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Georgia-Pacific Reports Full-Year 2004 and Fourth Quarter ResultsPerformance highlights include:
ATLANTA, Feb. 1 /PRNewswire-FirstCall/ -- Georgia-Pacific Corp. today reported full-year 2004 net income of $623 million ($2.37 diluted earnings per share), which was more than double net income of $254 million ($1.01 diluted earnings per share) for 2003. Full-year 2004 net income was $771 million ($2.93 diluted earnings per share) before $128 million in unusual items. Full-year 2003 net income was $349 million ($1.39 diluted earnings per share) before $95 million in unusual items and an accounting change (refer to "Reconciliation of Earnings Before Unusual Items" Table). Fourth quarter 2004 net income was $16 million (6 cents diluted earnings per share) compared with net income of $31 million (12 cents diluted earnings per share) for the same period of 2003. Fourth quarter 2004 net income was $134 million (51 cents diluted earnings per share) before $118 million in unusual items. Fourth quarter 2003 net income was $132 million (52 cents diluted earnings per share) before $101 million in unusual items (refer to "Reconciliation of Earnings Before Unusual Items" Table). "This has been an outstanding year for Georgia-Pacific. We've successfully implemented our consumer products strategy, posted record profits in our structural panels business and saw improving conditions in our packaging and papers businesses," said A.D. "Pete" Correll, chairman and chief executive officer of Georgia-Pacific. Full-Year 2004 Detail
Following are highlights of full-year results:
(in millions, except per share amounts)
2004 2003
Income from continuing operations $626 $324
Income from continuing operations per diluted share $2.38 $1.29
Income from continuing operations before unusual items $762 $341
Income from continuing operations before unusual items
per diluted share $2.90 $1.36
Net income (including discontinued operations) $623 $254
Net income per diluted share $2.37 $1.01
Net income before unusual items $771 $349
Net income before unusual items per diluted share $2.93 $1.39
The company normally reports on a 13-week quarter and a 52-week year. The company's 2003 fiscal fourth quarter and year had 14 weeks and 53 weeks, respectively. Net sales for the year 2004 were $19.7 billion, equal to $19.7 billion in 2003 sales. Excluding sales of the building products distribution business, which was sold in May 2004, net sales for 2004 increased $1.8 billion or 11 percent from 2003. Full-year 2004 included the following unusual items:
- A pretax charge of $159 million ($100 million after tax, or 38 cents
per diluted share) consisting of an increase of $48 million to add the
tenth year to the company's asbestos reserve, a $109 million increase
in reserves for its asbestos defense spending through 2014 (which
averages $11 million per year before tax benefits) and a net $2 million
reduction of its asbestos insurance receivables;
- A gain of $92 million ($39 million after tax, or 16 cents diluted
earnings per share) on non-strategic asset sales;
- A pretax charge of $74 million ($46 million after tax, or 18 cents
diluted loss per share) for the early extinguishment of debt;
- A pretax charge of $76 million ($47 million after tax, or 18 cents
diluted loss per share) for asset impairment and restructuring
primarily related to the Bellingham, Wash., facility which has been
sold to the Port of Bellingham; and severance and restructuring costs
at the Green Bay (Broadway) facility in Wisconsin and the South San
Francisco, Calif., packaging facility; and
- A pretax credit of $9 million ($6 million after tax, or 2 cents per
diluted share) from an increase in an insurance receivable related to
an environmental remediation site in the North America consumer
products business unit.
Income for the full year 2004 also included $123 million ($77 million after tax, or 29 cents diluted loss per share) in stock-based compensation costs. For the full year 2003, stock-based compensation was $48 million ($30 million after tax, or 12 cents diluted loss per share). For the year 2004, cash provided by operations was $1.5 billion, including $533 million in the fourth quarter. The company made capital expenditures for property, plant and equipment of $713 million during 2004, with $265 million spent in the fourth quarter. In 2003, cash provided by operations was $1.8 billion, and capital expenditures totaled $710 million. For the full year 2004, debt was reduced nearly $2 billion or 18 percent to $8.7 billion, including $217 million in the fourth quarter. Fourth Quarter 2004 Detail
Following are highlights of fourth quarter results
(in millions, except per share amounts)
4Q 2004 4Q 2003
Income from continuing operations $15 $137
Income from continuing operations per diluted share $0.06 $0.54
Income from continuing operations before unusual items $134 $132
Income from continuing operations before unusual items
per diluted share $0.51 $0.52
Net income (including discontinued operations) $16 $31
Net income per diluted share $0.06 $0.12
Net income before unusual items $134 $132
Net income before unusual items per diluted share $0.51 $0.52
Net sales for the fourth quarter 2004 were $4.5 billion and increased $130 million or 3 percent compared with the 2003 fourth quarter, excluding sales from the building products distribution business. Net sales for both quarters exclude results from the non-integrated pulp facilities, which have been sold and are reported as discontinued operations. Unusual items for the fourth quarter 2004 consisted of:
- A pretax charge of $159 million ($100 million after tax, or 38 cents
diluted earnings per share) for asbestos costs as described above;
- A pretax charge of $38 million ($23 million after tax, or 8 cents
diluted earnings per share) related to asset impairments, facility
closures and employee severance;
- A pretax charge of $21 million ($13 million after tax, or 5 cents
diluted earnings per share) related to the early extinguishment of
debt;
- A pretax gain of $13 million ($12 million after tax, or 4 cents diluted
earnings per share) from asset sales; and
- A pretax credit of $9 million ($6 million after tax, or 2 cents diluted
earnings per share) for the insurance receivable adjustment described
above.
In addition, net income for fourth quarter 2004 included $27 million ($17 million after tax, or 6 cents diluted loss per share) in stock-based compensation expense. For fourth quarter 2003, stock-based compensation expense was also $27 million ($17 million after tax, or 7 cents diluted loss per share). The quarter's results include $30 million (11 cents per share) from favorable changes in the status of tax audits and foreign tax rate changes. Details on unusual items for business unit operating profit are included in the "Reconciliation of Operating Profit Before Unusual Items" Tables at the end of the release. North America Consumer Products The North America consumer products segment includes the company's retail and commercial tissue businesses. Familiar consumer tissue brands include Quilted Northern(R), Angel Soft(R), Brawny(R), Sparkle(R), Soft 'n Gentle(R), Mardi Gras(R), So-Dri(R), Green Forest(R) and Vanity Fair(R), as well as the Dixie(R) disposable tableware business. The segment recorded full-year 2004 operating profit before unusual items of $730 million, up 19 percent compared with an operating profit before unusual items of $616 million for the previous year. Operating profit in 2004 was $698 million and included a net charge of $32 million for unusual items including severance, equipment relocation, facility sales and environmental reserve adjustments. Operating profit in 2003 was $601 million and included a net charge of $15 million for unusual items including environmental reserve adjustments, asset impairments, employee separation and machine closure costs. The segment recorded a fourth quarter 2004 operating profit before unusual items of $227 million, up 57 percent versus operating profit before unusual items of $145 million in the fourth quarter 2003. The fourth quarter 2004 operating profit was $222 million and included a net charge of $5 million for unusual items including asset impairments and environmental reserve adjustments. Fourth quarter 2003 operating profit was $167 million and included a net gain of $22 million for unusual items including asset impairments, employee separation, machine closure costs and environmental reserves. "Full-year operating profit before unusual items increased 19 percent over 2003 primarily due to the successful implementation of our strategy to improve and separate our brands, and to improve our returns," said Correll. "Gains in efficiency, improvements in distribution and product rationalization helped offset inflation. "Our progress is very encouraging and our strategy is clearly working. Compared to the fourth quarter of last year, our revenues in this segment are up 3 percent while earnings are up 57 percent." International Consumer Products The international consumer products segment markets both retail and commercial products such as bathroom and facial tissue, handkerchiefs and paper towels as well as tabletop products for foodservice in Europe and other locations. Market-leading brands include Lotus(R), Moltonel(R), Colhogar(R), Tenderly(R) and Delica(R). The segment recorded full-year 2004 operating profit before unusual items of $178 million, compared with an operating profit before unusual items of $175 million for 2003. Operating profit in 2004 was $174 million and included a net charge of $4 million for unusual items for severance costs and a fire at the company's Russian facility. Operating profit in 2003 was $160 million and included a net charge of $15 million in unusual items primarily for severance costs. The segment recorded a fourth quarter 2004 operating profit before unusual items of $42 million versus operating profit before unusual items of $52 million in the fourth quarter 2003. The fourth quarter 2004 operating profit was $39 million and included a net charge of $3 million for unusual items including severance costs. Fourth quarter 2003 operating profit was $37 million and included a net charge of $15 million of unusual items primarily for severance costs. The currency exchange rate between the U.S. dollar and the Euro benefited this year's fourth quarter results by approximately $3 million and benefited full-year 2004 results by $17 million. "Our continued cost reduction initiatives in Europe helped maintain our competitive position by offsetting lower prices and inflation," Correll said. Packaging Georgia-Pacific's packaging segment includes four containerboard manufacturing facilities and 55 converting operations. Its Color-Box subsidiary is the largest litho-laminated corrugated manufacturer in North America. The segment recorded a full-year 2004 operating profit before unusual items of $282 million, compared with an operating profit before unusual items of $277 million for the previous year. Operating profit in 2004 was $304 million and included a net gain of $22 million for unusual items for asset sales, severance and equipment relocation related to the asset sales. Full- year 2003 operating profit was $345 million and included a net gain of $68 million on asset sales, including the sale of railroad operations. The segment recorded a fourth quarter 2004 operating profit before unusual items of $72 million versus $59 million in the fourth quarter 2003. Fourth quarter 2004 operating profit was $77 million and included a pretax gain of $5 million for asset sales. The fourth quarter 2003 operating profit was $109 million and included a $50 million pretax gain on the sale of railroad operations. "Full-year 2004 operating profits in packaging were up over the same period in 2003. Increasing fiber and energy costs as well as maintenance spending were offset by improved pricing," Correll said. "Fourth quarter 2004 volume was down somewhat versus a year ago, primarily as a result of there being one week less in fourth quarter 2004." Bleached Pulp and Paper The bleached pulp and paper segment is comprised of the company's bleached board and communication papers businesses as well as its 38.9 percent minority ownership in Unisource. The segment recorded a full-year 2004 operating profit before unusual items of $26 million, compared with an operating profit before unusual items of $8 million for the previous year. Operating profit in 2004 was $51 million and included a net gain of $25 million primarily related to the sale of the company's interest in Brazilian pulp operations. The operating loss in 2003 was $48 million and included a net charge of $56 million in unusual items for asset impairment. The segment recorded a fourth quarter 2004 operating profit before unusual items of $23 million versus a loss before unusual items of $1 million in the fourth quarter 2003. In fourth quarter 2004, operating profit was $24 million and included a net gain of $1 million for a machine closure and a $4 million operating loss from the company's equity investment in Unisource. The fourth quarter 2003 operating loss was $8 million and included a net charge of $7 million primarily for a machine closure, and a $4 million operating loss from the equity investment in Unisource. "Year over year, we've executed a solid turn-around in these businesses with price increases and cost reduction initiatives across all grades," Correll said. Building Products Manufacturing The building products manufacturing segment includes the company's structural panels, gypsum, lumber, industrial wood products and chemical manufacturing businesses. The segment recorded a full-year 2004 operating profit before unusual items of $1.01 billion, compared with an operating profit before unusual items of $418 million for the previous year. Operating profit in 2004 was $997 million and included a net charge of $14 million for unusual items including facility sales, closures and severance costs. Operating profit in 2003 was $378 million and included a net charge of $40 million for unusual items primarily for asset impairments, employee separation and facility closure costs. The segment recorded a fourth quarter 2004 operating profit before unusual items of $101 million versus operating profit before unusual items of $206 million in the fourth quarter 2003. Fourth quarter 2004 operating profit was $86 million and included a net charge of $15 million for unusual items including asset impairments. Fourth quarter 2003 operating profit was $200 million and included a net charge of $6 million primarily for asset impairments and facility closure costs. "Strong demand drove record profits in structural panels and resulted in the second highest year of profits for our building products business. Plywood and oriented strand board prices were up 23 percent and 28 percent from 2003, while lumber prices were up 15 percent," Correll said. "Housing permits for October and November averaged 15 percent higher than the same period in 2003, indicating that residential demand remains strong along with improving commercial conditions." Building Products Distribution In May 2004, Georgia-Pacific finalized the previously announced sale of its building products distribution business to BlueLinx Holdings, Inc. In connection with the sale, Georgia-Pacific entered into a six-year agreement with this company to continue to sell it structural panels, lumber and other building products manufactured by Georgia-Pacific. The building products distribution business reported an operating profit of $111 million through the May 7 sale date, compared with $98 million for the full year in 2003. Other The company's Other segment primarily includes unallocated corporate expenses and the elimination of intersegment profit. For the year 2004, this segment reported a loss before unusual items of $480 million compared with a loss before unusual items of $315 million for the same period of 2003. The operating loss in 2004 was $711 million and included total pretax charges of $231 million for unusual items including additions to the company's asbestos reserves, the early extinguishment of debt and gains on asset sales. The operating loss in 2003 was $282 million and included a $33 million credit for unusual items primarily for litigation, monetization of a portion of the asbestos insurance receivable and pension settlement costs. The segment also experienced higher costs for stock-based compensation, incentive compensation, information technology, and employee and retiree benefits. The segment reported a fourth-quarter 2004 operating loss before unusual items of $149 million compared with a loss before unusual items of $102 million for the same period of 2003. The fourth quarter 2004 operating loss was $329 million and included pretax charges of $180 million of unusual items for additions to the company's asbestos reserves and the early extinguishment of debt. The fourth quarter 2003 operating loss was $137 million and included $35 million of unusual items for pretax charges for asbestos costs, net of anticipated insurance recoveries, litigation settlement costs and costs to monetize a portion of its asbestos insurance receivable. The segment also experienced higher costs related to incentive compensation, information technology and foreign currency translation. Discontinued Operations In May, the company finalized the sale of its non-integrated pulp operations. These operations reported net losses of $3 million through the May 7 sale date in 2004 and $98 million for the full year 2003. The fourth quarter 2003 net loss was $106 million due to a goodwill impairment charge. Summary "We are very pleased with our 2004 results. In 2005 we will continue to deliver on our promise to improve our financial strength and flexibility, and increase value for our shareholders by reducing debt, maximizing cash flow and improving returns on capital," Correll concluded. Headquartered at Atlanta, Georgia-Pacific is one of the world's leading manufacturers and marketers of tissue, packaging, paper, building products and related chemicals. With 2004 annual sales of approximately $20 billion, the company employs approximately 55,000 people at 300 locations in North America and Europe. Its familiar consumer tissue brands include Quilted Northern(R), Angel Soft(R), Brawny(R), Sparkle(R), Soft 'n Gentle(R), Mardi Gras(R), So- Dri(R), Green Forest(R) and Vanity Fair(R), as well as the Dixie(R) brand of disposable cups, plates and cutlery. Georgia-Pacific's building products business has long been among the nation's leading suppliers of building products to lumber and building materials dealers and large do-it-yourself warehouse retailers. For more information, visit http://www.gp.com/ . Certain statements contained in this release, that are not reported financial results or other historical information, including statements regarding the company's expected business outlook, anticipated levels of demand and pricing, and future economic and industry conditions are forward- looking statements (as such term is defined under the federal securities laws), are based on current expectations, and are subject to risks and uncertainties. Actual results could differ materially as a result of factors including, but not limited to, the effect of general economic conditions on the demand for consumer products, building products, and pulp and paper, the corresponding level of demand for and cost of wood fiber, wastepaper, energy and other costs, the effect of changes in the productive capacity of manufacturers of competitive products, unanticipated expenditures with respect to environmental, safety and health laws, the current military action in Iraq and the continuing war on terrorism, as well as actions taken or to be taken by the United States or other governments as a result of further acts or threats of terrorism, and other factors listed in Georgia-Pacific Corporation's Securities and Exchange Commission filings, including its report on Form 10-Q for the fiscal quarter ended Oct. 2, 2004. The accuracy of statements relating to the company's asbestos liabilities and defense costs is also subject to a number of risks, uncertainties and assumptions, including the rate at which new asbestos claims will be filed, the cost of defending and resolving pending and future claims, the occurrence of various types of diseases among the general population, the continued solvency of insurance companies which wrote product liability policies for Georgia-Pacific, the applicability to Georgia-Pacific of court decisions involving other companies which establish precedents for the allocation and payment of insurance coverages, and other factors. A tabulation of results follows:
GEORGIA-PACIFIC CORPORATION
Operating Highlights
(In millions, except per share amounts)
(Unaudited)
Fourth Quarter
2004 2003
NET SALES
North America consumer products $1,449 $1,403
International consumer products 523 497
Packaging 770 713
Bleached pulp and paper 563 523
Building products manufacturing 1,550 1,634
Building products distribution - 1,173
Other (1) (350) (733)
Total net sales $4,505 $5,210
OPERATING PROFIT (LOSS)
North America consumer products $222 $167
International consumer products 39 37
Packaging 77 109
Bleached pulp and paper 24 (8)
Building products manufacturing 86 200
Building products distribution - 22
Other (329) (137)
Total operating income 119 390
Interest expense (159) (213)
(Loss) income from continuing operations
before income taxes (40) 177
Provision for income taxes 55 (40)
Income from continuing operations, net of taxes 15 137
Income(loss) from discontinued
operations, net of taxes 1 (106)
Net income $16 $31
Basic per share:
Income from continuing operations, net of taxes $0.06 $0.55
Loss from discontinued operations, net of taxes - (0.43)
Net income $0.06 $0.12
Diluted per share:
Income from continuing operations, net of taxes $0.06 $0.54
Loss from discontinued operations, net of taxes - (0.42)
Net income $0.06 $0.12
Average number of shares outstanding:
Basic 256.4 251.2
Diluted 263.7 254.0
(1) Primarily intersegment sales elimination.
GEORGIA-PACIFIC CORPORATION
Operating Highlights
(In millions, except per share amounts)
(Unaudited)
Fiscal Year Ended
2004 2003
NET SALES
North America consumer products $5,656 $5,434
International consumer products 2,072 1,941
Packaging 2,968 2,787
Bleached pulp and paper 2,230 2,053
Building products manufacturing 6,892 5,885
Building products distribution 1,886 4,266
Other (1) (2,048) (2,710)
Total net sales $19,656 $19,656
OPERATING PROFIT (LOSS)
North America consumer products $698 $601
International consumer products 174 160
Packaging 304 345
Bleached pulp and paper 51 (48)
Building products manufacturing 997 378
Building products distribution 111 98
Other (711) (282)
Total operating income 1,624 1,252
Interest expense (701) (819)
Income from continuing operations
before income taxes 923 433
Provision for income taxes (297) (109)
Income from continuing operations, net of taxes 626 324
Loss from discontinued operations, net of taxes (3) (98)
Income before accounting change 623 226
Cumulative effect of accounting
change, net of taxes - 28
Net income $623 $254
Basic per share:
Income from continuing operations, net of taxes $2.45 $1.29
Loss from discontinued operations, net of taxes (0.01) (0.39)
Income before accounting change 2.44 0.90
Cumulative effect of accounting
change, net of taxes - 0.11
Net income $2.44 $1.01
Diluted per share:
Income from continuing operations, net of taxes $2.38 $1.29
Loss from discontinued operations, net of taxes (0.01) (0.39)
Income before accounting change 2.37 0.90
Cumulative effect of accounting
change, net of taxes - 0.11
Net income $2.37 $1.01
Average number of shares outstanding:
Basic 255.3 250.4
Diluted 262.8 251.4
(1) Primarily intersegment sales elimination.
GEORGIA-PACIFIC CORPORATION
Reconciliation of Earnings Before Unusual Items
(In millions, except per share amounts)
(unaudited)
Fourth Quarter 2004 Fourth Quarter 2003
Income Income Income Loss
from from from from
contin- discon- contin- discon-
uing tinued uing tinued
opera- opera- Diluted opera- opera- Diluted
tions, tions, earnings tions, tions, earnings
net of net of Net per net of net of Net per
taxes taxes income share taxes taxes income share
Income (loss) as
reported (GAAP
earnings) $15 $1 $16 $0.06 $137 $(106) $31 $0.12
Loss on early
extinguishment
of debt 13 - 13 0.05 - - - -
Increase in net
asbestos indemnity
liability 31 - 31 0.12 10 - 10 0.04
Increase in asbestos
defense liability 69 - 69 0.26 - - - -
Change in environmental
liabilities,
net of insurance
receivables (6) - (6) (0.02) (42) - (42) (0.17)
Gain on asset sales,
net (11) (1) (12) (0.04) (30) - (30) (0.12)
Pulp goodwill
impairment - - - - - 106 106 0.42
Asset impairments,
severance costs
and other 23 - 23 0.08 57 - 57 0.23
Income before
unusual items $134 $- $134 $0.51 $132 $- $132 $0.52
Income before unusual items and accounting change is net income reported
under generally accepted accounting principles ("GAAP") excluding the
after tax effect of items considered by management to be unusual, along
with the after tax effect of adopting new accounting standards. We believe
that this measure emphasizes our core ongoing operations and that it is
useful to investors enabling them to perform meaningful comparisons of
past and present operating results. We believe that using this information
along with net income provides for a more complete analysis of results of
operations. Net income is the most directly comparable GAAP measure.
GEORGIA-PACIFIC CORPORATION
Reconciliation of Earnings Before Unusual Items and Accounting Change
(In millions, except per share amounts)
(unaudited)
Fiscal Year Ended 2004 Fiscal Year Ended 2003
(Loss) (Loss)
Income income Income income
from from from from
contin- discon- contin- discon-
uing tinued Diluted uing tinued Diluted
opera- opera- earnings opera- opera- earnings
tions, tions, (loss) tions, tions, (loss)
net of net of Net per net of net of Net per
taxes taxes income share taxes taxes income share
Income (loss)
as reported
(GAAP
earnings) $626 $(3) $623 $2.37 $324 $(98) $254 $1.01
Loss on early
extinguish-
ment of debt 46 - 46 0.18 - - - -
Increase
(decrease)
in net
asbestos
indemnity
liability 31 - 31 0.12 (64) - (64) (0.25)
Increase in
asbestos
defense
liability 69 - 69 0.26 - - - -
Change in
environmental
liabilities,
net of
insurance
receivables (6) - (6) (0.02) (42) - (42) (0.17)
(Gain) loss
on asset
sales, net (51) 12 (39) (0.16) (41) - (41) (0.16)
Pulp goodwill
impairment - - - - - 106 106 0.42
Asset impair-
ments,
severance
costs and
other 47 - 47 0.18 164 - 164 0.65
Accounting
change - - - - - - (28) (0.11)
Income before
unusual items
and accounting
change $762 $9 $771 $2.93 $341 $8 $349 $1.39
GEORGIA-PACIFIC CORPORATION
Reconciliation of Operating Profit Before Unusual Items
(In millions)
(unaudited)
Fourth Quarter 2004
N. A. Int'l Bleached Building Building
Consu- Consu- Pack- Pulp & Products Products
mer mer aging Paper Mfg. Dist. Other Total
Operating
profit (loss)
as reported $222 $39 $77 $24 $86 $- $(329) $119
Unusual items:
Loss on early
extinguish-
ment of debt - - - - - - 21 21
Increase in
net asbestos
liability - - - - - - 159 159
Change in
environmental
liabilities,
net of
insurance
receivables (9) - - - - - - (9)
Gain on asset
sales, net (5) - (7) - - - - (12)
Asset
impairments,
severance
costs and
other 19 3 2 (1) 15 - - 38
Total unusual
items 5 3 (5) (1) 15 - 180 197
Operating profit
(loss)
excluding
unusual
items $227 $42 $72 $23 $101 $- $(149) $316
Fourth Quarter 2003
N. A. Int'l Bleached Building Building
Consu- Consu- Pack- Pulp & Products Products
mer mer aging Paper Mfg. Dist. Other Total
Operating
profit (loss)
as reported $167 $37 $109 $(8) $200 $22 $(137) $390
Unusual items:
Increase in
net asbestos
liability - - - - - - 16 16
Change in
environmental
liabilities,
net of
insurance
receivables (66) - - - - - - (66)
Gain on asset
sales, net - - (50) - - - - (50)
Asset
impairments,
severance
costs and
other 44 15 - 7 6 - 19 91
Total unusual
items (22) 15 (50) 7 6 - 35 (9)
Operating
profit
(loss)
excluding
unusual items $145 $52 $59 $(1) $206 $22 $(102) $381
Operating profit before unusual items is operating profit reported under
generally accepted accounting principles ("GAAP") excluding the pre-tax
effect of items considered by management to be unusual. We believe that
this measure emphasizes our core ongoing operations and that it is useful
to investors enabling them to perform meaningful comparisons of past and
present operating results. We believe that using this information along
with operating profit provides for a more complete analysis of results of
operations. Operating profit is the most directly comparable GAAP measure.
GEORGIA-PACIFIC CORPORATION
Reconciliation of Operating Profit Before Unusual Items
(In millions)
(unaudited)
Fiscal Year Ended 2004
N. A. Int'l Bleached Building Building
Consu- Consu- Pack- Pulp & Products Products
mer mer aging Paper Mfg. Dist. Other Total
Operating
profit (loss)
as reported $698 $174 $304 $51 $997 $111 $(711) $1,624
Unusual items:
Loss on early
extinguish-
ment of
debt - - - - - - 74 74
Increase
in net
asbestos
liability - - - - - - 159 159
Change in
environmental
liabilities,
net of
insurance
receivables (9) - - - - - - (9)
Gain on asset
sales, net (5) - (30) (24) (5) (20) (2) (86)
Asset
impairments,
severance
costs and
other 46 4 8 (1) 19 - - 76
Total unusual
items 32 4 (22) (25) 14 (20) 231 214
Operating profit
(loss)
excluding
unusual
items $730 $178 $282 $26 $1,011 $91 $(480) $1,838
Fiscal Year Ended 2003
N. A. Int'l Bleached Building Building
Consu- Consu- Pack- Pulp & Products Products
mer mer aging Paper Mfg. Dist. Other Total
Operating
profit (loss)
as reported $601 $160 $345 $(48) $378 $98 $(282) $1,252
Unusual items:
Increase
(decrease)
in net
asbestos
liability - - - - - - (102) (102)
Change in
environmental
liabilities,
net of
insurance
receivables (66) - - - - - - (66)
Gain on asset
sales, net - - (68) - - - - (68)
Asset
impairments,
severance
costs
and other 81 15 - 56 40 - 69 261
Total unusual
items 15 15 (68) 56 40 - (33) 25
Operating profit
(loss)
excluding
unusual
items $616 $175 $277 $8 $418 $98 $(315) $1,277
Notes to Operating Highlights
1. During the fourth quarter of 2004 the company recorded a pretax
asbestos-related charge of $159 million ($100 million after tax)
consisting of an increase of $48 million pretax for the tenth year of
the company's asbestos reserves, a $109 million pretax increase in
reserves for its asbestos defense spending through 2014 and a net
$2 million pretax reduction of its asbestos insurance receivables.
2. During the fourth quarter of 2004, the company recorded a pretax
charge of $38 million ($23 million after tax) primarily for asset
impairments, employee separation and machine closure costs.
3. During the fourth quarter of 2004, the company called $250 million of
its 8.25% debentures due March 1, 2023, and $250 million of its 8.125%
debentures due June 15, 2023. In conjunction with these transactions,
the company recorded a pretax charge of $21 million for call premiums
and to write off deferred debt issuance costs.
4. During the fourth quarter of 2004, the company sold certain packaging
assets and a warehouse, and recognized a pretax gain of $12 million.
5. During the fourth quarter of 2004, the company recorded a pretax
credit of $9 million ($6 million after tax) in its North America
consumer products segment for an adjustment to an insurance receivable
related to an environmental reserve.
6. On May 7, 2004, the company completed the sale of its building
products distribution segment to BlueLinx Holdings, Inc., for
$767 million in cash and a receivable of $51 million, primarily
related to working capital. In addition, the company received
$173 million in cash in June to settle an intercompany payable related
to product sold to the building products distribution business prior
to closing. This transaction resulted in a pretax gain of
$20 million, $13 million of which was recorded in the third quarter
and was a result of the final working capital adjustment.
7. On May 7, 2004, the company completed the sale of its non-integrated
pulp mills at Brunswick, Ga., and New Augusta, Miss., along with a
short-line railroad, to Koch Cellulose, LLC, ("Koch") and its
subsidiaries for $511 million in cash and a receivable of
approximately $9 million for working capital. In addition, Koch
assumed $73 million of indebtedness. This transaction resulted in a
pretax gain of $5 million and an after-tax loss of $13 million that
was included in discontinued operations on the statements of
operations. The working capital receivable of $9 million was received
in October 2004.
8. During the second quarter of 2004, the company sold all of its
interests in a Brazilian pulp business for $71 million. This
transaction resulted in a pretax gain of $24 million.
9. During the second quarter of 2004, the company sold certain packaging
assets and an aircraft and recognized a pretax gain of $26 million.
10. On July 2, 2004, the company entered into a new $2.5 billion, five-
year, senior unsecured credit facility that includes a $500 million
unamortizing term loan. As a result of the new credit facility, the
company recorded a pretax charge of approximately $3 million during
the second quarter of 2004 to write off deferred debt issuance costs.
11. During the first quarter of 2004, the company called $243 million of
its 9.875% debentures due Nov. 1, 2021, and $250 million of its 9.625%
debentures due March 15, 2022. During the second quarter of 2004, the
company called $250 million of its 9.5% debentures due May 15, 2022
and $240 million of its 9.125% debentures due July 1, 2022. In
conjunction with these transactions, the company recorded a pretax
charge of $50 million for call premiums and to write off deferred debt
issuance costs during the first six months of 2004.
12. The company's fiscal fourth quarter and year ends on the Saturday
closest to December 31. Typically, the company's fiscal fourth
quarter and year consists of 13 weeks and 52 weeks, respectively,
ending on Saturday. However, because the 2003 fiscal fourth quarter
and year ended on January 3, 2004, the company's 2003 fiscal fourth
quarter and year had 14 weeks and 53 weeks, respectively.
13. During the fourth quarter of 2003, the company recorded a pretax
credit of $66 million ($42 million after tax) in its North America
consumer products segment for an adjustment to an environmental
reserve.
14. In December 2003, the company recorded a one-time gain of $50 million
($30 million after tax) from the sale of most of its short-line
railroad operations for $56 million in cash. During the second quarter
of 2003, the company sold certain packaging assets and recorded a
pretax gain of $18 million in its packaging segment. These gains were
reflected in the packaging segment.
15. During the fourth quarter of 2003, the company recorded a pretax
charge of $16 million ($10 million after tax) for adding an additional
year to our 10-year reserve for asbestos liabilities and defense
costs, net of insurance receivables. In the third quarter of 2003, the
company reached agreements with two insurers of our asbestos
liabilities that resulted in an increase in the amount of insurance
receivable through 2012 by $118 million. These amounts were reflected
in the operating results of the Other segment.
16. During the fourth quarter of 2003, the company recorded a pretax
charge of $91 million ($57 million after tax) primarily for asset
impairments, employee separation and machine closure costs.
17. In September 2003, the company reached an agreement to settle a class
action lawsuit filed against Georgia-Pacific and other manufacturers
of containerboard, and recorded a charge of $21 million in the Other
segment to accrue for this settlement.
18. On April 4, 2003, the company announced the closure of tissue
manufacturing and converting operations at its Old Town, Maine, mill.
In connection with this closure, the company determined that the value
of related tissue assets and certain pulp assets at this location was
impaired. Accordingly, in the first quarter of 2003, the company
recorded a pretax impairment charge to earnings in the North America
consumer products segment and bleached pulp and paper segment of
$25 million and $49 million, respectively. In the second quarter of
2003, the company recorded a pretax charge of $11 million for related
severance and business exit costs.
19. On Dec. 29, 2002, the company adopted Statement of Financial
Accounting Standards No. 143, "Accounting for Asset Retirement
Obligations" (SFAS No. 143). SFAS No. 143 requires that entities
record the fair value of an asset retirement obligation in the period
in which it was incurred. The cumulative effect of adopting SFAS No.
143 was an after-tax credit of $28 million effective at the beginning
of 2003. Effective Dec. 29, 2002, the company also adopted
SFAS No. 148, "Accounting for Stock-Based Compensation - Transition
and Disclosure" (SFAS No. 148), an amendment of SFAS No. 123. The
impact on compensation expense recognized in 2003 relating to the 2003
stock option awards was a reduction to expense of approximately
$2 million.
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