Document VNE2D5ndK7zx07NBBxjRYpXZ

Georgia-Pacific Corporation PLAINTIFF'S EXHIBIT GP-I365 Sixty Years of Growth 1986 Annual Report SGP 0030598 Highlights Georgia-Pacific Corporation and Subsidiaries (Dollar amounts, except per share, and shares tire in millions) Net sales Income from continuing operations before extraordinary item Net income Per common share -- fully diluted Income from continuing operations before extraordinary item Net income Depreciation and depletion Cash provided by continuing operations Cash dividends paid Total assets at year end Return on capital employed1 Return on common equity1 Total debt-to-capital1 Cash dividends declared per share of common stock Shares of common stock outstanding at year end Number of common shareholders of record Number of employees 1 The method of calculating these amounts is described in the Financial Glossary presented on page 20. im $7,223 296 296 ms $6,716 207 187 2.64 2.64 339 575 97 5,114 10.4% 13.8% 26.3% $ .85 107 66,000 39,000 1.80 1.61 310 771 94 4,866 8.7% 10.2% 32.0% $ .80 103 74.000 39.000 Percent Change 8 43 58 47 64 9 (25) 3 5 6 4 (H) Net Sales (Billions oj dollars) 72 Income from Continuing Operations Before Extraordinary Item (Millions ofdollars) 296 SGP 0030600 Letter to Shareholders Georgia-Pacific Corporation and Subsidiaries Nineteen eighty-six was a year ofsolid performance for Georgia-Pacific. We invested to improve productivity and upgrade our product mix, to add value and reduce costs. We have improved profitability, and our financial position is strong. Most important, the wealth of our shareholders increased. Your shares appreciated, and your Board of Directors increased the quarterly dividend to 25 cents per share in the fourth quarter. Our net income rose to $296 million in 1986, 58 percent higher than in 1985. Sales reached $7.2 billion, compared with $6.7 billion in 1985. We capitalized on available resources, and improved profitability in an economic environment oflow inflation and moderate growth. We also added value to our products and improved manufacturing efficiencies with investments in existing plants and mills. We think these investments will have higher rates of return than would investments in large acqui sitions or in building n iw facilities. We see ample opportunities ahead for growth in building products sales and profits. We expect single-family residential construction and the remodeling, repair and additions market to remain strong in 1987, but anticipate some decline in multi-family starts, partly because of tax reform. Weak pricing likely will continue to challenge the building products industry during 1987 because of overcapacity in lumber and plywood production. The 15 percent tax on Canadian softwood lumber exported to the United States will give Canadian producers a new cost base that will be helpful to U.S. producers. We will continue to achieve growth in our building products sector through internal investments and acquisitions that represent good pro duction and marketing fits for Georgia-Pacific. We will maintain our strategy ofintegrating backward from distribution, as we have in roofing and moulding products, for example. Pricing improved for most of our pulp and paper products during 1986 as a result ofdecreased inventories worldwide and the lower-valued U.S. dollar. Demand is strong for commodities such as market pulp and linerboard, as well as for higher-margin printing and writing papers. In the tissue sector, demand has improved slightly, but markets remain highly competitive. We expect continued strength in our major markets in 1987, with additional price improvements for pulp, linerboard and other grades. In pulp and paper we plan to concentrate on containerboard and packaging, printing and writing paper, and tissue -- areas where we think we can be a major factor in the market. As we maintain our ability to meet the needs of our external pulp markets, we also plan to upgrade the value of our pulp by integrating forward into new paper capacity. We anticipate continued growth during 1987 through both internal investments and acquisitions. Our capital investments in 1986 were $482 million. In 1987 we expect to invest approximately $600 million, excluding possible acqui sitions. We expect that we will be able to fund this capital program and pay our dividends without increasing debt. While there will be opportunities to expand our markets in the future, formidable challenges also will affect the way we do business. Not only are we operating in highly competitive businesses, but the fiscal and economic environment in the U.S. and abroad also presents challenges. In the past 10 years, there have been eight major tax code revisions and many other changes in law and regulation. American business needs a stable tax environment to plan for the kinds of investments our industry must make to be competitive in world markets. With enactment of the new tax law, American industry lost investment tax credits and accelerated depreciation rates, in exchange for the promise of lower taxes in the future. If this promise is not kept, the effect on business confidence and business investment will be dramatic and adverse. These challenges, however, do not dampen our optimism about G-P's ability to compete effectively. Our return on equity has risen from 1 percent in 1982 to almost 14 percent in 1986, providing good momentum for continued improvement. Our management structure and profit improvement programs are focused on achieving continued growth in returns to our shareholders We are optimistic about our prospects for achieving the goal of consistent and superior returns on our shareholders' equity. Your Board recently announced the appointment of Ronald P. Hogan as executive vice president-operations. He has contributed substantially to the growth of our nationwide Distribution Division, and he will work directly with Robert A. Schumacher in managing Georgia-Pacific's operations. We know you join us in thanking all Georgia-Pacific employees for their fine contributions to our improved performance in 1986. Robert A. Schumacher President and ChiefOperating Officer T -a r Marshall Hahn,Jr. Chatnnan and ChiefExecutive Officer Pclmuny 13, 1987 i 4* SGP 0030602 Georgia-Pacific Corporation and Subsidiaries At Monticello, Mississippi, Georgia-Pacific recently rebuilt a linerboard machine, bringingproduction -at the mill to 2,200 tons per day of strong, high-quality containerboardfor the cormgated box industry. (Left to right) Danny Martinez, senior nice president-pulp and paper manufactur ing Ken Forehand, general manager and Karen Hanzlik, midwestem sales representatiue-containerboard, are three ofthe key employees making this mill one ofthe industry'sfinest. I 3 act S. "I '! -s *TaP3 -2 a a=. 5a= A r- 5^ |ft -a -g CQ 5 oo 3'-'\I SGP 0030603 Giv#w Hardwood Lum bn Company, a wholesaler o f lumber, is founded by Owen R Cheatham in .-tytjio/tj, Ceon>ui. 1927 & t Georgia-Pacific Corporation and Subsidiaries At Port Hudson, Louisiana, one of the world's largest andfastest uncoated free-sheet paper machines started up in April 1986. Instrumental team members making this project a success are (Itft to right): Dave Dimling, vice president-printing paper division; Jerry Kincaid, production managerfine paper and Ron Benge, crew leader. ia j1 5 -1^13 0J l` | !! f.tfT lia3.1 ua SGP 0030606 1939 Georgia-Pacific Corporation and Subsidiaries Bellingkam, Washington, is one offour Georgia-Pacific milk that will produce ANGEL SOFT, the new premium hath tissue product that represents our commitment to softness and quality. Key Georg a-Pacific people in the ANGEL ^OFT bath tissue intro duction are (left to right): Leroy Carbon-warehouse lead; Howard McDowell, manager-paper operations and Mike Wilson, vice presidentsales and marketing consumer and commercial paper products. I On $On VO SGP 0030607 uting Yard (G D Y ) is formed to serve supply depotsfo r the U S A rm y Corps o f Engineers. Georgia-Pacific Corporation and Subsidiaries The Distribution Center at Atlanta, Georgia, is one of 141 centers, which have enabled Georgia-Pacific to estab lish a strong position in remodeling/ repair markets-- including the rapidly growing do-it-yourself (DIY) segment. (Left to right) Ron Hogan, executive vice president-operations formerly senior vice president-distribution), and Mike Parramore, branch manager, help make the Distribution Division ; a unique asset in Georgia-Pacific's building products group. I- ? 0 | 5 I &.J Mj U<3 -,,3s ^H .>a ,h3 -= 5 -2 w aS 5 = = 5 | = 2 S s H" Hi 5 ' iS IdfodoidOI-il a c h. 1O 3.0 SGP 0030610 1955 Georgia-Pacific Corporation and Subsidiaries Georgia-Pacificfurther strengthened its position in (he structural panel industry with an oriented strand board plant at Grenada, Mississippi. The facility uses the industry's latest technology, and has a capacity of250 million squarefeet annually. Part of the Georgia-Pacific team (hat makes itgo are (left to right): Dane Mortensen, senior vice president-wood products manufacturing' SteveJackson, vice president-distribution division mar keting and advertising andJim Vanderhoof, plant manager. ovo' c 5 ^5 a. 6 9 =5 S'"52 $S ^5 s^ i o^ t S S '5 a 6 5 1 jf -a i8 ! = 0 r z" .2 2 ^ =S 11|111 ! 6 is ^ s a ^ s 5 3. 5 S' a 9 UJ O a8 9 0^ ss?' ~s 255 US -55 111 "r 1 -I out: 9 "s a ^ -a ^ ^ a<3 SGP 0030611 Ccortfiri-Paafic Corporation and Subsidiaries T3 Os Georgia-Pacific's gypsum plant at Brunswick, Georgia, produces wallboard andjoint compound along with our highly successful new product, DENS-GLASSTMgypsum board. Part of the Georgia-Pacific gypsum team effort are (left to right): Horace Batts-warehouse diagrammer; Oscar Covington, plant manager and Glenn Wilson, senior vice president-- gypsum and roofing division. SGP 0030614 G -P announces capacity expansion at Port Hudson. Sales reach $1.4 billion. 1971 . Georgia-Pacific Corporation and Subsidiaries Georgia-Pactfic's roofing plant at Hampton, Georgia, near Atlanta, manufactures shingles and rolled roofingfor the rapidly growing Southeast. Georgia-Pacific added roofing produc tion afi r establishing these products in its disti 'nttion system. (Left to right) John Khktts, plant manager; Ric Durand, general sales manager and Don Glass, vice president-roofing division, are some ofthe key people making this marketing-to-manuJacturing transition a success. *3 ?. ---'3 S= <3SN t`;S- ->-n IS HUI 5 5 "3 ? -- ~c I '4 1 f 4 a, -n 3 "S -3 rfv-. SGP 0030615 Georgia-Pacific Corporation and Subsidiaries Georgia-Pacific's new Beaver Creek resin plant near Grayling, Michigan, began operation at the end of 1986. The plant will manufacture adhesive and wet strength resins, strengthening the Chemical Division's position as a leading supplier to the building products and paper industries in the Midwest. Three key Chemical Division employees involved with this plant are (left to right):Joe Neu/nian, plant manager; Steve Seteia, sales managerGreat Lakes Region andJim Taylor, vice president-chemical division. SGP 0030618 Financial Contents Georgia-Pacific Corporation and Subsidiaries Financial Glossary Financial Glossary 20 Financial Review 21 Management's Discussion and Analysis 24 Responsibility for Financial Statements 29 Independent Auditors' Report 29 Statements of Income 30 Statements of Changes in Financial Position 31 Balance Sheets 32 Statements of Common Shareholders' Equity 33 Notes to Financial Statements Summary of Significant Accounting Policies 34 Unusual Items 36 Discontinued Operations 36 Extraordinary Item 36 Retirement Plans 37 Industry Segment Information 38 Indebtedness 40 Redeemable Preferred Stock 42 Common Stock 43 Commitments and Contingencies 44 Income Taxes 44 Acquisition 45 Litigation 45 Unaudited Selected Quarterly Financial Data 45 Five-year Selected Financial Data 46 Sales and Operating Profits by Industry Segment 47 Operating Statistics 48 Book value per common share--common shareholders' equity minus the unamortized discount on redeem able preferred stock, divided by the number of common shares outstanding (as of the end of the year). Current ratio -- total current assets divided by total current liabilities (as of the end of the year). Effective income tax rate--provision for income taxes divided by income from continuing operations before income taxes. Return on capital employed--income from continuing operations plus interest expense (net of taxes) and deferred income tax expense, divided by capital employed as of the beginning of the year. Capital employed is calculated as total assets, excluding net assets of discontinued operations, minus noninterest-bearing current liabilities. Return on common equity--income from continuing operations divided by common shareholders' equity as of the beginning of the year. Return on sales (industry segments) -- segment operating profits divided by sales to unaffiliated customers. Total debt-to-capital-- total debt divided by the sum of total debt, deferred income taxes, other long-term liabilities, redeemable preferred stock and common shareholders' equity (as of the end of the year). SGP 0030619 : Financial Review ;if-.o-^Georgia-Pacific Corporation anti Subsidiaries ' *`i;'V! ~ ' V, ' ' ' ` ` f - * -", '/--- ' >` -> P^-' H;c -' a *-' MA.7f` .et4V->?>-";';j' 2; iSfev- : *s&-;.-. > T '-*p. r _ . * ' . . - Georgia-Pacific recognizes as its primary economic Return on Capital Employed p' y- responsibility the need to improve the return to its ..-Return on capital employed is^our most important shareholders. Our framework for establishing finan measure of performance. Return as used here means cial goals, measuring operating performance, making profits after actual taxespaid but before financing investment decisions and compensating manage- ,. charges. It is calculated by'.adjiis'ting income from - ment has been designed to make us more efficient at allocating and managing capital. Shareholder value (net of taxes) and deferred income tax expense. Total - is capital employed, measured^as of the beginning of capital we employ is greater than our cost of capital. the year, is defined as total assets'; excluding net assets While this principle represents our primary financial of discontinued operations, minus noninterest- goal, we remain more concerned about long-term . .bearing current liabilities.. ;. performance than performance in any single year. Our long-term objective in focusing on this ratio is to generate returns in excess of our cost of Environment `jfc :Operatirig results'imprpyed;in;1986 for -.-capital and thereby add to the wealth;oTour share- / V-- - < ^-k`hp^Hiderls^/Or-e_o_r_g_iaJ-P' acific'sJncehtive compensation \ > ^* ---------1 --~ ~ ku -- * /, ' t^nprrrtoftgrnra'mmhbiacspecs'mawr-iat*rHdosaohnrroehtiuprmnaomnVc-a--pital e---m------p-l1oyedJ, .. Icomp'anies. Pulp'andipapermarkets improved from ^their"ldepfesse'd;ieyels'dfl985 asthe U.SJdollaf>=.'-' ... - ;^v7vi`~'tT.`:v<>. .-.* ... " lowered in value relative to foreign currencies anc ; ,-r* .--*s V':_ . ... . ^"worldwide invenforieTdechned.Tower interest i.-ivt ***'*.> . "rates resulted in lncreased-hbusing'cohstruction and ;--Va?fS'Retun> on Capital Employed -:.y.:... :'-J. '", . *>"i; -' -c Georgia-Paafic's corrimon stopk price increased ysAti-.;.! y C 8.7% feSlvT/ V-1 yjs-'v S, yy- . ftfT -V--82".83 '84 85 -86 SGP 0030620 :y';jr&22 r i? p ' During the last five years we have gained on this :-This cash-generating capacity'was used to finance long-term objective. Georgia-Pacific's return on a substantial portion of Georgia-Pacific's growth. capital employed was 10.4 percent in 1986, still below From 1982 through 1986, cash provided by opera- our cost of capital but significandy improved from :--tions accounted for ,79.1 .percent of Georgia-Pacific's .1 1982 when our return on capital employed was only 2.5 percehtlOvef this period of time, we completed r/total cash sources. During that same period, oper- Uating cash flows were supplemented with 5643 $f a major program ofdivesting underperforming assets h ^million of cash proceeds from asset sales and liqui- as well as assets unrelated to core forest products /dation of investments, including the divestitures of businesses. The cash generated from these divesti- * the company's Chemical Packaging Division in 1986, ft. t tures enabled us to reduce debt as well as make sub- - -i>:?;ifs oil and gas subsidiary in 1985 and its commodity - stantial capital investments to reduce manufacturing 1 chemicals subsidiary in 1984. fS costs and upgrade product mix. Georgia-Pacific's 'improved returns are also attributable to external V lV;^?!>y.J.''^^Five"y"ear Sources and Uses Clsh 11982-86 .' nniria ` r"'- ^^'^^t'Opcracions' ' * '*'$$22,682 g? Discontinued -.v' iiPS^Operanons ^i^^^^SiortoSale''-''' '' 139 TM --v$} l'|t' , Tie.-f5-' '* + ' .------ -------^ K s-J' -i-. . * j^itT-Toottaal from - ,. . ^%^'>Operadons r--: 2,82 r v Asset Sales and .^Liquidation \7of Investments ^Otbcr tit 643 100 $3,564 .'UsesofCash - Expenditures $2,229 Net Repayments 1 Debtanci 120%V^4^T^ictTcd Stock y _ W^tr^'^ArDividchd Payments ' 702 472 Js^iji^i^^LitigatJori Se'ttlcnicnt ' ________ PKvf&ilKMaHalbthif ; -V. - ill . t. -T.- i. o"n Hand V-C ' 50 ' *,' --- :--------------------- - * - - ` 53,564 l1ilt P af, if; 6;i jf .< '..VO ~'7 x_<,. 367 296 ' 253 207 75 20 I 82 83 84 85 86 Cl k SGP 0030621 ' Capital Investments . ':t:; . .^ From 1982 through 1986,^Georgia-Pacific spent . Capital expenditures of approximately $600 vpmillion areprojected for 1987,absenfaliy.major .'.. ' more "than $2.2 billion oncapital projects, including more than $1.9 billion for property, plant and equip- ment and $319 million for.iiniberand timberlands. Recent investmentsjn property, plant and equipment ' acquisitions. We expect to finance'tnis.prpgram with internally-generated funds. Consistent with the .. pattern ofrecent years, the rhajqrify^frhat amount - -'%'expected to be invested in'pulp^nMlpaper. V, " ".4- ' 23 have been concentrated in upgrading and modern- . -.-linn<r-A^' - - >#?&$:-- "T-'c . .: ...izing our pulp and paper-segment. t e.,l-Capital Structure .. s.t,/ - ` 'Capital expenditures are'categorized as defensive, `;We believe that managing Georgia-Pacific's capital '.those Ger-gia-Pacific miist rnake'to stay in business, .^structure within a 30 to 35 percent range of total . : and as high return, those'that arejustified on the basis -debt-to-capital will keep the company's cost of . of their return. Although some 'defensive expendi-'. capital competitive while ensuring access to most tures have positive returns, they are not undertaken major capital markets. This access will provide the primaril- for.that.reason^Dur ability to make high i-r ^needed flexibility to take advahta&Tjf internal and .. . . > :--Sff^i4-?tC$fj<!;'*^:pr6)ect is evaiu;____ ,____________ ____ -Cgenerated over the^^Qdw'iiwHttnenyWe define : *. -freepash flow as operating-profits after taxes paid, ... x- plus noncash chargesjsuch asjdepreciation, minus any new'investment required. Ouf/definition of new '.......... ' ' ' ''' '' 1 -.'merits as.well .as'capidliacp'eridiriifes.jnie process" *>; is designed to ensurejhiFprojects pfesented as .... - defensive are necessary and that internal discounted . vc :r. & 82?;;;83 >fv8A 85 . 86 Post-completion audits'areperfofmedoriall major ' g ... -Total debt-to-capital has been reduced toj26.3 >v. high return pfojectsi'bo'th'intenial projects and - percent from 42.1 percent since the end of 1982. acquisitions, to substantiate the achievement of During that time, total debt has been reduced to targeted rates of return. $1.2 billion from $1.9 billion. 't ' SGP 0030622 --i> `'*' ' V Vc-'Y^'Y^v*.'d,5. t. lyr,'\ 'iy'r.1 _, a *. - - -- -1 ;/;; : ` V? : -:*' - . ?; ? '--4iP':GYY'7Y'2t.>'t Vff -.w-'-.V '-ivi&i l ` ' -' '* ' GJManagementJspi^ssicm'aii<l>AjialysisY 7'HV-f?*; : ' . - 'V-Gw^ia-Pa/^f Co^ro/iorr ^ "V ' Gjl Dividends Liquidity and Capital Resources Ai| Y, '! * We recognize the importance ofdividends in addition Cash provided by continuing operations amounted f to stock performance as part of the total return to to $575 million in 1986 and $771 million in 1985. |` Georgia-Pacific's shareholders. As reflected in the y .The 1985 amount includes $150 million of cash $ chart, quarterly dividends were reduced to 15 cents generated through successful efforts in reducing tl; per share late in 1982 in resporise'to depressed earn- *' inventories and receivables in response to depressed [y 24 ings levels over several years. Consistent with our . 7. business conditions. A normal build-up of inven- guideline of paying approximately one-third of . -. tories and receivables occurred as conditions ^ sustainable earnings, the quarterly dividend rate was improved in 1986, requiring the use of $121 million ^ increased to 20 cents per share "in mid-1984 and y =;> `-hof cash. Cash flriwfrom continuing operations, y, again to 25 cents per share in late 1986 as . '... supplemented with $92 million proceeds from i|' Georgia-Pacific's profitability improved. . - . - a',1.05 v ~ 4l-fZ % / liquidation of investments and $79 million proceeds d|| r Y-%.'from sales of assets, wassufficient to fund $482 .1" ''&! &*5iraUipjrioflcapi^^ ,p| - J n debt and preferred stoclfb' :fneF$160 million and %m \1: jztr: Y -J:y: a t-ii ,, ,, -'iccc~ ~ : j yifito25 cents (from20.cents) pershare.^ -'.' m ft-hY'v-' 'Considerableprogress was made in reducing JT^^an^^mictunngiputstanding qebt,andjjreferred -$$ ici,5^|tock'dunng|986 YVh'due March i5y26i6'fwerejssued at par, . ... ? "^7,' -- $24 million of 12% notes duett various dates )f$ ?"djikbeginning in'2606^^refircS,%.^Yi'"'V?;~Vs''-* "dtii ^Si-ir 5^0 million ofreaeemable-prcferred stock was .* :J$m ^ ''m |d%`7 . '^$65,milhdn_of,145/8%.:hdtes Hue April 15, 1987 . M. ^^aucMarch 1,-2013 .were cailed -for redemption or -A v..vy L,1- -. -V-y -. 'iff* ^^S.spurchased in open market t: ansaepons,. v. 'Ad- -' ^|:4*4lj|l5b million of 10. i6%'riotes due June 15, 1990 1f"" Y- -^Y - v r ' A? / '1986 were retired, and : ", June 15, M, i., ' ifrThe amount of future dividends will be'determiried *'7 ~ 587 million of 5'/4/o convertible subordinated de- p \;yiY by capital needs and other cash requirement's 'and by. ... .J^ntures due April^ 1?96 were called for redemp- .;|| A-K'-5kth-'h'$--'r. .% ... Y; i " . - A`r. 7 '. -O ' 4; -the prospective returns on iricfemehtal capital^ ^y t*le 2,790,000 shares of tained in the business. Our objective is to maximize comrnon stock had been issued upon conversion c total returns to shareholders overthe long term."7"Y'*' *'$86 milhon of debentures at $30.87 per share, and ^ ' were*redeemed. 'Y:` $ I I SGP 0030623 &:< V-Vf^V-M-:- ,' _ At the end of 1986, Georgia-Pacific's total ., '.-... - Approximately 44 percent of tpHl.capital f {./. ,, . '.' 'debt-to-capital had been "reduced to 263 percent ' expenditures in 1986 were in'the p'ulparid paper from its 1985 year-end level of32.0 percent. The segment. A major project to upgrade production ?;- : Corporation has been authorized by its Board of \ .from market pulp to white paper atojirPort Hudson, - . Directors to purchase common stock in the open . .'Louisiana facility was completeS in^April. Major vri'. iiff,C' y-C; 51-vr ` market or in privately negotiated transactions in . . 'projects are now underway.tojebuud a'tissue -.order to maintain total debt-jto-capital within a target ..? .imachine at our Palatka, Flpridafadlity and to expand gp^d.^ i'&t&Ki'-'-''- '-' range,'curreritly '30 to 35.percen't. This target range -vf l and modernize four disposable diaper facilities {fei -fi'.'.i- ` * .--- sM-\'- -' '' '- - should provide flexibility for both internal and Acquired in 1985. Both projects should be external investment opportunities as they arise. completed in late 1987. .-.f |^ffvr- -:' ' "' '$-'* " '' At December 31,i-i986,vthe Corporation had >' - Vto 'yThe building products segment accounted for $250 milhon ofdebt securities registered forsalewith approximately 40 percent of total capital expendi- : ' -' ;//.. r. 7-;- -."' <T ,the Securities and Exchange Commission under a - -/^turesin 1986. This includes the'acqiiisitior ofa'" to *: shelf registration statenient."This financing source -.f'tohardbbard manufacturing cornpanv with 'five'ope'r-' . ;V.-. / ,, ; - S>to , 'toto to ` " ' , , - - . - .{.* .>* uV. ii-Wto enable.the Gprporatiomtoireact quickly tofi yj, Vfatin;glfaalities located ihlMinriesotaTWiscbrisih and T>-' acquisition opportunities and to favoraLb,le m-ar,kret..toto-, . -Arkansas, and, th, e' acq-uisitions of.three mo, ldmg-VV:-: .\s-*A'S-UVSA'1 /- ,, >* ' i'X- ` * y-i ***15 ' - xva major expansion was completed at our-Crossett, -V *. ' % Iff .-committed lines'ofcredit, 'together with other j received cash lUPp?' '***.'* ' available financing source/'anii Gporgia-Pacific's ''tionjofportions ofits inyestmerit m'Ceorgia Gulf . fflMiik',*-' n t* .. .it: .'capacitv'tdeerieratCfundsTromiopefations.'-areT-------u...-`i-rl.smos<...-r. ..-,v > . :r "Georgia-Pacifics capiQl expenditures totaled T. j ; $482 milhon in 1986jnd $642 mdiion in 1985. The ` - ' 'h*' V .* . .119Q88A6 ffiigmuirrpe iinncrlluuddpecs iinnvwecsltrmn^ennftcs iinn nprrAop#errthyt, plant -- .* - 1 at >\p> toons.'Capital expenditures of approximately $600 million are projected foril987. ;7 '<'=?-*" _v-'yb' ; .' *' SGP 0030624 ifr` 'jt'T-Jt* J .: : nKvv*-'' i Grvrgw-Paafu Corporation and Subsidianrs - ' * * ' ^ f * *t -* ^ .. ,c ' * i * , i y.^v; r.'-.v, V'.;;- 4r .Jv.' 26 In July 1986, the Corporation completed the sales ofits Chemical Packaging Division assets to two unrelated parties in separate transactions. These .... 1986 Compared with 1985 . Georgia-Pacific's consolidated net sales of$7.2 billion , in 1986 were 7.5 percent higher than the 1985 level sales generated cash proceeds of approximately $43 million. In November 1986, pursuant to the settlement government, the Corporation received approxi mately $14 million in cash. A $10 million extraor dinary grin, net ofrelated income taxes of$4 million, r per share on a primary basis) from $207 million ($1.83 per share) in 1985. A $30 million loss from discontinued operations, which was partially offset by a $10 million extraordinary gain from settlement : of a condemnation suit, lowered 1985 net income to $187 million ($1.64 per share). 1985 . := . Return on common equity, calculated as income c s, , In February 1986, the,Gorporationsoldits^:c,,-'Kl|romcohtinuingopefati6hs divided by common- l,'r' `'1 . Georgia-PacinC'Plastics.inc.subsidiarywhose' -< 'shareholders equity as of the beginning of the year, ^principal asset was an expandable polystyrene plant improved to'13:8 percent iri'1986 from 10.2 pi rccnt V-i-v, <. ^.'located in-Prinesville,'-Ghio.'.This completedj'our..' * . in 1985 1 A*<, a* % if '`iaV ''V r> V1'fe`? ^Return on Coinmon^Equity/ii^^^^^i :-12.6% ' 13.8% ,r *>'95S'AiS-SK! r* * X * -10.2% 1 _______________, ,___ihtspretax^preference atems;;|:;b^iv' ...... i^jj^^ndecbanges'are expected to' more thanoffsetlferiefits * & vlS'SslJffthe Corporation would have otherwise realized from ' t' t H v j, 5 % i v \ *4 "1 jr lower tax rates on ordinary-income. In the future, -if we antiapate higher effective income tax rates,'par ticularly in 1987 as the new tax rates are phased in. , : f'' Althougghh the initial cost of future capital invest- df' ments will increase without the investment tax credit,: ?* ~-v,'5';vV i \%t t ' rTf' ' lower ordinary tax rates on income generated by these capital projects should offset some ofthis . inq^^;pb^gdendy,'yy;e'd6.nbt foresee a significant impact on future capital investments. :,4:'Cn ... SfV A . '\v ,'r '^s/4 .v f wt'^n)1 A1 ,3.8% yl.0% -82 83 84 85 86 n * * SGP 0030625 A1'.-A.-? T' v'V i v-T ,-i', . . . Georgia-Pacific Corporation and Subsidiaries r' * * , V*t>L *'t i +* ' w v , 'ft . .EffectiveJanuary 1,1986, the Corporation 4:'V`: 'V ft'ft ' adopted Statement of Financial Accounting Stan- , The building products segment reported sales of$4.9 billion in 198$,fjipi^J(i6c5nt'fe6m$4 5 . dards No. 87, "Employers'Accounting for Pensions' billion in 1985. Operatog profits of $500 milbon .7 . - .. / .. , This change in accounting principle.increased in 1986 included M.|lX3nMon|)re-ttx reduction . ft-yftyft - . . income from continuing operations approximately ' of expense due to the adoptibn of a new timber ftft 7-vft. y ft : - $11 million in 1986. Alsp effectiveJanuary 1,-1986,; capitalization policy.-Excluaing this adjustment,' ft27ft.ftftftft. :i yKa new timber capitahzation policy was adopted and ?. .operating profits increased to $.489 millionin .1986 : . ' v. ..- applied retroactively,-which had the cumulative from $391 milhoh m4985,!as the return on sales : ft ' effect ofincreasing 1986 income from continuing . improved to 10.1 percent from 8.7 percent. Increased operations approximately $8 million. .volume and reduced manufacturing costs were the .... . . Incomefrom,continuing operations alsp in-fy , : major reasons for this seg;ment's improved results. - eludes a $33 million pre-tax gain from liquidation : Average prices for plywood and lumber in 1986 were of investments iri 1986 and a $ 19 million pre-tax .. ,, , -comparable to 1985 .levels,'wMe gypsum, roofing * '. gam on the sale of certain Oregon timberlands in.i 5ahd thermosetting resins prices-were lower on aver- i1n.9o8c.5. .tT. lhevstigaiiisJ are ........ ... classified as "Unusual items" - .v.f..t..."I T_._..._..._.._..._....- 1 l.J_..._.....'................v_______ > ft ,,age in 1986 . than in jl985.ir<E6f >1987,:-we anticipate'^-'.' Ts-V ,'5 - m the accompanying financial statements and - ft > ' little change in our bunding products markets, with - excluded from segment operating re ults. ,, . r, , ft ,The impact-tifthe new,.tax law reduced -1986 V,'.incom- e from continuing oJpetrfa.tion*snappOr' ox*i.ma`.tfet! $17 million thfough;repeahng the investment tax , credit,' althbught/dmcln-ediits-------- 11 -- "J ;"l1 no * under,transitionirmesMne- ts wererecordedfinlthi. ft?were thepnmaiwreason'ro 'income tax rate for the year, in 1985. jv.-,\i.vY.;Euture provisions for taxes currently payable are expected to inCTease underthe new taxlaw, . V< . -* . . . ' . vpamcd^y^l9t87^s|h^haghor capital,gains tax $7,223, prftS {V'*" ' Building products c 1 500 ^ $6,716_ $6,682 accounting pnnaples, deferred taxes provided prior ' ' uncome u- to 1987 will not be adjusted for the new lower tax > t ; ^n"me ^frrtom continuing i . rates until the related income or expense item enters operations `' $`296 $-207 ,$253 into taxable income.-Giventhe present accounting ft rules and our expectation of continued investment Sales in the pulp and paper segment reached 7.. in capital assets, it is unlikely that the effect oflower - $2.3 billion in 1986,6.9 percent higher than the 1985 tax rates on ousting deferred tax balances will sig level of$2.1 billion. Operating profits rose, to $146 nificantly affect future operating results.'However, - milhon in 1986 fr9mfthb'i985lleyel of $29 ifiillion, ft ifthe liability method ofaccounting for income taxes as the return on sales improved to 6.4 percent frpm : , were to be adopted, as is currently proposed by the. , 1.4 percent. The improved results in 1986 are due ' Financial Accounting Standards Board, 'existing ! ft primarily to decreased inventories worldwide and deferred tax balances would be reduced.; ;ft: the lower valued U.S. dollar, as well as timely up-. ! The remaining discussion refers to the "Selected , 7 grading and modernization of nulls'and equipment. Industry Segment Data" table. SGP 0030626 Georgia-Pacific Corporation and Subsidiaries . Results in the prior year were hampered by lost : 8.7 percent from 8.5 percent. The improved results production time due to labor problems and several major equipment conversion projects. Average prices were achieved despite lower average prices for lumber and plywood sheathing in 1985. Competition from for pulp, hnerboard, kraft paper and commercial V ;low-cost Canadianlumbeir imports and excess tissue were higher in 1986 than in 1985. Prices for ... -i-..-,industry capacity.in plywood sheathing markets . printing papers, corrugated boxes and multiwall held prices below levels historically experienced 28 packaging also strengthened during 1986, particu->;.; '-with similar levels ofdemand. Reductions in larly late in the year, although average prices for the' v Georgia-Pacific's fiber and conversion costs and year were lower than in 1985. We expect continued ' strong gypsum markets helped offset the effects of improvement in most of oiir pulp arid paper rharkets - these pricing conditions. Gypsum operations were in 1987, especially commodity grades such as pulp, ._v this segment's most profitable in 1985, although f<V > V f /<> 1'llVVv>hi.'4!':'/ .-:*: - hnerboard and uhcpated freesheet paper. , i 1 average prices for the year were slightly lower than General corporate charges increased to $91 . , in 1984. ,! . . mulkon in 1986 from $33.-million md985.tSrhisfet^-*v?,ii ,n*.^ The pulp and paper segment reported a 1.1 per increase relates primarily to( higher-compensation .: cent sales increase to $2.1-billion in 1985, reflecting expensefor stock options due to stock price increases a full-year contribution from the hnerboard, kraft as well as losses fromearly.-retirements ofhigh paper and corrugated container operations obtained interest rate debt in-1986 v * - > 'v through an acquisition-in mid-1984."Operating Total interest costs decreased to $147.million in profits declined sh'arply in 1985 to $29 million fl986 from $162 rhilhon in 1985 as;a result ofreduced . ' from $202 mihhorrin4984; as the return on sales ' debt levels andiowerjinterestirates.'ilriterest expense , fell to 1.4 pefcent)from;9.6:percent.'-A strong U.S. rof$i38frnillion in 1986 wasjlnghertthairthe 1985^ ' ' dollar and excess" .worldwide pulp capacity made ; level of $132 million, due topless interest'-bemg ; U S. products less competitive overseas and caused capitalized on construction projects'in 1986 an accumulation of domesticjriventories, resulting in lower prices for a number of this segment's major 1 1985 Compared with 1984, S ,, .products. Average prices for pulp','hnerboard, kraft Georgia-Pacific's consolidated net'sales'were $6.7, |ii|paper and priritihg'papefs were all belovy 1984 J ............... ............ '* ^javerage pricelevels>Tissuewas' the orily "major l^Pi^PP||^^inp$i:ff3MS^duct for whichlggpritl^mproved in 1985 rfton':.Sp^rnimmaar^y}p$Msj!in|i5^rMn);$^53 1 as compared to.l98|jfftted985 pulp arid paper ' milhon ($2.28 per share) in 1984. A $30 million results were ilso affected by lost production' time f.-.t - loss from discontinued opCTatibnSi'whidfwas park:. f-- dally offset by a $10 milhon extraordinary gain - ^caused by aj^e.^otrijCro^iett^Arld^sas pulp - .and paper mill during mqst qfthe third quarter and T : . from settlement of a condemnation suit,'lowered jV-by major equipment cbnversion projects at several 'f -U ,V <w?1985 net-income to $187-milhon.($l!64per-share).-i:/, jjgimiUs, particularly in the fourth quarter. A $12 million A $134 milhon loss from discontinued operations -- operating loss was reported in the 1985 fourth in 1984 lowered net income in that year to $119 ' quarter on sales which were 23 percent below the milhon (97 cents per share). , --. fourth quarter of 1984. .The results of continuing operations incjude a > General corporate charges decreased to $33 $19 milhon pre-tax gain on the sale ofcertain Oregon :-,t Kiriiilhon from $68 milhon in 1984. Much of this timberlarids in 1985 arid a $19 rnihiori pre-tax gain ^.-"..if1^-'reduction is attributable to interest and dividend on the sale ofthe Corporation's; forfrier headquarters " :; ' income on the debentures and preferred stock : building in Portland, Oregon' in 1984.These gains obtained from the sale of a commodity chemicals /are classified as "UriusS^ iteriis" iri"the accompariy- - subsidiary in December 1984. .. .. .. .- "-ing financial staterrierits arid excluded frorn segment - - Interest expense declined to $132 million in operating results. . ' \ -'* 1985 from $156 bullion in 1984. This reduction is `. The remaining discussion refers to the "Selected primarily attributable to increased capitalization of -Industry Segment Data" table. interest as a result ofthe large capital expenditures Sales in the building products segment were program in 1985. Total interest costs of $162 million $4.5 billion for both 1985 and 1984. Operating in 1985 were slightly lower than the 1984 level of profits increased to $391 milhon in 1985 from $379 $167 milhon. .milhon in 1984, as the return on sales improved to For a discussion of "Income Taxes", see Note 11. SGP 0030627 Responsibility for Financial Statements * Georgia-Pacific Corporation and Subsidiaries -v* i.-- v :i k* Independentj|A^t^^^^^^.^ * tViV m rg5ai . * . ^ V ^ j " * ,,W 1 * f * The financial statements on the following pages, . .. which consolidate the accounts of Georgia-Pacific," .*? Corporation and its subsidiaries, have been prepared , To the Shareholders and Board ofDirectors of Georgia-Pacific Corporation: ' ; - in conformity with generally,accepted account We have examined the balance sheets of ..; ,f-v.''. ing principles. 'Georgia-Pacific Corporafionja Georgia .corporation) , ; Management of Georgia-Pacific Corporation and subsidiaries as ofDecember 31,1986 arid 1985 is responsible for the accurate iand objective prep- ' ;arid the related statements .ofincome, Common , aration of the consolidated finandal statements, ij shareholders' equity and changes in financial posi- Accordingly,' the .Corporation maintains a system of .tiori for each of the three years in'the period ended ' policies, procedures and controls which is designed December 31,1986. Our examinations were made to provide reasonable assurance that assets are safe- in accordance with generally accepted auditing > guarded and that accounting records are reliable....... standards and, accordingly,'included such tests T Management believes that the proper internal con- - ' of the accounting records and such other auditing trols are in place and that the system is adequate procedures as we considered necessary in the . and effective in'safeguarding assets arid providing reliable accounting records fV circumstances _ , 'ff&sreus ` i i ,v~'K - r ; ."ifeVi In our opinion, the financial statements referred .An independentevaluation of the system is to above present fairly the'firiancial position of . performed by ;the'Corporation's'"qualified internal 'Georeia-Pacific Corporatiori.and subsidianes as . audit staffin order to.cpnfirm that the system: is , sofDecember 31,-1986 ahd1985;and the results of , adequate andjopeiratirigieffoctively. As indicated in ? the Irideperidehf'Audifois''RepdrriMrthur Andersen their operations and the changes>in their financial *-v .position for each of the three years in the period - &iCo.jperfoi--;jais-e--p--a-r-a--tejnd1-c-p--e--nae-n-t--e--x-a--m---.i-n.-.-a.*.--t.i.o.n.. i ' peVn-devd.D. ecembe,, ry31;4986,sin'cdnformity with . ; : ^generally accepted accounfingpnnciples which,h*:. aments; for,the .tnatithe r iexceptfor the changes (widi'^which we concur) `s --. . statemente"^^n^Qn^|aijfiy'm^^6mance .with. :i ,in the method ofaccouhring'forpensions descnbed generally accepted accounting principles applied 3 : in Note 5 and the method of accounting for refor on a c6nsisterit;b'asisiiA!rtbur .Aride'rseri'& Co is estation costs descnbed in Note 1,-were applied appointed by'the'Board ofDirectors'arid meets'; on a consistent basis. " regularly withithe Audit.Gommitteeof the Board ^ `,.,j'l'^e^^dit^SojnmitteejConsists.q^direeputsides,^H!| ' directprs'who'rwiwittHe.wprlc of the Corporation's".jii -1 *Co.i/Ubctjfi AitJt >.) V .iririVerh^ auHitprs^and independent pubhc }* i t V n- i Atlanta, Georgia i i .February 13,1987 J'The independent public accountants arid, ' internal audit staff have full and free access to the ; Audit Comrruttee '-jama C Van Meter ` Executive Vice President and ChiefFinancial Officer ' T T. Marshall Hahn,Jr Chairman and ChiefExecutive Officer February 13,1987 SGP 0030628 v. '; f 7V' ' Statements of Income. * - - - ' , ^ ; ' > ``" V " ' ,r ' :>:< .S': v'_.- - Georgia-Pacific Corporation and Subsidiaries ..... -- . C. (,Mt7//ofW, cxrpfper share amounts) ' Year ended December 31 1986 . 1985 1984 Net sales .- -- $7,223 77: $6,716 $6,682 30 . Costs and expenses Cost of sales .. Selling, general and administrative ' Depredation and depletion Interest ' '-.,7 '.''7 7: - ` - *.-. y -' 7. r; 5,783 '-; ` ' ' 511 ' - , 339 : >7 138 ' 5,553 431 310 . 132 ' 6,77i. ; 6,426 5,441 426 282 156 6,305 '' .,= ' Income from continuing operations before unusual items, ' income taxes and extraordinary-item , , > v - . Unusual items -, ; =.;-. y7 .: 452 7vv 7 290 33. ' 19 377 19 s t\ r " Income from continuing operations before income taxes and v extraordinary item y Provision for income taxes;'' 7 *Wif-'.^,5# > ti :c\r )* r , * ' \ "'/f *4 \ . j--\ >' r :, Income from contmumg operations before *v ^ ; > >-> .: / extraordinary item , , 7 ., Discontinued operations ' < y '>,> ^ k Operating income, net of taxes ' , ri?-v' V> 7 *''-*'* A* " i ' (Loss) on disposal, riet oftaxes, 7', i v, ,' 'o n. 4^ ' <V *'UV.v << ^ ' 4s -// M <V ^ 1 *if^i tr 1 f ir >^ 7** " *. *!- H' , (Loss) from discontinued operations'1^ 1/5 Income before extraordinary item j h >. \, Settlementot^condemnapon suit, net oftaxes Net income , ,' r 'v''.. >,r '> .', > ' 'i % , '< ' *u " j " ' sf<V7<s?`i,7>,7''f^i74f s' ^ &?!,'?,h1' ' ^ *H 1'- ^ ' cr `s *3 iV* - TjwrV'v, ,,'* ; Per common share--primary^ . . r'.i.v;. K v - V ' ' ; ." - 7^f$<*H* `4.7-7 -'`it ,** ` i'1 ->) ' extraordinary itemvi-' i7r v< 1 , i(Loss) from discontinued operations ? 0 PVVV ' m4v. v . , ` r Income before extraordinary item) r . 1 7 ' 7% , ,v . r ' "5 !>,7 V ;<*, /, Settlement ofcondemnafioifsuit/i ,'7? > Sp ;A'i 17 f v . ' v-. --s 4 3 (T j *J ? v >\ j 1 a Net income ' ' ' '' ' 1 i' ' ,-^7(i ' TVV r$c< <. - ' -i Per common share--fully,diluted y '' *&?<** 5 , ' \ Income from continuing operations before'v extraordinary item : - - (Loss) from discontinued ojperations . '.-..77 .- . : . , ;' '485 309 : ' ';189 f' ' 102 7- 1 1,1 ^ 396 143 ,^296r',, a 4 *1^ V ' Vv.^S : 1 207 *4 >-- > V-tSi'. , / (30) `^A/,.i'Tri,'; V ' 1 (30) . r>:29&$'? . fv> vax cc^v7 4. S A 7 177 10 / *: 253 ' 26 (160) (i34) 119' $ 296, $ 187 - $ 119 i4#V*;`7 f* % '4f^ (f,j ,>jf>, 7;.'.' ; . - - , $ ,2.69 -7 V?3 ` ^ 'jtC . 2.69* ' At ^v< (29) , ^ `1 54 ''7( .10 $ 2.69; v< $ '1 64 ' v'>7i 1 $ 2.28 (1.31) .97 / $ .97 $ 2.64 7 $ 1.80 (.28) $ 2.24 (1.27) Income before extraordinary item ,= ; >:, !Settlement of condemnation suit ' 2.64 , 1.52 ^ .09 .97 . Net income .' ,\y . $ 2.64 `. $ 1.61 ;V . 5 .97 * ^r 1 i - r- The accompanying notes are an integralpart ofthesefnanaal statements. "J-.7 .. "7 v,!' - "Y' v: - - > J. ,, - u. ; ;-77 ' SGP 0030629 Statements ofChanges in Financial Position ** *\ " ' (Sfihcm) Cash provided by (used for) continuing derations Income from continuing operations before . extraordinary item Items in income not affecting cash Depredation /. - Depletion ' ' y -f ^';.Vc~Defiin^niconKtaxa'\~ Gain om sales ofassets - -(v r'y-;- Gain on hqmdation ofinvestments Other ' . Cash provided by (used for) working capital ..BecatnMes . ImwailHwics Ptsjscd exposes i.'s v,-> "'.vi'..^ - Adms^fitfd^mdaioam^hsMkaes- 1986 ' ' 1985 , `1984 ' * .,''k&f*.0`-'.;y.`; $296 $207 $2< 51 ^ 3 316 '270 \A;V v' r' 247 23 40 ......... " '35'-. 87 . 84 90: (30) :v|vCS;5 (33) _ v. -- V 7 35 : ; ` ; V.8 666 636 633 (61) 86 (60) 64 (15) - - aV (9) 45 . ' / /(6) , (91) /^;135S, 575 .771 11 (86) , (61). il 2 21 ; . (124)': 509 . -291 , Cadi gepnrcBdfjm^ tmf --eaia. mgaam\ setatomtoat - . CaApinEwi^ Cash pomaded by ((rased for)) fiBrarariirog aa&wmes * y ^ 4 Ww* irVt I^ 14 s (661) (481) 476' ' ' * 358 (375) 312 t? _ dkmtHKanmniniBtES , , f- T\i IFtefcm^sttodkpc^^ _ i if ^ t,*- (r^iniTTTmmnrnim gftmrflc irefmftifl ffmnrmn ^`-ryy^vV'- - II [miiiKUfrlftfflfi IklilluTHnftiTTllhTniYnyp ... . >- *<.-: i *' * '..'"r.Al-**';>' S Tr-e, r . r ' - - '- 4 .'.r, -'w; ''-> rCaigiD (ijjgBsm ton)) mmanniBB atniTOBag Ca&jpraw&iteflly ((^^ - (50) v,;-w (40) 86 ' * '-- (86) 1 * , ^ - (160) (169) ` (3?) , (95)' ffin^nmiy,,fflaintaBtfiaipip^^ . - TiilllHhtir3WYiHmimfan41nmfe . V: % (426) = :(56) (619) - (23). (575) (135) ffhaanetetfefinimTOaKrileBarffaBmaa fflimmAffinmnnlit^nijirnitgimmCiiinogwniirimmte V41w--?r'C- ' (TMhnr' ' ....... 'V (482) 79 92 (14) , (642) - (710) 32 : . . 62 ll' 22 (325) '(599) ' (626) Caufti ffiiirirflfmlkjmtrti Ihtnigne(iflangetaa)) iin cianha ffldhnme anUnaginiiii ffiff-jjuarr (97) 18 V'-V; - .62 (94) . 26 .36 :.a. .: : (86) '(?) 43 JMhmtirattomU cotfyeur $80 $ 62 S 36 'Iftfa:<ucanf])iai)Yit$ii(i)ees<mr<wnhtc<^ttfmTi<\lTrl{twJj'nwnthiL'jnu a:;'.:: SGP 0030630 - j t-w.r*. ?;V * ' (Millions, except shares and per share amounts) . 19S* ms ' 32 Assets Current assets Cash ; . Receivables, less allowances of $21 and $19 i Inventories' - . . } A A`t ... Prepaid expenses . .. . . - CdOi.;'. . .vT-jf-c;.;; . - O 00 ' - ..... . ;; s ; . 618 'iLs.a.;.. 681 . : ,,, 41 1,420 Timber and timberlands, net 844 Property, plant and equipment' ` " ' Land and improvements, buildings, machinery and equipment, at cost \ccumulated depreciation _ i < .. " '- . 5,052 ' (2,361) V .'-fZ'. , r U.W * ~h -lw,~ J':' .T - * ,( *v. Net ssets ofdiscqndnued operations '-it- "C-/, -t'C, .JtXk&Xji ;.;2,691 , if' .v 'cj-'. ;trt *-. tv < $ 62 569 634 26 W- || - `... . Mm Cifi?Pi34'-'' : 295 p|g7/-/ ^STi3.-23 . . 104 W 4r1* mtXib 276 M 7 73 ^ff 38 M 99 -.-631 Ml; - * *(& 1,257 ;p 69 f 1 156 ff Common shareholders'equity.:; 3 - ri ;. - tshrS\^-'r:^M;:Ai:srr! ' {:**X '*-r lv t " Common stqck^p'ar^yalue^.SO; "authorized[150,000,000 shares; -.107,987,000 and 104,368,000 shares^issued ,-r_. 7,V'y Additional paid-in capital' ' Sylgr'-A\:':.'~ C. >*'.' ;Retained earnings c.V`'r;---,* ^ ^ s-- --y Less -- 'Co_mm6h_stock;hy3 in treasury, kt"cost;' 639,000 and jvv--. -,'1^43,000 shafes'%'!:^*2e-^ `s> - ; Accumulated transladon adjustments ` " ' ' ~ f . .. -' The ticcotnptmying note? are an integral pan of these financial statements. -T-. -M* '7- 6-; 86 i/idi _ 1,304. 83 1,004 1,114 3f - "(35) ' 7'... (20) (19) . 2,452 . . 2,147 S5.114 ' $4,866 v-Vp SGP 0030631 Statements of Common Shareholders' Equity Georgia-Pacific Corporation and Subsidiaries ;>. (Millions, except shares) ~.l ^Common Stock - , Common Stock - -Shares, Issued Sham, Treasury `Z *0 < t'T' X?'&-xt*&r'cs 'TfJj fo 1 >V. i'iBijdp*(/*'Sk' , '. Total - Additional r ;- .Common^ Paid-in : , ' Stock \ . , Capital * 'Retained Eammgs **' Accumulated *.m-Treasury j * .^Translation : S/odf . Adjustments .103,344,000 - - .'771,000 .104,115,000 / -vi- ; 253,000 104,368,000 1,829,000 Balance at December 31,1983 Net income 7- Cash dividends declared Common stock . Preferred stock . : Common stock issued ..(240,000) : /Stock option plans . ',- ..^-Employee stock purchase plan Translation adjustments Other 1,589,000 Balance at December 31,1984 . Net income Cash dividends declared Comm on stock - ' ' Preferred stock , Common stock issued " v (446,000) Stock option plans ; o'' - -! Employee stock purchase plan Translation adjustments ' . # Other ' 1,143,000 Balance at December 31, 1985 $2,013 $83 $ 989 $1,001 ^ *(57) 119 .V.'ilir-- -- 119 -- * (3) -- - I (72) tctf/rr- ' " (13) -- - (72) -- - .(13) 1-- -- -- 6 i/4/.^-1 ` 12 (24) ' (6) 2,035 , 187' 83 , (2) 12 : - 999.; --. < . -- .7 (6)7 1,029 ; 187 8 -; - -- . - ' i24) ' --- :. (49), (27) . . - (82) ill) 11 5 8 -(6) 2,147i `-- (82);' ,, - , .111)i. )- * , , > **. \ \ *. ' (3);1. ; .,14 . ~ j' %' , ', o 1 5' 1 > 8* ' -i(6)J?1V *- _____ - 83 1,004 l,'ll^' C^>'-"y-A'VJ35-?)l '.,(19) : 829,000 ' ` 2,790,000 107,987,000 /.Cash dividends declared ' ' Common stock , Preferred stock , /./ : : Common stock issued (504,000) . Stock option plans Employee stock purchase plan , Conversion ofdebentures u Other, ________, ;)639;000 '^Balance at December.31,*4986. .The accompanying notes are an integralpart ofthesefinancial statements. K' (89) ^ '* . w'-;. ItisSS - 1 <:&>/" 14 i144 86 , 1 ,.2 ;(2) 13 `U/Mr? 84^*r:^>'. 16 - ^V . :\v)rr^ ______a $2,452^ *<tS86 i *l,ipi;^$l'^U^(19);. . "$(20 ~ - 1 1< ' ~ t-r i i"*#/?/is( SGP 0030632 zt'' l ';:iNo*tes tq Financial Statements k.'-vA .. ,~v Georgia-Pacific Corporation and Subsidiaries i ... i p\ c> i-i ~ ` ^ > ** * ' >1 *< J4 icfeif^WW J >l , '1-)* > I , Note 1. Summary ofSignificant Accounting Policies Principles ofConsolidation. The consolidated financial statements include the accounts of Georgia-Pacific Corporation and . . subsidiaries (Corporation). All significant inter- ^ 1 company balances arid transactions are eliminated ' : in consolidation. '..' c ..; Income Per Common Share. : 'i- ^ Income per common share is computed based on..-,:. income applicable to common stock (after preferred stock dividends and discount accretion) and the -.weighted out-v 4, standing. The co mputation ofprimary income per common share assumes:^!) conversion of the re-: s; y .. deemable preferred stockinto commori'shares, -when v ? the effect is' dilutive; aridip) issuance of common J - 1 1 ' 'Hutivestock^ptionar 1 1 1 ,>r ! i f-S^putatibriWifully diluted incombipeftofrirndn share 7 ;jl.M7ftiassumes:*(.l) treasury buybackdor, dilutive stock.%& ':V'>7'o''`p-Vti-oCn'-.Va:;n;jd^tock>ip-/'u.`r-Ac1hase plans at..the4yea7r-e'n-dC'CfCs.-cly-'f?y:" c market price, ifhigher'than'the average market price; ; and (21 conversion of the 5 '/t%i convertible sub- ` yfiikWwi' ' vf * (- .v ordinated debentures into coinmon shares, when -j. feiillll'? 4^ l\r 2`** the effectls\dilutive.Vi3j^.viC`^VtiftiAS%5(('i AN&.'L'y.f <&s`(4kvl{ `X\ . Income from continuing 4 -i j - > f . 15 operations before*. extraordjina^ry itemsK and accounting change 2 24 4 1 -i"; ?,: 1 80 * "X-iP-/ ry,tr ' y . * a. cl 4 The average number of shares used in the income per common share computations for 1986, 1985 and 1984, respectively, were 104,782,000; 103,432,000 and 102,293,000 for primary and 107,504,000; 106,550,000 and 105,336,000 for fully diluted. Inventory Valuation.' Inventories are valued at the lower of average cost or market. Inventory costs include costs ofmaterials, labor and plant overhead. The major classes of inventories were as follows: December 31 '(Millions) C '1986 1985 i Inventories at lower of average . : - co- s- t- o.rv m. a{ rke, t,vx'sf =.?," \ ,, -..-.RawimatenalsfR" ')'/. 1 . Finished goods tfjrt-' (* ' .. .. 6 I' Supplies/ i 5. jf .8186 - , 517 ..'. 77 $189 477":' 73 7 LIFO reserve ^ > t ^/ 780 id;.;.' t-.l-rr 739.. (99) ; V. ('`95} $681 / .:. *634 IS 1 -v-'':V'" The last-in,Tirst-out (LIFO) dollar value pool method ofinventory valuation is utilized for the majority of inventories at manufacturing facilities and thepOTporatioi?s*manu&cturi;d inventories produasjthstributiph "centers. f; - Thekvefa^cbstWethod is used for aill other inven- ifbnekjlnyentdfies valued using the LIFO method ; 7 represented approximately 55% and 52%, respec- f tivelykpfcprisblidated inventdnes at December 31, 1986 and 1985. ' jEffective January. 1, 1985, the Corporation realignedyjk LIFO, inventory pools to correspond to natural business units father'than divisional product groups. Management believes this pooling change minimizes the impact of price level changes on inventory Valuations, thereby achieving a better matching of costsjand revenues. The effect of this change on the accompanying'financial statements was nofmaterial. * v J4 .02 82 83 84 85 86 SGP 0030633 /Georgia-Pacific Corporation and Subsidiaries . is-ismsm. Property, Plant and Equipment. Property, plant and equipment are recorded at cost. Lease obligations for which the Corporation assumes " substantially all the property rights and risks of ' ownership are capitalized. Replacements of major units ofproperty-are capitalized and the replaced properties retired, Maintenance, repairs and replace ments ofminorjunits ofproperty are charged to expense as incurred- Themajor classes of property, plant and equip- ment were as follows: ,J > ' ' . -'.December 31 (Millions) 7- 7- - . ..f - im ms Land and improvements Buildings t Machinery and equipment Construction in progress > i . i >' $ 123 549 4,318 l62 $ 120 _ y `";3;955 ' 155 $5,052 $4,741 1 . .1' * fi,C *** j ! '%-`t t ' y1 ''' 5 > < ! ..f ^.Provisions for depreciation are computed using com ponttJ^j^^^lj^ppn^turiated.se^ce'jhves.'.i'nie The Corporation defers net operating costs on new ^ construction projects during the start-up phase and ; amortizes the deferral over five yeafsl The amounts deferred, which were not material iri'1986,1985 / arid 1984, are included in the property, plant and equipment accounts ^Interest Capitalized . and Expensed (Millions ofdollars) Interest Expense Capitalized Interest ing'facilities whichi jpreyiprisly used the units-of- production method bfdepreciation were retroactively converted to .the straight-line method to conform , ; with the Corporation's other operations. The effect ;.financial^4!,, ` sta.t.e...m...e..n.t"s...w...a.'s not- material. .property.dispositions; property.cost is credited to rTimberiandJiimberlands*/i(iMiM'!q}fyMMi , -STph&em.Cso&rpwormativon Xdaepletes itsinvestmen't' in. timuber the property .accounts and charged to .the accumu- . 5lovefltoe total fiber thatIvilljbelavailable during the ' ^ - latedqejireqanpnJaccpunts'ana any{proceeds are pH tn <1 tori lrtrrtnrfh 0''jl 1 mh ar r*n m Mrwv :1 credited to the,accumulated depreciation accounts. the /' When there arejabno^ - - '''Corporafion changed its1accouhdng''fdr nmbefebsts _ . the cost and related depreciation amounts are - to capitalize certain reforestation'costy 'previously - removed from the accounts and any gam or loss expensed in order to achieve a better matching is reflected in income. : of these costs with the feveriiies'realized from the " . The Corporation capitalizes interest on projects .'V^eventual harvesting of the timber. This capitalization where.C9nstnictipn.takes considerable time and policy'.was applied retrbactiyelyland had the cufnu-' -entails major experidiuires/Such interest is charged ., lativeeffect ofincreasing 1986 net incortie approxi- . to* the property, plant arid equipment accounts and mately $8 milHon. The riew capitalization policy -r" - amortized overthe approximate life of the related, is not eacpected to materisdly affect depletion expense ' assets in order to properly match expenses with , in future periods. revenues resulting frorri the facihties.'Tnterest i- ' capitalized and expensed was as follows: Reclassifications. .. (Millions) Year ended December 3 J 1986 1985 1984 , Certain amounts have been reclassified in 1985 and ' 1984 to conform with the 1986 presentation. . Total interest costs Interest costs capitalized Interest expense $147 (9) 4138 $162 (30) $132 $167 (11) $156 SGP 0030634 4 * "! (lf<f ' ~fj-t 'l' * 1 ' 51 *-. ... u-j^> 14 . Georgia-Pacific Corporation and Subsidiaries v 1 * < t- V ?* yr34^vJr^>j ;:;?S'.. \r-v -- _ '. 36 Note 2. Unusual Items The Corporation realized certain gains during the last three years which are considered to be unusual items: :i-`-.' <v --Year.ended December 31 ' ... .5. .' (Millions) -i _':V ' im ; . y ms , 1984/ ` ` ' ' Liquidation of investments ! $33 : $- i . -Sale of timberlands . 19 vSalc of Portland office ' /' building ;VC; .j9 ^y:. . i- * ,$33 . -/. .$!>< . ;; ..-..$19 .. Exchange prior to.the'sale, net cash proceeds were approximately $136 million at closing. Also during 1985, the Corporation sold its Polymer, Inc. sub sidiary, whose principal asset was a color concentrate ; plant in Farmingdale, New York, for $8 million in cash. : In December 1984, the Corporation sold its ; commodity chemicals subsidiary, Georgia-Pacific Chemicals, Incj'-to the executive group managing cthat business'TJhaeEthe terms of the agreement, 2s the Corporation received $192 million in cash plus debt, preferred stock and warrants which had an cestimated value of $70 million. ^^,Thes^o|p^^t^^imdaPy_ estimated a $160 1 million losjfqndisffosal of discontinued_operations,'^T net of reiateci'in^ome^x t^riefits of $137 million, `M* *>- >v`which"was-recordeddrftiiefourth`quarter of 1984. ' ^ Ti. his estimiv.a"teAT-Jw't-Ta-'Us1 ifevised m-- t*h~e 1985 third quarter, '1,4 ` h time a^ntadditional $30 million loss, net of 4* '.ncomeitax'benerits or $14vm-1 .iil,-l>ion' -, *-- - : ,- principaljisset was an expandable polystyrene plant ' vVT-"'. ;;.' VC in Painesyille,'Ohio, for $13 million in cash.fv: v '' " v - ' In September 1985, the Corporation sold its Exchange Oil & Gas Corporation subsidiary (Exchange). After adjusting for cash received from A $10 million'extraordinary gain, net of related income taxes of$4.million, had been recorded in SGP 0030635 : Georgia-Pacific Corporation and Subsidiaries' i: ' * V-***i.v ' --" *. r' . ***>- -, ,, 1, ,, _ *.lf . * \ A . ;r ir-fi? '' '4^'J}1 f' Note 5. Retirement Plans Defined Benefit Pension Plans. Most of the Corporation's employees participate in noncontributory defined benefit pension plans. .These include plans which are administered solely 'by'the Corporation, plans which are administered jointly by the Corporation and other employers or " labor unions, and union-administered multiemployer plans. The Corporation's funding policy for solely administered plans is consistent with the applicable -requirements of Federal law. Contributions to jointly administered and multiemployer plans are before income taxes in 1986, principally due to amortization of the initial excess of plan assets over the projected benefit obligation over estimated remaining service periods ranging from 10 to 17 years. Net income increased,approximately $11 ' million as a result of thischange.7 - ' . " -A.-The table below setsTofth the funded statusof ;the solely and jointly administered plans and the ' amounts recognized in the accompanying Balance Sheets. The weighted average discount rates and .rates of increase in future compensation levels used in determining the projected benefit obligation were 8.0% and 6.0% at November 30,1986 and 9.0% and - <'6.0% : /t.-.-i.ia: -- are .. 7met periodie pensionpost in;1986 was 1.5%?-'fit ' ..has separate'plans for salaried,employees and officers ..... -.<|bonds, mortgage securities,-!guaranteed investment under which benefits'are pnmarilyirelated to earn- < .contracts, cash equivalents and real estate. 'At ., 'is not -T.sDecember 31, 1986,>$9,'fnillioh of current prepaid -- ... EffectiveJanuary,! ,'1986, |He^Corporation "v ivc* ost included m^other-assets. 3 h'4ew<u!wnatri -x ' fVaar3s.Ho?^7^mplpy%K',^^^ii3^'fpr'.Pensions"x.. ^respectively, at ljec5?rSber'v3.1,-').98S and 1985, were ,T(SFAS 87).`fflys change in accounting principle re-.> 7" WVincluded in other long-term liabilities. & r. z h. (J- itp '`t f-iK- ',>7 i'`"' `iS'H * bry-< A Ay..Year ended December^dl}.!986 ) ..(Year ended December 31, 1985 s- vv tSf-- * * i 7 PiahTHaving'^^filPlan Having ^fi^^Plans Having -P/druHai'i/uj - W. ?t-. -. , i, 'Assets m Excess l JAccumulatedjxyAAssets m Excess Accumulated zxihkofAccumulated f%F ^Benejiis in' Accumulated 's''s^'Benefits in ' ^ --.v ' r'%"-^.Benefits f-" Excess ofAssets ^fir^-Bettefits ~ '..-ExccssofAssets i^ciimulace'dbenefit obligarioi?at'NpvemfiSf'36^<"%'5 ,1 ;'Nonvested portion 4i\ < .. ' > > <- '* -- v.i?..--vi.S`TvV-v-. <(!'v.>f7'j,'v^'1i?jf..**:3.'*i* . ,-.?',T/. ;; Effect of projected future compensation levels jr; : " . - ^ r45f * >^3j3#t|if3j|225 '.V ; TA'iS-Jl ' . 29 ' . : A v2 ' .-;.i ^332 i .i. y.Af'is 'rt:v'>iA ;.''24n ' . . 40 V'%v3.` T1, / <--- - 29 ' -2 Projected benefit obligation at November 30 Plan assets at fair value at November 30 372 v 497 -' : is ' vf ( . 274 ' 4 402 14 3 Plan assets in excess of (less than) projected benefit obligation Contributions made in December -. .- v-.-.v 7 . Unrecognized net loss 'r";'^ '. a:-c,`v--- ;. Unrecognized prior service cost ' - Unrecognized net (asset) obligation from initial application of SEAS 87 . , ;;. ' /. Prepaid (accrued) pension cost at December 31 ' 125 . u -. 5 ,V v- . io 2 (120) $ 22 (14) 128 . ... ' ..., 2 (11) , ' 3- . -- ' ' -1 *(11) 030) '' S ' '' 1. $(10) :fiy % W w SGP 0030636 W X? f 38 . -.A&f??yMs- - Georgia-Pacific Corporation and Subsidiaries Pension expense included the following components currently retired employees and to amortize the in 1986: actuarially determined cost of active employees' retirement benefits over their estimated remaining (Millions) - Net periodic pension cost for solely and '``jointly administered pension plans ~T'3v/; Service cost of benefits earned ; ;' Interest cost on projected benefit obligation Actual return on plan assets - -Net amortization and deferral ' * `tr-- r Contributions to multiemployer .. pension plans if*..' - 1 . $22 26 (79) 38 7 -4 service period. The Corporation previously ex pensed these benefits as paid. Management believes this change res'ults in a better matching of the costs of retiree benefits with the periods benefited from employee service. The effect of the change on the accompanying financial statements was not material. Note 6. Industry Segment Information The Corporation's primary operations are reported in vo industry.segments: (1) Building products, iiij1 -='w< wi ich includes the manufacture and distribution of st; ctural panels ((plyWood, particleboard, oriented str ,nd boardfwaferboard. etc.), lumber, gypsum, -siijC roufmgj fotmaMehyHe'ahd thermosetting resins; and, (2) PuljTand paper, which includes the manu facture and distribution of containers and packaging ogniKtilftifISefined :* (linerboaid^kfafnpaper,' corrugated boxes, etc.), j$353n3b6riwfi9851(it$$^ pulp mill by^jir'tidu'ct Chemicals. ' ' A : Certain industry segment information for the years 1984 through 1986 is presented on the fol lowing page. The Corporation's sales to foreign markets represented less than 10% of total sales mployees,.with additional income.upon - to unaffdiated customcrs in each of those years. No ient."The Corporation makes'annualfcontn-ffti, single custpmeflaccouitfed for more than 10% of &r b*; * * Stock Bonus Plan, which>'was'1amended and restated "'".as* the SavirigsPlan effective January!,' 1985, ;y i Annual contributions to the former.Stock Bonus . limitedbased on the availability of the 'vi/- (Corpoorraattiioonn''ss profits. "' > .'5 Retiree Health Care and Life Insurance Benefits. The Corporation also provides certain health care and life insurance benefits to eligible retired em ployees. Effective January 1, 1985, the Corporation changed its method of accounting for these benefits to accrue the full actuarially determined cost for SGP 0030637 17 1.6 13 82 83 84 85 H(. Georgia-Pacific Corporation and Subsidiaries - ., (Millions) % .- Sales to Unaffiliated Customers Intersegment Sales Total Revenues Operating Profits (Losses) Depreciation m 4 ^Capital and Depletion /Expenditures ` Assets Year ended December 31,1986 Building products . Pulp and paper Other operations ' $4,853 $235 $5,088 2,281 77 . . -2,358 ,89 ... .. 29 . ;- 118 $500 $153 ? 146 . ..- . 176 35 . = - 5 \ft $192 213 6. $1,694 2.253 . .60 - ' - Eliminations and adjustments Intersegment sales Timber and timberiands Unusual items (Note 2) General corporate Interest expense income taxes - . 7,223 341 - 7,564 - ^ - - .(341) -- (341) ' - - -` '-- -ft ..4-'. . " ~y 681 -' 33 (91) .. .. , . 5 (138) (189) 411 ' . .. ..4,007 ,. .56 15 '-- - 844 - . .263 ' '' * " " Total $7,223 $- $7,223 $296 , $339 1$482 $5,114 ear ended December 31,1985 . uilding products Pulp and paper ' Other operations $4,470 2,134 112 / x a *3- ^ v * $188 76 28 : $4,658 2,210 140 trC4 7ft'`.< . Sr Z* #^ <'**&*** f i;`: 'lit}*} $391 29 35 ,, j$i45 ;* $164 435 -i 7 $1,623 2,175 71 6,716 Eliminations'and adjustments > : ; . intersegment sales Timberand timberiands., ... ' Wi w i*iy4L!S'1Wvi<* Unusual items (Note 2)' 1 * General corporate "-y J , Interest expense ' ' J. !t * K 1 ' --M** % Income taxes , - Continuing operations , .". 6,716 292 (292) 7,008 iW&i4- (292) ?*P:h / V yr V- ^ \ '455 , , - - :j 30 i - - ' .(102) - (*- ' 6,716 207- - '#,'310 ' 606 ,-ft .-.ftr-'?. ;j Ai }"" V* ,23 , 3,869 T '* -803 ; v-i3 ' S, ft] 83 ' T-- - " " - . 642 " 4,855 Piscontimiedoperations, net -- -- *-- (30) - ~i\~r , ^ ~ :n Settlement ofcondemnation - suit, net^,,. t, vt^/ ' ..... *V , - .10^ a-W, - - _ . Total ft-1' . $6,716' /,1$6,716,\, ,$187 ,,'''.$310, $642 $4,866 ; > -ft Yeanended December 31,1984 ; . Building products -. Pulp and paper s *f*'{,, .`ftl, ft-ft Other operations . '4 ..$4,452 . '-2,111 ' li9 % * W ` Jt1**' 'y ^ ^ $189. ` '66 27 ~ , $4,641' 2,177 . 146 `hj * 't.'iV >K ' ii* ' -* h '1 t* `1 -Hr.'..--.-- ' /a -"V- - ' .-$37?,:.' ..$1,535 202' ^(^i23>^(::.,4o2 ft VI,982 20 " 'r,6 '7 80 - / ' - , Ebminadons and adjustments ; Intersegment sales ' : Timber and timberiands Unusual items (Note 2) General corporate ... . .^Interest expense . Income taxes \ 6,682 ` 282 , ^ .-(420)' -- - 6,964 - . 601 - 273 ' 546 3,597 (420) V'v'' 7;:- ;'135 19 (68) ....ft.vY;;? ./- ... 29 .' (156) "'(143) . 840 190 Continuing operations ' : - 6,682 ' (138) ' 6,544 - 253 -. . . 282 '710 : .4,627 Discontinued operations, net : ' 446 - 138 . . ; 584 (134) ?.V'.ft -ft 33 - 158 Total . $7,128 $ - $7,128 $119 . $361 : $743 $4,785 Intersegment sales are recorded at estimatedfair market values and income on such sales is included in operating profits (losses). '(( j ' Timber and timberiands have not been allocated to industry segments because they are managedjointly to supply raw materials to both the building products and pulp and paper segments. Logs and residualfiber are included at cost in the operating profits ofthe various manufacturingfacilities ' SGP 0030638 , 3 Georgia-Pacific Corporation and Subsidiaries . ' A . / - - .- " - - , *< .,, j'i ' '.--i' i .> . < . w-'fs? - 7 V y T-V -'V.'.-rTT,cVA^7';'7 V ... Sjiirs.Av1 Note 7. Indebtedness Long-term debt consisted of the following: One of these agreements is with nine domestic ..ifP'.money center banks and establishes a $385 million ;}H unsecured revolving line ofcredit until May 1,1989, isls'-- (Millions) Commercial paper and other short-term notes _. Year ended December 3 J ms ' $ 175 . $ *153 at which time the'outstanding balance may be h converted to a term loan repayable in eight equal X ' semiannual installments beginning onJune 30,1989, m ' Commitment fees during the revolving loan period Notes are Vi of 1 percent of the daily average unused 1C J% Floating rate, currently 6.00% due 1987 ' 13 Va% due 1994, redeemable after 1991 - 150 _ '32' ' ' .7' 32 ; \ 100 -V lcio available credit. The interest rates associated with . .-this agreement afe'based on either the prime rate, certificate of deposit rate or the offshore rate. A second agreement is with ten banks and 5/a%. . ' ' '.rij'/Y-XX : / 65 /.. establishes an unsecured r< /olving line of credit i % due 1990, redeemable : 37% due 1988 .. V, j-V1* j,f'L ~ fl6 X , , ..totaling $215 million until May 1, 1988. Commit i7536'-''.''*'^'rpeht fees dufipgJtheTevplvirig loan period are' Insi * ance companies -v, | ^Vj It: .birnii5^^" ... C'/e% term loan,'payable in* annualP* * } yCredit. -- --.------------------------- -------- m- $ % M. 40 -M'rhr 'A-bvli&t*.r^vnient are baseftionleidiefitfaefrime rate.'Federal ;;.,9Vb%_ term loan, payable m annual . -funds rate or jEi^^pU#jntefban offered rate. , VT^^atmual installmehts,through'1996 VjE*^|if?*32 ^ - ' 13.60%rrs.ffel:nrixo:rr^nsb-itaeSsi'-cXiu;-er<1:i9r8-7.lcvn''K'5TX,'s.-,*4.a.5(),` Revenue bonds, average interest rate .-.,y - - J ' '.L:,, &;, oif 1 percent of the "iigcfciaily average unused available credit. The interest rates associated .with this agreement are based on *-7 ^either the prime'rate;b1rVcertificate*pfdeposit rate. .fe fl i':piymeh5J|?000J^S^|S T >rjboff6wihgsT'At''December 31,1986, $175 million m Sir * -- s lone-termdebt/Management intends .......... ....... .................. . ,-;.Zero coupon debentures', effective ,'r,, A, f ....... . .. :e these borrown >.gs on a long-termi!basis !=m-J$f.i4ti! 7>,:by either repla'ciiig them with'long-tefrh obligations.1#/. -v--. , - - .- ! im extendm^ bjJ.ioiTO.inawhrl^anhiiaUy ^'jXf ' 1987 through i990 *r-; ;vv."r.:. 566"^f>7' 70 .rcplaGmg^themj^j^s^rt-.term oMigaOQris. - On March 4,1986, the Corporation issued Discount term debentures, effective . - interest rate 11.30% due 2015 125 .. 125 Lessj Current portion :*? , -Unamortized discount ' '.1,081V. *- 1,373 , : >v 54 V Viv- 75 ..'-:V.ir:'.-,<$i8~93'ilvV'il',257 $150 million of 9'/(% sinking fund debentures due , March 15, 2016. The debentures require the CorpoJ-.'ration to make.sinking fund payments commencing .'i-J; rfCin 1997.and are jedeernablp (siibjdct to certain re- '*** t-r-'strictions) at'any'time at the Corporation's option. -:r'> ... In March 1986, $24 million of 12% notes tiV.i.-,r classified as "purchase contracts and other" in the The scheduled maturities^oflong-term debt are^lS^ . T./.Y-^accompanying table were, retired. The Corporation million in 1987, $102 million in 1988, $23 million in - - . '-.also retired $65 million of 14s/8% notes in April 1989, $77 million in 1990 and $28 million in 1991. - 1986 and redeemed $150 million of 10.10% notes - As of December 31,1986, the Corporation had . . in June 1986. The Corporation purchased $26 mil- three bank revolving credit agreements providing lion of its outstanding 12Vi % sinking fund deben- for aggregate fines of credit of $700 million. tures in June and redeemed the remaining $74 million in December 1986. SGP 0030639 Georgia-Pacific Corporation and Subsidiaries Onjune 15, 1986, $14 million of zero coupon debentures were retired as scheduled. The remaining zero coupon debentures may not be redeemed prior to maturity. The discount term debentures do not bear interest prior to June 15, 1990 but bear interest thereafter at 1130%, require the Corporation to make sinking fund payments commencing in 1996 and are redeemable (subject to certain restrictions) at any time on or after June 15, 1990 at the Corporation's option. In the fourth quarter of 1986, the Corporation called for redemption its outstanding 5 '/4 % con vertible subordinated debentures. By the redemption date, 2,790,000 shar :s of common stock had been issued upon conversion of $86 million of deben tures at $30.87 per share, and $1 million cash had been paid for debem ares that were redeemed. Capitalization (Billions ofdollars) 4.5 4.6 2.0 43 43 44 2.5 2.0 2.0 2.1 Common Equity Total Debt*^ ^ .. Deferred Taxes and Other Long-term Liabilities Redeemable Preferred Stock - 1.9 . -tv ,i *. .1.6 1.5 Ky ...s: 1.4 1.2 i.v;.. .8 II .2 .2 i 0 0 0 .1 e 82 84 85 86 In December 1986, the Corporation terminated two interest rate exchange agreements which were being used as hedges against anticipated future rollovers of $ 102 million of commercial paper borrowings. The Corporation paid $25 million in termination fees which are being amortized to interest expense over the periods from termination until the original 1991 maturity dates of the terminated agreements. At December 31, 1986, the Corporation had registered for sale up to $250 million of debt secu rities under a shelf registration statement with the Securities and Exchange Commission. The floating rate notes are convertible by the holder, prior to April 1,1987, into 8*/2% debentures '"aui`2009, and are redeemable in whole or in part at the Corporation's option. Prior to Apri. 1, 1987, the Corporation may also convert the notes into fixed rate debentures due 2009 at a defined premium over the yield on 30-year Treasury securities, but not less than 8'/2%. The conversion by the Corporation is subject to the election by the holder to have the notes mature on the specified conversion date. The interest rate on the notes is adjustable semiannually to a rate based upon the six-month Treasury bill rate plus a specified premium. At December 31,1986, $63 million oflong-term debt was secured by property and timber with a net book value of $136 million, including $83 million .net book value (original cost $198 million) relating to Certain manufacturing and pollution control facil ities which were financed with the proceeds from revenue bonds issued by governmental units and guaranteed by the Corporation. The Corporation leases such facilities from the governmental units and pays all costs incidental to ownership of the'properties. Certain insurance company loan agreements place limitations on cash dividends that can be paid. The amount of retained earnings available for cash dividends under the most restrictive covenants of these agreements is approximately $872 million. In addition, the agreements require the Corporation to maintain a minimum of $250 million of consoli dated working capital and impose certain limitations on additional borrowings. SGP 0030640 Georgia-Pacific Corporation and Subsidiaries Note 8. Redeemable Preferred Stock (Millions) Balance at December 31, 1983 Shares repurchased Amortization of the excess of involuntary liquidating value over fair value at issue date Balance at December 31,1984 Shares repurchased Amortization i f the excess of involuntary liquidating value over fair value at issue date Balance at December 31,1985 Shares repurchased Amortizadon of the excess of . involuntary liquidating value over fair value at issue date Balance at December 31,1986 Adjustable Rote Convertible Preferred Slock Series Series Series cA B Total $148 $33 $34 $215 (32) -- *" (32) 31 3 7 119 34 37 190 (32) (8) -- (40) 3 v __ v 3 .. 6 90 26 40 156 (32) (7) () (50) 31 3 7 $ 61 $20 $32 $113 The number of shares of adjustable rate convertible preferred stock (preferred stock) issued and out standing were as follows: Series A Series B Series C Total ' December 31 1986 1985 .1,656,000 2,484,000 - 573,000'-: 765,000 1,049,000 i,318,000 . ` 3,278,000 ` 4,567,000 The preferred stock was recorded at fair market value on the date of issue. The excess of involuntary liquidating value over such fair market value is.. being amortized over a ten-year period by a charge to retained earnings and a corresponding credit to preferred stock. Subject to adjustment for common stock divi dends and splits, each share of the preferred stock has a conversion price of $39.00 and an involuntary liquidating value of $39.00, and is convertible into one share of common stock and entitled to one vote. In addition, whenever six quarterly 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. Each share ofpreferred stock is entitled to receive cumulative quarterly 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 Cor poration fail to make the scheduled purchase offers, as described in the following paragraphs, unless the average of the last reported sales prices for the Cor poration's common stock during a prescribed perioc of time is at least 108% of the conversion price of the preferred stock during such period. Subject to the price of the Corporation's common stock and the appropriate action by the Board of Directors, the Corporation has the option to make offers to purchase, at a price of $39.00 per share plus accumulated dividends, a specified numbe: ofshares annually. In 1986, the Corporation accepter: tenders for the purchase of approximately 828,000 shares of Series A, 192,000 shares of Series B and 269,000 shares ofSeries C preferred stock at $39.00 per share. Based on the price of its common stock, the Corporation has elected not to make a purchase offer in 1987. The optional preferred stock purchase offers for the years subsequent to 1987 would be for approximately 1,289,000 shares in 1988, 458,000 shares in 1989 and 242,000 shares in 1990. The preferred stock will be subject to optional redemption (Series A--1987 through 1988, Series B --1987 through 1989 and Series C --1987 through 1990) at $39.00 per share plus accumulated divi dends provided that the average of the last reported sales prices for the Corporation's common stock foi a prescribed period of time is at least 125% of the then conversion price of the preferred stock. When these conditional redemption periods expire, the pre ferred stock may be redeemed, without limitation, at $39.00 per share plus accumulated dividends. Subject to certain limitations, the Corporation is required to redeem on an annual basis, as a sink ing fund, approximately 414,000 shares of Series A beginning in 1988, 96,000 shares of Series B beginning in 1989 and 134,000 shares of Series C beginning in 1991, at $39.00 per share plus accumulated dividends. SGP 0030641 Georgia-Pacific Corporation and Subsidiaries Note 9. Common Stock At December 31, 1986, the following authorized shares of the Corporation's common stock were reserved for issue: 1987 Employee Stock Purchase Plan 1984 Employee Stock Option Plan Conversion of redeemable preferred stock 2,000,000 4,103,000 3,278,000 9,381,000 The Corporation called its 5*4% convertible sub ordinated debentures during 1986, which resulted in the issuance of2,790,000 common shares to holders who elected to convert their debentures ^ into common stock at a conversion price of $30.87 per share (Note 7). During 1986, the Corporation adopted, subject to shareholder approval, the 1987 Employee Stock Purchase Plan (Purchase Plan). In connection with the Purchase Plan, 2,000,000 shares of common stock .were reserved for issue at a subscription price 'of $39.53 per share: The subscription period began January 30,1987 and ends on March 13,1987. Sub scribers have the option to receive their payments plus interest at the rate of 7% per annum in lieu of stock. The Purchase Plan expires on March 31,1989. The Corporation issued 829,000 shares during 1986 under the 1984 Employee Stock Purchase Plan, which expired on October 31,1986. In connection with the 1984 Employee Stock Option Plan (Option Plan), 4,103,000 shares of common stock were reserved for issue. The Option Plan provides for the granting of stock options to certain officers and employees. Holders of stock options may be granted cash awards, payable upon exercise of an option, of an amount not to exceed 100% of the amount by which the market value of the common stock, as defined, exceeds the option price. In addition, holders may be granted rights to surrender all or part of the related stock option in exchange for common stock with a fair market value equal to the amount by which the market value of the common stock, as defined, exceeds the option price. Compensation resulting from stock options and cash awards is initially measured at the grant date based on the market value of the common stock, with adjustments made in subsequent periods for market price fluctuations. The Corporation recognized stock options compensation expense of $33 million in 1986, $6 million in 1985 and $4 million in 1984. Additional information relating to options is as follows: Year ended December 31 1986 Options outstanding atjanuarv 1 Granted Exercised/Surrendered Cancelled 1,226,000 1,408,000 (1,107,000) (36,000) Options outstanding at December 31 Options available for - grant at December 31 ' 1,491,000 2,612,000 Total reserved shares 4,103,000 Options exercisable at December 31 : 115,000 Option prices per share Granted . Exercised/Surrendered Cancelled '. . 4,... . ^ v -.y $26 $21-$25 ,$21-$26 1985 1,710,000 -- (453,000) (31,000) 1,226,000 3,986,000 5,212,000 1,226,000 -- J21-S25 $21-$22 The shares and prices relating to the Purchase Plan, the Option Plan and the redeemable preferred stock are subject to adjustment for certain changes in the capital structure, including common stock splits and stock dividends. .Common Stock Price Range (Amounts in dollars) * - 41.25 31.88 18.00 13.25 82 83 84 85 86 SGP 0030642 Georgia-Pacific Corporation and Subsidiaries Note 10. Commitments and Contingencies The Corporation is a 50% partner in a joint venture (GA-MET) with Metropolitan Life Insurance Com pany (Metropolitan). GA-MET owns and operates the Corporation's office headquarters complex in Atlanta, Georgia. The Corporation accounts for its investment in GA-MET under the equity method. During 1986, GA-MET borrowed $170 million from Metropolitan for the primary purpose of retiring debt incurred from the acquisition and construction of the Atlanta headquarters complex. The note bears interest at 9 V2% and requires monthly payments of principal and interest with a final in stallment due in 2011. The note is secured by the land and building of the Atlanta headquarters complex. In the event of foreclosure, each partner has severally guaranteed payment ofone-halfof any shortfall of collateral value to the outstanding secured indebtedness. Based on present market conditions and building occupancy, the likelihood of any obli gation to the Corporation with respect to this guarantee is considered remote. * During 1986, the Corporation adopted a pro gram to self-insure for general liability claims up to $25 million in amount. These risks were previously insured with a nominal deductible amount. Note 11. Income Taxes The provision for income taxes is based on pretax financial accounting income which differs from taxable income. Differences generally arise because certain items, such as depreciation and capitalized interest, are reflected in different time periods for financial accounting and tax purposes. The Corporation uses the flow-through method of accounting for investment tax credits. Under the flow-through method, investment tax credits are recognized as a reduction of income tax expense in the year the qualified investment is made. The provision for income taxes for continuing operations consisted of the following: (Millions) Federal income taxes, net of investment tax credit Current Deferred State income taxes Year ended December 31 tm 1985 1984 % 79 87 23 $189 $ 13 84 5 $102 $ 40 90 13 $143 The difference between the ordinary Federal in come tax rate and the Corporation's effective income tax rate for continuing operations is summarized as follows: Federal income tax rate Increase (decrease)as a result of Value of timber appreciation taxed at capital gains rate Investment tax credit .-. State income taxes, net of Federal benefit Other Year ended December J / 1986 46% 1985 46% 1984 46% (8) (10) (3) (10) (6) ,.. (4) # 3 3 3 S'- 14 39%_____ 33'%______ 36%* The Tax Reform Act of 1986 increased the effective income tax rate by 4% in 1986 due to the repeal of theinvestment tax credit, although some credits were jUjt. allowed under the transition rules. The following is a summary of the components of the deferred tax S: provision for continuing operations: (Millions) Excess oftax depreciation ' over financial -V! ; ' depreciation Write-down of certain assets Sale of tax benefits Fees paid to terminate , , interest rate exchange agreements Prepayment of pension expense Deferred start-up costs, net Capitalized interest, net Reinstatement from recog nition ofinvestment tax credits in 1982 Other Year ended December 3I 1986 1985 # m 1984 ;m. $87 (15) (12) $97 (6) (13) $83 j - : 10 j (13)1 12 Hvi-, 11 __ _ 7 4 (6) (4) 6 (6) k: 22 1 (4) - $87 $84 $90 SGP 0030643 Ceorgia-PadJuCorporation and Subsidiaries- ^sms ^ Martyr,, t' Note 12. Acquisition In July 1984, the Corporation acquired certain assets from St. Regis Corporation for approximately $360 million in a transaction accounted for as a" ' \ purchase. The purchased assets included a linerboard / and kraft paper mill, related timberlands and cutting ' contracts in Mississippi, 16 corrugated container . plants, and certain current assets related to those operations. The results ofthese operations have been included in the accompanying Statements of Income from the date of acquisition. Had the operations been acquired as of the beginning of 1984, the Corporation's operating results for that year would not have been materially affected. ' r, vV' ' Note13. Litigation^cji'j^i(, ,, The Corpofati6niS;a^rty':to various legal proceed;'mgs,generally mad-entallto-itsbusiness. Although the ultimate dispqsjtipfeofthese .proceedings is not ' .believe that al!versp|||et^{n^tipris'in! any or all of ' such proceedings'willihawAmate'nal adyerseieffect . upon the financial condition of.the Corporation; Note 14. Unaudited Selected Quarterly Financial Data < y ' . 1st Quarter 2nd Quarter . .. 3rdQuarter . " 3 . ' .`4th Quarter (Millions, except per share amounts) 1986 1985 1986 1985 1986 1985- . . . 1986 Net sales Gross profit Income from continuing ; operations before . . extraordinary item Income before ~ extraordinary item Net income * ; ... $1,604 287 $1,580 269 $1,929 374 $1,794 323 \ ' - ' , - *." - - vy y 30 49 \86 67 30 49 30 49 86 67 86 67 $1,909.: 41.1 *' $1,752 '' `-$1,781 302 . 368 w ' ' ' .-'-''"yy. 97 58.. : 83 97 28 97 28 83 83 Per common share income from continuing operations before extraordinary item Primary `Fully diluted = Per common share income before extraordinary item : ' . 'Primary - . : Fully diluted " Per common share net income . Primary Fully diluted Dividends declared per common share Price range ofcommon stock High Low .25 .43 :25 ; :42 ^ .25 43 .25 .42 .79 . ., -61 .77 sift- .60 : r- . -. .79 .61 .77 .60 ..90 .88 /. .90 .88 .25 ' ' " .43 .25 .42 .79 .77 .61 .60 .90 .88 .20 .20 .20 .20 .20 33.50 24.75 27.38 21.00 34.25 28.00 25.13 20.50 37.38 29.00 .52 .51 '.23 - .23 .23 .23 .20 25.63 21.13 .75 .74 - .75 .74 .75 .74 .25 41.25 35.63 . "1985 $1,590 269 . 33 33 43 .27 .27 .27 .27 .37 .36 .20 26.88 20.63 Incomefrom continuing operations before extraordinary itetn includes: --a tl2 million pre-tax increase in the 1986first quarterfrom adoption ofa new timber capitalization policy (Note 1); --a S33 million pre-taxgainfrom liquidation ofinvestments in the 1986fourth quarter (Note 2); --a ill million increase in income tax expense in the 1986fourth quarter due to the repeal ofthe investment tax credit under the Tax Reform Act of 1986 (Note 11); and -- a S19 million pre-tax gainfrom the sale oftimberlands in thefirst quarter of 1985 (Note 2). SGP 0030644 Five-year Selected Financial Data Georgia-Pacific Corporation and Subsidiaries (Millions, except {ter share amounts) Operations Net sales Costs and expenses Cost of sales Selling, general and administrative Depreciation and depletion Interest Provision for restructuring operations1 Income (loss) from continuing operations before unusual items, income taxes and extraordinary items2 Unusual items Provision for income taxes Income from continuing operations before extraordinary items2 Financial position, end ofyear Current assets Timber and timberlands, net Property, plant and equipment, net Net assets of discontinued operations Other assets Total assets Current liabilities Long-term debt Deferred income taxes Other long-term liabilities Redeemable preferred stock Total net assets Working capital Other statistical data Capital expenditures Per common share Income (loss) from continuing operations before extraordinary items--primary2 Income from continuing operations before extraordinary items --fully diluted2 Dividends declared Market price: High Low ' Year end Book value3 Shares of common stock outstanding at year end Number of common shareholders of record (thousands) Number ofemployees (thousands) Effective income tax rate3 Return on capital employed3 Return on common equity3 Total debt-to-capital3 Current ratio3 1 Previously classified as mwsual ilmts. Before cumulative effect ofaccounting change in 1982. iThe method ofcalculating these amounts ts described in the Financial Glossary presented on page 20. 1986 Year ended December 31 198S 1989 198J 1982 $7,223 $6,716 $6,682 $6,040 $5,003 5,783 511 339 138 - 6,771 5,553 431 310 132 - 6,426 5,441 426 282 156 - 6,305 4,978 374 289 157 135 5,933 4,206 359 275 186 30 5,056 452 33 189 $ 296 290 19 .102 $ 207 ' 377 19 143 $ 253 107 -- 32 $ 75 (53) 79 6 $ 20 $1,420 844 2,691 -- 159 5,114 837 893 695 124 113 $2,452 $ 583 $1,291 804 2,606 11 154 4,866 $1,406 - 840 2,270 158 111 4,785 631 1,257 606 , 69 156 640 1,383 503 34 190 $2,147 $2,035 $ 660 $ 766 $1,268 753 1,989 653 69 4,732 612 1,453 413 26 215 $2,013 $ 656 $1,176 748 2,214 651 130 4,919 716 1,618 365 22 209 $1,989 $ 460 $ 482 $ 642 $ 710 $ 188 $ 207 2.69 1.83 2.28 .53 (.01) 2.64 .85 41.25 24.75 37.00 22.70 107 66 39 39.0% 10.4% 13.8% 26.3% 1.7 1.80 .80 27.38 20.50 26.50 20.59 103 74 39 33.0% 8.7% 10.2% 3210% 2.0 2.24 .70 25.75 18.00 25.00 19.58 103 79 40 36.1% 11.7% 12.6% 35.7% 2.2 .54 .60 31.88 22.38 24.75 19.48 102 80 39 29.9% 4.2% 3.8% 37.4% 2.1 .02 1.05 27.25 13.25 26.25 19.22 101 88 44 23.1% 2.5% 1.0% 42.1% 1.6 SGP 0030645 Sales and Operating Profits by Industry Segment Georgia-Pacific Corporation and Subsidiaries (Millions) 1986 1985 Year ended December 31 1984 1983 1982 Trade sales Building products Structural panels Lumber Gypsum Roofing Thermosetting resins Other SI,864 1,676 375 230 155 553 26% 23 5 3 2 8 S1,666 1,434 377 260 173 560 25% 21 6 4 3 8 4,853 67 4,470 67 Pulp and paper Containers and packaging Tissue Printing and tie papers Market pulp Other 1,029 502 461 - 221 68 14 7 7 -.3 1 1,037 15 514 8 356 5 ... -.-,157 . .-2 70 1 2,281 - 32 2,134 31 Other operations 89 1 112 2 Continuing operations Operating profits ".Building products ' Pulp and paper Other operations $7,223 100% - $6,716 100% $ ;500. - 73% p ' . ' : :. .146 . 22 - ' 35 : 5 -391 86% 29 6 35 8 Continuing operations S 681 100% $ 455 100% $1,637 1,461 360 268 186 540 4,452 25% 22 5 4 3 8 67 909 507 445 - -225 25 13 8 7 3 - 2,111 31 119 2 $6,682 100% 379 63% 202 34 20 3 $ 601 100% $1,560 1,424 269 222 162 506 4,143 26% 24 4 4 3 8 69 S1,217 1,003 183 197 136 450 3,186 24% 20 4 4 3 9 64 647 11 449 7 450 7 191 3 - 31 1 605 429 . 437 187 29 12 8 9 4 1 1,768 29 1,687 34 129 2 130 2 $6,040 100% ' $5,003 100% $ .277.- >192% y.t S .128 66% 13 4 . 41 21 -13 ' 4 25 13 $ 303 100% $ 194 100% Salesfigures exclude intercompany sales, but income on such sales is included in operating profits. Operating profits are before income taxes, interest and general corporate expenses, unusual items, extraordinary items and cumulative effect ofaccounting change in 1982. Ojreraling profits in 1982 and 1982 /iiiir been restated ft) include restructuring charges which were previously classified as unusual items. The restatement reduced 198.1 operating profits by ill million in building pnrducts and S58 million m pulp andpaper, and reduced 1982 operating profits by S8 million in building products, S3 million in pulp andpaper, SI million m oilier operations and S12 million ingeneral corporate charges. Additional information regarding industry segments is presented in Note 6 ofthe Notes to Financial Statements. ' - Sales by Industry Segme t (Billions ofdollars) Building Produets Pulp & Paper Other Operations ; 7.2 -4.8 6.7 6.7 . ' 45 . 4.5 6.0 4.1 5.0 3.2 Operating Profits by Industry Segment (Millions ofdollars) Building lJrodu..ts Pulp & Paper Other Operations 681 500 601 379 455 391 303 277 25 2.1 2.1 1.8 1.7 194 128 202 146 .1 .1 .1 .1 .1 tat 82 83 84 85 86 SGP 0030646 41 29 I 13 1 1 25 35 35 I 13 20 1 | i 82 83 84 85 86 Operating Statistics Georgia-Pacific Corporaiioti and Subsidiaries As ofDecember 31,1986 Facilities Capacity 1986 1985 1984 1983 1982 Building Products Structural panels Softwood plywood (3/s") (m.sq.ft.) 18 Hardwood plywood (sm) (m.sq.ft.) 2 Particleboard (W) (m.sq.ft.) 4 Softboard (Vi") (m.sq.ft.) 1 Hardboard (W) (m.sq.ft.) 7 Fiberboard (-Vt") (m.sq.ft.) 1 Panelboard ('/*") (m.sq.ft.) 1 Waferboard (%") (m. sq.ft.) 1 Oriented strand board (Vs") (m.sq.ft.) 3 Lumber (m.bd.ft) 37 ?v mlding (m.bd.ft.) 3 G\ psum board (m.sq.ft.) .,... .... 9.. Ri jfing --shingles and rolls (t.squares) 5 Formaldehyde (m.lbs.) 10 Thermosetting resins (m.lbs.) 16 Distribution centers 141 4,760 373 460 250 1,183 75 300 155 690 1,854 39 2,739 8,096 1,195 2,063 4,706 4,414 335 311 425 410 241 239 349 368 75 76 248 290 139 128 525 173 1,784 1,684 8- 2,473.. ...2,495 7,361 7,789 1,233 1,188 1,805 1,650 4,443 343 381 243 361 69 311 112 96 1,650 - 2,412 7,539 i,169 . 1,527 4,430 442 400 241 346 77 299 64 51 1,603 - 2,242 5,973 1,081 1,451 3,831 444 303 226 220 63 301 22 - 1,406 - 1,681 5,363 966 1,146 Pulp and Paper Pulp (t.tons) Paper (t.tons) Corrugated packaging (m.sq.ft.) Tissue products (t.tons)" '- 271 3,955 3,699 3,292 3,332 2,976 2,648 3,290 2,999 2,824 - 2,703 2,375 2,162 30 18,224 14,572 13,703 11,880 8,427 7,680 4 471 437 432 422 422 393 Miscellaneous Facilities Building products Pulp and paper . ' Other manufacturing'operatioris Resources (as of December 31) -North American timberlands (t.acres) Owned in fee : ' ' Controlled ' Totalfor pulp/paper 16 20 ;;:;;C3 ;; r .* 13% Timber Resource Base North America (acres) Owned in Fee 4,700,000 Controlled 530,000 5,230,000 . .j 4,700 .4,760 530 480 1,920 480 4,630 530 4,630 510 sm = surface measure basis t - thousands in = millions SGP 0030647 Directors Georgia-Pacific Corporation and Subsidiaries T Marshall Hahn, Jr.1 2 Chairman and ChiefExecutive Officer; Atlanta, Georgia Willard S. Boothby.Jr.13 Managing Director, Paine Webber Incorporated; Investment Bankers; New York, New York Robert L. Clare, Jr.3.5 Partner, Shearman & Sterling; Attorneys; Neiv York, New York Robert B. Clay tor1 3 4 Chairman and ChiefExecutive Officer, Norfolk Southern Corporation; Norfolk. Virginia Harvey C. Fruehauf, Jr.1 4 " President, HCF Enh prises, Inc.; Private Investment Company; St. Clair Shores, Michigan ... - : Richard V. Giordano3 4 . Chairman and ChiefExecutive Officer, The BOC Group; London, England ^ \FrancisJungers1 ,.2 . ^ ; .... Private Business Consultant; Sunriver, Oregon F. James McDonald3 5 President and ChiefOperating Officer, General Motors Corporation; Detroit, Michigan We are saddened to report that Harold E. Sand, a ; - member ofthe Board of Directors and 1 retired exec- ,:,:.utiye^( w ,, , 'iSf98S,';at the age'6'69^ /V- Mr. Sand joined jQeorgia-Pacifii: i 11956 when fCofwhere he was pfesiderit^Thejgreafsuccess and .strength of Geq'rgiajPacific's bulling products . `Sfe JfCiHe was elected Executive Vice President-, ? * v ^/Building Products' irilSyO.andeiectedlto^the board in 1982. Robert E. McNair21 Partner, McNair Law Firm, 'P.A.; Columbia, South Carolina ~-r ' " Chauncey j. Medberry2 4 JAtf Chairman ofthe Board (retired), Bank ofAmerica N.T. &S.A. andBankamerica Corporation; Los Angeles, California Robert A. Schumacher President and ChiefOperating Officer; Darien, Connecticut - 1 Exccutnv Committee 2Audit Committee 2Stock Option Platt and Management Compensation Committee * Pittance Committee ^Nominating Committee SGP 0030648 Officers Georgia-Pacific Corporation and Subsidiaries T. Marshall Hahn, Jr. Chairman and ChiefExecutive Officer Robert A. Schumacher President and ChiefOperating Officer Harold L. Airington Executive Vice President-Building Products Ronald R Hogan Executive Vice President-Operations Conrad Schweitzer Executive Vice President-Pulp and Paper James C. Van Meter Executive Vice President and ChiefFinancial Officer J. Kermit Birchfield, Jr. Senior Vice President-Legal and Governmental Affairs George A. MacConnell Senior Vice President-Distribution Division Daniel A. Martinez Senior Vice President-Pulp and Paper Manufacturing Davis K. Mortensen Senior Vice President-Wood Products Manufacturing Glenn E. Wilson Senior Vice President-Gypsum and Roofing Division Maurice W. Kring Group Vice President-Tissue, Pulp and Paperboard J. Wayne Amy Vice President-Distribution Division, Southwest Region Joseph J. Armetta ' Vice President-Distribution Division, Midwest Region David S. Dimling . 'VCC-C " -C' -! -C.Oj'.,.. Vice President-Printing Paper Division Willie L. Duke Vice President-Eastern Wood Products Manufacturing Division , Diane Durgin Vice President-Law and Secretary Donald L. Glass Vice President-Roofing Division Stephen K. Jackson Vice President-Distribution Division Marketing and Advertising Joseph H. Joiner Vice President-Controller and Information Resources John F. McGovern Vice President-Finance Dennis D. Melstrom Vice President-Pulp and Paper Information Resources Thomas F. Mitchell Vice President-Government Affairs Dewey L. Mobley Vice President-Western Wood Products Manufacturing Division AllanJ. Nadeau Vice President-Northern Pulp and Paper Division Kelly E. Powell, Jr. . Vice President-Distribution Division, Western Region John F. Rasor - Vice President-Mid-Continent Wood Products Manufacturing Division David W. Reynolds Vice President-Human Resources Robert A. Starling , , Vice President-Distribution Division, Southeast Region Marion L. Talmadge Vice President-Executive Affairs James R. Taylor Vice President-Chemical Division Douglas A. Thom Vice President-Packaging Division Carroll T. Tolar Vice President-Engineering Michael A. Vidan Vice President-Wood Products Sales Division Michael B. Wilson - v Vice President-Sales and Marketing Consumer and _ Commercial Paper Products Wayne I. Tamblyn Treasurer SGP 0030649