Document NeBG5ZYyd7LqgVEKV1DGRzrJE

Highlights Dollar amounts and shares are in thousands Net sales Income1 Per share of common stock1 Primary Fully diluted Depreciation Depletion Cash dividends declared Total assets Cash dividends declared per share of common stock Shares of common stock and common stock equivalents Primary Fully diluted Number of common shareholders of record Number of employees 1982 $5,402,000 52,000 1981 $5,414,000 I 60,000 1980 $5,016,000 243,000 .48 .50 293,000 63,000 119,000 5,150,000 1.51 1.49 223,000 4,000 I 3 2,000 5,060,000 2-33 2.27 211,000 56,000 I 30,000 4,51 2,000 $ 1.05 $ 1.20 $ 1.20 106,370 110,220 88,000 44,000 105400 109,450 89,000 44,000 O Co 0^ 00 0 I 04,000 90,200 44,000 Before extraordinary items and accounting change in 1982. SALES (in billions) 197* 1979 19*0 19*1 19*2 $5.: jj.o $5.4 15.4 DEBT-TO-EQUITY RATIO 197* .48 >979 ^*57 19S0 ,;9 19S1 7 19*2 **74 INCOME (in milli ons) 1979 19*0 /9*i HIHIHHiSieo 19S2 51 1 $301 $ j :fe Before extraordinary items am! accounting change in 1982. SGP 0029945 I Letter to Shareholders We are pleased to report that an improving business trend which began in the closing months of 1982 has continued into 1983 and appears likely to maintain its upward direction throughout this year and into 1984. Howe\er, the improvement came too late to prevent 1982 from being our worst vear in recent times. Although we reported net income of S1J3 million or Si.44 per share on a priman basis, our 1982 results included several extraordinan and nonoperating factors. Expenses associated with settlement of the plvwood litigation, the Atlanta relocation, and writedow ns of certain facilities were more than offset bv a change in accounting police, an ex change of debt for common shares, the sale of tax credits and natural gas royalties, and modest operating earnings. The litigation settlement was a difficult action for us to take, because we did not fix plvwood prices. In tact, we had previously won on the same issues, facts, and evidence in another case in the 9th Circuit. How ever, because of the expenses and risks involved and the possibility that we would be in court over this matter for a long time into the future, we felt it was in the company's best interest to remove the shadow of this potentially large, unknown factor. With this litigation resolved, our stature in credit markets and the investment communitv will improve, and we can focus on future opportunities. On the management level, we have planned tor this future progress bv assuring a smooth and effective transition of executive leadership. Robert E. Elowerree w ill retire as chief executiv e officer at the share holder' meeting in Mav, while continuing as chairman of the board. T. Marshall Hahn, Jr., president, has been elected chief operating officer and will become chief executive officer in Mav. Robert A. Schumacher, executive vue president - Northeast Division, has been elected executive vice president - pulp and paper with responsibilitv tor all of the tompanv's pulp and paper operations. James R. Kuse. senior v is e president - C'hemical Division, has ov erall responsibilitv tor the SGP 0029946 companCs chemical operations. Stanlev S. Dennison became executiu- mcc president - building products on Harold E. Sand's retirement. We anticipate a gradual hut stead\ economic recowr\ and will closed monitor our performance and economic conditions w ith a \ ieu toward increasing the divi dend according to our police' of paving out at least one-third of operating earnings as cash die idends. The fourth-quarter divi dend reduction to 60 cents per share annuallc was part of a comprehensive cost-reduction program that affected Georgia-Pacific emplovees as well as our shareholders. This pro gram enabled us to come through a verv tough economic period eeith our competitiee abilities sharpened, rather than impaired. 7! Marshall Hahn, Jr. Robert E. Flowerree We can all look forward to reaping the benefits of this competitive- edge during the economic recocerv that lies ahead. Respectfullv submitted, Robert E. Flowerree Chairman and Chief Executive Officer r^ -U T. Marshall Hahn, Jr. President and Chief Operating Officer Februarv io,1985 1 SGP 0029947 The Sunbelt It's not true that you can't go home again, particularly when home is where the action is. As a small company, Georgia-Pacific moved its headquarters from Georgia to the Pacific Northwest in the 1950s, just as that region's plywood industry began its steep growth curve. For the next quarter century, Georgia-Pacific was the nation's fastest-growing major corporation. We became the world's largest plywood producer and developed the country's leading buildi' g prod ucts distribution system. We now rank at or near the top in vi tually every category of building products and also hold leading posi. ons in many pulp, paper and chemical markets. In 1982, this commitment to growth brought our corporate head quarters back to Georgia, to the focal point of today's growth sectors. The Sunbelt has truly become our company's new growth area as well as our country's most rapidly expanding region. Our Atlanta headquarters symbolizes this new era. The Sunbelt's population has approximately doubled since 195-0, with the growth rate reaching 21% during the 1970s, many times higher than the non-Sunbelt states. During this period, the Sunbelt accounted for two-thirds of all new jobs created in the United States, and the region remains a magnet for new industry. The 1970s also saw acceleration of the South's post-war transition from agriculture to industry and ser vices, accompanied by rapidly rising incomes. Important to Georgia-Pacific, the region's housing market has by far outpaced that of other areas. In 1982, the Sunbelt accounted for more than 70% of all housing starts, continuing what has become a major trend in this important market. HOUSING STARTS (% of) 197S 19 79 1980 l9Sl !9S2 Sunbelt * Other Stales 4 'wV-T /; - POPULATION GROWTH RATH 1970-1980 B 5% Sunbelt Ji Other States SGP 0029948 Georgia-Pacific has solidly established itself in this rapidly growing Sunbelt market. Beginning in the 1960s, we pioneered the production and marketing of Southern pine plywood, a product many said could not be made, and which now accounts for more than 8y% of our almost four billion square feet of annual softwood plywood capacity. We sup port these plants with some three million acres of Southern timberlands, more than two-thirds of our U. S. holdings. Approximately three-quarters of our U. S. assets are located in the Sunbelt, including 70 of our 87 wood product manufacturing facilities, as well as large pulp and paper installations in Arkansas, Louisiana, and Florida, and a major chemical complex south of Baton Rouge, La. Georgia-Pacific also remains an important force on the West Coast, where we serve the western end of the Sunbelt as well as other Western markets with tremendous long-term potential. Our company has more than 800,000 acres of Western timberlands under long-term manage ment and leading positions in several important industry sectors that enhance our competitive position in this region. Although we do not anticipate another corporate headquarters move in the foreseeable future, we do intend to be wherever new opportunities present them selves and to participate fully in the economic progress that lies ahead. GEORGIA-PACIFIC US. ASSETS Sunbelt--74% ft Other States--26% SGP 0029949 5 Building Products During 1982,Georgia-Pacific's building products business continued to generate more than $10 million in dailv sales despite the worst indus try conditions in modern times. This remarkable performance resulted from expansion in new markets, distribution of new products, and the co ipletion of modern facilities. We maintained our progress in remodeling and repair as a major supplier to home centers and to dealers who cater to pro fessional and do-it-vourself re modelers. This market retains great potential for future growth, with remodeling and additions in the suburbs and the repair and rehabilitation of older structures in the cities. These projects favor products sc d through our Dis tribution Division over competi tive construction materials. We also continued to advance in commercial and industrial Harold L. Airington, Vice President--Wood Products Sales; Davis K. Mortensen, Vice President--Southern Division; Stanley S. Dennison, Executive Vice President --Building Products at the Hawthorne, Florida, plywood plant markets, where we have consider able room for further expansion. A directed effort to increase industrial accounts during the vear resulted in manv new customers for a wide range of products for such diverse uses as pallets, furniture, and truck bodies. SGP 0029950 In the commercial area, more than 80% of the structures built are three stories or less, similar to a two-storv house with a basement, a market w here we have traditionally excelled. Commercial buildings also offer opportunities to expand sales ot our new products as well as our tradi tional lines. Our locus on the commercial market has helped us become a signihcant factor in the built-up roofing business almost overnight. These Hat roofs predt minate in commercial construction and can require re pair or replacement in seven to 10 years, about twice as fast as shingled residential roofs, where we also continued our rapid growth as a supplier. Our total roohng sales in creased bv approximately 40% in 1982, and we expect even better performance during 1983. A greater number of housing starts will increase roohng demand and many people who postponed reroohng during the recession will go ahead with the project as interest rates decline. Our effi cient, modern plants give us a distinct advantage in the roofing business, where we expect healthy gains over the next sev eral years. Glenn E. Wilson, Vice President--Gypsum Division at the Hampton, Georgia, roofing plant 7 SGP 0029951 Our progress in roofing and the ability to move such large volumes of goods during one of the vvorst-ever years for building products result directly from our Distribution Division's marketing strength, which has grown during the recent period of high interest rates. The trend for customers to reduce financing costs by using a Georgia-Pacific distribu tion center as their w arehouse has now firmly estabfished itself as an industry practice. As a result, customers are now demanding a full line of building products at each center. To accommodate these demands, we consolidated several branches into larger centers during the year, bringing our nationwide total to 143, w hich is 13 less than a year earlier. The consolidations improved customer service, re duced costs, and allowed us to move further into such growth areas as insulation and fasteners. This distribution strength meant w e could run most of our mills and plants at close to capac ity during 1982 and also allowed John H. Dunkak, Senior Vice President-- Western Division; George J. Ritchie, Vice President--Western Division, Wood Products Manufacturing at the Fort Bragg, California, sawmill us to bring on line tw o state-of-the-art w ood product facilities -- a plvwood plant at Haw thorne, Fla., and a saw mill at Ellabeil. Ga. SGP 0029952 The Hawthorne facility is the southernmost plywood plant in the coun try and serves the large, fast-growing Florida market. With it, we are at the leading edge of plywood technology and are achieving maximum wood recovery at the lowest cost, making us a formid able competitor in this market. Our Southern pine sawmill at Ellabell is the most modern in the country and is patterned after our highly successful Fort Bragg, Calif., redwood and fir "quad- mill." Ellabell's laser-guided twin quadmills serve the growing Southern market as well as in creasing numbers of customers in Europe and the Caribbean. These new products and modern facilities, supported by the Distribution Division's mar keting power, will help maintain Ronald P. Hogan, Group Vice President--Distribution Division at the Atlanta building products distribution center Georgia-Pacific's building prod ucts leadership in future years. We have adapted to the market envi ronment of the 1980s and are already capitalizing on its trends and opportunities. BUILDING PRODUCTS SALES (in billions) ^mm * ` * l'4' Total Corporate Building Products BUILDING PRODUCTS OPERATING PROFITS (in millions) 1982 Total Corporate Building Products SGP 0029953 9 Pulp & Paper Although 1982 was the Year the recession caught up with the paper business, at Georgia-Pacific we continued to upgrade our products and facilities and to advance in several market sectors. Market pulp sales were the hardest hit. The worldu ide reces sion, the strength of the U. S. dollar in Europe, and the devalu ation of Scandinavian currencies all combined to undercut demand for this countrv's market pulp. As a result, we curtailed production at various locations during the Year. How ever, we did benefit from the 1981 acquisition of In- veresk, our British paper unit, which continued to be an excel lent customer for our pulp pro duction at Woodland, Maine. One notable achie\ement dur James E. Frew, Group Vice President -- Pulp and Paper; Robert A. Schumacher, Executive Vice President -- Puip and Paper at the Palatka, Florida, pulp and paper mill ing 1982 was the completion of our pulp mill modernization at Crossett, Ark., which has trans formed that mill into one of the industry's most efficient. The savings from this project exceeded our expectations during the first Year of operation and will increase in future vears. SGP 0029954 We also benefited from the fine performance of new tissue equip ment at Palatka, Fla., which includes a modern twin-wire machine and the equipment to convert its output into tissue and toweling. This equipment joined other modern facilities in Arkansas, New York, and Washington to help improve Georgia-Pacific s position in highlv com petitive tissue markets. Our companv outperformed the industrv in 1982, with impressive gains in our Coronet, Delta, Mr. Big, Hudson and M-D branded products. We have successful!v expanded the products from Palatka into new markets and new lines. People are responding to our "extra value" approach and our product line is gaining reputation with consumers and with the trade, which knows us as both a major brand-name and private-label tissue producer. Our industrial tissue opera tions also made new gains during 1982 bv expanding in its tradi tional business and industrial markets and bv adding restaurant - and hospital specialty accounts. Modernized equipment also Conrad Schweitzer, Group Senior Vice President--Pulp and Paper at the Madera, California, corrugated container plant 11 SGP 0029955 helped us cultivate new markets in the fine paper business, where we are now supplying carbonless base paper and release paper (which is used as backing for presensitized labels) and we are developing a new surface-treated product for the gravure printing trade and other customers. These are exciting new products in rapid-growth secton which contributed to profits and helped increase our share of the i \e paper market in a verv tough vear. We are just beginning to develc n the potential of our rebuilt equipment, which has greatlv enhanced our competitive position. Our Packaging Division also began developing potential oi a differ ent kind during 1982 bv effectively integrating the recently acquired corrugated container facilities east of the Rockies into our existing op erations. This gave Georgia-Pacific a nationwide packaging business, w hich has been one of our objectives in this sector. For manv years we have been building a highly successful West Coast corrugated container business, where we have developed expertise in specialized products that gained us an enviable customer list and excellent return . We are now extending this expertise eastward to benefit further from our abili ties in this business. Although the corrugated container arena was highh competitive in 1982, the food and beverage market held up quite well and th.s is an area of strength for our w estern operations. The national representation provided bv our Midw est and Southern acquisitions and the bulk- packaging specialties they brought us have opened up many new mar kets. A growing container business will add to Georgia-Pacific's position in pulp and paper during the economic upturn. We expect to benefit from this upturn in all areas of our piper business. Our facilities are ri .nning better and more effic rntly than ever before. Even vv ith the dismal conditions of [982, we largely succeeded in keeping our mills running and in attracting new buyers to our products, as well as continuing to IS--g 2 sfii: serve existing customers. We have the production capabilities to expand profitably in our cho sen markets during the economic recovery. Carroll T. Tolar, Vice President--Engineering; Calvin R. Shaw, Senior Vice President--Crossett Division at the Crossett, Arkansas, pulp and paper mill PULP AND PAPER SALES (in billions) 1 V Total Corporate Pulp and Paper PULP AND PAPER OPERATING PROFITS (in millions) I/ -an > 1982 1 Sun / v 2 ; Total Corporate Pulp and Paper SGP 0029957 Chemicals Georgia-Pacific s Chemical Division remained an important factor ii n our company's performance during 1982, although the effects of the low level of economic activity were readily apparent. Our own plants and mills continued to use significant quantities of our chemical and resin production. How ever, sales to outside customers suffered because of closures id curtailments. We were able to increase our sales of pi vvinvl chloride (PVC), despite the fact that w e have no internal demand for this product. However, low PVC prices greatlv affected this sector throughout most of the vear, largely because of depressed conditions in con struction and agricultural pipe markets. Bv vear-end, prices for our PVC lines had begun to strengthen, suggesting further improvemt nt during 1983. Our success in broadening our PVC customer base and in creasing our market share came through expansion in specialty PVC markets. Georgia-Pacific is James R. Kuse, Senior Vice President -- Chemical Division at the Plaquemine, Louisiana, chemical complex SGP 0029958 now manufacturing resin of excellent clarity for food-packaging film wrap, for hospital items such as medical tubing, and for a variety of products ranging from swimming pools to waterbeds. We have succeeded in producing these high-quality resins with modern large-reactor technology, making us a low-cost competitor in these higher-margin lines. G-P alsc scored technological gains in an area of growing public attention with the development of low-emitting urea-formaldehvde resins used lor interior plvwood and other manufactured boards. In the area of exterior panels, we formulated some very effective phenolicbased resins for waferboard and oriented strandboard (OSB), two of G-P's newer products. We experienced considerable interest in another of our newer pat ented products, Korad acrvlic film, fora variety of protective, decorative and specialty applications. Another new G-P product, rosin size, which is used in papermaking, was a major success in the first vear of produc tion from our plant at Crossett, Ark. We became a major competitor in this market almost as soon as the plant started up. Georgia-Pacific's leadership in thermosetting resins was strength ened bv the resin plants acquired in 1981 which moved our company into new and growing industrial resin markets such as insulation, fiber glass shingle mats, laminates and veneers, filters, and many others. CHH.V1ICAL SALKS (in billions) 197S (9 79 !980 1981 !9S2 Total Corporate I Cln'micnK * M4 W 'n h. ' ^ 74 " CHK.MICAL OPFRATING PROFITS (in millions) 1978 1979 S,J7/-< 1980 1981 1982 K Total Corporate I Clu'imtaK SGP 0029959 We are also entering the growing insulation market from another direc tion with a plant to manufacture expandable polystyrene now under _________________________________ construction in Ohio. G-P's Dis- tribution Diyision markets insula tion board made of this material, which has mam other uses as well. This plant will add a sig nificant new dimension to our chemical business when it starts up in early 1984. Bv that time, we anticipate that the economic recovery will be reflected in our Chemical Division's performance. Many of our products are related to the construction industry, which began to turn upward * at the end of 1982. A great Charles F. Mackey, Vice President--Piaquemine Division at the Piaquemine, Louisiana, chemical complex number of our new lines depend less on the building cycle, pro viding better balance and new opportunities for growth. Our efficient, modern facilities and the highly integrated nature of our oper ations make Georgia-Pacific an extremely effective competitor in all of our selected chemical markets. SGP 0029960 Rf i! r c e s International The productivitv of Georgia-Pacific's forest resource base continued to improve during 1982, with programs to upgrade our timber quality nationwide, In the Northeast, where the budworm continues to ravage fir and spruce, we are reforesting infested areas with resistant hvbrid larch and developing faster growth in the healthy stands through selective logging. In the South, where independent nonindustrial owners hold most of the timberlands, we have been actively developing landowner assistance programs to help provide raw material for our plants and mills. In Florida, we are altering the forest management practices on the timberlands acquired from Hudson Pulp & Paper to grow sawtimber as well as pulpwood, primarily bv thinning the pine plantations at an earlv age for better growth. With larger trees, we can first use the harvest in our sawmills and plywood plants and then use the chips and residues for paper and other products. In the West, we are upgrading the quality of our northern California timberlands bv plant ing redwood in openings created John E. Wishart, Vice President-- Timber and Timberlands; Robert L. Goodwin, Vice President--Gas and Oil at an oil well in the Crossett Forest 17 SGP 0029961 bv the selective harvesting of mixed redwood and Douglas fir stands. In Oregon, we are re-establishing Douglas fir on suitable sites alter harvest ing the alder for logs and pulpwood. We are continuing our own tree-genetics program and are also supporting universitv research that holds great promise for healthier, more abundant commercial forests. Georgia-Pacific was active under the ground as well as above it dur ing 1982, with natural gas discoveries in Texas and Louisiana. Our oil and gas potential will be further developed through centralization of all phases of oil, gas, and lignite management for G-P's North American timberlands at Exchange Oil & Gas. This new mineral management pro gram will allow us to optimize utilization of these important resources. We have also been extending Georgia-Pacific's resource-management abilities into foreign markets, with increased exports and new facilities. Our company plans to enter the paper business in the Far East in 1986 with completion of a kraft paper and linerboard mill in Indonesia. Georgia-Pacific is to ow n 2f% of this v enture, w ith the Indonesian gov ernment owning fo%, and a private Indonesian investor owning the remaining 2 j%. We anticipate our share will be supplied principally in the form ol technology, equipment, and management. In our other In donesian joint venture, we are increasing plvwood capacitv and helping to construct a resin plant that will supply the plvwood operation and other customers. In terms of exports, our new Ellabell, Ga., sawmill sent joinery grade timbers to Europe for use in such items as windows, doors, and cabinets. We also increased our European plywood exports and expect offshore sales of both plywood and lumber to increase when the European economy improves. Over the longer term, the U. S. forest resource will almost certainly become one of our country's major assets in world trade. Georgia-Pacific's abundant timber resources, manufacturing expertise, and marketing strengths will make us a major participant in this trend. Richard C. Newman, Vice President--International Division at the port in Savannah, Georgia TIMBER RESOURCE BASE North America (in acres) Owned in fee Controlled Regional Timber Distribution Eastern tl.S. and Canada c Southern U.S. Western U.S. 4,830,000 ^06,000 136,000 19% H lb 1 00 % SGP 0029963 9 Thomas F. Mitchell, Vice President--Government Affairs; Mary A. McCravey, Vice President and Secretary; Stephen K. Jackson, Vice President-- Advertising and Public Relations at the Atlanta Headquarters Marion L. Talmadge, Vice President and Treasurer; Joseph H. Joiner, Vice President and Controller at the Atlanta Headquarters CAPITAL EXPENDITURES (in millions) 197 s >979 19S0 igsi 19S2 V40/' ! S I,:/:s' Plant additions -- Property, Plant and Equipment Natural resources COMMON SHAREHOLDERS' EQUITY (in billions) 197s 1979 1950 1951 1952 $1.7 Si.8 Si 9 $1.9 $2.0 CASH DIVIDENDS AND EARNINGS PER SHARE 1978 7979 >1 1 :</C 1950 ix :o7'' 1951 8 1 try''-. , 1 1982 flf Before extraordinary items and accounting change in 198' Cash dividends STOCK PRICE RANGE 197S 1979 1950 1951 1952 20 SGP 0029964 Financial Review [n 1982, Georgia-Pacific effectively coped with an extremely difficult financial environment and two major one-time expenses bv implementing a comprehensive cost-cutting program and with several other measures that strengthened our company's financial position. During the first half, we sold tax benefits under the Economic Recovery Tx Act of 1981 for approximately S41 million. We also changed from the deferral to the flow through method of accounting for investment tax credits, resulting in $130 million earnings effect. Second-quarter lrnings benefited from a S67 million sale of natural gas ai 1 condensate royalties on portions of our company's Port fudson, La., acreage. Third-quarter earnings included S. million from an exchange of approxi mately 2.4 million o mmon shares for the extinguishment of all further G-P obligations with respect to industrial devel opment bonds with a principal amount of $62 million. Earnings were reduced bv two major one-time expenses. Setdement of the plvwood litigation resulted in a Sj6 mil lion after-tax charge and the Atlanta relocation resulted in a $29 million expense. Also, writedow ns of certain facilities and other nonoperating costs accounted for a S3 3 million expense in the fourth quarter. We improved cash flow bv reducing operating expenses and capital budgets, deferring salary reviews for all salaried personnel, negotiating reasonable agreements with several unions, curtailing operations, and reducing the dividend in the fourth quarter to a 60 cent annual level, one-half the previous rate. This cost-reduction program spread the burden of the recession equitably among the corporation's employees and shareholders. It allowed us to remain financially sound and competitive, and also put us in a position both to strengthen our financial balance sheet and to ease some of the pro gram's spartan measures as the economic recovery proceeds. Capital Expenditures (Dollar amounts in millions) Property, Plant and Equipment Building products New plants, distribution centers and equipment Replacement and modernization Pulp and paper New plants and equipment Replacement and nodernization Chemicals New plants and equipment Replacement and modernization Other Corporate Total property, plant and equipment Natural Resources Timber and timberlands Natural gas and oil properties Total natural resources Total capital expenditures I982 1981 S 10 28 S 98 28 126 8 86 57 <77 65 263 22 39 I I 56 3 3 95 7 12 27 26 170 522 42 48 90 $260 If2 40 <52 $674 SGP 0029965 21 Sales and Operating Profits by Industry Segment (Dollar amounts in millions) Year ended December 31 1982 1981 1980 >979 1978 Trade Sales to Unaffiliated Customers Building products Plywood and specialties Lumber Gvpsum Other Pulp, paper and paperboan. Containers and packaging Printing and specialty Tissue Market pulp Chemicals Other operations Operating Profits Building products Pulp, paper and paperboard Chemicals Other operations $1,217 1,003 182 647 3>49 23% 18 3 12 $1,230 1.017 193 582 56 3,022 23% $ 1,154 >9 993 3 196 11 543 56 2,886 23% 20 4 11 $1,338 1,283 229 478 58 3.328 26% 25 4 9 64 S'.343 1,178 203 393 3,' '7 30% 27 5 9 71 605 437 429 .87 1,658 628 67 $5,402 II 8 8 4 3i 12 I 100% 569 375 388 248 1,580 738 74 $5414 10 5*9 7 267 7 369 5 245 29 1400 '4 66 r I 69 100% $5,016 10 462 5 269 8 334 5 204 28 1,269 '3 542 I 68 100% $5,207 9 286 5 244 7 215 4 130 25 875 10 344 J 67 100% $4403 7 5 5 3 20 8 1 100% $ 105 46 7$ 9 $ 235 45% $ 116 19 I l6 J2 '49 4 >5 100% S 396 29% 29 38 4 100% $ 160 '4' '53 '3 $ 467 34% 3 33 3 100% $ 329 '54 '37 >3 $ 633 52% 24 22 2 100% S 434 6l 87 '5 $ 597 73% 10 '5 2 100% Trade sales exs'lude intercompany sales, but income on such sales is included in operating profits. \dditional information regarding industry segments is presented in Note 6 of the Notes to Financial Statements on page 50 SGP 0029966 ueorgM-rK.jrporjuon jna y^D^uiawi St\temh\t^ of Income Dollar amount' and 'hart' am in thou'and' Net sales Costs and expenses Cost ot sales ( Note i ) Selling, general ami administrative (Note 2) Depreciation and depletion (Notes i, 2 and 5-) Interest ( Note 1 ) Other income, net ( Note 2) Income before income taxes, extraordinary items and cumulativ e effect of accounting change Provision for income taxes (Note 3) Income before extraordinary items and accounting change Litigation settlement, net ot taxes (Note 10) Gam on exchange ot bonds (Note 4) Cumulative effect ot change in accounting for investment tax credits (Note 5) Net income Per common share -- Primary (Note 1) Income before extraordinary items and accounting change Litigation settlement Gain on exchange ot bonds Accounting change Net income Per common share--Fully diluted (Note r) Income before extraordinary items and accounting change Litigation settlement Gain on exchange of bonds Accounting change Net income I982 $5,402,000 Year ended December 19^1 19^0 $5414,000 $5,0 r 6,000 4,475,000 I94,ooo 356,000 186,000 (76,000) >33*000 4455,000 327,000 277.000 12 5,000 -- 5,184,000 4,018,000 }0 1 ,000 267,000 79,000 -- 4,665,000 67,000 15,000 52,000 (56,000) 27,000 I 30,000 2 30,000 70,000 160,000 -- -- -- 3$ i ,000 108,000 243,000 -- -- -- S 153*000 S 160,000 5 243,000 5 .48 S 1.51 S 2,33 (-5^) 2 1.23 -- -- -- -- -- -- S 1.44 S 1.51 $ 2,33 $ .50 $ 149 S 2.27 (i) -- .24 -- -- -- 1.19 -- -- S 1.42 S 149 S 2.27 The accompanwng note-* are an integral part of these financial statements- } Georgia-Pacific Corporation and Subsidiaries Balance Sheets Dollar amounts and shares are in thousands Assets Current assets Cash Receivables, less allowances of $15,000 and $i 1,000 Inventories (Note i) Refundable income taxes Prepaid expenses Natural resources (Notes i and 7) Timber and timberlands Coal, minerals, natural gas and oil Property, plant and equipment (Notes i, 3 and 7) Land, buildings, machinery and equipment, at cost Accumulated depreciation Other assets (Note 12 > The accompam mg notes are an integral part of these financial statements. December 31 1982 1981 S 36,000 572,000 699,000 -- 23,000 1,330,000 S 30,000 503,000 7 17,000 50,000 2 3,000 1,3 2 3,000 748,000 151,000 899,000 752,000 120,000 87 2.000 4,642,000 (1,840,000) 2,802,000 4,5 I 3,000 ( i ,7 3 2,000 2,781,000 I 19,000 84,000 $5,150,000 S 5.060,000 SGP 0029968 Liabilities and shareholders' equity Current liabilities Commercial paper and other short-term notes ( Note 7 t Current portion of long-term debt Accounts pacable Accrued compensation Current income taxes Other current liabilities Long-term debt, excluding current portion (Note 7) Deferred income taxes (Note 3) Employee stock purchase plan (Note 9) Redeemable preferred stock (Note 81 Adjustable rate convertible preferred stock, without par value, authorized 10,000 shares (involuntarv liquidating value $39.00 per share) Shares issued and outstanding Series A, 4,141 Series B, 937 Series C, 1,343 Common shareholders' equity (Notes 4, 7 and 9) Common stock, par \alue $.80; authorized i 50,000 shares; 103,289 and 103,277 shares issued Additional paid-in capital Retained earnings Less -- Common stock held in treasury, at cost; 1,95-3 and 4,340 shares December 1982 / 981 S 195,000 63,000 340,000 62,000 ,000 I I 3,000 778,000 1,618,000 550,000 6,000 $ 150,000 292,000 295,000 61,000 -- 96,000 894,000 1,487,000 545,000 ,000 45,000 32,000 32,000 209,000 O f-t <3 <D ] I ,000 $0,000 O O 00 83,000 989,000 978,000 (61,000) 83,000 i ,028,000 90.000 ([ 35,000) 1,989,000 [ ,926,000 $5,1 50,000 $5,060,000 25 Georgia-Pacific Corporation and Subsidiaries Statements of Common Shareholders' Equity Dollar amounts and shares are in thousands Common Stock Issued Treasury ,03.54 4.447 2 * S' (S) 39 103,269 4.478 8 (1 38) 103.277 4.340 12 103,289 12,387) i.9f3 (Notes 4, 7 and 91 Balance at December 31, 1979 Net income Cash dividends declared Common stock Preferred stock Common stock issued Common stock purchased Other Balance at December 31, 1980 Net income Cash dividends declared Common stock Preferred stock Common stock issued Other Balance at December 31, 1981 Net income Cash dividends declared Common stock Preferred stock Market value of common stock issued from treasure Other Balance at December 31, 1982 Total $1,786,000 243,000 Common Stock $82,000 (1 18,000) (1 2,000) ,000 (4,000) 1,900,000 160,000 82,000 (I 19,000) (13,000) 4,000 (6,000) 1,926,000 i 3,000 1,000 83,000 1104,000) < 13,000) 3,000 (6,000) $ 1,989,000 $83,000 Additional Paid-in Capital $1,023,000 Retained Earning'* $819,000 243,000 ,000 < 118,0001 (12,000) 1,028,000 (4,000) 928,000 160,000 < 119,000) (r 3,000 1,028,000 (6,000) 90,000 r 3,000 (104,000) < 13,000) (39,000) S 989,000 (6,000) $978,000 Treasun Stock S( 138,000) < 138,0001 3.000 < 13 5,000) 74,000 S (61,000) The accompammg notes are an integral part of these financial statements SGP 0029970 2b Gecrjia-Paane (.jrporjuon and Subsidiaries Statfmfnt' < >f CHWvjh i\ Financial Portion 000 4 O O O & Dollar amount.' and 'hares are in thousand'. Sources of working capital Income belore extraordmarv items and accounting change Items in income not affecting working capital Depreciation Depletion Deferred income taxes (Note 3) Total from operations Litigation settlement, net of taxes (Note to) Items in litigation settlement not affecting working capital Gain on exchange of bonds (Note 4) Items in gain on exchange of bonds not affecting w orking capital Market value of common stock issued from treasure Face value of industrial revenue bonds defeased Cumulative effect of change in accounting for investment tax credits (Note 5) Items in accounting change not providing working capital Additions to long-term debt (Note 7 ) Stock issued for acquisitions Total sources of working capital Uses of working capital Cash dividends declared Long-term debt pavments and current maturities (Note 7) Capital additions, net Timber and timberlands Coal, minerals, natural gas and oil Propertv, plant and equipment Other Total uses of working capital Increase (decrease) in working capital Changes in working capital Increase (decrease) in current assets Cash Receivables Inventories I Refundable income taxes Prepaid expenses | (Increase! decrease in current liabilities J Commercial paper and other short-term notes i Current portion of long-term debt 1 Accounts pavable and accrued liabilities ! Current income taxes 1 Increase (decrease) in working capital Th <- accompanvmg notes are an integral part of these rinanaal statements. \ear ended December 11 1982 iqSi iv3.Sc S 52,000 5 [bo,OOO S243,000 293,000 63,000 5,000 413,000 (56,000) 81,000 25,000 27,000 2 23,000 4,000 118,000 555,000 -- -- -- -- : 11,000 6,000 5b4,oco -- -- -- -- 35,000 (62,000) -- I 30,000 (130,000) -- 295,000 -- 733,000 -- -- -- -- -- 555,000 32 ,000 (,142,000 -- -- -- -- -- 1 80,000 ,000 749,000 1 19,000 183,000 13 2,000 295,000 I 30,000 62,000 42,000 48,000 170,000 48,000 610,000 $123,000 112,000 40,000 522,000 20,000 1,(21 ,000 S 21,000 44*000 2 2,000 518,000 12,000 788,000 S (39,000) $ 6,000 69,000 (18,000) (50,000) -- 7,000 (3 2,0001 [ 00,000 0,000 12,000 128,000 S 10,000 3 3,00c 3 2,000 -- (3,000) 00 0o0 b00 (45,000) 229,000 (63,000) (5,000) 116,000 $123,000 12 5,000 (248,000) < 2 2,000) 1107,0001 S 21,000 (116,000) 26,000 ( I ,000) (6,0001 (in ,000) S (39,0001 '-7 Georgia-Pacific Corporation and Subsidiaries Notes to Financial Statements NOTE i. Summary of Significant Accounting Policies Principles of Consolidation. The consolidated financial statements include the accounts of Georgia-Pacific Corporation and subsidiaries (corpora tion). The investment in GA-MET (Note 12> is accounted for bv the equity method. All significant intercompany balances and transactions are eliminated in consolidation. Income per Share of Common Stock. Primary income per share of common stock has been com puted based on the weighted av erage number of shares out standing, assuming conv ersion of the conv ertible preferred stock and issuance of shares under stock option and stock purchase plans. The av erage number of shares used in the computation for primary income per share was 106,370 in 1982, 105,400 in 1981 and 104,000 in 1980. Fully diluted income per share of common stock, in addition, assumes conversion of the convertible subordinated debentures. The average number of shares used in the computation for fullv diluted income per share was 110,220 in 1982; 109,450 in 1981 and 108,050 in 1980. lmenior\ Valuation. The last-in. first-out (LIFO) method of inventory valuation is utilized tor the majority of inventories at manufacturing facilities and the corporation's manufactured inventories located at its building products distribution centers. The average cost method is used for all other inventories. Inventories are valued at the lower of cost or market as follow v LIFO \\TTa5Jl' GOSt 31I \\ ember 1982 H.M S314,000 S307,000 385,000 41 0,000 $699*000 S7 17,000 and $ 139,000 higher than those reported at December 31, 1982 and 1981, respectivelv. Propem. Property and equipment , e recordc d at cost. Lease obli gations for which the corporation assumes substantial all the property rights and risk of ownership are capitalized. Replacements of major units of property are capitalized and the replaced properties etired. Maintenance, repairs and replacements of minor nits of property are charged to expense as incurred. Provisions for deprec ition of buildings, machinerv and equipment are comput< 1 on the straight-line or units-ofproduction method using composite rates based upon esti mated serv ice lives of the various units of property The ranges of composite rates tor the principal classes are: land improvements -- 5% to 7%; buildings--2% to 5% and machinery and equipment-- 5% to 20%. No gain or loss is recognized on normal property disposi tions; property cost is credited to the property accounts and charged to the accumulated depreciation accounts and anv proceeds are credited to the accumulated depreciation ac counts. When there are abnormal dispositions of property, the cost and related depreciation amounts are removed from the accounts and anv gain or loss is reflected in income. The corporation amortizes its timber costs over the total fiber that will be available during the estimated growth cy cle. Timber earning costs are expensed as incurred. All costs of exploring tor and developing domestic oil and gas reserves are capitalized using the full-cost method of accounting and charged to operations on the basis of unitsof-production over the estimated future production from proven reserves. The corporation capr.tliz.es interest on borrowed funds during construction periods. Such interest is charged to the property, plant and equipment accounts and amortized over the approximate life of the related assets in order to properlv The coqtoration uses the dollar value pool method for computing LIFO inventories; therefore, it is not possible to present a breakdown of inventories between finished goods raw materials and supplies. Inventors costs include cost of materials, labor and plant overhead. If LIFO inventories were valued at the lower of average cost or market, the inventories would have been Si 37,000 SGP 0029972 Dollar amounts and shares are in thousands match expenses with re\enues resulting from the facilities. Interest capitalized and the impact on net income uas: Total interest co'vts interest costs capitalized Interest expense Increase in net income alter giv ing effect to amortization ot capitalized mtere and income taxes 1982 $209,000 (2 3,000) $ 186,000 Tor endo J December j i WJM 1980 S198,000 (7} .000 5 I } 8,000 < ^9,000) S12 ,000 S 79,000 S -- S 28.000 S 24.000 The corporation c ters net operating costs on new con struction projects during the start-up phase and amortizes the deferral over approximatelv seven years. The amounts deferred are included in the property, plant and equipment accounts. The amounts deferred tor new project start-up costs were Sj.ooo, $2 3,000 and $19,000 in [982, [981. and 1980, respectively. Effects of Inflation. "Effects of Inflation Supplementary Information" beginning on page 39 contains disclosures on the effects of inflation and changing prices on the corporation's operations deter mined bv constant dollar and current cost methodologies. NOTE 2. Other Income/Expense In 1982, the corporation received $41,000 from the sale of certain tax benefits as pros ided for under the Economic Re covers Tax Act of 1981. Also in 1982, the corporation sold, for approximately 67,000, its 24.7 percent rovaltv interest on certain portions of its acreage in Port Hudson held, a producing gas condensate held in East Baton Rouge Parish, Louisiana. This income is included in Other income, net. The corporation completed in 1982 the relocation of its corporate office to Atlanta, Georgia. The corporation expensed relocation costs of $29,000 in 1982 which are in cluded in Other income, net. Additionally, the corporation expensed approximately $33,000 in the fourth quarter of 1982 related primarily to writedowns of certain facilities to net realizable value. These expenses have been charged primarily to "Selling, general and administrative expenses" and "Depreciation and deple tion expense." NOTEj, Income Taxes The provision for income taxes is based on pretax financial accounting income which differs from taxable income. Dif ferences generally arise because certain items, such as de preciation and capitalized interest, are reflected in different time periods tor financial accounting and tax purposes. Investment tax credits realized on the purchase of qualihable assets were previously recorded on the deferral method and recorded as an addition to accumulated depreciation and were being amortized to income as a reduction of de preciation expense over seven years. For tax purposes, the full credit earned was used to reduce current Federal in come taxes payable. Investment tax credits amortized into income as a reduction of depreciation expense amounted to $26,000 in 1981 and $21,000 in 1980. Effective January 1, 1982, the corporation began recognizing investment tax credits (Note p as a reduction of income tax expense. The provision for income taxes consists of the following: Federal income taxes, net of investment tax credit Current (benefit) Deterred State income taxes (benefit) Charge equivalent to ime>tment tax credit 1982 s 8,000 ,000 2,000 -- $ 1 ,000 wSi wSo S(9j,oooi 118,000 14,0001 S ,000 4,000 9,000 4.9,000 5 70,000 40.000 S 108.000 The difference between the ordinary Federal income tax rate and the corporation's effective income tax rate is sum marized as follows: Federal income tax rate Increase (decrease) as a result of investment tax credit Value of timber appreciation taxed at capital gains rate State income taxes, net of Federal benefit Investment credit amortization Other 1982 46% (20) -- -- (7) 2 2% I4S| 46% -- (10) 2 (6) (2) J0% W^C 4b % -- ( 12) 2 o' I2) ]I% 29 Georq/a-Paafic Corporanon and Subsidiaries Notes to Financial Statements Components of the deferred tax provision are as follows: Excess ol tax depreciation over hnanaa) depreciation Reversal o( deterred iniomr taxes dee to recognition ot investment ta\ credits Capitalized interest, net Deterred start-up costs, net Exploration and development costs capitalized lor financial purposes Sale of tax benerits Write down ol certain assets Other 1982 I98 I iqHo j f8,ooo S 64,000 5> 32,000 (fo,ooo) -- -- 24.000 9.000 -- 13,000 I 2,000 9,000 (21,000) (},ooo) S {,000 9.000 -- -- 1 2.000 S1 / S.000 -- -- -- 7.000 S 4,000 Approximately Sjo.ooo of investment tax credits recognized for financial reporting purposes is av ailable to reduce in come taxes to be paid in future vears. NOTE 4. Gain on Exchange of Bonds In August 19S:. the corporation exchanged approximately 2.400 shares of common stock held in treasury for the extin guishment of all further obligations with respect to indus trial revenue refunding bonds, Series 1977, issued bv the Citv of Crossett, Arkansas. The bonds had a principal amount of S61.900. As a result of the transaction, the corporation realized a tax-free extraordina \ gain of $27,000. NOTE 5. Change in Accounting Policy The corporation adopted, as of January 1, 1982, the flow through method of accounting for investment tax credits. Linder the flow-through method, investment tax credits are reflected in net income in the v car the qualified investment is made, rather than bv amortizing the credits over the esti mated lives of the equipment. The corporation previouslv followed the deferral method. This change was made be cause management believes that the flow-through method m financial reporting is more consistent w ith that of most industrial companies and particularlv those companies in the forest products industry Additionally, this change will make the accounting treatment of investment tax credits consistent with the required accounting for the sale of tax benefits. If the flow -through method had been in effect, 1981 and 1980 net income would have been increased bv S14.000 (13* per share) and $19,000 u81' per sharel, respectively. Quar terly net income per share tor 1981 would have increased as follows: first quarter <;, second quarter 3, third quarter 2, and 3 in the fourth quarter. NOTE 6. Industry Segment Informat'on Intersegment sales are recorded at estimate 1 fair market values. Timber and timberlands have not been allocated to industry segments because they are manag< 1 jointly to sup ply raw materials to all forest products segments. Logs and residua) fibers are included at cost in the operating profits of the various manufacturing facilities. Sales to foreign markets were less than 10% of total sales to unaffiliated customers in 1980 through 1982. Also, no single customer accounted for more than io% of sales to unaffiliated customers. For addi tional information regarding industry segments, see "Sales and Operating Profits bv Industry Segment" on page 22. As a result of the accounting change for investment tax credits (Note j), depreciation and depletion expense (Note 3) in 1982 was greater. Depreciation expense tor each of the corporation's segments would have increased bv the follow ing amounts if the change had been applied retroactiv elv: Building products Pulp, paper and paperboard products Chemicals Total 19M S 6.000 12.000 8.000 S26.00C I4SC S 7.000 9,000 3.00c 8:1 ,occ The writedown of certain facilities to net realizable value (Note 2) affected the earnings of the segments in the fourth quarter of 1982 bv the following amounts: Building products SS.ooo; Pulp, paper and paperboard products S3.00o; Chem icals $2,000; Other operations $8,000; and Corporate Si 2,000. SGP 0029974 Dollar jmoum^ and -north arc -n :houijnd^ sale' t< Linafhliate.l L u-tumer>- Budding products Pulp, paper and paperboard products Cheniic aN Other operations Total operation* Eliminations and adjustments Intersegment salt's Timber and timberlands Other income, net (Note 21 General corporate Interest expense Income taxes Consolidated totals s-j.049.ooo 1 ,b{8,ooo 6 2 8,000 67,000 {402,000 -- -- -- -- -- -- ${,402,000 Building products Pulp, paper and paperboard products Chemical, Other operation. Total operations Eliminations and adjustments Intersegment sales Timber and timberlands General c orporate Interest expense Income taxes Consolidated totals $ 3.0:2.000 1 .{80.000 7 38.000 74.000 {,414,000 -- -- -- -- -- 5 {,414,000 - Building products Pulp, paper and paperboard products Chenika!, Other operations Total operations Eliminations anil ad]u,tments Intersegment sales Timber and timberlands General corporate Interest expense Income taxes Consolidated totals $2,886,000 14.00.000 66 1 ,000 69,000 {.016,000 -- -- -- -- -- ${,016,000 'Before i'vtraonlinar\ and amounting change in 19S: Inter'egmellt ~ Sale' $ 37.000 41.000 94.000 2.oco 174.000 < I 74.0001 -- -- -- -- -- $-- $ 48.000 43.000 97.000 2,000 190.000 1 190,0001 -- -- -- -- $-- $ 48,000 48,000 84,000 2,000 I 82,000 ( [82,000) -- -- -- -- $-- Total Ret eiUJes S^,08b,OOO 1 .699,000 7 2 2.000 69,000 {, {76.0CO 1 174,0001 -- -- -- -- -- ${402,000 $ 3,070,000 1,623,000 S) c.ooo 76,000 {,604,000 ( 190.000 -- -- -- -- ${414,000 $2.9 34,000 1448,000 745.000 7 1,000 {,198,000 ( 182,000) -- -- -- -- ${,016,000 Famine' S io{.oco 4b.000 7{.ooo 9.oco -if-300 -- -- 76.000 ( isb.ooc; i 1 {.0001 $ {2.000 $ 1 16,000 I 1 6.000 [49,000 1 {.OOO 3 96,000 -- -- (41 .0001 ( 1 2 {.0001 < 70,000) $ 160,000 $ 160,000 141.000 I {3,000 I 3.OOO 467 ,000 -- -- ( 37 .OOOI (79,0001 ( 108,0001 $ 243,000 000 Deprecia tion and Depletion Capital Espendi- ture' Wet' i. ar ended l Vc< inner ,1 ws; 0148,000 I 09.000 77.ooo i 3,000 S 38.000 o{,ooo 81.000 7 .000 $ 1.478.occ 1,{'c.occ i .02 {.occ 347.000 I 9 1.000 4.1 fn.ooc -- -- -- 9,000 -- -- -- 42.000 -- 27.00c -- -- -- 748,000 -- 246,0c c -- -- $3 {b,ooo $260,000 ${. I {0.000 War ended i V.t ember 31, :v*s 1 $ 1 3 {,000 78.000 {4.000 {,000 $ 1 26.000 263,000 I 3 {,000 I 2.000 $ 1.434.000 1 .602.000 947.000 97.000 272,000 {36.000 4.0$O.CCO -- -- {,000 -- -- -- I I 2.000 2b,000 -- -- -- 7 {2,00c 2 2 8.00C -- -- $277,000 $674,000 ${,060,000 War ended De.t mlvr 31. m'c $r 30,000 78.000 {0,000 4,000 $143,000 2 I 3,000 (69,000 4,000 Si .403,000 1,31 6.000 894,000 64,000 262,000 {29,000 3,677.000 -- -- {,000 -- -- 52 67,000 -- 44,000 11 ,ooo -- -- ${84,000 -- 68 2 .GCQ 1 {3,000 -- -- $4.{i 2.000 SGP 0029975 3' Georgia-Pacific Corporanon and Subsidiaries Notes to Financial Statements NOTE 7. Indebtedness Long-term debt consists of the following: Banks 8*/4% term loans, pavabie in equal annual installments, 1986 through 1988 iol/2% term loans, pavabie m equal semiannual installments through 1984 j i lA% term loans, due 1982 Foreign bank revolver Other--average interest rate 11.6% pavabie in varying installments through 1991 Commercial paper Notes 6^/8% due 1982 7l/4% due 198 10.10% due 1990 Floating rate, currently 10 7% maturing at holders' option in 1984, due 1987 i4^fc% due 1987 15.37% due 1988 Insurance companies 6V% term loans. pa\able annually in installments through 1989 5Va% term loans, pavabie annuallv in installments through 1987 6`/a% term loan, pavabie annuallv in installments through 1982 9^% term loan, pavabie annuallv in installments through 1997 io'/2% term loans, pavabie annuallv in installments through 1996 ioVj% term loans, pavabie annuallv in installments through 1996 Revenue bonds, average interest rate 6.3% with varving annual pavments to 2007 Purchase contracts and other, average interest rate 8.0% with varving annual pavments to 2003 jJ/4% convertible subordinated debentures Litigation settlement Less current portion 1982 198l $ 150,000 S 150,000 3,000 -- -- 5,000 140,000 75,000 63,000 398,000 ._ 100,000 150,000 65,000 323,000 100,000 100,000 150,000 150,000 65,000 75,000 150,000 -- -- 1 3,000 30,000 __ 8,000 5,000 39,000 1 5,000 36,000 2,000 8,000 5,000 40,000 I 20,000 181,000 94,000 109.000 [ (9,000 99,000 125.00c -- 1,681,000 63,000 1,779,000 292,000 $1,618,000 S1,487.000 The scheduled pavments of long-term debt are S63 ,000 in 1983, $266,000 in 1984. $234,000 in 19S 5, Si 18,000 in 1986 and S171.000 in 1987. The corporation has two Revolving Credit and Term Loan Agreements fa domestic agreement and a foreign agreement) totaling $650,000. The domestic revolver with 24 banks establishes an unse cured revolving line of credit totaling $300,000 until De cember 1, 1984, at which time the outstanding balance will be converted to a term loan reparable in eight semiannual installments beginning on June 1, 1983. Commitment fees during the revolving loan period will be l/% ol 1 percent per annum of the unused av ailable credit. The interest rates as sociated with this agreement are based on either the prim" rate, certificate ol deposit rate or the offshore rate. At De cember 31, 1982, no funds were borrowed from the banks under this agreement. This agreement supports commercial paper outstanding. The foreign revolver with 13 European and Canadian banks establishes an unsecured revolving line of credit total ing $350,000 until December 7, 1984, at which time the out standing balance will be converted to a term loan reparable in ten equal semiannual installments beginning June 7, 1985. Commitment fees during the revolving loan period will be 14 of 1 percent per annum of the unused av ailable credit. The agreement provides for either domestic or Eurodollar borrowings at the corporation's option. The interest rate associated with this agreement for domestic borrowings is based on either the prime rate or the Federal funds rate. The interest rate on Eurodollar borrowings is based on the Libor rate. No funds were borrowed from the banks under this agreement at December 31, 1982. Restrictive cov enants included in both agreements are substantial the same as those pertaining to the corpora tion's other bank agreements. There are no prepavment penalties in either agreement. The 5150,000 floating rate notes are conv ertible hv the holder, prior to April 1, 1987, into 8*/2% debentures due 2009. The notes are not redeemable prior to October 1, 1984. On and after such date, the notes are redeemable in w hole or in part, at the option of the corporation. At anv time prior to April 1, 1987, the corporation mav corn ert the notes into fixed rate debentures due 2009 at a defined premium over the vield on 30-vear Treasurv securities, but not less than 81/2%. The conversion bv the corporation is subject to the election bv the holder to have the notes mature on the specified conversion date. The interest rate on the notes is adjustable semiannuallv to a rate based upon the six-month treasurv bill rate plus a specified premium. In April 1982, the corporation, through a w hollv-ow ned subsidiary issued U.S. S65.000 i4;/s% notes due April 15. 1987 with warrants (130 thousand) to purchase U.S. S13c.00c O SGP 0029976 Dollar amounts and shares are m thousands inotes due April 13. 1990. As ot December 31, 1982, $320 ot the if% notes have been issued. There were i2f thousand warrants outstanding at December 31, 1982. The warrants expire on April if, 1984. In Ma\ 1982, the corporation through a whollv-owned subsidiarv, received U.S. S7f,ooo from a Swiss Franc loan with two European banks. The loan has an effective interest rate of if.37% and is due December 1, 1988. The loan has been fullv hedged for currencv fluctuations. The f'/4% convertible subordinated debentures mature in 1996. The debentures are convertible into common stock at $30.87 per share at December 31, 1982. Additionally, the In denture prov ides for a sinking fund for the redemption on April 1, in each of the vears 1983 through i99f, of not ess than f% nor more than 10% of debentures outstanding on April I, 1981. At December 31, 1982, $123,000 of long-term debt was secured bv propertv and timber with a net book value ot $182,000, including Si 19,000 (original cost $2fo,ooo) relating to certain manufacturing and pollution control facilities w hich were financed with the proceeds from revenue bonds issued bv governmental units and guaranteed bv the corpo ration. The corporation leases such facilities from the gov ernmental units and pavs all costs incidental to ownership of the properties. Certain loan agreements place a limitation on cash dividends that can be paid. As of December 31, 1982, the amount of retained earnings available for cash dividends under the most restrictive covenants of the loan agreements is approximatelv $320,000. In addition, certain agreements require the corporation to maintain a minimum of $2 fo,ooo of consolidated working capital and impose limitations on additional borrowings. The corporation had at December 31, 1982, separate ar rangements with a number of banks providing for (i) revolv ing lines of credit, aggregating $280,000, that require if months w ritten notice of cancellation bv a participating bank and (ii) seasonal standbv lines of credit, aggregating $70,000. None of the lines carrv commitment fees or long term conversion features. The corporation has agreed to maintain bank deposits on an annual average basis amount ing to approximatelv 3>/2% of the revolving lines plus 3</2% of all loans outstanding thereunder. The corporation uses the lines of credit and the domestic revolver to support commercial paper and master note bor rowings. At December 31, 1982 the corporation had clas sified $398,000 of commercial paper with an interest rate of 9.4% as long-term debt. It is the corporation's intention to refinance the commercial paper with long-term debt. NOTE 8. Redeemable Preferred Stock Adjustable Rate Convertible Protorreti Stock Balance, December jt. 1979 Amortization ot the excess involuntarv liquidating value over fair value at acquisition date Balance, December ji. 1980 Stock issued for acquisition Amortization of the excess involuntary liquidating value over lair value at acquisition date Balance, December 31. 19S1 .Amortization ot the excess involuntarv liquidating value over fair value at acquisition date Balance, December ji, 1982 Senes A Sene-' B Nerie< C Dial $l 36,000 $29,000 $ -- S155,000 3,000 139,000 1,00c 30,000 -- -- 2S.000 4,000 1 59,000 28.000 3,000 142,000 1.000 31,000 2,ooo 30.000 5.000 20 3,000 3,000 1,000 2.000 5,000 $145,000 $3 2,000 $32,000 $209,000 The adjustable rate convertible preferred stock ("preferred stock") is recorded at (air value on the date ot issue. The ex cess of involuntarv liquidating value over such fair value is amortized over a lo-vear period bv a charge to retained earnings and corresponding credit to preferred stock. Each share of preferred stock is entitled to receive cumulative quarterlv cash dividends at the annual rate of $2.24. Such dividend rate is subject to increase up to a maximum of $4.00 per share should the corporation fail to make the scheduled purchase offers described below unless the average of the last reported sales prices for the corpora tion's common stock during a prescribed period of time is at least 108% of the conv ersion price of the preferred stock during such period. Subject to adjustment for common stock dividends and splits, each share of preferred stock has a conversion price ot $39.00, and has an involuntarv liquidat ing value of $39.00, is convertible into one share of common stock and is entitled to one vote. In addition, whenever six quarterlv dividends on Series A preferred stock are unpaid, the holders of such Series A stock are entitled to elect two directors of the corporation until all past dividends have been paid. Subject to the price of the corporation's common stock and the appropriate action bv the Board of Directors, the corporation is scheduled to make offers to purchase, at a price of S39.00 per share plus accumulated dividends, a specified number of shares annuallv beginning w ith 828 shares in 1984; 1,020 shares in 1985 and 1,289 shares in 1986 and 1987. 33 SGP 0029977 Georgia-Pacific Corporation and Subsidiaries Notes to Financial Statements SGP 0029978 The preferred stock will be subject to redemption (Series A --1984 through [988; Series B --1985 through [989 and Series C --1986 through 1990! at S39.00 per share plus ac cumulated dividends provided that the average of the last reported sales prices for the corporation's common stock is at least 12 5% of the then conversion price of the preferred stock. Thereafter, the preferred stock max' be redeemed, without limitation, at S39.00 per share plus accumulated dividends. NOTE 9. Common Stock At December 31, 198:, the following authorized shares of common stock of the corporation were reserxed for issue: Stock option plan Emplovee stock purchase plan Conversion of the j>/4% convertible subordinated debentures Conversion of preferred stock 86: I .OOO 3.855 6441 12,1 58 At December 31, 1981. the total number of shares of com mon stock ot the corporation coxered bx' the 1974 Emploxee Stock Option Plan (74 Plan) was 862 shares ol xvhich 230 shares were subject to outstanding options. During 1982, no options were granted or exercised and the 2 50 shares subject to option expired on April 15, 1982. As of December 31, 1982, 862 shares are axailable lor grant until October 15, 1983. On October 31, 1982, the 1980 Emploxee Stock Purchase Plan expired and 7 shares were issued in accordance with the terms of the Plan. As of December 31, 1982, 1,000 shares of common stock haxe been subscribed at S16.86 per share under the 1982 Emploxee Stock Purchase Plan (Plan). Subscribers have the option to receixe their paxments plus interest at the rate of io% per annum m lieu of stock. During the subscription period xxhich ended April 16, 1982, 7,283 emplovees sub scribed and 6.541 emploxees are still in the Plan at Decem ber 31, 1982. The Plan expires on Max 31, 1984. The shares and prices relating to the Stock Option Plan, the Emploxee Stock Purchase Plan, the convertible sub ordinated debentures and the preferred stock are subject to adjustment tor certain changes in the capital structure, in cluding common stock splits and stock dividends. NOTE 10. Litigation As prexiouslx reported, m 1978 the corporation and two other defendants receixed an untax orable jurx xerdict in a cix il class action antitrust suit inx olx ing the sale and distri bution of softxvood plvwood. On February 21, 1980, sum mary judgment was entered bx the United States District Court for the Eastern District of Louisiana (the "District Court") axxarding certain plaintiffs damages allegedlx owing them pursuant to the jurx xerdict. The corporation appealed this judgment to the United States Court of Appeals for the Fifth Circuit which later affirmed the judgment in all respects. Subsequentlx, the corporation petitioned the Supreme Court of the United States to review the loxxer court's decision which petition was granted on Max' 17, 1982. On January 13, 1983, the corporation and the other txxo de fendants executed a w ritten settlement agreement pursuant to which plaintiffs will receixe $165,000 over a period ot time. The settlement agreement prox ides the corporation will pav $99,000 of which SiS.ooo was paid on januarx 28, 1983, $36,000 is paxable on or before Januarx 30, 1984, and $45,000 on or before Januarx 30, 1985. This unusual and nonrecurring charge, including legal fees, in the amount ot $56,000, net of a related tax benefit of $48,000, has been re flected as an extraordinarx item in 1982. The agreement has receixed the preliminarx approval ot the District Court but the settlement is contingent upon: (i) a hearing (anticipated to occur prior to the summer ot 1983) to proxide, among other things, an opportunitx for anyone desiring to object to the settlement to be heard; and (ii) final approval bx the Dis trict Court and anv reviewing court. The settlement agree ment further provides that, pending final approx al of the settlement, the parties w ill request a stav of the proceedings in this lawsuit in the Supreme Court. The corporation is a defendant in a class action.suit con taining antitrust allegations inx olx ing the corporation's south east timber and lumber operations. It is management's opin ion that the results of this action will not hax e a material adxerse effect upon the financial position of the corporation. On December 4, 1980, the Attorney General of the State of Oklahoma filed a cix il complaint in the District Court ol Maxes Countx, Oklahoma, on behalf of the state ot Okla homa against the corporation, sexen other corporations and one public agencx alleging that the defendants wrongfullx discharged chemical' into Prxor Creek, its tributaries and Ft. Gibson Reserxoir. The complaint requests compensators damages of $8,300 and pumtixe damages of $150,000 A mo tion to dismiss the action on the ground that the Attornex General acted without authoritx has been granted bx the trial court. The Attornex General appealed the decision to the Oklahoma Supreme Court which upheld the dismissal. The Attornex General is currentlx attempting to petition the Supreme Court to reconsider its decision. Management beliex es that no significant discharge ot chemical-' from the corporation's propertx into the bodie- ot w ater ha^ oc curred Dollar amounts ana >narc>. arc :n thounjnas six actions ha\o Ivrn riled against Georgia-Pacific in Louisiana alleging damages trom a Februarv 1981 discharge of phenol into the Mississippi Ri\er trom Georgia-Pacific's Plaquemine, Louisiana, chemical plant. Four are private class actions which allege m the aggregate 8550,000 in dam ages plus attorneys' tees and other relief. Two are private actions and allege 5850 m damages plus attornevs' tees. -Management believes that the maximum liability, it anv, in the actions m the states ot Oklahoma and Louisiana will not have a material adverse effect on the financial condition ot the corporation During 1982, the corporation was involved in a number ot proceedings with various governmental agencies relating to env ironmental matters, including 14 proceedings concerning discharges ot materials into the air and 22 proceedings con cerning discharges into the vvaterwavs. The corporation paid an aggregate ot approximatelv S150 in fines and entered into various agreements and consent decrees pertaining to procedures to be followed in the future in certain ot these proceedings and is working with the agencies concerned to resolve pending proceedings. Management does not con sider these proceedings material in the aggregate. The corporation is partv to various other legal pro ceedings generallv incidental to its business. Although the ultimate disposition ot these proceedings is not presentlv determinable, management does not believe that adverse determinations in anv or all such proceedings will have a material adverse effect upon the financial condition of the corporation. NOTE 11. Pension and Bonus Plans Most of the corporation's hourly employees participate in noncontributorv pension plans. Contributions to manv ot these plans are based upon hourly rates set forth in various contracts. The corporation also has a noncontributorv pen sion plan for all of its salaried emplovees, excluding officers, to supplement the stock bonus plan. The corporation accrues the actuanallv determined cost ot the salaried plan based upon years ot service, average compensation and value ot assets held bv the stock bonus plan. Total pension costs accrued tor pension plans adminis tered solelv or jointly bv the corporation were $16,000 in 1982, Si 5.000 in 1981 and Si6,ooo in 1980, including amortiza tion ot prior serv ice costs over periods ranging trom ten to thirty vears. An assumed weighted average annual rate ot investment return ot b`/2% was used in determining the actuarial pres ent values ot vested and nonvested accumulated benefits. A comparison ot these accumulated benefits as estimated bv consulting actuaries and the plan assets tor the corporation's plans administered solelv or jointlv i s as follow s: ! V> vrnivr ;: Actuarial pre-ent \aiur ot accumulated plan bcncnt> Vested \om c$ted Assets available tor plan hment' 1982 `t'-i OO OO OO Ijs <S) 52 2 2,000 S2 19,000 > 1 'o.ccc :7.ccc Sls7.;cc > 1 77 ,:cc The corporation also made contributions to several collec tively bargained, muiti-emplover pension plans in accord ance with the provisions ot negotiated labor contracts generallv based on the number ot hours worked. Informa tion trom the plans' administrators is not presentlv available to permit the corporation to determine its share ot un funded v ested benefits. Georgia-Pacific and certain subsidiaries have a noncon tributorv stock bonus plan tor qualified salaried emplovees including officers. At December 31, 1982, there were 11.699 qualified and participating salaried emplovees m the plan. Salaried emplovees receive an allocation each vear up to a maximum ot 10% ot their salary contingent on the availabil ity of the corporation's profits, as defined in the plan. The costs incurred tor this plan were 53,000 in 1982. 59,000 in 1981 and Si9,ooo in 1980. NOTE 12. Other Assets In 1980, the corporation formed a joint venture (GA-MET1 with Metropolitan Lite Insurance Company. Each partner has a 50% interest in the venture. GA-MET owns and oper ates the corporation's office headquarters building in At lanta, Georgia, and the office building complex in Portland. Oregon. The corporation leases trom GA-MET. at market rates, office space in the Atlanta and Portland buildings. GA-MET has a construction loan agreement with rive par ticipating banks tor the construction of the Atlanta building. At December 31, 1982, the construction loan outstanding is $93,000. The loan matures in January 1988 and is secured bv the venture's properties. The corporation accounts tor this investment using the equity method. The corporation's investment ot $25,000 in GA-MET is included in "Other assets" on the balance sheets. As ot December 31, 1982 "Other assets" includes $20,000 net, related to first mortgages the corporation has on em ployees' residences in Atlanta, Georgia, and the estimated realizable value ot the remaining homes purchased trom em ployees in Portland, Oregon, and Augusta, Georgia. The corporation intends to sell the mortgage loans in the secon dary mortgage market. G SGP 0029979 Independent Auditors' Report Responsibility for Financial Statements To the Shareholders and Board of Directors of Georgia-Pacific Corporation: We have examined the balance sheets of Georgia-Pacific Corporation (a Georgia corporation) and subsidiaries as of December 31, 1982 and 1981, and the related statements of income, common shareholders' equity and changes in finan cial position for each of the three vears in the period ended December 31, 1982. Our examinations were made in accord ance with generally accepted auditing standards and, accord ingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our report dated February 12, 1982, our opinion on the [981 and 1980 financial statements was qualified as being sub ject to the effect of anv adjustments that might have been required had the outcome of the plywood antitrust litigation been know n. As explained in Note 10, on January 13, 1983, a written settlement agreement was executed, subject to court approval, to settle the litigation, and a provision for this settlement was recorded in 1982. Accordingly, our pre sent opinion on the 1981 and 1980 financial statements, as presented herein, is different from that expressed in our pre vious report. In our opinion, the financial statements referred to above present fairly the financial position of Georgia-Pacific Cor poration and subsidiaries as of December 31, 1982 and 1981, and the results of their operations and the changes in their financial position for each of the three years in the period ended December 31, 1982, in conformity with generally ac cepted accounting principles, which, except for the change (with which we concur 1 in the method of accounting for investment tax credits described in Note 5, have been applied on a consistent basis. The financial statements on the preceding pages, which consolidate the accounts of Georgia-Pacific Corporation and its subsidiaries, have been prepared in conformity with gen erally accepted accoutring principles applied on a consistent basis except for the change in the method of accounting for investment tax credits. Management of Georgia-Pacific Corporation is responsible for the accurate and objective preparation of the c< solidated financial statements. Ac cordingly, the corpor. rion maintains a system of policies, procedures and cont- Is which is designed to provide rea sonable assurance tha assets are safeguarded and that ac counting records are Table. An independent evaluation of the system is performed bv the corporation's internal audit staff in order to confirm that the system is adequate and operating effectively. As indicated in the Independent Au ditors' Report, Arthur Andersen & Co. performs a separate independent examination of the corporation's consolidated financial statements for the purpose of determining that the statements are presented fairlv in accordance with generallv accepted accounting principles applied on a consistent basis. Arthur Andersen & Co. is appointed bv the Board of Di rectors and meets regularly with the Audit Committee of the Board. The Audit Committee is comprised of three out side directors who review the work of the corporation's internal auditors and independent public accountants and approve fees paid for audit and non-audit services. The in dependent public accountants have full and free access to the Audit Committee ARTHUR ANDERSEN & CO. Atlanta, Georgia, February 11, 1983. SGP 0029980 36 Management" Remew of Recent Operating Results 1982 LomparcJ .ii;n 1981 The forest products industry continued to experience its deepest recession since the end ot World War II. The corpo ration's sales were S5.4 billion in 1982, the same as 1981. In come before extraordinarv items and change in accounting for investment tax credits was $52 million 148* per share on a primarv basis), down Irom 5i6o million (Si.51 per share) in the like period a \ear ago. The building products business is heavily dependent upon the level of hous ig starts, commercial building activity and the availability a 1 cost of mortgage funds. The 1,065-,000 housing starts in 982 were the lowest in the United States since 1946, even ss than the depressed 1981 level of 1,102,000. The corporation's building products segment had sales of S3.0 billion in 1982 the same as 1981. Operating in come was S105 million, a 9% decrease from the $116 million in 1981. The decrease in operating income was attributable to the change in accounting tor investment tax credits and the writedown ot certain assets to net realizable value (see Note 6). Sales in this segment were at good levels, but prices are still too sott to provide satisfactory results. However, the corporation experienced some improvement in the tourth quarter of 1982, particularly in plywood, and expects future improvement if interest rates continue to moderate. Demand for the corporation's pulp and paper products correlates closelv with real growth in the gross national product, but is also affected bv inventory levels of the users of these products and industry productive capacity The corporation's pulp and paper segment sales were Si.7 billion in 1982 compan .1 with Si.6 billion in 1981, a 5% increase. Operating income was down 60% to $46 million compared with 1981s Si 16 million. The decrease in operating earnings is attributable in part to market conditions and competition which have resulted in price decreases, and to the change in accounting for investment tax credits and the writedown of certain assets to net realizable value (see Note 6). Addition ally, the export pulp market, in particular, has been affected bv the strong U. S. dollar. The pulp and paper markets con tinued to be soft. The corporation's chemical operations are impacted bv the market for building products anti the growth in gross national product, (sales tor the corporation's chemical seg ment were 5628 million in 1982,1 15% decrease from S738 million in 1981. Operating income declined to 875 million compared with S149 million in 1981, a 50% decrease. The de creases are a result ot lower prices and volumes tor most ot the corporation's chemical products. The reduction in de mand resulted in some curtailment ot operations beginning in late 1981 and continuing into 1982. Oil and gas income decreased in 1982 compared with 1981, This segment's per formance vvas also adversely affected bv the change in ac counting for investment tax credits and the writedown of certain assets to net realizable value (see Note 61. Other operations' income decreased as a result ot the writeoff ot certain leasehold improvements in the tourth quarter of 1982. For a discussion ot "Other income, net" and "Provision for income taxes," see Notes 2 and 5 ot the Notes to Finan cial Statements. Interest expense increased in 1982 due to the higher level of debt outstanding, higher interest rates and lower lev els ot capitalized interest 1981 Compared iwt/t 1980 Sales were S5.4 billion, up 8% trom the $5 billion in the 1980 period. Net income in 1981 vvas down 54% to S160 mil lion, or $1.51 per share on a primarv basis, compared with $243 million (S2.55 per share) for 1980. The corporation's building products segment had reve nues of 5}.1 billion in 1981 compared with [980's S2.9 billion, a 5% increase. Operating earnings decreased 28% to Si 16 million. Although lumber and plvwood volumes increased SGP 0029981 37 from a year ago, prices were down significantly while costs w ere somew hat higher. In the latter part of the year, the corporation closed or curtailed production at several ol its plywood plants and sawmills The pulp and paper segment revenues increased to Si.6 billion, up 12% from the Si.4 billion reported in 1980. Earn ings were Si 16 million, down 18% , compared with the 1980 level ol S141 million. Volum for pulp and paper products were up slightK in 1981. Revenues from the corpo ation's chemical segment in creased to S8 5 5 million, a 1: > increase ov er the S745 million reported in 1980. Earnings were S149 million, a 3% decline from the same period in 1980. Oil and natural gas profits in creased in 1981. The balance of the chemical operations performed to the corporation's expectations in the year's economy except those chemical products, particularly vinyl chloride monomer and PVC resin, closely associated with the construction industry. The chemical operation's profit margins were negatively impacted bv high feedstock costs. The corporation curtailed operations in late 1981 at several of its chemical plants Interest expense was S4*> million greater in 1981 due to higher interest rates and a higher level of debt the corpora tion had outstanding. Licjuidm and Capital Resources The corporation's ability to generate adequate cash to meet its needs is influenced bv v arious factors and corporate ob jectives. For 1982, the corporation expended S170 million for plant and equipment and S90 million for natural resources and declared Si 19 million in div idends. Working capital at December 31, 1982 amounted to $352 million, a Si2 3 million increase from December 31, 1981. Total de.4 decreased bv $33 million. Funds provided from operatio is amounted to $413 million for the year 1982. The $27 mil'ion extraordinary gain from the defeasance of the revenue bonds and the Si 30 million related to the change in accounting did not provide funds. The corporation had S407 million available from its lines of credit at December 31, 1982. In response to the impact of continuing depressed eco nomic conditions in the corporation's businesses, the Board of Directors on October 29,1982, reduced the fourth-quarter dividend to 13 cents per share (from 30 cents). The current annual common dividend rate is $.60 a share. Management believes that cash generated from operations, reduction in the common div idend rate, credit commitments and long term debt funding capabilities are adequate to meet the capital expenditure budget (1983 projected expenditures of S300 million) and liquidity needs of the corporation. De pending on money market conditions, the corporation mav determine to issue additional securities in 1983. SGP 0029982 EfFFGTm.)F INFLATION SlIPPLHMFNTAR'i INFORMATION The accompanying tables set forth selected financial data re lating to the effects of general inflation (constant dollar) and chances m specific prises (current cost) in accordance with Financial Accounting 'standards Board Statement No. 33, "Financial Reporting and Changing Prices." Constant dollar and current cost estimates are necessarilv based upon numerous assumptions and subjective judgments. Although management believes that the estimates have been devel oped in a reasonable manner in compliance with the re quirements of Statement No. 33, it should be recognized that thev mav be of onlv limited value because of the high degree of imprecision inherent in the estimation process. Thus, the information presented herein should be viewed in the context of Statement No. 33 and not as precise indi cators of the effects of inflation. Description of Computations Constant dollar data were determined bv adjusting histori cal cost financial information tor changes that have occurred in the general purchasing power of the dollar as measured bv the Consumer Price Index for All Urban Consumers. In accordance with Statement No. 33, inventories, natural re sources, and property plant and equipment have been re stated from historical cost dollars into average 1982 constant dollars. Current cost estimates tor propertv, plant and equipment and natural gas and oil properties were developed using historical costs appropriately indexed for increased costs of construction and exploration. A similar adjustment w as made to historical depreciation and depletion amounts. Timber and timberlands have been included in current cost data as adjusted to reflect the effect of general inflation with no further adjustment to reflect current cost estimates. The current cost of inv entories at manufacturing plants was determined bv reference to average production costs experienced during the vear. Current cost of inventories at building products distribution centers was based upon a re view of recent purchases tor a representativ e sample of products at selected branches. Adjustments have been made to cost of sales and deple tion and depreciation to reflect the effects of the restated asset amounts, but no adjustments were made to reflect the restated components of depletion and depreciation in inven tors since the effect of such adjustments would not be material. Purchasing Power Gam A monetary asset represents monev or a claim to receive money w ithout reference to future prices of specific goods or services. Similarly, a monetary liability is an obligation to pav a sum of monev the amount of which is fixed or determinable without reference to future prices or .services. The corporation's monetary liabilities exceed its monetary assets. Accordingly, an important hedge against inflation is provided as this net monetary liability position will he paid in dollars which have a lower purchasing power than the dollars originally received in return for the oh nations. Statement No. 33 does not provide for an adjustment to net income for this important factor; rather the adjustment is required onlv as supplementary information under the cap tion "Gain from decline in purchasing power of net amounts owed." General Comments on Inflation Accounting Data For the year ended December 31, 198:, income as re ported was $32 million. After adjustments tor the effect of general inflation, this became a S148 million loss, and after reflecting changes in specific prices, a loss of Si 12 million. The adverse effects of the mandated inflation adjustments to income are offset bv the $86 million gain front decline in purchasing power of net amounts owed. The adjustments required bv Statement No. ; 3 represent an attempt to estimate w hat it would cost in terms of to day's dollars to build currently existing facilities. Thus, the calculations do not reflect the economic benefit of new technology which would be realized bv replacing the corpo ration's existing plants with new facilities. Such replacement of the corporation's plants would result in increased produc tivity and certain other cost savings. The cost savings would be realized primarily in the form of reduced manpower re quirements. lower maintenance costs and reduced costs tor energy. Such savings would reduce the adverse effects of inflation. Statement No. 33 does not prov ide tor adjusting income tax expense tor the increases in costs determined under the constant dollar and current cost computations because such increases are not deductible tor income tax purposes. SGP 0029983 19 Georgia-Paajic Corporation and Subsidiaries Statement of Consolidated Income Adjusted for Effects of Changing Prices Dollar amounts in millions of 1982 average dollars Net sales Costs and expenses Cost of sales Selling, general and administrative Depreciation and depletion Interest Other income, net Income (loss) before income taxes Provision for income taxes Income (loss)1 Income (loss) per share of common stock1 Priman Fullv diluted Gain from decline in purchasing power of net amounts owed Net assets at end of vear Increase in specific prices (current cost) of inventories, propertv, plant and equipment and natural resources held during the vear2 Effect of increase in general price level Excess of increase in general price level over increase in specific prices As Reported $5-42 Year ended Decemf>er 31, 1982 Adjusted For Genera] Inflation $5402 Adjusted he>r Changes m Specific Prices $5-402 4.47 S 394 3 56 I 86 (76) 5-335 67 15 S 52 4,49^ 394 03 1 86 (76) 5-535 (133) '5 S (148) 4,477 394 1 86 (76) 5-499 <97) 15 S (112) S .48 5 $2,198 S( 1.39) ([.32) S 86 $4,038 $( 1.06) 1.99) S 86 $3,845 $ 22 S 242 S 220 `Before extraordinan items and accounting change. : Vs of December 31. 198:. current cost of inventories \\ as S840. current cost ot property plant and equipment, net of accumulated depreciation, was S3.8b:, and current cost of natural resources, net of depletion, was $1,4:9. SGP 0029984 4= Ueorgia-Pjafic {.corporation ana Subsidiaries Fl\ FGhAR COMl>\Rh< )\ OF SELECTED SUPPLFMFNTARV FINANCIAL DATA Adjected h >r Effects < >f Changing Prices Dollar amounts in millions ot 1982 average dollars 1982 Net sales As reported Adjusted for general inflation Sg,402 Income 1 loss)1 As reported Adjusted tor general inflation Adjusted for changes in specific prices Income (loss) per share -- primary1 As reported Adjusted for general inflation Adjusted for changes in specific prices Income (loss) per share -- fullv diluted1 As reported Adjusted tor general inflation Adjusted tor changes in specific prices Net assets at end of year As reported Adjusted for general inflation Adjusted for changes in specific prices Excess of increase in general price level of inventory, property, plant and equipment and natural resources over increase in specific prices Gain from decline in purchasing power of net amounts ow ed Cash div idends declared per common share As reported Adjusted for general inflation Market price per common share As reported Adjusted tor general inflation S 52 (148) (..2) (39) (..06) S -5 (>32) (99) $2,198 4,038 3*845 $ 220 S 86 $ 1.05 1.05 $26.25 26.25 Additional Supplementary Financial Data (Dollars in millions) Total assets $5,150 Long-term obligations $1,618 Redeemable preferred stock $ 209 Average consumer price index 289.1 i 00 * 198 I S54I4 5-739 S 160 (30) II $ 1.51 (.28) .10 S 1.49 (.23) 13 S 2,l29 4,016 3,896 $ 45 S 175 $ 1.20 1.27 $20.13 20.67 $5,060 $1,487 $ 203 272.4 'Betore extraordinary items and accounting change in 1982. [980 .$5,016 5,869 $ 243 60 1 r0 $ 2.33 57 1.05 $ 2.27 57 i .04 $2,069 4,041 3.971 S 241 $ 235 $ 1.20 [ .40 $25.00 2797 $4,512 $1,227 $ 169 246.8 Year ende< 1 December } 1 `979 i 97 8 $5,207 6,925 $4-40 3 E>, ^ I b S 326 257 274 S 301 $ 3.11 2 45 2 59 $ 2.92 $ 3.02 2-39 2-54 $ 2.83 $1,951 3,885 3-993 S1,7 19 $ 80 $ 231 $ 1.13 1 5 $26.38 33.2 $4,1 18 $ 1,109 $ 165 217-4 $ 1.03 [.52 $24.25 34-55 $3,344 $ 827 .$ -- 195-4 SGP 0029985 +1 Georgia-Pacific Corporation and Subsidiaries Selected Quarterly Financial Data Dollar amount* in million-* First 198: Quarter Net sales Costs and expenses Cost of sales Selling, general and administrative (Note 2) Depreciation and depletion (Note 2) Interest Other income, net (Note 2) Si, 199 1,004 *s IS 35 (331 1,166 Income (loss) before income taxes, extraordinary items and accounting change Provision (benefit) for income taxes 33 8 Income (loss) before extraordinary items and accounting change Litigation settlement, net ot taxes (Note 10) Gain on exchange of bonds (Note 4) Cumulate e effect ol change in accounting for imestment tax credits (Note 3) Net income (loss) 25 -- -- 1 3 S 155 Per common share--Primary (Note 1) Income <loss l before extraordinary items and accounting change Litigation settlement Gain on exchange ot bonds Accounting change S .23 -- -- 1.23 Net income (loss) S 1.46 Per common share--Fully diluted (Note 1) Income (loss) before extraordinary items and accounting change S .23 Litigation settlement -- Gain on exchange of bonds -- Ac counting change 1.19 Net income (loss) S 1.42 Dividends declared per share $ .30 Price range of common stock1 High 1 .era S20.63 Si 5.38 Second Quarter Quarter 'lear-to-Date Si 41 5 S 2,614 1,161 92 90 52 <72) '423 2,163 177 165 87 ( 103) 2,489 92 125 2 I 29 71 96 ---- -- -- -- S 71 13 S 226 S ,68 -- -- -- $ .68 S .91 -- -- '23 S 2.14 S .66 -- -- -- S .66 S .30 817,63 Si 3.25 S .89 -- -- 1.19 S 2.08 S .60 Third Quarter Quarter 'lear-to-Date S1422 $4,036 1,196 9' 90 46 -- 1423 ( 1) -- (Il -- 27 -- S 26 3.361 268 255 33 ( IOQ 3,91 2 1 24 29 95 -- 27 130 S 232 S (.01) -- 25 -- S .24 S .90 -- 25 1.23 S 2.38 s-- 24 -- S .24 S .3c $20.2 3 Si 3.(13 S .89 -- 24 1,19 s 2.32 S gc Fourth Quarter Quarter Var-tn-Date S1,366 55402 1,114 I 26 I0I 53 29 1423 4.475 394 35b 1 86 (761 5435 <57 67 (14) 1 5 (43t (36) -- -- S (99) 52 (56) -7 130 S 153 S (.42) (.32) -- -- S (.941 S .48 (.321 25 1 23 S 1.44 $ (.39) (.31) -- -- S (.90) S .13 S .30 ( 51) 24 1.19 S 1.42 S 1.03 $27.23 Si 7.7 3 SGP 0029986 4- Dollar amount-' m million' igS i Net sales Costs and expenses Cost ot sales Selling, general and administrative Depreciation and depletion Interest Income before income taxes Provision for income taxes Net income Per common share ( Note i) Primary Fuilv diluted Dividends declared per share Price range of common stock1 High Lou hirst Quarter 81.348 Nfv. Olnd Quarter Quarter Var-to- Date 81 -44 5 82,791 Third Q)uart<,*r Quarter Var-to-Date S ! .40 1 84.192 Fourth Quarter Quarter T-ar-tu-Date Si.::: S5.414 i ,098 So 70 25 `-75 7? O Sp 1.177 S6 7 5 1,363 80 25 8 55 7.773 I 66 140 33 7,636 '33 48 S 107 I.IbO 88 7s 33 1.35b 45 14 5 31 3.435 254 213 90 3.992 2CO 62 s 138 1 .02c 73 'M 35 1.192 3 \ S '2 4-455 177 277 ' 75 5-04 - ]~ 70 S 1 oc S .+9 +S S .30 S .52 n 5 .30 S 1.01 99 S .60 s .29 79 5 30 s 1.30 1.28 s .90 S .2 I 21 8 3= 5 1.51 14,) S 1 2c S32.38 5:4.50 S31.7; $26.50 527 63 817 75 822.50 817 7 5 'The amounts reflect the ran^o ot market prices ot Georgia-Pacific Common Mock as quoted m the New T>rk Stu<A Exchange-- L-mpoMte transactions. The New T;rk Stock Exchange is the principal market in which the securities are traded. SGP 0029987 Georgia-Pacific Corporation and Subsidiaries Summary of Financial Position Dollar amounts in millions Working Capital Current assets Current liabilities Working capital Noncurrent assets Natural resources, net of depletion Property, plant and equipment, at cost Accumulated depreciation Net Other assets Total working capital and noncurrent assets Source of working capital and noncurrent assets Long-term debt, excluding current portion Deferred income taxes Emplovee stock purchase plan Redeemable preferred stock Common shareholders' equitv Total source of working capital and noncurrent assets Changes in consolidated financial position Source of funds Funds from operations Other Financing Debt -- Notes, banks, and others Equity--Common and preferred stock Total source of funds Use of funds Cash dhidends Long-term debt repayments and current maturities Additions (net) Natural resources Property, plant and equipment Miscellaneous Total use of funds Increase (decrease) in working capital I982 $1,330 778 SP 899 4,642 (1,840) 2,802 119 $4,372 $1,618 55 6 209 1,989 $4,372 $ 413 25 295 -- 733 119 .83 90 t7o 48 610 S 123 1981 Si,323 894 429 872 4,0 3 (D7 3 2) 2,78 1 84 $4-. 1 66 $ 1,487 54? 5 203 1,926 $4,166 s 335 -- 555 32 1,142 132 295 '52 522 20 I,l2l S :i 19P0 Si,195 787 408 774 3'994 ( 14-94) 2,500 43 S3J25 Si ,227 427 2 169 {,900 $3,725 December 31 1979 1978 Si .1 2 3 676 447 S 944 474 470 764 3,476 (1,283) 2,193 38 S3442 505 2,988 (1.1231 1,865 3 S2.870 S1,109 373 9 165 1,786 S 817 3>9 5 -- i.7'9 S3442 $2,870 S 564 -- 180 5 749 130 62 66 5,8 12 788 S (39) S 608 -- 406 167 1,181 12I 124 297 518 '44 1.204 S (231 S 539 -- 196 737 l05 1O1 "5 366 1b 7=3 5 34 SGP 0029988 44 Ot'ur^/d-rji.TK Lorporjuor. jnu jurM-Jun** Summary of Opfratio\s Dollar amounts in millions Net sales Costs and expenses Costs ol sales Selling, genera' and administrative Depreciation and depletion Interest Other income, net Income before ii come taxes Provision lor in >me taxes Income' Depreciation Depletion Deferred income taxes Funds generated from operations Statistics Income per share of common stock1 Primarv Fullv diluted Cash dividends on common stock Shares ol common stock and common stock equivalents (in thousands) Income as % of sales1 Funds generate! from operations as % of sales Current assets to current liabilities Debt-to-equit\2 Price range of common stock High Low 1982 $5,402 4-475 394 356 186 (76) 5-335 67 15 52 293 63 5 $ 413 1 98 I $5,414 44-55 277 '25 -- 5-i84 230 7 160 223 54 1 18 $ 555 1980 $5,016 4,01 8 301 267 79 -- 4,665 35' 108 243 2I I 56 54 $ 564 Year ended December j 1 1979 1978 55,207 $443 4,100 279 228 66 -- 4,673 534 :o8 326 [90 38 54 S 608 34' 233 194 3$ -- 3-87 5 528 227 31 16) 31 44 $ 539 00 1 000 1 5 S 1.05 106,570 1.0% 7.6% 1.71:1 74:i $27.25 13-25 S 1.51 >49 $ 1.20 105,400 3.0% 10.3% 1.48:1 .70:1 $32.38 >7-75 S 2.33 2.27 S 1.20 I 04,000 4.8% 11.2% 1.52:1 59" $34.88 2 1.50 S 3.11 3-2 Si.125 104,810 6.3% 11.7% i .66:1 .57:1 $30.38 23.50 i 1 i |0 $ 2.92 2.S3 $1,02 5 6.8% 12.2% 1.99:1 .48:1 $32.50 23.50 1 1 'Before extraordinar\ items and accounting change in 1982. 2The ratio ot debt-to-equitv has been computed bv dividing the sum ot long-term debt (excluding current portion) bv the sum of redeemable preterred stock and common shareholders' equitv. 4C SGP 0029989 Directors & Officers directors Robert E. Flowerree1 Chairman and Chief Executive Officer Atlanta, Georgia Willard S. Boothby, Jr.3 4 6 Managing Director Blvth Eastman Paine Webber Incorporated Investment Bankers New York, New York Robert A. Schumacher Executive Vice President Pulp and Paper Darien, Connecticut John F. Watlington, Jr.1 2 Chairman, Executiv e Committee The Wachov ia Corporation and Wachovia Bank and Trust Companv, N.A. Winston-Salem. North Carolina Albert J. Bows1 4 ` Financial Consultant Atlanta, Georgia Julian N. Cheatham 1 1 President J. N. Cheatham Corporation Private Investment Companv Portland, Oregon 'Executive Committee 'Audit Committee 'Stock Option Plan and Management Compensation Committee 'Finance Committee 'Chairman, Executive Committee `Nominating Committee 'Resigned effective Januarv 29,1983 Robert L. Clare, Jr.1 Partner, Shearman & Sterling Attorneys New York, New York Harvey C. Fruehauf, Jr.2 4 6 President HCF Enterprises, Inc Private Investment Companv Detroit, Michigan T. Marshall Hahn, Jr.1 President and Chief Operating Officer Atlanta, Georgia Francis Jungers' 2 Private Business Consultant Sunriver, Oregon Harry J. Kane7 Executive Vice President--Finance Atlanta, Georgia Robert E. McNair1 6 Partner. McNair Glenn Konduros Corlev Singletarv Porter N Dibble Attorney Columbia, .'south Carolina ChauncevJ. Medberrv4 6 Member of the Board of Directors Bank of America N T. & S.A and Bankamenca Corporation Los Angeles. California Harold E. Sand President Sand Investment Co Portland, Oregon OFFICERS1 Robert E. Flowerree Chairman and Chief Executiv e Officer T. Marshall Hahn, Jr. President and Chief Operating Officer Stanley S. Dennison Executive Vice President Building Products Robert A. Schumacher Executiv e Vice President Pulp and Paper Conrad Schweitzer Group Senior V ice President Pulp and Paper John H. Dunkak Senior Vice President Western Division James R. Kuse Senior Vice President Chemical Div ision Calvin R. Shaw Senior Vice President Crossett Div ision James E. Frew Group Vice President Pulp and Papier Ronald P. Hogan Group Vice President Distribution Division Maurice W. Kring Group Vice President Tissue Products Harold L. Airington Vice President Wood Products Sales Howard S. Bergen Vice President Resin Division John D. Bryan Vice President Commodity Chemicals Jack J. Castevens Vice President Distribution Division Southeast Region David S. Dimling Vice President Pnnting Paper Division Donald L. Glass Vice President Distribution Division Midwest Region Robert L. Goodwin Vice President Gas and Oil Stephen K. Jackson Vice President Advertising and Public Relations Joseph H. Joiner Vice President and Controller Alfred P. Lee Vice President Sales and Marketing Consumer Paper Products George A. MacConnell Vice President Distribution Div ision Northeast Region Charles F. Mackev Vice President Plaquemine Division Daniel A. Martinez V ice President Palatka Division Mary A. McCravey Vice President and Secretary John F. McGovern Vice President Finance Dennis D. Melstrom Vice President Packaging Division Thomas F. Mitchell Vice President Government Aihirs Davis K. Mortensen Vice President Southern Div ision Richard C. Newman Vice President International Division Kelly E. Powell, Jr. Vice President Distribution Division Western Region George J. Ritchie Vice President Western Div ision Wood Products Manufacturing Marion L. Talmadge Vice President and Treasurer Carroll T. Tolar Vice President Engineering Lawrence B. Trammel Vice President Distribution Div sion Southwest Region Glenn E. Wilson Vice President Gvpsum Division Michael B. Wilson Vice President Consumer Paper Products Sales John E. Wishart Vice President Timber and Timberlands As ot January 31. 1983 SGP 0029990 4-f 1A> hf> **** ST '^'f4^*'^.-'ki :$ -* *?w--. :~; f-.\l*my&Ns ,f;V .. .. v.; -.. ; +fn*-:r.**mgmem ...... ... Center - ' Gwigia-Parific Cdtp----- _______ ^ >twwt,Nj.. - i;Qo^l^^offc^ "'' . v i AAtdUrit^arj'Gdoitste j*3oj f^nefeA^IStocJb(GPEr!A), . ..-"V-'1/. y*.;. .k- ". !. ,; - nju. ift DIvision (C.P Pr ) and (Cl* Pr (') are lifted ojj . I! ^ TlfcWtetofcS^ib^^ . Cmyirtt, Arkansas /iti? nWv^,,,m>;,-^:; ^',ir^-:;..3S"-:;-!S!SW ' fcofe^ -.-, -... :', ^&SSL< .......................... %JU> - r k* -^*--- * 4*VmiLM,Am ft{--rjjui r*mnl rt CK^b-Pinfe aWr ,oi .Western Division CeorgM-Pacifie Biublir.g ti Southwest Fifth Aven Portland, ;l Orego,n 97 ?n+ AvaiUble lnlorn Hion ;.^ j Annual ftrprirt to Uic- Securities. and f:iu.hange Con 'Mission on '1* 1AIU )V7IVHB1|1.1V 1 J "' out charge at any time after March .' ''* * w ``-i. rl 1 ai-rl'n--" M* --------- - - Ho, fc>i*N4 . . ... " .......... igiliililiijlii IW-V*----.- - '. , : , I ,~ f: AA&r^'AtA^ .- !(;. -, -' ~-J; ':! ', \; ... -- > . -.-: - ---. ' ' _,:. 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