
13,713 |
|
$ |
(14,508 |
) |
|
$ |
26,364 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Consolidating Balance Sheet
As of December 30, 2000
|
|
Georgia-Pacific Corp.
|
|
Non-Guarantor Subsidiaries
|
|
Fort James Corp.
|
|
Consolidating Adjustments
|
|
|
Consolidated Amounts
|
In millions |
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
1 |
|
$ |
31 |
|
$ |
8 |
|
$ |
|
|
|
$ |
40 |
Receivables, less allowances |
|
|
130 |
|
|
1,903 |
|
|
671 |
|
|
|
|
|
|
2,704 |
Inventories |
|
|
818 |
|
|
1,185 |
|
|
890 |
|
|
|
|
|
|
2,893 |
Deferred income tax assets |
|
|
76 |
|
|
14 |
|
|
86 |
|
|
|
|
|
|
176 |
Net assets of discontinued operations |
|
|
|
|
|
145 |
|
|
|
|
|
|
|
|
|
145 |
Other current assets |
|
|
465 |
|
|
193 |
|
|
397 |
|
|
(606 |
) |
|
|
449 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
1,490 |
|
|
3,471 |
|
|
2,052 |
|
|
(606 |
) |
|
|
6,407 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment, net |
|
|
3,882 |
|
|
3,213 |
|
|
4,689 |
|
|
|
|
|
|
11,784 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill, net |
|
|
1,444 |
|
|
957 |
|
|
6,584 |
|
|
|
|
|
|
8,985 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets |
|
|
15,029 |
|
|
1,495 |
|
|
613 |
|
|
(14,895 |
) |
|
|
2,242 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
21,845 |
|
$ |
9,136 |
|
$ |
13,938 |
|
$ |
(15,501 |
) |
|
$ |
29,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS
EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt |
|
$ |
1,645 |
|
$ |
697 |
|
$ |
217 |
|
$ |
|
|
|
$ |
2,559 |
Accounts payable |
|
|
593 |
|
|
613 |
|
|
602 |
|
|
|
|
|
|
1,808 |
Other current liabilities |
|
|
692 |
|
|
354 |
|
|
518 |
|
|
(255 |
) |
|
|
1,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
2,930 |
|
|
1,664 |
|
|
1,337 |
|
|
(255 |
) |
|
|
5,676 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, excluding current portion |
|
|
10,109 |
|
|
125 |
|
|
2,121 |
|
|
|
|
|
|
12,355 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior deferrable notes |
|
|
863 |
|
|
|
|
|
|
|
|
|
|
|
|
863 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities |
|
|
1,781 |
|
|
2,980 |
|
|
1,735 |
|
|
(3,849 |
) |
|
|
2,647 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax liabilities |
|
|
440 |
|
|
695 |
|
|
1,020 |
|
|
|
|
|
|
2,155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders/invested equity |
|
|
5,722 |
|
|
3,672 |
|
|
7,725 |
|
|
(11,397 |
) |
|
|
5,722 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
21,845 |
|
$ |
9,136 |
|
$ |
13,938 |
|
$ |
(15,501 |
) |
|
$ |
29,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
97
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
NOTE
18. SUBSEQUENT EVENTS
On May 7, 2002, the Board of
Directors approved separating the Corporation into two public companies. The separation will align the Corporations businesses into a consumer products and packaging company and a building products and distribution company, each of
which will have a distinct strategic focus and competitive strengths and the potential for creation of additional value. The separation is expected to produce a number of other important benefits as well, such as creating both a value-added consumer
products and packaging company with strong brands and stable cash flows, and one of the strongest domestic building products companies; providing more focused employee performance incentives; eliminating cross-subsidies, with each business free to
use its cash flow to reinvest or distribute to shareholders as appropriate; and allowing each business to adopt its own capital structure. The new consumer products and packaging company will consist of the Corporations consumer products
business, packaging business and pulp and paper business. After the separation, Georgia-Pacific will consist of the Corporations building products manufacturing and distribution businesses and the Unisource paper distribution business. The
Corporation intends to effect the separation through an initial public offering of approximately 15% to 20% of the outstanding shares of the new consumer products and packaging company. The initial public offering is expected to occur in the fourth
quarter of 2002. The Corporations bondholders will be offered the opportunity to exchange their current Georgia-Pacific Corporation bonds for bonds of the new consumer products and packaging company in a manner that preserves bondholder value.
In connection with the separation, new credit facilities will be raised and new long-term bonds will be issued by Georgia-Pacific to repay existing indebtedness. The full separation of the new consumer products and packaging company from
Georgia-Pacific is expected to be completed in the first half of 2003 through a tax-free distribution of shares to existing Georgia-Pacific shareholders. The structure and timing of the transactions outlined above are subject to a number of factors,
including industry conditions and capital markets. On May 8, 2002, Moodys Investor Service cut the Corporations unsecured debt rating to Bal from Baa3, and its commercial paper rating to Not-Prime from
Prime-3.
98
Selected Financial DataOperations
|
|
Year Ended
|
|
|
|
December 29,
|
|
|
December 30,
|
|
|
January 1,
|
|
|
December 31,
|
|
|
|
2001
|
|
|
2000
|
|
|
2000
|
|
|
1998
|
|
|
1997
|
|
In millions, except per share amounts and ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
25,016 |
|
|
$ |
22,050 |
|
|
$ |
18,409 |
|
|
$ |
13,868 |
|
|
$ |
13,586 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
19,404 |
|
|
|
17,359 |
|
|
|
14,417 |
|
|
|
11,378 |
|
|
|
11,295 |
|
Selling and distribution |
|
|
2,025 |
|
|
|
1,600 |
|
|
|
818 |
|
|
|
592 |
|
|
|
646 |
|
Depreciation and amortization |
|
|
1,343 |
|
|
|
910 |
|
|
|
815 |
|
|
|
806 |
|
|
|
844 |
|
General and administrative |
|
|
1,072 |
|
|
|
856 |
|
|
|
765 |
|
|
|
534 |
|
|
|
571 |
|
Interest |
|
|
1,080 |
|
|
|
595 |
|
|
|
426 |
|
|
|
372 |
|
|
|
381 |
|
Other loss (income) |
|
|
387 |
|
|
|
177 |
|
|
|
4 |
|
|
|
(12 |
) |
|
|
(33 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
25,311 |
|
|
|
21,497 |
|
|
|
17,245 |
|
|
|
13,670 |
|
|
|
13,704 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before income taxes |
|
|
(295 |
) |
|
|
553 |
|
|
|
1,164 |
|
|
|
198 |
|
|
|
(118 |
) |
Provision (benefit) for income taxes |
|
|
181 |
|
|
|
210 |
|
|
|
448 |
|
|
|
87 |
|
|
|
(32 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
|
(476 |
) |
|
|
343 |
|
|
|
716 |
|
|
|
111 |
|
|
|
(86 |
) |
Income from discontinued operations, net of taxes |
|
|
70 |
|
|
|
162 |
|
|
|
400 |
|
|
|
176 |
|
|
|
215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before extraordinary items and accounting change |
|
|
(406 |
) |
|
|
505 |
|
|
|
1,116 |
|
|
|
287 |
|
|
|
129 |
|
Extraordinary items and accounting change, net of taxes |
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
(13 |
) |
|
|
(60 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(407 |
) |
|
$ |
505 |
|
|
$ |
1,116 |
|
|
$ |
274 |
|
|
$ |
69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other statistical data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Georgia-Pacific Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
$ |
(476 |
) |
|
$ |
343 |
|
|
$ |
716 |
|
|
$ |
111 |
|
|
$ |
(86 |
) |
Extraordinary items and accounting change, net of taxes |
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
(13 |
) |
|
|
(60 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(477 |
) |
|
$ |
343 |
|
|
$ |
716 |
|
|
$ |
98 |
|
|
$ |
(146 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
$ |
(2.09 |
) |
|
$ |
1.95 |
|
|
$ |
4.17 |
|
|
$ |
0.62 |
|
|
$ |
(0.47 |
) |
Extraordinary items and accounting change, net of taxes |
|
|
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
(0.07 |
) |
|
|
(0.33 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(2.10 |
) |
|
$ |
1.95 |
|
|
$ |
4.17 |
|
|
$ |
0.55 |
|
|
$ |
(0.80 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations |
|
$ |
(2.09 |
) |
|
$ |
1.94 |
|
|
$ |
4.07 |
|
|
$ |
0.61 |
|
|
$ |
(0.47 |
) |
Extraordinary items and accounting change, net of taxes |
|
|
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
(0.07 |
) |
|
|
(0.33 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(2.10 |
) |
|
$ |
1.94 |
|
|
$ |
4.07 |
|
|
$ |
0.54 |
|
|
$ |
(0.80 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Timber Company: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of taxes |
|
$ |
70 |
|
|
$ |
162 |
|
|
$ |
400 |
|
|
$ |
176 |
|
|
$ |
215 |
|
Basic per common share |
|
$ |
0.86 |
|
|
$ |
2.01 |
|
|
$ |
4.75 |
|
|
$ |
1.95 |
|
|
$ |
2.35 |
|
Diluted per common share |
|
$ |
0.86 |
|
|
$ |
2.00 |
|
|
$ |
4.73 |
|
|
$ |
1.94 |
|
|
$ |
2.33 |
|
Average number shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Georgia-Pacific Group, basic |
|
|
227.6 |
|
|
|
175.8 |
|
|
|
171.8 |
|
|
|
179.8 |
|
|
|
182.9 |
|
Georgia-Pacific Group, diluted |
|
|
227.6 |
|
|
|
176.9 |
|
|
|
175.9 |
|
|
|
181.1 |
|
|
|
182.9 |
|
The Timber Company, basic |
|
|
81.0 |
|
|
|
80.7 |
|
|
|
84.1 |
|
|
|
90.3 |
|
|
|
91.4 |
|
The Timber Company, diluted |
|
|
81.7 |
|
|
|
81.1 |
|
|
|
84.6 |
|
|
|
90.8 |
|
|
|
92.1 |
|
Earnings to fixed charges |
|
|
(a |
) |
|
|
1.8 |
|
|
|
3.5 |
|
|
|
1.5 |
|
|
|
(a |
) |
Effective income tax rate |
|
|
100.0 |
% |
|
|
38.0 |
% |
|
|
38.5 |
% |
|
|
43.9 |
% |
|
|
27.1 |
% |
(a) |
|
In fiscal 2001 and 1997 fixed charges exceeded earnings by $306 million and $129 million, respectively. |
99
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
Earnings to Fixed Charges
Income before income taxes, extraordinary items and accounting change plus total interest cost (interest expense plus capitalized interest) and one-third of rent expense, divided by total interest cost
plus one one-third of rent expense.
Effective Income Tax Rate
Provision (benefit) for income taxes divided by income (loss) from continuing operations before income taxes.
100
Selected Financial DataFinancial
Position, End of Year
|
|
Year Ended
|
|
|
|
December 29,
|
|
|
December 30,
|
|
|
January 1,
|
|
|
December 31,
|
|
|
|
2001
|
|
|
2000
|
|
|
2000
|
|
|
1998
|
|
|
1997
|
|
In millions, except per share amounts, ratios, and percentages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial position, end of year: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
$ |
5,460 |
|
|
$ |
6,407 |
|
|
$ |
4,661 |
|
|
$ |
2,555 |
|
|
$ |
2,862 |
|
Property, plant and equipment, net |
|
|
9,792 |
|
|
|
11,784 |
|
|
|
7,060 |
|
|
|
6,225 |
|
|
|
6,277 |
|
Goodwill, net |
|
|
8,265 |
|
|
|
8,985 |
|
|
|
2,697 |
|
|
|
1,677 |
|
|
|
1,599 |
|
Other assets |
|
|
2,847 |
|
|
|
2,242 |
|
|
|
1,087 |
|
|
|
990 |
|
|
|
992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
26,364 |
|
|
$ |
29,418 |
|
|
$ |
15,505 |
|
|
$ |
11,447 |
|
|
$ |
11,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
5,810 |
|
|
$ |
5,676 |
|
|
$ |
3,849 |
|
|
$ |
2,402 |
|
|
$ |
2,727 |
|
Long-term debt |
|
|
9,358 |
|
|
|
12,355 |
|
|
|
3,955 |
|
|
|
3,368 |
|
|
|
3,029 |
|
Senior deferrable notes |
|
|
863 |
|
|
|
863 |
|
|
|
863 |
|
|
|
|
|
|
|
|
|
Other long-term liabilities |
|
|
3,582 |
|
|
|
2,647 |
|
|
|
1,803 |
|
|
|
1,566 |
|
|
|
1,546 |
|
Deferred income taxes |
|
|
1,846 |
|
|
|
2,155 |
|
|
|
1,160 |
|
|
|
987 |
|
|
|
959 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
21,459 |
|
|
$ |
23,696 |
|
|
$ |
11,630 |
|
|
$ |
8,323 |
|
|
$ |
8,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity |
|
$ |
4,905 |
|
|
$ |
5,722 |
|
|
$ |
3,875 |
|
|
$ |
3,124 |
|
|
$ |
3,469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other statistical data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment investments |
|
$ |
739 |
|
|
$ |
909 |
|
|
$ |
723 |
|
|
$ |
638 |
|
|
$ |
717 |
|
Timber and timberland purchases |
|
|
31 |
|
|
|
59 |
|
|
|
78 |
|
|
|
59 |
|
|
|
44 |
|
Cash paid for acquisitions |
|
|
133 |
|
|
|
6,142 |
|
|
|
1,658 |
|
|
|
112 |
|
|
|
|
|
Current ratio |
|
|
.94 |
|
|
|
1.1 |
|
|
|
1.2 |
|
|
|
1.1 |
|
|
|
1.1 |
|
Total debt to capital, book basis |
|
|
52.2 |
% |
|
|
56.7 |
% |
|
|
42.8 |
% |
|
|
43.5 |
% |
|
|
41.8 |
% |
Total debt to capital, market basis: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Georgia-Pacific Group |
|
|
65.5 |
% |
|
|
68.1 |
% |
|
|
39.7 |
% |
|
|
46.3 |
% |
|
|
43.4 |
% |
The Timber Company, discontinued operation |
|
|
* |
|
|
|
21.0 |
% |
|
|
32.2 |
% |
|
|
32.2 |
% |
|
|
31.6 |
% |
Per share market price: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Georgia-Pacific Corporation (through December 16, 1997): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
108.56 |
|
Low |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
70.50 |
|
Period-end |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
85.13 |
|
Georgia-Pacific Group: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
$ |
37.65 |
|
|
$ |
51.94 |
|
|
$ |
54.13 |
|
|
$ |
40.50 |
|
|
$ |
32.00 |
|
Low |
|
$ |
25.39 |
|
|
$ |
19.31 |
|
|
$ |
29.34 |
|
|
$ |
18.69 |
|
|
$ |
29.50 |
|
Period-end |
|
$ |
27.98 |
|
|
$ |
31.13 |
|
|
$ |
50.75 |
|
|
$ |
29.28 |
|
|
$ |
30.38 |
|
The Timber Company, discontinued operation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
$ |
39.70 |
|
|
$ |
32.00 |
|
|
$ |
27.19 |
|
|
$ |
27.25 |
|
|
$ |
25.88 |
|
Low |
|
$ |
27.85 |
|
|
$ |
20.75 |
|
|
$ |
19.88 |
|
|
$ |
17.38 |
|
|
$ |
22.50 |
|
Period-end |
|
|
* |
|
|
$ |
29.94 |
|
|
$ |
24.63 |
|
|
$ |
23.81 |
|
|
$ |
22.69 |
|
Book value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Georgia-Pacific Group |
|
$ |
21.32 |
|
|
$ |
25.45 |
|
|
$ |
22.50 |
|
|
$ |
18.06 |
|
|
$ |
18.80 |
|
The Timber Company, discontinued operation |
|
|
* |
|
|
$ |
1.81 |
|
|
$ |
1.51 |
|
|
$ |
(0.98 |
) |
|
$ |
(0.53 |
) |
Shares of stock outstanding at year-end: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Georgia-Pacific Group |
|
|
230.1 |
|
|
|
224.8 |
|
|
|
172.2 |
|
|
|
173.0 |
|
|
|
184.5 |
|
The Timber Company, discontinued operation |
|
|
* |
|
|
|
80.2 |
|
|
|
82.9 |
|
|
|
87.1 |
|
|
|
92.6 |
|
Dividends declared per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Georgia-Pacific Corporation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2.00 |
|
Georgia-Pacific Group |
|
$ |
0.50 |
|
|
$ |
0.50 |
|
|
$ |
0.50 |
|
|
$ |
0.50 |
|
|
|
|
|
The Timber Company, discontinued operation |
|
$ |
1.00 |
|
|
$ |
1.00 |
|
|
$ |
1.00 |
|
|
$ |
1.00 |
|
|
|
|
|
* |
|
The Corporation completed the spin off of The Timber Company and its merger with and into Plum Creek on October 6, 2001 (see Note 3 of the Notes to
Consolidated Financial Statements). 1997 amounts are for the period from December 17, 1997 through December 31, 1997. |
101
GEORGIA-PACIFIC CORPORATION AND SUBSIDIARIES
Book Value Per Common Share
Shareholders/parents equity divided by shares of common stock outstanding as of the end of the year.
Total Debt to Capital, Book Basis
Total debt divided by the sum of total debt, senior deferrable notes, deferred income taxes, net, other long-term liabilities and shareholders/parents equity as of the end of the year.
Total debt includes commercial paper and short-term notes, current portion of long-term debt, (all of which are included in Current liabilities), long-term debt and accounts receivable pledged.
Total Debt to Capital, Market Basis
Total debt divided by the sum of total debt and the market value of shareholders/parents equity as of the end of the year. Total debt includes commercial paper and short-term notes, current
portion of long-term debt, (all of which are included in Current liabilities), long-term debt and accounts receivable pledged. The market value of shareholders/parents equity is the market price of common stock multiplied by
the number of common stock shares outstanding.
Current Ratio
Current assets divided by current liabilities as of the end of the year.
102
Sales and Operating Profits by Operating
Segment
|
|
2001
|
|
|
2000
|
|
|
1999
|
|
|
1998
|
|
|
1997
|
|
In millions, except percentages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales(a): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer products: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tissue |
|
$ |
6,030 |
|
|
24 |
% |
|
$ |
1,948 |
|
|
9 |
% |
|
$ |
1,186 |
|
|
6 |
% |
|
$ |
1,063 |
|
|
8 |
% |
|
$ |
1,013 |
|
|
7 |
% |
Dixie |
|
|
859 |
|
|
3 |
|
|
|
77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
103 |
|
|
1 |
|
|
|
29 |
|
|
|
|
|
|
9 |
|
|
|
|
|
|
20 |
|
|
|
|
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer products |
|
|
6,992 |
|
|
28 |
|
|
|
2,054 |
|
|
9 |
|
|
|
1,195 |
|
|
6 |
|
|
|
1,083 |
|
|
8 |
|
|
|
1,035 |
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Packaging |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Containerboard |
|
|
523 |
|
|
2 |
|
|
|
626 |
|
|
3 |
|
|
|
554 |
|
|
3 |
|
|
|
544 |
|
|
4 |
|
|
|
569 |
|
|
4 |
|
Packaging |
|
|
1,959 |
|
|
8 |
|
|
|
2,020 |
|
|
9 |
|
|
|
1,892 |
|
|
10 |
|
|
|
1,617 |
|
|
12 |
|
|
|
1,315 |
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total packaging |
|
|
2,482 |
|
|
10 |
|
|
|
2,646 |
|
|
12 |
|
|
|
2,446 |
|
|
13 |
|
|
|
2,161 |
|
|
16 |
|
|
|
1,884 |
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bleached pulp and paper: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market pulp |
|
|
763 |
|
|
3 |
|
|
|
1,052 |
|
|
5 |
|
|
|
828 |
|
|
5 |
|
|
|
815 |
|
|
6 |
|
|
|
955 |
|
|
7 |
|
Bleached board |
|
|
241 |
|
|
1 |
|
|
|
195 |
|
|
1 |
|
|
|
198 |
|
|
1 |
|
|
|
182 |
|
|
1 |
|
|
|
219 |
|
|
2 |
|
Paper |
|
|
1,147 |
|
|
5 |
|
|
|
1,137 |
|
|
5 |
|
|
|
1,347 |
|
|
7 |
|
|
|
1,622 |
|
|
12 |
|
|
|
1,625 |
|
|
12 |
|
Other |
|
|
140 |
|
|
|
|
|
|
142 |
|
|
1 |
|
|
|
140 |
|
|
1 |
|
|
|
147 |
|
|
1 |
|
|
|
148 |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total manufacturing |
|
|
2,291 |
|
|
9 |
|
|
|
2,526 |
|
|
12 |
|
|
|
2,513 |
|
|
14 |
|
|
|
2,766 |
|
|
20 |
|
|
|
2,947 |
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paper distribution: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fine paper |
|
|
3,845 |
|
|
16 |
|
|
|
4,200 |
|
|
19 |
|
|
|
1,980 |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supply systems |
|
|
2,356 |
|
|
9 |
|
|
|
2,661 |
|
|
12 |
|
|
|
1,329 |
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total paper distribution |
|
|
6,201 |
|
|
25 |
|
|
|
6,861 |
|
|
31 |
|
|
|
3,331 |
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total bleached pulp and paper |
|
|
8,492 |
|
|
34 |
|
|
|
9,387 |
|
|
43 |
|
|
|
5,844 |
|
|
32 |
|
|
|
2,766 |
|
|
20 |
|
|
|
2,947 |
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Building products manufacturing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wood panels |
|
|
1,015 |
|
|
4 |
|
|
|
1,120 |
|
|
5 |
|
|
|
1,233 |
|
|
7 |
|
|
|
1,095 |
|
|
8 |
|
|
|
981 |
|
|
7 |
|
Lumber |
|
|
983 |
|
|
4 |
|
|
|
1,069 |
|
|
5 |
|
|
|
1,086 |
|
|
6 |
|
|
|
851 |
|
|
6 |
|
|
|
881 |
|
|
6 |
|
Gypsum products |
|
|
621 |
|
|
2 |
|
|
|
903 |
|
|
4 |
|
|
|
1,189 |
|
|
6 |
|
|
|
992 |
|
|
7 |
|
|
|
885 |
|
|
7 |
|
Chemicals |
|
|
481 |
|
|
2 |
|
|
|
461 |
|
|
2 |
|
|
|
445 |
|
|
2 |
|
|
|
455 |
|
|
3 |
|
|
|
482 |
|
|
4 |
|
Other |
|
|
140 |
|
|
1 |
|
|
|
97 |
|
|
|
|
|
|
104 |
|
|
1 |
|
|
|
122 |
|
|
1 |
|
|
|
70 |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total manufacturing |
|
|
3,240 |
|
|
13 |
|
|
|
3,650 |
|
|
16 |
|
|
|
4,057 |
|
|
22 |
|
|
|
3,515 |
|
|
25 |
|
|
|
3,299 |
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Building products distribution: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wood panels |
|
|
1,713 |
|
|
7 |
|
|
|
2,115 |
|
|
10 |
|
|
|
2,506 |
|
|
14 |
|
|
|
2,127 |
|
|
15 |
|
|
|
1,919 |
|
|
14 |
|
Lumber |
|
|
1,354 |
|
|
5 |
|
|
|
1,473 |
|
|
7 |
|
|
|
1,662 |
|
|
9 |
|
|
|
1,471 |
|
|
11 |
|
|
|
1,639 |
|
|
12 |
|
Other |
|
|
742 |
|
|
3 |
|
|
|
723 |
|
|
3 |
|
|
|
696 |
|
|
4 |
|
|
|
741 |
|
|
5 |
|
|
|
860 |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total distribution |
|
|
3,809 |
|
|
15 |
|
|
|
4,311 |
|
|
20 |
|
|
|
4,864 |
|
|
27 |
|
|
|
4,339 |
|
|
31 |
|
|
|
4,418 |
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total building products |
|
|
7,049 |
|
|
28 |
|
|
|
7,961 |
|
|
36 |
|
|
|
8,921 |
|
|
49 |
|
|
|
7,854 |
|
|
56 |
|
|
|
7,717 |
|
|
57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and other(b) |
|
|
1 |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
3 |
|
|
|
|
|
|
4 |
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales |
|
$ |
25,016 |
|
|
100 |
% |
|
$ |
22,050 |
|
|
100 |
% |
|
$ |
18,409 |
|
|
100 |
% |
|
$ |
13,868 |
|
|
100 |
% |
|
$ |
13,586 |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer products |
|
$ |
792 |
|
|
101 |
% |
|
$ |
(17 |
) |
|
(1 |
)% |
|
$ |
131 |
|
|
8 |
% |
|
$ |
129 |
|
|
23 |
% |
|
$ |
145 |
|
|
55 |
% |
Packaging |
|
|
384 |
|
|
49 |
|
|
|
512 |
|
|
45 |
|
|
|
324 |
|
|
20 |
|
|
|
89 |
|
|
16 |
|
|
|
(23 |
) |
|
(9 |
) |
Bleached pulp and paper |
|
|
69 |
|
|
9 |
|
|
|
509 |
|
|
44 |
|
|
|
181 |
|
|
11 |
|
|
|
(32 |
) |
|
(6 |
) |
|
|
19 |
|
|
7 |
|
Building products |
|
|
150 |
|
|
19 |
|
|
|
382 |
|
|
33 |
|
|
|
1,205 |
|
|
76 |
|
|
|
608 |
|
|
107 |
|
|
|
324 |
|
|
123 |
|
Corporate and other(c) |
|
|
(610 |
) |
|
(78 |
) |
|
|
(238 |
) |
|
(21 |
) |
|
|
(251 |
) |
|
(15 |
) |
|
|
(224 |
) |
|
(40 |
) |
|
|
(202 |
) |
|
(76 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating profits |
|
$ |
785 |
|
|
100 |
% |
|
$ |
1,148 |
|
|
100 |
% |
|
$ |
1,590 |
|
|
100 |
% |
|
$ |
570 |
|
|
100 |
% |
|
$ |
263 |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Represents net sales to unaffiliated customers. |
(b) |
|
Includes net sales from miscellaneous businesses. |
(c) |
|
Includes some miscellaneous businesses, unallocated corporate operating expenses and the elimination of profit on intersegment sales.
|
103
SCHEDULE IIVALUATION AND QUALIFYING
ACCOUNTS
For the Years Ended December 29, 2001, December 30, 2000 and January 1, 2000
Description
|
|
Balance at Beginning of Period
|
|
Charged to Costs and Expenses
|
|
Charged to Other Accounts
|
|
|
Deductions
|
|
|
Balance at End of
Period
|
In Millions |
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 29, 2001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
34 |
|
$ |
32 |
|
$ |
|
|
|
$ |
(27 |
)** |
|
$ |
39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring reserves |
|
$ |
55 |
|
$ |
57 |
|
$ |
109 |
**** |
|
$ |
(118 |
) |
|
$ |
103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 30, 2000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
25 |
|
$ |
34 |
|
$ |
|
|
|
$ |
(25 |
)** |
|
$ |
34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring reserves |
|
$ |
64 |
|
$ |
19 |
|
$ |
8 |
**** |
|
$ |
(36 |
) |
|
$ |
55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended January 1, 2000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
25 |
|
$ |
5 |
|
$ |
|
|
|
$ |
(5 |
)** |
|
$ |
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring reserves |
|
$ |
2 |
|
$ |
2 |
|
$ |
98 |
*** |
|
$ |
(38 |
) |
|
$ |
64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
**** |
|
Net amounts charged to goodwill |
104
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
Except as to information with respect to executive officers, which is presented below under Item 10 to this Form 10-K, the information required by Part III of this Form
10-K is, pursuant to General Instruction G(3) of Form 10-K, incorporated by reference from the Corporations definitive Proxy Statement to be filed pursuant to Regulation 14A for the Corporations Annual Meeting of Shareholders
scheduled to be held on May 7, 2002. Georgia-Pacific will, within 120 days of the end of its fiscal year, file with the Securities and Exchange Commission a definitive proxy statement pursuant to Regulation 14A.
ITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Additional information regarding
the Corporations directors required by this Item is set forth in the Corporations Notice of 2002 Annual Meeting of Shareholders and Proxy Statement in the sections entitled Nominees and Directors and is incorporated herein by
this reference thereto.
Executive Officers of Georgia-Pacific Corporation
The executive officers of Georgia-Pacific are as follows :
Name
|
|
Age
|
|
Date First Elected as an Officer
|
|
Position or Office
|
A. D. Correll |
|
60 |
|
1988 |
|
Chairman, Chief Executive Officer, President and a Director |
Patricia A. Barnard |
|
52 |
|
1998 |
|
Executive Vice PresidentHuman Resources |
James E. Bostic, Jr. |
|
54 |
|
1991 |
|
Executive Vice PresidentEnvironmental, Government Affairs and Communications |
Danny W. Huff |
|
51 |
|
1993 |
|
Executive Vice PresidentFinance and Chief Financial Officer |
James F. Kelley |
|
60 |
|
1993 |
|
Executive Vice President and General Counsel |
David J. Paterson |
|
47 |
|
1994 |
|
Executive Vice PresidentPulp and Paperboard |
Ronald L. Paul |
|
58 |
|
1995 |
|
Executive Vice PresidentWood Products and Distribution |
John F. Rasor |
|
58 |
|
1983 |
|
Executive Vice PresidentWood Procurement, Gypsum and Industrial Wood Products |
Lee M. Thomas |
|
57 |
|
1993 |
|
Executive Vice PresidentConsumer Products |
Charles C. Tufano |
|
57 |
|
1998 |
|
PresidentUnisource |
James E. Terrell |
|
52 |
|
1989 |
|
Vice President and Controller |
Alston D. Correll has been Chief Executive Officer of
Georgia-Pacific since May 1993, Chairman since December 1993 and President since July 1991. Mr. Correll has been a director of the Corporation since May 1992.
Patricia A. Barnard has been Executive Vice PresidentHuman Resources since January 2001. Prior to that time she served as Senior Vice PresidentHuman Resources
from March 1999 until January 2001 and Vice PresidentCompensation and Benefits from February 1998 until March 1999. Prior to that time, she served as Group DirectorHuman Resources, Paper & Chemicals from 1997 to 1998 and Group
DirectorHuman Resources, Paper from 1995 until 1997.
105
James E. Bostic, Jr. has been Executive Vice PresidentEnvironmental,
Government Affairs and Communications since January 2001. Prior to that time, he served as Senior Vice PresidentEnvironmental, Government Affairs and Communications from February 1995 until January 2001, Group Vice PresidentPaper from
April 1992 until January 1995, Group Vice PresidentButler Paper and Mail-Well from January 1992 to April 1992, and Vice PresidentButler Paper and Mail-Well from January 1991 to January 1992.
Danny W. Huff has been Executive Vice PresidentFinance and Chief Financial Officer since November 1, 1999. Prior to that time, he
served as Vice President and Treasurer from February, 1996 to November, 1999 and Treasurer from October 23, 1993 to February 1, 1996.
James F. Kelley has been Executive Vice President and General Counsel since August 2000. Prior to that time, he served as Senior Vice PresidentLaw and General Counsel from December 1993 until August 2000.
David J. Paterson has been Executive Vice President Pulp and Paperboard since August 2001. Prior to that time, he
served as PresidentPaper from January 2001 until August 2001, Senior Vice PresidentCommunication Papers from August 2000 until January 21, 2001 and Vice PresidentSales and Market Pulp and Bleached Board from May 1994 until August
2000.
Ronald L. Paul has been Executive Vice PresidentWood Products and Distribution since December
30, 1997. Prior to that time, he served as Executive Vice PresidentWood Products from September 1997 until December 1997, Vice PresidentStructural Panels and Building Products Engineering from May 1996 until September 1997 and Vice
PresidentEngineering and TechnologyBuilding Products from May 1995 until May 1996.
John F. Rasor has
been Executive Vice PresidentWood Procurement, Gypsum and Industrial Wood Products since December 16, 1997. Prior to that time, he served as Executive Vice PresidentForest Resources from January 1997 to December 1997, Senior Vice
PresidentForest Resources from February 1995 until December 1996, Group Vice PresidentForest Resources from May 1992 through January 1995, Group Vice PresidentTimber from January 1992 to May 1992 and Vice PresidentForest
Resources from 1991 to January 1992.
Lee M. Thomas has been Executive Vice PresidentConsumer Products since
November 2000. Prior to that time, he served as Executive Vice PresidentPaper and Chemicals from December 1997 until November 2000, Executive Vice PresidentPaper from January 1997 until December 1997, Senior Vice PresidentPaper
from February 1995 until December 1996, Senior Vice PresidentEnvironmental, Government Affairs and Communications from February 1994 through January 1995, and Senior Vice PresidentEnvironmental and Government Affairs from March 1993
through January 1994.
Charles C. Tufano has been PresidentUnisource since January 2001. Prior to that time,
he served as Senior Vice PresidentPaper Distribution from July 1999 until January 2001, Vice PresidentWest, Distribution Division from February 1998 until July 1999 and DirectorPrinting Papers, Communication Papers Division from
1995 until 1998.
James E. Terrell was elected Vice President of the Corporation in January 1991 and has served as
Controller since 1989.
The Corporations Board of Directors elects officers of the Corporation. The Chief
Executive Officer has the authority to appoint one or more Vice Presidents to hold such office until the next annual organizational meeting of the Board. The Chief Executive Officer also has the authority to approve the compensation of officers at
the Vice President level. The Compensation Committee of the Board of Directors determines the compensation of all other officers of the Corporation, including officers who are also directors of the Corporation. There are no other arrangements or
understandings between the respective officers and any other person pursuant to which such officers are elected.
106
ITEM 11.
EXECUTIVE COMPENSATION
The information required by this Item is set forth in the
Corporations Notice of 2002 Annual Meeting of Shareholders and Proxy Statement in the sections entitled Compensation Committee Report, Summary Compensation Table, Option and Performance Rights Grants in 2001
and Agreements with Executive Officers and is incorporated herein by reference thereto.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information
required by this Item is set forth in the Corporations Notice of 2002 Annual Meeting and Proxy Statement in the section entitled Ownership of Common Stock of Georgia-Pacific and is incorporated herein by reference thereto.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM
14.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
|
(a) |
|
The following documents are filed as a part of this Form 10-K for the Corporation: |
|
(1) |
|
The Consolidated Financial Statements, Notes to Consolidated Financial Statements and the Report of Independent Public Accountants for Georgia-Pacific
Corporation and subsidiaries dated January 23, 2002 are presented under Item 8 of this Form 10-K. |
|
(2) |
|
Financial Statement Schedules: |
Valuation and Qualifying Accounts of Georgia-Pacific Corporation and subsidiaries and Georgia-Pacific Group for the years ended December 29, 2001, December 30, 2000 and January 1, 2000.
Schedules other than that listed above are omitted because they are not required, are inapplicable or the information is otherwise shown
in the Corporations Consolidated Financial Statements or notes thereto.
Number
|
|
Description
|
3.1(i) |
|
Articles of Incorporation, restated as of December 16, 1997 (Filed as Exhibit 4.1 to the Corporations Registration Statement on Form S-8 as filed with
the Commission on December 18, 1997, Commission File No. 333-42597, and incorporated herein by this reference thereto). (1) |
|
|
|
3. 1(ii) |
|
Articles of Amendment to Restated Articles of Incorporation (Filed as Exhibit 3.1 to the Corporations Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
3.2 |
|
Bylaws, as amended to date. (1) (2) |
|
|
|
107
Number
|
|
Description
|
4.1(i) |
|
Restated Rights Agreement, dated as of December 16, 1997, between Georgia-Pacific Corporation and First Chicago Trust Company of New York, with form of
Georgia-Pacific Group Rights Certificate attached as Exhibit A-i, form of Timber Group Rights Certificate attached as Exhibit A-2, Series B Preferred Stock Designation attached as Exhibit B-i and Series C Preferred Stock Designation attached as
Exhibit B-2 (Filed as Exhibit 8 to the Corporations Registration Statement on Form 8-A as filed with the Commission on November 26, 1997, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
4.1(ii) |
|
Amendment No. 1 to the Amended and Restated Rights Agreement, dated as of November 8, 1999 (Filed as Exhibit 4.3(ii) to the Corporations Annual Report
on Form 10-K for the year ended January 1, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
4.1(iii) |
|
Amendment No. 1 (sic) to the Amended and Restated Rights Agreement, dated as of November 8, 1999 (Filed as Exhibit 1 to the Corporations
Registration Statement on Form 8-A/A as filed with the Commission on October 2, 2001, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
4.1(iv) |
|
Amendment No. 2 to the Amended and Restated Rights Agreement, dated as of July 18, 2000 (Filed as Exhibit 2 to the Corporations Registration Statement
on Form 8-A/A as filed with the Commission on October 2, 2001, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
4.1(v) |
|
Amendment No. 3 to the Amended and Restated Rights Agreement, dated as of September 26, 2001 (Filed as Exhibit 3 to the Corporations Registration
Statement on Form 8-A/A as filed with the Commission on October 2, 2001, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
4.2 (i) |
|
Indenture, dated as of March 1, 1983, between Georgia-Pacific Corporation and The Chase Manhattan Bank (National Association), Trustee (Filed as Exhibit
4.4(i) to the Corporations Annual Report on Form 10-K for the year ended December 31, 1996, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
4.2(ii) |
|
First Supplemental Indenture, dated as of July 27, 1988, among Georgia-Pacific Corporation, The Chase Manhattan Bank (National Association), Trustee, and
Morgan Guaranty Trust Company of New York (Filed as Exhibit 4.4(ii) to the Corporations Annual Report on Form 10-K for the year ended December 31, 1996, Commission File No. 001-03506, and incorporated herein by this reference thereto).
(1) |
|
|
|
4.2(iii) |
|
Agreement of Resignation, Appointment and Acceptance, dated as of January 31, 1992 by and among Georgia-Pacific Corporation, Morgan Guaranty Trust Company of
New York and The Bank of New York, as Successor Trustee (Filed as Exhibit 4.4(iii) to the Corporations Annual Report on Form 10-K for the year ended December 31, 1996, Commission File No. 001-03506, and incorporated herein by this reference
thereto). (1) |
|
|
|
4.3 |
|
Form of Purchase Contract Agreement relating to Stock Purchase Contracts and Stock Purchase Units (Filed as Exhibit 4(p) to the Corporations
Registration Statement on Form S-3 as filed with the Commission on June 30, 1999, Commission File No. 333-80757, and incorporated herein by this reference thereto). (1) |
|
|
|
4.4 |
|
Form of Pledge Agreement for Stock Purchase Contracts and Stock Purchase Units (Filed as Exhibit 4(q) to the Corporations Registration Statement on
Form S-3 as filed with the Commission on June 30, 1999, Commission File No. 333-80757, and incorporated herein by this reference thereto). (1) |
108
Number
|
|
Description
|
4.5 |
|
Form of Remarketing Agreement between Georgia-Pacific Corporation and Morgan Stanley & Co. Incorporated (Filed as Exhibit 4(u) to the Corporations
Registration Statement on Form S-3, as filed with the Commission on June 30, 1999, Commission File No. 333-80757, and incorporated herein by this reference thereto). (1) |
|
|
|
4.6 |
|
Indenture between James River Corporation of Virginia and the Bank of New York, dated November 1, 1991 (Filed as Exhibit 4.1 to the Corporations
Registration Statement on Form S-3, as filed with the Commission on November 4, 1991, Commission File No. 33-43335, and incorporated herein by this reference thereto). |
|
|
|
4.7 |
|
First Supplemental Induenture, dated as of September 19, 1997 between Fort James Corporation and The Bank of New York. (1) (2) |
|
|
|
4.8 |
|
Second Supplemental Indenture among Georgia-Pacific Corporation, Fort James Corporation, and The Bank of New York, dated February 19, 2001 (Filed as Exhibit
4.6 to the Corporations Annual Report on From 10-K for the year ended December 30, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
4.9 |
|
Form of Stock Purchase Units (included as Exhibits A and B of Exhibit 4.3) (Filed as Exhibit 4(v) to the Corporations Registration Statement on Form
S-3, as filed with the Commission on June 30, 1999, Commission File No. 333-80757, and incorporated herein by this reference thereto). (1) |
|
|
|
10.1 |
|
Directors Group Life Insurance Program (Filed as Exhibit 10.1 to the Corporations Annual Report on Form 10-K for the year ended December 31, 1998,
Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
|
|
10.2 |
|
Form of Officer Retirement Agreement (Officers Retirement Plan) (Filed as Exhibit 10.2 to the Corporations Annual Report on Form 10-K for the year
ended December 30, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
|
|
10.3(i) |
|
Key Salaried Employees Group Insurance PlanPre-1987 Group (As Amended and Restated Effective January 1, 1987) (Filed as Exhibit 10.3(i) to the
Corporations Annual Report on Form 10-K for the year ended December 31, 1996, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
|
|
10.3(ii) |
|
Amendment No. 1 (Effective January 1, 1991) to the Key Salaried Employees Group Insurance PlanPre-1987 Group (As Amended and Restated Effective January
1, 1987) (Filed as Exhibit 10.3(ii) to the Corporations Annual Report on Form 10-K for the year ended December 31, 1996, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
10.3(iii) |
|
Key Salaried Employees Group Insurance PlanPost-1986 Group (Effective January 1, 1987) (Filed as Exhibit 10.3(iii) to the Corporations Annual
Report on Form 10-K for the year ended December 31, 1996, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
|
|
10.3(iv) |
|
Amendment No. 1 (Effective January 1, 1991) to the Key Salaried Employees Group Insurance PlanPost-1986 Group (Effective January 1, 1987) (Filed as
Exhibit 10.3(iv) to the Corporations Annual Report on Form 10-K for the year ended December 31, 1996, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
109
Number
|
|
Description
|
10.3(v) |
|
Amendment No. 2 to the Key Salaried Employees Group Insurance PlanPost-1986 Group (effective January 1, 1987). (Filed as Exhibit 10.3(v) to the
Corporations Annual Report on Form 10-K for the year ended December 31, 1998, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
|
|
10.3(vi) |
|
Amendment No. 3 to the Key Salaried Employees Group Insurance PlanPost-1986 Group (effective August 1, 1994). (Filed as Exhibit 10.3(vi) to the
Corporations Annual Report on Form 10-K for the year ended December 31, 1998, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
|
|
10.3(vii) |
|
Amendment No. 4 to the Key Salaried Employees Group Insurance PlanPost-1986 Group (effective January 1, 1998) (Filed as Exhibit 10.3(vii) to the
Corporations Annual Report on Form 10-K for the year ended December 31, 1998, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
|
|
10.4 |
|
Economic Value Incentive Plan, as Amended and Restated effective January 21, 2001. (Filed as Exhibit 10.4 to the Corporations Annual Report on Form
10-K for the year ended December 30, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
|
|
10.5 |
|
Amendment No. 1 to the Georgia-Pacific Corporation Economic Value Incentive Plan, as Amended and Restated by Action of the Compensation Committee on January
29, 2001 effective February 15, 2001. (Filed as Exhibit 10.5 to the Corporations Annual Report on Form 10-K for the year ended December 30, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto).
(1)* |
|
|
|
10.6(i) |
|
1995 Shareholder Value Incentive Plan, as Amended and Restated effective December 16, 1997. (Filed as Exhibit 10.8(iv) to the Corporations Amendment
No. 2 to Registration Statement on Form S-4 as filed with the Commission on November 7, 1997, Commission File No. 333-35813, and incorporated herein by this reference thereto). (1)* |
|
|
|
10.6(ii) |
|
Amendment No. 1 to the Amended and Restated 1995 Shareholder Value Incentive Plan, effective May 5, 1998 (Filed as Exhibit 10.8(ii) to the Corporations
Annual Report on Form 10-K for the year ended January 1, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
|
|
10.6(iii) |
|
Amendment No. 2 to the Amended and Restated 1995 Shareholder Value Incentive Plan, effective September 29, 1999 (Filed as Exhibit 10.8(iii) to the
Corporations Annual Report on Form 10-K for the year ended January 1, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
|
|
10.6(iv) |
|
Amendment No. 3 to the Amended and Restated 1995 Shareholder Value Incentive Plan, effective March 24, 2000 (Filed as Exhibit 10.8(iv) to the
Corporations Annual Report on Form 10-K for the year ended January 1, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
|
|
10.6(v) |
|
Amendment No. 4 to the Amended and Restated 1995 Shareholder Value Incentive Plan, effective July 18, 2000. (Filed as Exhibit 10.4 to the Corporations
Quarterly Report on Form 10-Q for the quarter ended July 1, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
|
|
10.6(vi) |
|
Form of Replacement Option Under the 1995 Shareholder Value Incentive Plan (Georgia-Pacific Group stock) (1995 Grant) (Filed as Exhibit 99.11 to the
Corporations Registration Statement on Form S-8 as filed with the Commission on December 18, 1997, Commission File No. 333-42597, and incorporated herein by this reference thereto). (1)* |
|
|
|
110
Number
|
|
Description
|
10.6(vii) |
|
Form of Replacement Option Under the 1995 Shareholder Value Incentive Plan (Timber Group stock) (1995 Grant) (Filed as Exhibit 99.12 to the
Corporations Registration Statement on Form S-8 as filed with the Commission on December 18, 1997, Commission File No. 333-42597, and incorporated herein by this reference thereto). (1)* |
|
10.6(viii) |
|
Form of Replacement Option Under the 1995 Shareholder Value Incentive Plan (Georgia-Pacific Group stock) (1996 Grant) (Filed as Exhibit 99.13 to the
Corporations Registration Statement on Form S-8 as filed with the Commission on December 18, 1997, Commission File No. 333-42597, and incorporated herein by this reference thereto). (1)* |
|
10.6(ix) |
|
Form of Replacement Option Under the 1995 Shareholder Value Incentive Plan (Timber Group stock) (1996 Grant) (Filed as Exhibit 99.14 to the
Corporations Registration Statement on Form S-8 as filed with the Commission on December 18, 1997, Commission File No. 333-42597, and incorporated herein by this reference thereto). (1)* |
|
10.6(x) |
|
Form of Replacement Option Under the 1995 Shareholder Value Incentive Plan (Georgia-Pacific Group stock) (1997 Grant) (Filed as Exhibit 99.15 to the
Corporations Registration Statement on Form S-8 as filed with the Commission on December 18, 1997, Commission File No. 333-42597, and incorporated herein by this reference thereto). (1)* |
|
10.6(xi) |
|
Form of Replacement Option Under the 1995 Shareholder Value Incentive Plan (Timber Group stock) (1997 Grant) (Filed as Exhibit 99.16 to the
Corporations Registration Statement on Form S-8 as filed with the Commission on December 18, 1997, Commission File No. 333-42597, and incorporated herein by this reference thereto). (1)* |
|
10.6(xii) |
|
Form of Special Replacement Option Under the 1995 Shareholder Value Incentive Plan (Georgia-Pacific Group stock) (1997 Grant) (Filed as Exhibit 99.17 to the
Corporations Registration Statement on Form S-8 as filed with the Commission on December 18, 1997, Commission File No. 333-42597, and incorporated herein by this reference thereto). (1)* |
|
10.6(xiii) |
|
Form of Special Replacement Option Under the 1995 Shareholder Value Incentive Plan (Timber Group stock) (1997 Grant) (Filed as Exhibit 99.18 to the
Corporations Registration Statement on Form S-8 as filed with the Commission on December 18, 1997, Commission File No. 333-42597, and incorporated herein by this reference thereto). (1)* |
|
10.7 |
|
Outside Directors Stock Plan (As in effect September 23, 1998, including Amendments No. 1 and 2). (Filed as Exhibit 10.7 to the Corporations Annual
Report on Form 10-K for the year ended December 30, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (l)* |
|
10.8(i) |
|
Directors Deferred Compensation Plan, effective September 22, 1998 (Filed as Exhibit 10.10(ii) to the Corporations Quarterly Report on Form 10-Q for
the quarter ended September 30, 1998, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
10.8(ii) |
|
Form of Deferral Agreement (Filed as Exhibit 10.10(i) to the Corporations Quarterly Report on Form 10-Q for the quarter ended September 30, 1998,
Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
10.9(i) |
|
Amendment No 1 to the Change of Control Agreement for Gary A. Myers dated March 15, 1999 (Filed as Exhibit 10.1 to the Corporations Quarterly
Report on Form 10-Q for the quarter ended July 1, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
|
|
111
Number
|
|
Description
|
10.9(ii) |
|
Amendment No 1 to the Change of Control Agreement for Donald L. Glass dated March 15, 1999 (Filed as Exhibit 10.2 to the Corporations Quarterly Report
on Form 10-Q for the quarter ended July 1, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
|
|
10.9(iii) |
|
Form of Change of Control Agreement (Filed as Exhibit 10.9(iii) to the Corporations Annual Report on Form 10-K for the year ended December 30, 2000,
Commission File No. 001-03506, and incorporated herein by this reference thereto). (l)* |
|
|
|
10.10(i) |
|
Amended and Restated Receivables Purchase Agreement dated as of October 13, 1999, among G-P Receivables, Inc., as the Seller, and Georgia-Pacific
Corporation, as the Collection Agent, and Canadian Imperial Bank of Commerce, Citibank, N.A., and Bank One, NA (Chicago Office), as the Secondary Purchasers, and Canadian Imperial Bank of Commerce, as the Administrative Agent (Filed as Exhibit
10.11(i) to the Corporations Annual Report on Form 10-K for the year ended January 1, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
10.10(ii) |
|
Amended and Restated Receivables Purchase Agreement dated as of October 13, 1999, among G-P Receivables, Inc., as the Seller, and Georgia-Pacific
Corporation, as the Collection Agent, and Asset Securitization Cooperative Corporation, Corporate Asset Funding Company, Inc., and Falcon Asset Securitization Corporation, as the Purchasers, and Canadian Imperial Bank of Commerce, as the
Administrative Agent (Filed as Exhibit 10.11(ii) to the Corporations Annual Report on Form 10-K for the year ended January 1, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
10.10(iii) |
|
Second Amended and Restated Receivables Purchase Agreement dated as of December 19, 2001, among G-P Receivables, Inc., as the Seller, and Georgia-Pacific
Corporation, as the Collection Agent, and Citibank, N.A., Commerzbank AG (New York Branch), The Bank of Tokyo-Mitsubishi, LTD (New York Branch) and Wachovia Bank, N.A., as the Secondary Purchases and Citicorp North America, Inc., as the
Administrative Agent. (1) (2) |
|
|
|
10.10(iv) |
|
Second Amended and Restated Receivables Purchase Agreement dated as of December 19, 2001, among G-P Receivables, Inc., as the Seller, Georgia-Pacific
Corporation, as the Collection Agent, Blue Ridge Asset Funding Corporation, Corporate Receivables Corporation, Corporate Asset Funding Company, Inc., Four Winds Funding Corporation, and Victory Receivables Corporation, as the Purchasers, and
Citicorp North America, Inc., as the Administrative Agent. (1) (2) |
|
|
|
10.11(i) |
|
Georgia-Pacific Corporation/Georgia-Pacific Group 1997 Long-Term Incentive Plan (Filed as Exhibit 10.10(i) to the Corporations Amendment No. 2 to
Registration Statement on Form S-4 as filed with the Commission on November 7, 1997, Commission File No. 333-35813, and incorporated herein by this reference thereto). (1)* |
|
|
|
10.11(ii) |
|
Amendment No. One to the Georgia-Pacific Group 1997 Long-Term Incentive Plan (Filed as Exhibit 10.12(ii) to the Corporations Annual Report on Form 10-K
for the year ended January 1, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
10.11(iii) |
|
Amendment No. Two to the Georgia-Pacific Group 1997 Long-Term Incentive Plan (Filed as Exhibit 10.12(iii) to the Corporations Annual Report on Form
10-K for the year ended January 1, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
112
Number
|
|
Description
|
10.11(iv) |
|
Amendment No. Three to the Georgia-Pacific Group 1997 Long-Term Incentive Plan (Filed as Exhibit 10.11(iv) to the Corporations Annual Report on Form
10-K for the year ended December 30, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
|
|
10.11(v) |
|
Form of Revised Georgia-Pacific Group 1997 Long-Term Incentive Plan Option (Filed as Exhibit 10.1 to the Corporations Quarterly Report on Form
l0-Q for the quarter ended March 31, 1998, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
|
|
10.11(vi) |
|
Form of Revised Special Georgia-Pacific Group 1997 Long-Term Incentive Plan Option (Filed as Exhibit 10.2 to the Corporations Quarterly Report on Form
10-Q for the quarter ended March 31, 1998, Commission File No. 001-03506,and incorporated herein by this reference thereto). (1)* |
|
|
|
10.11(vii) |
|
Form of Georgia-Pacific Group 1997 Long-Term Incentive Plan Performance Share Grant Agreement for the January 1, 1999 through December 31, 1999 Performance
Period (January 28, 1999 Grant). (Filed as Exhibit 10.12(iv) to the Corporations Annual Report on Form 10-K for the year ended December 31, 1998, Commission File No. 001-03506, and incorporated herein by this reference thereto).
(1)* |
|
|
|
10.11(viii) |
|
Form of Georgia-Pacific Group 1997 Long-Term Incentive Plan Performance Share Grant Agreement for the January 1, 1999 through December 31, 2000 Performance
Period (January 28, 1999 Grant). (Filed as Exhibit 10.12(v) to the Corporations Annual Report on Form 10-K for the year ended December 31, 1998, Commission File No. 001-03506, and incorporated herein by this reference thereto).
(1)* |
|
|
|
10.11(ix) |
|
Form of Georgia-Pacific Group 1997 Long-Term Incentive Plan Performance Share Grant Agreement for the January 1,1999 through December 31, 2001 Performance
Period (January 28, 1999 Grant) (Filed as Exhibit l0.12(vi) to the Corporations Annual Report on Form 10-K for the year ended December 31, 1998, Commission File No. 001-03506, and incorporated herein by this reference thereto).
(1)* |
|
|
|
10.11(x) |
|
Form of Georgia-Pacific Corporation/Georgia-Pacific Group 1997 Long-Term Incentive Plan Performance Share Grant Agreement for the January 1, 2001 through
December 31, 2003 Performance Period (January 29, 2001 Grant) (Filed as Exhibit 10.11(x) to the Corporations Annual Report on Form 10-K for the year ended December 30, 2000, Commission File No. 001-03506, and incorporated herein by this
reference thereto). (1)* |
|
|
|
10.11(xi) |
|
Form of Georgia-Pacific Corporation/Georgia-Pacific Group 1997 Long-Term Incentive Plan Option (January 28, 1999 Grant) (Filed as Exhibit 10.12(vii) to the
Corporations Annual Report on Form 10-K for the year ended December 31, 1998, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
|
|
10.11(xii) |
|
Form of Georgia-Pacific Corporation/Georgia-Pacific Group 1997 Long-Term Incentive Plan Option (January 21, 2000 Grant) (Filed as Exhibit 10.12(x) to the
Corporations Annual Report on Form 10-K for the year ended January 1, 2000, Commission File No. 001-03506, and incorporated here by this reference thereto). (1)* |
|
|
|
10.11(xiii) |
|
Form of Georgia-Pacific Corporation/Georgia-Pacific Group 1997 Long-Term Incentive Plan Performance Share Grant Agreement for the January 1, 2000 though
December 31, 2002 Performance Period (January 21, 2000 Grant) (Filed as Exhibit 10.12(xi) to the Corporations Annual Report on Form 10-K for the year ended January 1, 2000, Commission File No. 001-03506, and incorporated here by this reference
thereto). (1)* |
|
113
Number
|
|
Description
|
10.12(i) |
|
Georgia-Pacific Corporation/Timber Group 1997 Long-Term Incentive Plan (Filed as Exhibit 10. 10(ii) to the Corporations Amendment No. 2 to Registration
Statement on Form S-4 as filed with the Commission on November 7, 1997, Commission File No. 333-35813, and incorporated herein by this reference thereto). (1)* |
|
|
|
10.12(ii) |
|
Amendment No. 1 to the Timber Group 1997 Long-Term Incentive Plan (Filed as Exhibit 10.13(ii) to the Corporations Annual Report on Form 10-K for the
year ended January 1, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
|
|
10.12(iii) |
|
Amendment No. 2 to the Timber Group 1997 Long-Term Incentive Plan (Filed as Exhibit 10.3 to the Corporations Quarter Report on Form 10-Q for the
quarter ended July 18, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto).* |
|
|
|
10.12(iv) |
|
Form of Revised Timber Group 1997 Long-Term Incentive Plan Option (Filed as Exhibit 10.3 to the Corporations Quarterly Report on Form l0-Q for the
quarter ended March 31, 1998, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
|
|
10.12(v) |
|
Form of Timber Group 1997 Long-Term Incentive Plan Option (January 21, 2000 Grant) (Filed as Exhibit 10.13(iv) to the Corporations Annual Report on
Form 10-K for the year ended January 1, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
|
|
10.13(i) |
|
Fort James Corporation MIP Bonus Deferral Plan (Filed as Exhibit 99.1 to Fort James Corporations Registration Statement on Form S-8, Commission File
No. 333-66715, dated November 3, 1998, and incorporated herein by this reference thereto). (1)* |
|
|
|
10.13(ii) |
|
Fort James Supplemental Deferral Plan 1999, Amendment and Restatement. (Filed as Exhibit 10.13(ii) to the Corporations Annual Report on Form 10-K
for the year ended December 30, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
|
|
10.13(iii) |
|
Fort James Corporation Stock Option Plan For Outside Directors, Amended and Restated as of February 18, 1999 (Filed as Exhibit 99.6 to the Corporations
Registration Statement on Form S-8 dated December 7, 2000, Commission File No. 333-51442, and incorporated herein by this reference). (1)* |
|
|
|
10.13(iv) |
|
Fort James Corporation 1996 Stock Incentive Plan, 1997 Amendment and Restatement (Filed as Exhibit 10.13(iv) to the Corporations Annual Report on Form
10-K for the year ended December 30, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
|
|
10.13(v) |
|
Fort James Corporation Split Dollar Life Insurance Plan (Effective date of January 1, 1998 (Filed as Exhibit 10.13(v) to the Corporations Annual Report
on Form 10-K for the year ended December 30, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (l)* |
|
|
|
10.13(vi) |
|
Form of Fort James Corporation Restricted Stock Unit Award Agreement. (Filed as Exhibit 10.13(vi) to the Corporations Annual Report on Form 10-K
for the year ended December 30, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
|
|
114
Number
|
|
Description
|
10.13(vii) |
|
Fort James Corporation Supplemental-Benefit Plan (Amended and Restated Effective January 1, 1999) (Filed as Exhibit 10.13(vii) to the Corporations
Annual Report on Form 10-K for the year ended December 30, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)* |
|
|
|
10.13(viii)(a) |
|
Fort Howard Corporation Management Equity Plan (Filed as Exhibit 10.H with the Fort Howard Corporations Annual Report on Form 10-K for the year ended
December 31, 1991, Commission File No. 001-06901, and incorporated herein by this reference).* |
|
10.13(viii)(b) |
|
Amendment dated December 28, 1993 to the Fort Howard Corporation Management Equity Plan (Filed as Exhibit 10.9(A) with the Fort Howard Corporations
Annual Report on Form 10-K for the year ended December 31, 1993, Commission File No. 001-06901, and incorporated herein by this reference). (1)* |
|
|
|
10.13(viii)(c) |
|
Amendment dated March 1, 1995 to the Fort Howard Corporation Management Equity Plan (Filed as Exhibit 10.9(B) with the Fort Howard Corporations Annual
Report on Form 10-K for the year ended December 31, 1994, Commission File No. 001-20473, and incorporated herein by this reference). (1)* |
|
|
|
10.13(ix)(a) |
|
Fort Howard Corporation 1995 Stock Incentive Plan (Filed as Exhibit 10.15 with the Fort Howard Corporations No. 1 to Registration Statement on Form
S-1, Commission File No. 33-56573, dated February 8, 1995, and incorporated herein by this reference). (1)* |
|
|
|
10.13(ix)(b) |
|
Amendment No. 1 to Fort Howard Corporation 1995 Stock Incentive Plan (Filed as Exhibit 4.4 with the Fort Howard Corporations Registration Statement on
Form S-8, Commission File No. 333-20959, dated February 3, 1997, and incorporated herein by this reference). (1)* |
|
|
|
10.13(x) |
|
James River Corporation of Virginia 1987 Stock Option Plan 1993 Amendment and Restatement (Filed as Exhibit 10(j) to James River Corporations Annual
Report on Form 10-K for the fiscal year ended December 26, 1993, Commission File No. 001-06901, and incorporated herein by this reference). (1)* |
|
|
|
10.14 |
|
Agreement and Plan of Merger dated as of May 25, 1999, among Unisource Worldwide, Inc., Georgia-Pacific Corporation and Atlanta Acquisition Corp. (Filed as
Exhibit 99(c)(1) to the Schedule 14D-1 of Atlanta Acquisition Corp. and Georgia-Pacific Corporation, Commission File No. 005-51073, and incorporated herein by this reference thereto). (1) |
|
|
|
10.15 |
|
Joint Venture Agreement among Georgia-Pacific Corporation, Chesapeake Corporation, Wisconsin Tissue Mills Inc. and Georgia-Pacific Tissue, LLC, dated as of
October 4, 1999 (Filed as Exhibit 10.15 to the Corporations Annual Report on Form 10-K for the year ended January 1, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
10.16 |
|
Operating Agreement Georgia-Pacific Tissue, LLC, dated as of October 4, 1999, between Wisconsin Tissue Mills Inc. and Georgia-Pacific Corporation (Filed as
Exhibit 10.16 to the Corporations Annual Report on Form 10-K for the year ended January 1, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
115
Number
|
|
Description
|
10.17 |
|
Agreement and Plan of Merger, dated as of July 16, 2000, among Georgia-Pacific Corporation, Fenres Acquisition Corp. and Fort James Corporation (Filed as
Exhibit 2 to the Corporations Form 8-K dated July 17, 2000, filed July 18, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
10.18(i) |
|
Agreement and Plan of Merger, dated as of July 18, 2000, by and among Plum Creek Timber Company, Inc., a Delaware Corporation, Georgia-Pacific Corporation, a
Georgia corporation and North American Timber Corp., NPI Timber, Inc., GNN Timber, Inc., LRFP Timber, Inc., and NPC Timber, Inc., each a Delaware corporation and a wholly owned subsidiary of Georgia-Pacific Corporation (Filed as Exhibit 2.1 to the
Corporations Form 8-K as filed with the Commission on July 20, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
10.18(ii) |
|
Amendment No. 1 to the Agreement and Plan of Merger, dated June 12, 2001 (Filed as Exhibit 2.1 to the Corporations Form 8-K dated June 12, 2001,
filed June 14, 2001, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
10.19(i) |
|
Voting Agreement and Consent dated as of July 18, 2000, by and among Plum Creek Timber Company, Inc., a Delaware corporation, Georgia-Pacific Corporation, a
Georgia corporation and each of the security holders party thereto (Filed as Exhibit 9.1 to the Corporations Form 8-K as filed with the Commission on July 20, 2000, Commission File No. 001-03506, and incorporated herein by this reference
thereto). (1) |
|
|
|
10.19(ii) |
|
Amendment No. 1 to the Voting Agreement and Consent, dated June 12, 2001 (Filed as Exhibit 9.1 dated June 12, 2001, filed June 14, 2001, Commission File
No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
10.20(i) |
|
Credit Agreement (Multi-Year Revolving Credit Facility), dated as of November 3, 2000, among Georgia-Pacific Corporation, the Lenders Named therein, Bank of
America, N.A., as Agent and Issuing Bank, and Merrill Lynch Capital Corporation and Morgan Stanley Senior Funding Inc., as Co-Syndication Agents, Banc of America Securities LLC, Merrill Lynch Capital Corporation, and Morgan Stanley Senior Funding
Inc., as Book Managers and Lead Arrangers (Filed as Exhibit 10.20 to the Corporations Annual Report on Form 10-K for the year ended December 30, 2000, Commission File No. 001-03506, and incorporated herein by reference thereto).
(1) |
|
|
|
10.20(ii) |
|
First Amendment to the Credit Agreement (Multi-Year Revolving Credit Facility), dated as of January 26, 2001. (Filed as Exhibit 10.1 to the
Corporations Form 8-K dated March 15, 2001, filed March 15, 2001, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
10.20(iii) |
|
Second Amendment to the Credit Agreement (Multi-Year Revolving Credit Facility), dated as of March 15, 2001 (Filed as Exhibit 10.2 to the Corporations
Form 8-K dated March 15, 2001, filed March 15, 2001, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
10.20(iv) |
|
Third Amendment to the Credit Agreement (Multi-Year Revolving Credit Facility), dated as of December 5, 2001 (Filed as Exhibit 10.1 to the Corporations
Form 8-K dated December 6, 2001, filed December 12, 2001, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
116
Number
|
|
Description
|
10.21(i) |
|
Credit Agreement (18-Month Revolving Credit Facility), dated as of November 3, 2000, among Georgia-Pacific Corporation, the Lenders Named therein, Bank of
America, N.A., as Agent, and Merrill Lynch Capital Corporation and Morgan Stanley Senior Funding Inc., as Co-Syndication Agents, Banc of America Securities LLC, Merrill Lynch Capital Corporation, and Morgan Stanley Senior Funding Inc., as Book
Managers and Lead Arrangers (Filed as Exhibit 10.21 to the Corporations Annual Report on Form 10-K for the year ended December 30, 2000, Commission File No. 001-03506, and incorporated herein by reference thereto). (1) |
|
|
|
10.21(ii) |
|
First Amendment to the Credit Agreement (18-Month Revolving Credit Facility), dated as of March 15, 2001 (Filed as Exhibit 10.3 to the Corporations
Form 8-K dated March 15, 2001, filed March 15, 2001, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
10.21(iii) |
|
Second Amendment to the Credit Agreement (18-Month Revolving Credit Facility), dated as of December 5, 2001 (Filed as Exhibit 10.2 to the Corporations
Form 8-K dated December 6, 2001, filed December 12, 2001, Commission File No. 001-03506, and incorporated herein by this referenced thereto). (1) |
|
|
|
10.22(i) |
|
Credit Agreement (Asset Disposition Bridge Facility), dated as of November 3, 2000, among Georgia-Pacific Corporation, the Lenders Named therein, Bank of
America, N.A., as Agent, and Merrill Lynch Capital Corporation and Morgan Stanley Senior Funding Inc., as Co-Syndication Agents, Banc of America Securities LLC, Merrill Lynch Capital Corporation, and Morgan Stanley Senior Funding Inc., as Book
Managers and Lead Arrangers (Filed as Exhibit 10.22 to the Corporations Annual Report on Form 10-K for the year ended December 30, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)
|
|
|
|
10.22(ii) |
|
First Amendment to the Credit Agreement (Asset Disposition Bridge Facility), dated as of March 15, 2001 (Filed as Exhibit 10.4 to the Corporations
Form 8-K dated March 15, 2001, filed March 15, 2001, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
10.23(i) |
|
Credit Agreement (Capital Markets Bridge Facility), dated as of November 3, 2000, among Georgia-Pacific Corporation, the Lenders Named therein, Bank of
America, N.A., as Agent, and Merrill Lynch Capital Corporation and Morgan Stanley Senior Funding Inc., as Co-Syndication Agents, Banc of America Securities LLC, Merrill Lynch Capital Corporation, and Morgan Stanley Senior Funding Inc., as Book
Managers and Lead Arrangers (Filed as Exhibit 10.23 to the Corporations Annual Report on Form 10-K for the year ended December 30, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
10.23(ii) |
|
First Amendment to the Credit Agreement (Capital Markets Bridge Facility), dated as of March 15, 2001 (Filed as Exhibit 10.5 to the Corporations
Form 8-K dated March 15, 2001, filed March 15, 2001, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
10.23(iii) |
|
Second Amendment to the Credit Agreement (Capital Markets Bridge Facility), dated as of December 12, 2001 (Filed as Exhibit 10-3 to the Corporations
Form 8-K dated December 6, 2001, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
117
Number
|
|
Description
|
10.24 |
|
Credit Agreement (Timber Disposition Bridge Facility), dated as of November 3, 2000, among North American Timber Corp., the Lenders Named therein, Bank of
America, N.A., as Agent, and Merrill Lynch Capital Corporation and Morgan Stanley Senior Funding Inc., as Co-Syndication Agents, Banc of America Securities LLC, Merrill Lynch Capital Corporation, and Morgan Stanley Senior Funding Inc., as Book
Managers and Lead Arrangers (Filed as Exhibit 10.24 to the Corporations Annual Report on Form 10-K for the year ended December 30, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1)
|
|
|
|
10.25 |
|
Form of Subsidiary Guaranty (Georgia-Pacific Corporation) (Multi-Year Revolving Credit Facility) (Filed as Exhibit 7.01(c) to Exhibit 10.20 to the
Corporations Annual Report on Form 10-K for the year ended December 30, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
10.26 |
|
Form of Subsidiary Guaranty (Georgia-Pacific Corporation) (18-Month Revolving Credit Facility) (Filed as Exhibit 6.01(c) to Exhibit 10.21 to the
Corporations Annual Report on Form 10-K for the year ended December 30, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
10.27 |
|
Form of Subsidiary Guaranty (Georgia-Pacific Corporation) (Asset Disposition Bridge Facility) (Filed as Exhibit 6.01(c) to Exhibit 10.22 to the
Corporations Annual Report on Form 10-K for the year ended December 30, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
10.28 |
|
Form of Subsidiary Guaranty (Georgia-Pacific Corporation) (Capital Markets Bridge Facility) (Filed as Exhibit 6.01(c) to Exhibit 10.23 to the
Corporations Annual Report on Form 10-K for the year ended December 30, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
10.29 |
|
Form of Subsidiary Guaranty (Georgia-Pacific Corporation) (Timber Disposition Bridge Facility) (Filed as Exhibit 7.13(a) to Exhibit 10.24 to the
Corporations Annual Report on Form 10-K for the year ended December 30, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
10.30 |
|
Georgia-Pacific Group 2000 Employee Stock Purchase Plan (Filed as Exhibit 10.21 to the Corporations Annual Report on Form 10-K for the year ended
January 1, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
10.31 |
|
The Timber Company 2000 Employee Stock Purchase Plan (Filed as Exhibit 10.22 to the Corporations Annual Report on Form 10-K for the year ended January
1, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
10.32(i) |
|
Georgia-Pacific Tissue, LLC 2000 Employee Stock Purchase Plan (Filed as Exhibit 10.23 to the Corporations Annual Report on Form 10-K for the year ended
January 1, 2000, Commission File No. 001-03506, and incorporated herein by this reference thereto). (1) |
|
|
|
10.32(ii) |
|
Georgia-Pacific Corporation Georgia-Pacific Group 2001 Canadian Employees Stock Purchase Plan, Amended and Restated as of August 28, 1995 (Filed as
Exhibit 99 to the Corporations Registration Statement on Form S-8, Commission File No. 333-44112, dated March 30, 2001, and incorporated herein by this reference thereto). (1) |
|
|
|
118
Number
|
|
Description
|
|
|
|
10.33(i) |
|
Securities Purchase Agreement, dated as of January 21, 2001, among Georgia-Pacific Corporation, as seller, Georgia-Pacific Finance, LLC, Svenska Cellulosa
Aktiebolaget SCA (publ), and SCA Tissue, Inc. (Filed as Exhibit 10.32 to the Corporations Annual Report on Form 10-K for the year ended December 30, 2000, Commission File No. 001-03506, and incorporated herein by this reference
thereto). (1) |
|
|
|
10.33(ii) |
|
Purchase Agreement by and among Georgia-Pacific Corporation, Certain Subsidiaries of Georgia-Pacific Corporation and Domtar, Inc., dated as of June 1, 2001.
(1) (2) |
|
|
|
10.33(iii) |
|
Amendment No. 1 to Purchase Agreement by and among Georgia-Pacific Corporation, Certain Subsidiaries of Georgia-Pacific Corporation and Domtar, Inc., dated
as of August 3, 2001. (1) (2) |
|
|
|
10.34 |
|
Form of Master Timber Agreement between North American Timber Corporation, LRFP Timber, Inc., NPTC Timber Inc., GNN Timber, Inc., and GPW Timber, Inc., and
Georgia-Pacific CorporationGeorgia-Pacific Group) (Filed as Exhibit 10.33 to the Corporations Annual Report on Form 10-K for the year ended December 30, 2000, Commission File No. 001-03506, and incorporated herein by this reference
thereto). (1) |
|
|
|
10.35(a) |
|
Fort Howard Corporation Management Equity Participation Agreement (Filed as Exhibit 10.9 to Amendment No. 2 to Fort Howard Corporations Registration
Statement on Form S-1 dated October 25, 1988, Commission File No. 33-23826, and incorporated herein by this reference thereto).* |
|
|
|
10.35(b) |
|
Letter Agreement dated June 27, 1990 modifying the Fort Howard Corporation Amended and Restated Management Equity Participation Agreement (Filed as Exhibit
10.V with the Fort Howard Corporations Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 001-06901, and incorporated herein by this reference thereto).* |
|
10.35(c) |
|
Letter Agreement dated July 31, 1990 modifying the Fort Howard Corporation Amended and Restated Management Equity Participation Agreement (Filed as Exhibit
10.W with the Fort Howard Corporations Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 001-06901, and incorporated herein by this reference thereto).* |
|
|
|
10.35(d) |
|
Letter Agreement dated February 7, 1991 modifying the Fort Howard Corporation Amended and Restated Management Equity Participation Agreement (Filed as
Exhibit 10.GG with the Fort Howard Corporations Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 001-06901, and incorporated herein by this reference thereto).* |
|
10.35(e) |
|
Letter Agreement dated February 7, 1991 modifying the Fort Howard Corporation Amended and Restated Management Equity Participation Agreement (Filed as
Exhibit 10.HH with the Fort Howard Corporations Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 001-06901, and incorporated herein by this reference thereto).* |
|
10.35(f) |
|
Letter Agreement dated December 28, 1993 modifying the Fort Howard Corporation Amended and Restated Management Equity Participation Agreement (Filed as
Exhibit 4.3(f) with the Fort Howard Corporations Registration Statement on Form S-8 dated September 29, 1995, Commission File No. 33-63099, and incorporated herein by this reference thereto). (1)* |
119
Number
|
|
Description
|
10.35(g) |
|
Letter Agreement dated March 1, 1995 modifying the Fort Howard Corporation Amended and Restated Management Equity Participation Agreement (Filed as Exhibit
10.8(F) with the Fort Howard Corporations Annual Report on Form 10-K for the year ended December 31, 1994, Commission File No. 000-20473, and incorporated herein by this reference thereto). (1)* |
|
12 |
|
Statements of Computation of Ratio of Earnings to Fixed Charges. (1) (3) |
|
21 |
|
Subsidiaries. (1) (2) |
|
23 |
|
Consent of Independent Auditors. (1) (3) |
|
99.1 |
|
Properties. (1) (2) |
|
* |
|
Compensatory plan or arrangement. |
(2) |
|
Filed on March 22, 2002 as exhibits to the original filing of the Annual Report on Form 10-K for the fiscal year ended December 29, 2001.
|
|
(i) |
|
On October 9, 2001, the Corporation filed a Current Report on Form 8-K under Items 2 and 7 thereof. The Report disclosed the Corporations redemption of
all of the outstanding shares of Georgia-Pacific Corporation-Timber Company Common Stock, par value $0.80 per share (Timber Common Stock), in exchange for the common stock of six former subsidiaries of Georgia-Pacific (collectively, the
Spincos), which collectively held all of the assets and liabilities attributed to Georgia-Pacifics timber and timberlands business (The Timber Company), by issuing one unit (a Unit), consisting of one share
of common stock of each Spinco, for each share of Timber Common Stock outstanding, effective as of the close of trading on the New York Stock Exchange on October 5, 2001. The Report also disclosed the subsequent merger of each of the Spincos with
and into Plum Creek Timber Company, Inc., a Delaware corporation (Plum Creek), with Plum Creek as the surviving corporation (the Mergers) pursuant to the terms of the Agreement and Plan of Merger, dated as of July 18, 2000,
as amended by Amendment No.1 to Agreement and Plan of Merger, dated as of June 12, 2001 (as amended, the Merger Agreement), by and among Plum Creek, Georgia-Pacific and the Spincos, each Unit was converted into the right to receive 1.37
shares of Plum Creek common stock, par value $.01 per share (Plum Creek Common Stock). |
|
(ii) |
|
On October 18, 2001, the Corporation filed a Current Report on Form 8-K under Items 5 and 7 thereof. The Report disclosed the Corporations issuance of a
press release on October 18, 2001 regarding earnings for the third quarter of 2001. |
|
(iii) |
|
On December 12, 2001, the Corporation filed a Current Report on Form 8-K under Items 5 and 7 thereof. The Report filed amendments, as Exhibits 10.1 to 10.3
thereof, to the Corporations credit facilities filed as Exhibits 10.20 to 10.23 of the Corporations Annual Report on Form 10-K for the fiscal year ended December 30, 2000, and their amendments filed as Exhibits 10.1 to 10.5 to the
Corporations Current Report on Form 8-K for the report dated March 15, 2001. |
|
(iv) |
|
On December 14, 2001, the Corporation filed a Current Report on Form 8-K/A, under Items 5 and 7. The Report amended the Corporations Current Report on
Form 8-K for the report dated December 6, 2001, as filed on December 12, 2001, for the purpose of correcting a typographical error. The September 29, 2001 Interest Coverage Ratio was erroneously reported as being 2.8x. The correct number was 2.5x.
|
120
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this amended report to be signed on its behalf by
the undersigned, thereunto duly authorized.
GEORGIA-PACIFIC CORPORATION (Registrant) |
|
By: |
|
/s/ A. D. CORRELL
|
|
|
(A. D. Correll, Chairman, Chief Executive Officer and President) |
Date: August 16, 2002
121