-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, nJIhEz8Sz21v6ZNMSajv2wfLBVvVO6oRnmtF0Mbv9yQa1x1wSg4gLco8TXDOpm0Z KrC9OIf8d0kdYcgEjYROyg== 0000950130-94-000536.txt : 19940331 0000950130-94-000536.hdr.sgml : 19940331 ACCESSION NUMBER: 0000950130-94-000536 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHAMPION INTERNATIONAL CORP CENTRAL INDEX KEY: 0000019150 STANDARD INDUSTRIAL CLASSIFICATION: 2621 IRS NUMBER: 131427390 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-03053 FILM NUMBER: 94518993 BUSINESS ADDRESS: STREET 1: ONE CHAMPION PLAZA CITY: STAMFORD STATE: CT ZIP: 06921 BUSINESS PHONE: 2033587000 FORMER COMPANY: FORMER CONFORMED NAME: UNITED STATES PLYWOOD CHAMPION PAPERS IN DATE OF NAME CHANGE: 19720821 10-K 1 FORM 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 10-K ---------------- (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NO. 1-3053 CHAMPION INTERNATIONAL CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) NEW YORK 13-1427390 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) 06921 ONE CHAMPION PLAZA, STAMFORD, (ZIP CODE) CONNECTICUT (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 358-7000 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- ----------------------- COMMON STOCK, $.50 PAR VALUE NEW YORK STOCK EXCHANGE (92,959,357 SHARES OUTSTANDING ON FEBRUARY 28, 1994) 4 7/8% CONVERTIBLE SUBORDINATED NEW YORK STOCK EXCHANGE DEBENTURES DUE APRIL 1, 1997 6 1/2% CONVERTIBLE SUBORDINATED NEW YORK STOCK EXCHANGE DEBENTURES DUE APRIL 15, 2011
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X . NO . INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [X] THE AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT AS OF FEBRUARY 28, 1994 WAS APPROXIMATELY $3,224,000,000. PORTIONS OF THE REGISTRANT'S ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 ARE INCORPORATED BY REFERENCE IN PARTS I, II AND IV HEREOF. PORTIONS OF THE REGISTRANT'S DEFINITIVE PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS SCHEDULED TO BE HELD ON MAY 19, 1994 ARE INCORPORATED BY REFERENCE IN PART III HEREOF; SAID DEFINITIVE PROXY STATEMENT WILL BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WITHIN 120 DAYS AFTER THE CLOSE OF THE FISCAL YEAR ENDED DECEMBER 31, 1993. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS GENERAL Champion International Corporation was incorporated under the laws of the State of New York on April 28, 1937. References to the "Company" include Champion International Corporation and its subsidiaries at December 31, 1993, unless the context otherwise requires. The Company is one of the leading domestic manufacturers of paper for business communications, commercial printing, publications and newspapers. In addition, the Company has significant plywood and lumber manufacturing operations and owns or controls approximately 5,072,000 acres of timberlands in the United States. The Company's Canadian and Brazilian subsidiaries also own or control significant timber resources supporting their operations. The Company's business segments are paper and wood products. See Note 13 of Notes to Financial Statements on pages 37 and 38 of the Company's Annual Report to Shareholders for the fiscal year ended December 31, 1993 (the "Company's 1993 Annual Report"), which Note is incorporated by reference herein, for information concerning the Company's business segments and operations in different geographic areas for 1991, 1992 and 1993. PAPER See the Net Sales table on page 18 of the Company's 1993 Annual Report, which table is incorporated by reference herein, for information concerning the net sales to unaffiliated customers of the various products of the paper business for 1991, 1992 and 1993. PRINTING AND WRITING PAPERS The printing and writing papers business manufactures and sells printing and writing papers, bleached paperboard and pulp. The principal domestic manufacturing properties of this operation consist of integrated pulp and paper mills at Courtland, Alabama; Canton, North Carolina; and Pensacola, Florida; and a paper mill at Hamilton, Ohio. As of December 31, 1993, these mills had an annual capacity of approximately 1,846,000 tons of pulp and 2,066,000 tons of printing and writing papers and bleached paperboard. Most of the pulp produced by the printing and writing papers business is used in its own paper mills; approximately 14%, produced at the Pensacola and Courtland mills, was sold in the open market in 1993. A portion of the fiber requirements of this business also is supplied by other Company pulp mills, and approximately 4% of its fiber requirements in 1993 were purchased from third- party suppliers. Uncoated papers produced by the printing and writing papers business are used for computer forms, copier paper and envelope papers. Coated papers are used in catalogs, magazines, brochures, labels and annual reports. In 1993, 63% of this operation's bleached paperboard production was used by the Company's DairyPak unit, which converts polyethylene-coated paperboard into milk and juice cartons and ovenable packaging. The balance either was sold to independent purchasers, primarily for conversion to cups, or was exported. The Company leases substantial portions of the Courtland mill under 10 long- term net leases which expire between 1997 and 2029. Each of these leases provides for rental payments over its term sufficient to pay interest on and to retire the industrial development or pollution control revenue bonds issued in connection with the financing of the property subject to such lease. The Company is required to purchase, or has the option to purchase, the property subject to each such lease for a nominal sum at the time the related bonds are retired. 1 The domestic printing and writing papers business and the publication papers business jointly maintain 11 sales offices in various parts of the United States, as well as an order services office in Hamilton, Ohio, for the sale of their products to direct purchasers and through paper merchants. Certain of these sales offices are shared with the newsprint and kraft operations. Champion Papel e Celulose Ltda., a 99%-owned subsidiary ("Champion Papel"), is a major integrated manufacturer of pulp and printing and writing papers in Brazil with net sales to unaffiliated customers of (U.S.) $272,498,000 in 1993. As of December 31, 1993, this mill had an annual capacity of approximately 334,000 tons of pulp and 373,000 tons of paper. In addition to being a leading supplier of printing and writing papers in Brazil, Champion Papel exports a substantial portion of its paper production. PUBLICATION PAPERS The publication papers business manufactures and sells coated and uncoated publication papers and pulp. The manufacturing properties of this operation consist of integrated pulp and paper mills at Bucksport, Maine; Deferiet, New York; Quinnesec, Michigan; and Sartell, Minnesota. As of December 31, 1993, these mills had an annual capacity of approximately 810,000 tons of pulp and 1,250,000 tons of publication papers. A significant portion of the fiber requirements of the publication papers business is supplied by its own mills. In addition, a portion of its fiber requirements is supplied by other Company pulp mills, and approximately 26% of its fiber requirements in 1993 were purchased from third-party suppliers. The Company manufactures pulp for sale in the open market at the Quinnesec mill. In 1993, approximately 60% of the pulp production of this mill, or 215,000 tons, was sold in the open market through the Company's headquarters in Stamford, Connecticut, as well as a sales office in Appleton, Wisconsin. The balance was used in the production of paper at the Quinnesec mill and at the Company's printing and writing papers mills. The Company's publication papers are used primarily for consumer magazines, direct mail catalogs, directories, textbooks and coupons. Sales are made to direct purchasers and through paper merchants and brokers from the 11 sales offices jointly maintained by the publication papers operation and the printing and writing papers operation, and from the Hamilton, Ohio order services office. The Company leases the building which houses one of the paper machines at the Sartell mill until 2008. Thereafter, the Company has options to renew the lease for five terms of five years each. The Company also has the option to purchase the building at its then-current market value at the end of the initial term in 2008 or at the end of each five-year renewal term. The Company leases certain water pollution control facilities at the Deferiet mill until November 30, 1994. The lease provides for rental payments over its term sufficient to pay interest on and to retire the tax-exempt bonds (in the original principal amount of $7 million) issued to finance the acquisition of those facilities. The Company has the option to purchase the facilities for a nominal sum at the time the bonds are retired. NEWSPRINT The newsprint business manufactures pulp and manufactures and sells newsprint, directory paper and groundwood specialties. The manufacturing properties of this operation consist of integrated pulp and paper mills at Lufkin and Sheldon, Texas. As of December 31, 1993, these mills had an annual capacity of approximately 1,191,000 tons of pulp (which includes 150,000 tons of recycled pulp) and 952,000 tons of newsprint, directory paper and groundwood specialties. Virtually all of the newsprint operation's pulp production is used in its own paper mills; approximately 2% was sold in the open market in 1993. 2 Most of the newsprint produced by the Company is sold in the Southwest, Southeast and Midwest. In general, sales are made directly to publishers and printers through four sales offices, three of which are shared with the printing and writing papers and publication papers operations, and one order services office. PULP For information concerning market pulp produced at the Pensacola and Courtland mills, see the section captioned Printing and Writing Papers above, and for information concerning market pulp produced at the Quinnesec mill, see the section captioned Publication Papers above. Weldwood of Canada Limited, a Canadian subsidiary in which the Company has approximately 85% ownership ("Weldwood"), manufactures bleached softwood kraft pulp at its mill in Hinton, Alberta, Canada. As of December 31, 1993, this mill had an annual capacity of approximately 424,000 tons. In 1993, approximately 29% of the mill's pulp production was used in the Company's own publication papers and printing and writing papers mills. The balance was sold in the open market through the Company's headquarters in Stamford, Connecticut, a Company sales office in Appleton, Wisconsin and a Weldwood sales office in Bad Homburg, Germany. Cariboo Pulp & Paper Company, a joint venture owned equally by Weldwood and Daishowa-Marubeni International Limited, operates a bleached softwood kraft pulp mill in Quesnel, British Columbia, Canada. As of December 31, 1993, this mill had an annual capacity of approximately 340,000 tons. In 1993, approximately 13% of Weldwood's 50% share of the mill's pulp production was used in the Company's own publication papers and printing and writing papers mills. The balance of Weldwood's share was sold in the open market through the Company's headquarters in Stamford, Connecticut, a Company sales office in Appleton, Wisconsin and a Weldwood sales office in Bad Homburg, Germany. While certain of the Company's mills purchase pulp in the open market, the Company and Weldwood overall are net sellers of pulp. In 1993, the Company and Weldwood in the aggregate produced approximately 855,000 tons of pulp for sale to unaffiliated purchasers, while the Company used approximately 314,000 tons of pulp purchased from third-party suppliers, resulting in net market pulp of approximately 541,000 tons. KRAFT The Company produces pulp, unbleached linerboard and kraft paper for multiwall and grocery bags at its mill in Roanoke Rapids, North Carolina. As of December 31, 1993, this mill had an annual capacity to produce approximately 489,000 tons of pulp, 402,000 tons of linerboard and 105,000 tons of kraft paper. All of this mill's pulp production is used at the mill. In addition, approximately 7% of its fiber requirements in 1993 were purchased from third- party suppliers. The linerboard and kraft paper produced at the Roanoke Rapids mill are sold to converters through three sales offices, two of which are shared with the printing and writing papers and publication papers operations, and one order services office. PAPER DISTRIBUTION OPERATION Nationwide Papers is the Company's wholly owned distributor of paper and paper products. Its marketing operations are carried out through 28 wholesale warehouse facilities in 18 states. In addition, Nationwide Papers operates a facility which converts rolls of bleached paperboard into sheets for sale to textile, furniture and tobacco producers. In 1993, approximately 75% of its sales were attributable to merchandise purchased from numerous manufacturers other than the Company. However, Nationwide Papers is not dependent on any single supplier for such merchandise. 3 WOOD PRODUCTS The Company is a major producer of plywood and lumber. The Company's wood products business is conducted through its domestic wood products operations and through the wood products operations of Weldwood. The principal wood products manufacturing facilities operated by the Company and by Weldwood are summarized under Item 2 of this Report. As of December 31, 1993, the Company had approximate annual capacities of 813 million square feet (3/8" basis) of softwood plywood and 497 million board feet of softwood lumber. As of December 31, 1993, Weldwood had approximate annual capacities of 450 million square feet (3/8" basis) of plywood (principally softwood), 927 million board feet of softwood lumber and 160 million square feet (3/8" basis) of waferboard. The Company sells lumber and plywood through four sales offices to wholesalers, dealers, industrial users and retailers. Weldwood sells wood products within Canada through a 50%-owned building materials distribution company which serves all major markets in that country. In addition, Weldwood exports substantial portions of its products directly. In 1993, Weldwood had net sales to unaffiliated customers of (U.S.) $610,947,000, of which (U.S.) $500,905,000 was attributable to the wood products portion of its business. See the Net Sales table on page 20 of the Company's 1993 Annual Report, which table is incorporated by reference herein, for information concerning the net sales to unaffiliated customers of the various products of the wood products business for 1991, 1992 and 1993. TIMBER PROPERTIES The Company owns 4,431,360 acres and controls 640,638 acres of timberlands in the United States. The Company's owned and controlled timberlands contain in the aggregate approximately 17,796,000 cunits (one cunit equals one hundred cubic feet of solid wood) of merchantable sawtimber and approximately 34,686,000 cunits of pulpwood. In 1993, the Company harvested approximately 36% of its domestic fiber requirements from its owned and controlled timberlands. A portion of the fiber harvested by the Company is sold in the domestic open market and in the export market. Broken down by region, the Company's domestic timber acreage and volume are as follows: The Company owns 296,862 acres and controls 3,158 acres of timberlands in the West, primarily in Washington. These timberlands contain in the aggregate approximately 8,216,000 cunits of merchantable sawtimber and approximately 706,000 cunits of pulpwood. In the South, primarily in Texas, North Carolina, South Carolina, Alabama, Georgia, Florida, Tennessee and Virginia, the Company owns 2,530,471 acres and controls 630,077 acres of timberlands containing in the aggregate approximately 4,963,000 cunits of merchantable sawtimber and approximately 20,033,000 cunits of pulpwood. The Company owns 1,604,027 acres and controls 7,403 acres of timberlands in the North, primarily in Maine, Michigan, New Hampshire, New York and Vermont. These timberlands contain in the aggregate approximately 4,617,000 cunits of merchantable sawtimber and approximately 13,947,000 cunits of pulpwood. The Company's domestic log and pulpwood requirements are procured from its owned and controlled lands, as described above, as well as from open market purchases, short-term timber purchase contracts with independent timber owners and agencies of the United States and various state governments, and supply agreements with other companies. In the opinion of management, these sources will provide an adequate supply of logs and pulpwood to meet the Company's principal raw materials requirements for the foreseeable future. It is expected that the proportion of fiber derived from the Company's owned and controlled lands will decline until the middle to late 1990s but will increase thereafter as more of the Company's plantations, primarily in the South, reach maturity. Supplementing the Company's domestic timberlands are its several seed orchards and nursery operations. These facilities will enable the Company to produce most of the trees which it plans to plant in the United States in the future, including the approximately 60 million trees planned for planting in 1994. Weldwood obtains raw materials for its wood products manufacturing operations from Weldwood fee-owned timberlands (which at December 31, 1993 totaled approximately 41,800 acres); from sustained-yield, long-term 4 licenses which grant cutting rights on government-owned timberlands; and from long-term agreements with other companies based on their harvesting licenses. Weldwood's fee-owned timberlands contain approximately 81,000 cunits of merchantable sawtimber. Weldwood has rights to harvest approximately 936,000 cunits of merchantable sawtimber from long-term licenses annually and, during the balance of the current terms of such licenses, has rights to harvest an aggregate of approximately 11,000,000 cunits. In addition, Weldwood has rights to obtain approximately 119,000 cunits of merchantable sawtimber on an annual basis from supply agreements with other companies. Weldwood believes that these sources will provide a substantial portion of the raw materials required by its wood products manufacturing operations for the foreseeable future, with the balance to be obtained from other third-party suppliers. In addition, in Alberta, Canada, Weldwood has cutting rights through June 15, 2008 with respect to approximately 2,461,000 acres of timberlands pursuant to an agreement with the Provincial Government of Alberta. This agreement is renewable at Weldwood's option for successive 20-year periods as long as the Hinton, Alberta pulp mill remains in operation. Weldwood has the right to harvest approximately 671,000 cunits of pulpwood annually under this agreement. Cariboo Pulp & Paper Company holds certain rights to harvest up to 533,000 cunits of pulpwood annually from approximately 3,900,000 acres of government- owned timberlands in British Columbia pursuant to a long-term license. Weldwood believes that this source of pulpwood, as well as supplies of wood chips from sawmills and plywood plants in the area, will satisfy the raw materials requirements of Cariboo's pulp mill for the foreseeable future. Babine Forest Products Company, a joint venture in which Weldwood has an indirect 58% interest, operates a sawmill in British Columbia and is beneficially entitled to harvest approximately 184,000 cunits of merchantable sawtimber annually pursuant to long-term licenses. Houston Forest Products Company, a joint venture in which Weldwood and Eurocan Pulp and Paper Company are equal participants, operates a sawmill in British Columbia and is beneficially entitled to cut approximately 229,000 cunits of merchantable sawtimber annually pursuant to a long-term license. Champion Papel owns or controls 228,444 acres of timberlands in Brazil, which are not in or near the Amazon Basin. Certain of the Company's land holdings have a value substantially in excess of that of land primarily used for fiber supply purposes. The Company has sold or contributed to its wholly owned real estate subsidiaries, net of land repurchased by the Company, an aggregate of approximately 225,000 acres of such land. These subsidiaries have sold approximately 165,500 acres, of which approximately 15,500 acres were sold during 1993, for residential, recreational, commercial or industrial purposes. The balance is being held for similar sale or long-term appreciation. A substantial portion of the land held by the Company's real estate subsidiaries is located near Houston, Texas and Jacksonville, Florida. MINERAL, OIL AND GAS RESOURCES The Company owns or controls various mineral, oil and gas rights with respect to approximately half of the timberlands owned or controlled by the Company in the United States. The Company has conducted a general review of its domestic mineral, oil and gas rights and presently is not aware of any significant reserves or deposits except as discussed below. The Company has oil and gas interests in fields located in Florida, Alabama, Texas, Louisiana and Mississippi. Drilling operations are conducted by others pursuant to leases and other agreements with the Company. The Company estimates that proved reserves attributable to the Company's interests in such fields aggregate approximately 1,230,000 barrels of oil and 2,600,000 Mcf (thousand cubic feet) of natural gas as of December 31, 1993. The Company's share of production from such fields, which in general has been declining in recent years, was approximately 295,000 barrels of oil, 562,000 Mcf of natural gas and 1,846,000 gallons of gas products in 1993. Proved oil and gas reserves attributable to the Company's non-operating royalty interests and/or operating interests in the oil and gas fields described above are based primarily upon estimates furnished by the operators of 5 those fields. The Company's share of production from such fields during each calendar year is based on monthly production information received from the operators, showing the application of such interests of the Company to actual production volumes for such month. The Company owns the surface rights and full or partial mineral rights to considerable timberlands in Texas which overlay lignite deposits. The Company estimates that it owns approximately 350,000,000 tons of lignite reserves in Texas, of which 80% is estimated to be recoverable. These lignite reserves presently are not being mined due to current market conditions. CAPITAL PROGRAM The Company presently anticipates that annual capital spending, for incremental improvements, routine capital replacements and environmental compliance, will be approximately $260 million in 1994. The Company has no present plans for new major capital projects. Major projects were completed at four of the Company's mills in 1993. Of these, the series of projects at the Courtland, Alabama printing and writing papers mill was the most significant. Completed in August, the projects at Courtland primarily involved an expansion of the mill's pulp capacity, the addition of an uncoated paper machine, the rebuilding of two existing paper machines, the construction of cogeneration facilities and modifications to address environmental issues. These projects increase the Courtland mill's annual pulp capacity by 245,000 tons and, when fully operational, will increase the Company's annual printing and writing papers capacity by 300,000 tons. The new paper machine is expected to use 240,000 tons of the additional pulp production. The cost of the projects was approximately $920 million. The modernization and environmental improvement project at the Company's Canton, North Carolina printing and writing papers mill was completed in July at a cost of approximately $285 million. The project, which improved product quality as well as the mill's environmental performance, resulted in a reduction in paper production of approximately 9% and a reduction in pulp production of approximately 6%. In March, the construction of a deinking facility at the Company's Sheldon, Texas newsprint mill was completed. The facility has the capacity to provide approximately 150,000 tons of recycled pulp annually, all of which is used in the manufacture of newsprint at the mill, replacing virgin pulp. The project cost approximately $85 million. Weldwood completed construction in August of a sawmill at Hinton, Alberta, Canada to replace the existing sawmill there. The new sawmill, with an annual capacity of 215 million board feet of lumber, was completed at a cost of approximately (U.S.) $55 million. COMPETITION The markets in which the Company sells its products are highly competitive. The Company faces numerous competitors within the forest products industry in each of its major markets and also competes with suppliers of milk and juice cartons and kraft paper substitutes made from plastics. Competition in all markets is based primarily on price. The Company is one of the largest domestic producers and suppliers of printing and writing papers, publication papers, newsprint, lumber, plywood, milk and juice cartons, and hardwood market pulp. Weldwood is the largest producer of plywood and one of the largest producers of lumber in Canada. Champion Papel is one of the largest producers and suppliers of printing and writing papers in Brazil. FOREIGN OPERATIONS Net sales to unaffiliated customers by the Company's foreign subsidiaries for 1993 were (U.S.) $883,445,000, accounting for 17.4% of consolidated net sales of the Company. Income from operations of the foreign subsidiaries 6 for 1993 was (U.S.) $132,278,000 which, reflecting the weak overall results of the Company's domestic operations, accounted for all of the consolidated income from operations of the Company. Net income (after minority interest) of the foreign subsidiaries for 1993 was (U.S.) $59,949,000, which accounted for all of the consolidated income of the Company. The major foreign operations, which are discussed above under their respective business segment headings, are in Canada and Brazil. The Company believes that the risks associated with its foreign operations are somewhat greater than those associated with its domestic operations. Weldwood exports substantial portions of its products and, as a result, is affected significantly by currency fluctuations. Champion Papel, the Company's Brazilian subsidiary, is subject to that country's continuing economic and political instability. Tight monetary and fiscal policies, including high interest rates, imposed in March 1990 in an attempt to control Brazil's high inflation rate, remain in effect. Brazil continues to experience high inflation rates and currency fluctuations. (See Note 13 of Notes to Financial Statements on page 38 of the Company's 1993 Annual Report, which Note is incorporated by reference herein, for further information as to foreign operations.) EMPLOYEES The Company had 25,250 employees at December 31, 1993. Of these, 18,669 were domestic employees, 54% of whom were covered by contracts with labor unions. Overall, 63% of the Company's employees were covered by contracts with labor unions. Union contracts covering domestic operations will expire as follows: 1994 - the Roanoke Rapids, North Carolina kraft mill, the Lufkin and Sheldon, Texas newsprint mills, and the Florida and Washington wood products operations; 1995 - - the Bucksport, Maine and Sartell, Minnesota publication papers mills, and the Courtland, Alabama printing and writing papers mill; 1996 - the Pensacola, Florida printing and writing papers mill; 1997 - the Maine and Georgia wood products operations; 1998 - the Deferiet, New York publication papers mill and the Canton, North Carolina and Hamilton, Ohio printing and writing papers mills. The Quinnesec, Michigan publication papers mill is a non-union facility. At Weldwood, union contracts covering the Hinton, Alberta, Canada pulp mill, as well as all of Weldwood's wood products facilities except the Longlac plants, will expire in 1994. The union contract covering the joint venture pulp mill in Quesnel, British Columbia, Canada also will expire in 1994. The union contract covering the waferboard plant and specialty hardwood plywood plant in Longlac, Ontario, Canada will expire in 1996. The union contract which covers the paper industry in Brazil, including Champion Papel, is renegotiated each year. THE ENVIRONMENT For information regarding environmental capital expenditures, hazardous substance cleanup, environmental legal proceedings and other environmental matters affecting the Company, see Management's Discussion and Analysis of Financial Condition and Results of Operations, incorporated by reference in Item 7 of this Report from the Company's 1993 Annual Report. ENERGY REQUIREMENTS The Company believes that it will be able to meet its energy needs for the foreseeable future. Wood wastes and pulping liquors, which are by-products from the manufacture of wood products and pulp, provide a reliable and relatively low-cost source of energy for the Company's primary manufacturing facilities. The Company's domestic wood products manufacturing facilities and domestic pulp, paper and kraft mills satisfy approximately half of their energy requirements from such wood wastes and pulping liquors. 7 The Company's foreseeable needs for purchased energy have been anticipated, and the Company believes that it has arranged for adequate sources of supply. ITEM 2. PROPERTIES In 1993, the overall operating rate for the Company's domestic and foreign manufacturing facilities exceeded 98% of capacity in the paper segment, 80% of capacity for lumber and studs, and 97% of capacity for panelboard (plywood and waferboard). Production curtailments in the Company's paper segment were attributable primarily to scheduled maintenance. Production curtailments in the wood products segment were attributable primarily to log supply shortages resulting from the scarcity of timber, as well as the process of disposing of several mills. Reference is made to Item 1 of this Report for information concerning the general character, adequacy and capacity of the principal plants, timber properties and other materially important physical properties of the Company. The following lists show the location, nature and ownership of the Company's principal plants. Except as indicated, none of these plants is subject to a mortgage and all are owned in fee. PAPER PRINTING AND WRITING PAPERS (a) Integrated pulp and printing and writing papers mills: (i) Courtland, Alabama/1/; (ii) Canton, North Carolina; (iii) Pensacola, Florida; and (iv) Mogi Guacu, Brazil. (b) The Company operates a printing and writing papers mill in Hamilton, Ohio. (c) The Company operates a plant in Waynesville, North Carolina which applies polyethylene coating to bleached paperboard and which also converts roll stock into cut-size paper. (d) The Company operates five plants which convert polyethylene-coated paperboard into milk and juice cartons and one plant which converts polyethylene-coated paperboard into ovenable packaging. All of these plants are located in the United States. PUBLICATION PAPERS (e) Integrated pulp and publication papers mills: (i) Bucksport, Maine; (ii) Deferiet, New York/2/; (iii) Quinnesec, Michigan; and (iv) Sartell, Minnesota/2/. - ---------- /1/For Courtland, Alabama mill lease information, see Item 1 - Paper of this Report. /2/For Deferiet, New York and Sartell, Minnesota mill lease information, see Item 1 - Paper of this Report. 8 NEWSPRINT (f) Integrated pulp and newsprint mills: (i) Lufkin, Texas; and (ii) Sheldon, Texas. PULP (g) The Company's printing and writing papers mills in Pensacola, Florida and Courtland, Alabama and publication papers mill in Quinnesec, Michigan also produce market pulp. (h) Weldwood operates a pulp mill in Hinton, Alberta, Canada and owns 50% of a joint venture which operates a pulp mill in Quesnel, British Columbia, Canada. KRAFT (i) The Company operates an integrated pulp, unbleached linerboard and kraft paper mill in Roanoke Rapids, North Carolina. WOOD PRODUCTS (a) The Company operates three softwood plywood plants in the United States. (b) Weldwood operates two softwood plywood plants and one specialty hardwood plywood plant in Canada. One of these plants is located on leased land. (c) The Company operates seven softwood lumber mills in the United States. (d) Weldwood operates five softwood lumber mills in Canada. One of these mills is located on leased land. (e) Each of Babine Forest Products Company and Houston Forest Products Company, joint ventures in which Weldwood has an interest, operates a mill for the production of softwood lumber in Canada. Both mills are located on leased land. (f) Weldwood operates one waferboard plant in Canada. ITEM 3. LEGAL PROCEEDINGS On January 4, 1991, a class action was brought against the Company in state court in Tennessee. The class consisted of all Tennessee residents who own or lease land around Douglas Lake or along the Pigeon River. Subsequently, the case was transferred to the United States District Court for the Eastern District of Tennessee. While the original complaint sought $5 billion in compensatory and punitive damages, immediately prior to trial the plaintiffs reduced their demand to $367.9 million. The plaintiffs originally claimed damages for both personal injury and property damage, but the personal injury claims were dismissed. The case proceeded to trial on plaintiffs' theory that discharges of hazardous materials, including dioxin, from the Company's Canton, North Carolina mill had decreased property values along the river and the lake. On October 16, 1992, a mistrial was declared when the jury was unable to reach a unanimous verdict. On May 3, 1993, the court approved a settlement of the action providing for a payment of $6.5 million by the Company. On June 1, 1993, the court's approval of the settlement was appealed. 9 On September 18, 1992, an action was brought in the District Court of Brazoria County, Texas by 26 individuals engaged in seafood-related businesses against the Company, Simpson Pasadena Paper Company, the Gulf Coast Waste Disposal Authority and eight other corporations and individuals. The action sought unspecified damages for lost business profits, diminution in property value and mental anguish allegedly resulting from the purported discharge of dioxin into the Brazos River, Galveston Bay, the Neches River and their adjacent waters, from the Company's Sheldon and Lufkin, Texas mills, Simpson's Pasadena, Texas mill and the other defendants' mills and plants. The Company sold the Pasadena mill to Simpson in 1987 but may be liable for damages, if any, arising from wastewater discharges which occurred prior to the sale. On September 2, 1993, at the plaintiffs' request, the action was dismissed with respect to the Company's Lufkin mill. In December 1993, the action was settled for an immaterial amount. On September 18, 1992, an action was brought in the District Court of Harris County, Texas by 71 individuals primarily engaged in seafood-related businesses against the Company, Simpson Pasadena Paper Company, the Gulf Coast Waste Disposal Authority and eight other corporations and individuals. The action sought unspecified damages for lost business profits, diminution in property value and mental anguish allegedly resulting from the purported discharge of dioxin into the Brazos River, Galveston Bay, the Neches River and their adjacent waters, from the Company's Sheldon and Lufkin, Texas mills, Simpson's Pasadena, Texas mill and the other corporate defendants' mills and plants. The Company sold the Pasadena mill to Simpson in 1987 but may be liable for damages, if any, arising from wastewater discharges which occurred prior to the sale. On September 2, 1993, at the plaintiffs' request, the action was dismissed with respect to the Company's Lufkin mill. In December 1993, the action was settled for an immaterial amount. On November 9, 1992, an action was brought against the Company in the Circuit Court for Baldwin County, Alabama purportedly on behalf of a class consisting of all persons who own land along Perdido Bay in Florida and Alabama. The action originally sought $500 million in compensatory and punitive damages for personal injury, intentional infliction of emotional distress and diminution in property value allegedly resulting from the purported discharge of hazardous substances, including dioxin, from the Company's Pensacola, Florida mill into Eleven Mile Creek, which flows into Perdido Bay. However, in February 1994, the plaintiffs reduced their demand to not more than $50,000 for each class member. It is anticipated that the class, if certified, will consist of approximately 1,000 members. The parties currently are engaged in discovery. The Company and many other corporations, municipalities and individuals are defendants in three separate actions filed in the District Court of Galveston County, Texas by numerous individuals on March 8, 1993, April 20, 1993 and May 13, 1993, respectively. Each of these actions seeks compensatory and punitive damages in excess of $5 billion for personal injury and property damage allegedly resulting from the purported disposal of waste materials, including hazardous substances, into the McGinnis Waste Disposal Site located at Hall's Bayou Ranch. On July 17, 1991, an action was brought in the United States District Court for the District of Colorado against Weldwood and 14 other Canadian forest products companies purportedly on behalf of a class of United States purchasers of Canadian lumber. The action, seeking injunctive relief and unspecified treble damages, alleged a conspiracy by the defendants and others to fix freight charges for, and to sell on a delivered price basis, Western Canadian softwood lumber, thereby allegedly artificially raising, fixing, maintaining or stabilizing prices in violation of United States antitrust laws. On January 8, 1993, the action was dismissed, upon the motion of the defendants, for reasons of comity. On January 20, 1993, the plaintiff filed a notice of appeal. In February 1994, the action was settled for an immaterial amount. The Company is vigorously defending each of the pending actions described above. The Company also is involved in other legal and administrative proceedings and claims of various types. While any litigation contains an element of uncertainty, management, based upon the opinion of the Company's General Counsel, presently believes that the outcome of each such proceeding or claim which is pending or known to be threatened (including the actions described above), or all of them combined, will not have a material adverse effect on the Company. 10 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. EXECUTIVE OFFICERS OF THE REGISTRANT/1/ John A. Ball (age 65) is a Senior Vice President of the Company, a position which he has held since March 1983. He has responsibility for corporate and marketing communications, governmental affairs, public affairs and facilities services. L. Scott Barnard (age 51) is an Executive Vice President of the Company, a position which he has held since August 1992. He has responsibility for sales and marketing for the printing and writing papers and publication papers businesses. From February 1989 to August 1992, he was Vice President-Sales and Marketing for the printing and writing papers and publication papers businesses. Gerald J. Beiser (age 63) is Senior Vice President-Finance of the Company, a position which he has held since 1975. William H. Burchfield (age 58) is an Executive Vice President of the Company, a position which he has held since November 1982. He has responsibility for the domestic printing and writing papers business. Mark V. Childers (age 41) is Senior Vice President-Organizational Development and Human Resources of the Company, a position which he has held since August 1992. From June 1991 to August 1992, he was Vice President-Organizational Development Project of the Company. From August 1988 to June 1991, he was Manager-Organizational Development at the Lufkin, Texas mill. Richard J. Diforio, Jr. (age 58) is a Senior Vice President of the Company, a position which he has held since November 1992. He has responsibility for environmental, health and safety affairs. From September 1990 to November 1992, he was Vice President-Environment, Health and Safety of the Company. From September 1986 to September 1990, he was Vice President-Environmental Affairs of the Company. Joe K. Donald (age 51) is an Executive Vice President of the Company, a position which he has held since August 1989. He heads the publication papers business. From December 1987 to August 1989, he was Vice President- Manufacturing of the printing and writing papers business. Mark A. Fuller, Jr. (age 61) is an Executive Vice President of the Company, a position which he has held since August 1980. He has responsibility for the Company's overall marketing program as well as for Nationwide Papers, Champion Export, pulp sales and sales of wood chemicals and by-products. From July 1986 to August 1989, he headed the publication papers business. Marvin H. Ginsky (age 63) is Senior Vice President and General Counsel of the Company. He was elected a Senior Vice President in May 1981. He has been the General Counsel since 1973. L.C. Heist (age 62) is President and Chief Operating Officer and a director of the Company, positions which he has held since December 1987. Burton G. MacArthur, Jr. (age 47) is an Executive Vice President of the Company, a position which he has held since January 1990. He has responsibility for the newsprint and kraft operations. From March 1989 to January 1990, he was Vice President-Management Information Services of the Company. _______________________________ /1/The term of office for each executive officer expires at the Annual Meeting of the Board of Directors of the Company scheduled to be held on May 19, 1994. 11 Kenwood C. Nichols (age 54) is Vice Chairman and a director of the Company, positions which he has held since August 1989. He has been the principal accounting officer of the Company since July 1983. He also has responsibility for internal audit, corporate analysis, tax affairs, management information services, mineral resources, corporate security and the Company's real estate subsidiaries. From July 1983 to August 1989, he was a Senior Vice President of the Company. Richard E. Olson (age 56) is an Executive Vice President of the Company, a position which he has held since December 1987. He has responsibility for engineering, technology, manufacturing support and major projects. From December 1987 to January 1990, he had responsibility for the newsprint, domestic pulp and kraft operations. Richard L. Porterfield (age 47) is an Executive Vice President of the Company, a position which he has held since August 1992. He heads the forest products unit, which consists of domestic timberlands operations and the domestic wood products business. From January 1990 to August 1992, he was Senior Vice President- Organizational Development and Human Resources of the Company. From August 1989 to January 1990, he was Vice President-Organizational Development Project of the Company. From June 1988 to August 1989, he was Director-Participative Management and Administration of the forest products unit. Andrew C. Sigler (age 62) is Chairman of the Board of Directors and Chief Executive Officer of the Company. He was elected Chairman of the Board effective January 1, 1979. He has served as Chief Executive Officer since 1974 and has been a director since 1973. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company had 23,394 record holders of its Common Stock as of February 28, 1994. The Company's Common Stock is traded on the New York Stock Exchange. Restrictions on the ability of the Company to pay cash dividends are included in several of the Company's debt instruments and the Company's Restated Certificate of Incorporation. At December 31, 1993, the most restrictive of these limitations required the Company to maintain tangible net worth (as defined below) of at least $2.770 billion. As a result of this requirement, such amount is unavailable for the payment of dividends. Approximately $454 million of tangible net worth at December 31, 1993 was free of such restrictions. Tangible net worth is defined as shareholders' equity plus the Company's $92.50 Cumulative Convertible Preference Stock minus goodwill, unamortized debt discount and other like intangibles, all determined on a consolidated basis for the Company. For information concerning the high and low sales prices of the Company's Common Stock for each quarterly period during the last two years and the amount of dividends paid on the Company's Common Stock in each quarterly period during the last two years, see the section on the inside back cover of the Company's 1993 Annual Report captioned Common Stock Prices and Dividends Paid. Said section is incorporated by reference herein. ITEM 6. SELECTED FINANCIAL DATA There is incorporated by reference herein the table on pages 50 and 51 of the Company's 1993 Annual Report captioned Eleven-Year Selected Financial Data. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS There is incorporated by reference herein the section on pages 43 to 49 of the Company's 1993 Annual Report captioned Management's Discussion and Analysis of Financial Condition and Results of Operations. 12 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA There is incorporated by reference herein the sections of the Company's 1993 Annual Report captioned Consolidated Income, Consolidated Retained Earnings, Consolidated Balance Sheet, Consolidated Cash Flows, Notes to Financial Statements and Report of Independent Public Accountants, which sections are located on pages 22, 23, 24, 25, 26 to 40, and 41, respectively, of the Company's 1993 Annual Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT See the section captioned Executive Officers of the Registrant under Part I of this Report for information concerning the Company's executive officers. For information concerning the directors of the Company, see the sections captioned The Board of Directors -The Nominees, Information on the Nominees and Directors, and Committees in the Company's definitive Proxy Statement for the Annual Meeting of Shareholders scheduled to be held on May 19, 1994. Said sections are incorporated by reference herein. ITEM 11. EXECUTIVE COMPENSATION There is incorporated by reference herein from the Company's definitive Proxy Statement for the Annual Meeting of Shareholders scheduled to be held on May 19, 1994 the sections therein captioned The Board of Directors - Directors' Compensation; and Executive Compensation - Summary Compensation Table, Option/SAR Grant Table, Option/SAR Exercise and Year-End Values Table, Pension Plan Table, and Employment and Severance Agreements. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT There is incorporated by reference herein from the Company's definitive Proxy Statement for the Annual Meeting of Shareholders scheduled to be held on May 19, 1994 the sections therein captioned Principal Shareholders and Stock Ownership by Nominees, Directors and Named Executive Officers. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS There is incorporated by reference herein from the Company's definitive Proxy Statement for the Annual Meeting of Shareholders scheduled to be held on May 19, 1994 the section therein captioned Transactions. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) FINANCIAL STATEMENTS. The following Consolidated Financial Statements of Champion International Corporation and Subsidiaries, Notes to Financial Statements, and Report of Independent Public Accountants are incorporated by reference herein from the Company's 1993 Annual Report: 13
CAPTION IN COMPANY'S DESCRIPTION 1993 ANNUAL REPORT (PAGE NUMBER) ----------- -------------------------------- Consolidated Statements of Income for each of the three years in the period ended December 31, 1993.....................................Consolidated Income (page 22) Consolidated Statements of Retained Earnings for each of the three years in the period ended December 31, 1993......................Consolidated Retained Earnings (page 23) Consolidated Balance Sheets at December 31, 1993 and 1992.......................Consolidated Balance Sheet (page 24) Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 1993.............................Consolidated Cash Flows (page 25) Notes to Financial Statements.........................................Notes to Financial Statements (pages 26 to 40) Report of Independent Public Accountants with respect to the financial statements listed above.................Report of Independent Public Accountants (page 41)
(b) FINANCIAL STATEMENT SCHEDULES. The following Financial Statement Schedules and Report of Independent Public Accountants on Schedules are filed with this Annual Report on Form 10-K on the pages indicated:
DESCRIPTION PAGE ----------- ------ V. Property, Plant and Equipment............................................. S-1 VI. Accumulated Depreciation and Amortization of Property, Plant and Equipment S-2, 3 VIII. Valuation and Qualifying Accounts......................................... S-4 IX. Short-Term Borrowings..................................................... S-5 X. Supplementary Income Statement Information................................ S-6 Report of Independent Public Accountants on Schedules..................... S-7
All other schedules have been omitted since the information is not applicable, is not required or is included in the Consolidated Financial Statements or Notes to Financial Statements listed under section (a) of this Item 14. (c) EXHIBITS. Each Exhibit is listed according to the number assigned to it in the Exhibit Table of Item 601 of Regulation S-K. The Exhibit numbers preceded by an asterisk (*) indicate Exhibits physically filed with this Annual Report on Form 10-K. All other Exhibit numbers indicate Exhibits filed by incorporation by reference herein. Exhibit numbers 10.1 through 10.29, which are preceded by a plus sign (+), are management contracts or compensatory plans or arrangements. EXHIBIT NUMBER DESCRIPTION - ------ ------------ 3.1 Restated Certificate of Incorporation of the Company, filed in the State of New York on October 20, 1986 (filed by incorporation by reference to Exhibit 3.1 to the Company's Form 10-K for the fiscal year ended December 31, 1986, Commission File No. 1-3053). 3.2 Certificate of Amendment of Restated Certificate of Incorporation of the Company, filed in the State of New York on July 18, 1988 (filed by incorporation by reference to Exhibit 4.1 to the Company's Form 10-Q for the quarter ended June 30, 1988, Commission File No. 1-3053). 3.3 Certificate of Amendment of Restated Certificate of Incorporation of the Company, filed in the State of New York on December 6, 1989 (filed by incorporation by reference to 14 EXHIBIT NUMBER DESCRIPTION - ------ ------------ Exhibit 4.1 to the Company's Form 8-K dated December 14, 1989, Commission File No. 1-3053). 3.4 Certificate of Amendment of Restated Certificate of Incorporation of the Company, filed in the State of New York on December 21, 1989 (filed by incorporation by reference to Exhibit 3.4 to the Company's Form 10-K for the fiscal year ended December 31, 1989, Commission File No. 1-3053). 3.5 By-Laws of the Company (filed by incorporation by reference to Exhibit 3(ii).1 to the Company's Form 10-Q for the quarter ended March 31, 1993, Commission File No. 1-3053). 4.1 Letter agreement dated March 29, 1991 of the Company to furnish to the Commission upon request copies of certain instruments with respect to long-term debt (filed by incorporation by reference to Exhibit 4 to the Company's Form 10-K for the fiscal year ended December 31, 1990, Commission File No. 1-3053). 4.2 Agreement dated February 2, 1994 between the Company and Loews Corporation (filed by incorporation by reference to Exhibit 4.7 to the Company's Registration Statement on Form S-3, Commission Registration No. 33-52123). +10.1 Champion International Corporation 1986 Management Incentive Program, consisting of the 1986 Stock Option Plan and the 1986 Contingent Compensation Plan (filed by incorporation by reference to Exhibit 19.1 to the Company's Form 10-Q for the quarter ended June 30, 1986, Commission File No. 1-3053). +10.2 Amendment to Champion International Corporation 1986 Management Incentive Program (filed by incorporation by reference to Exhibit 10.1 to the Company's Form 10-Q for the quarter ended March 31, 1993, Commission File No. 1-3053). +10.3 Champion International Corporation Restricted Share Performance Plan, as amended (filed by incorporation by reference to Exhibit 10.2 to the Company's Form 10-K for the fiscal year ended December 31, 1989, Commission File No. 1-3053). +10.4 Champion International Corporation Management Incentive Program, as amended, consisting of the Amended 1976 Incentive Stock Option Plan and the Contingent Compensation Plan (filed by incorporation by reference to Exhibit 4.3 to the Company's Registration Statement on Form S-8, Commission Registration No. 2-77129). +10.5 Resolutions of the Board of Directors of the Company adopted on August 16, 1984 amending the Amended 1976 Incentive Stock Option Plan (filed by incorporation by reference to Exhibit 10(b) to the Company's Registration Statement on Form S-14, Commission Registration No. 2-94030). +10.6 Champion International Corporation Supplemental Retirement Income Plan (filed by incorporation by reference to Exhibit 10.7 to the Company's Form 10-K for the fiscal year ended December 31, 1989, Commission File No. 1-3053). +10.7 Supplemental Retirement and Death Payments Agreement dated as of August 1, 1964, as amended by letter agreement dated January 9, 1965, between the Company and Mr. Sigler (filed by incorporation by reference to Exhibit 10.8 to the Company's Form 10-K for the fiscal year ended December 31, 1990, Commission File No. 1-3053). 15 EXHIBIT NUMBER DESCRIPTION - ------ ------------ +10.8 Restated Agreement between the Company and Mr. Sigler, as amended as of February 19, 1987, providing certain employment, severance and retirement arrangements (filed by incorporation by reference to Exhibit 19.1 to the Company's Form 10-Q for the quarter ended June 30, 1987, Commission File No. 1-3053). +10.9 Agreement Relating to Legal Expenses dated February 19, 1987 between the Company and Mr. Sigler providing reimbursement of certain legal expenses following a change in control of the Company (filed by incorporation by reference to Exhibit 19.2 to the Company's Form 10-Q for the quarter ended June 30, 1987, Commission File No. 1-3053). +10.10 Amendment dated as of April 21, 1988 to Restated Agreement between the Company and Mr. Sigler as amended as of February 19, 1987 (filed by incorporation by reference to Exhibit 19.1 to the Company's Form 10-Q for the quarter ended June 30, 1988, Commission File No. 1-3053). +10.11 Amendment dated as of August 18, 1988 to Restated Agreement between the Company and Mr. Sigler as amended as of February 19, 1987 (filed by incorporation by reference to Exhibit 10.10 to the Company's Form 10-K for the fiscal year ended December 31, 1988, Commission File No. 1-3053). +10.12 Amendment dated as of August 18, 1988 to Agreement Relating to Legal Expenses dated February 19, 1987 between the Company and Mr. Sigler (filed by incorporation by reference to Exhibit 10.11 to the Company's Form 10-K for the fiscal year ended December 31, 1988, Commission File No. 1-3053). +10.13 Amendment dated as of September 19, 1991 to Restated Agreement between the Company and Mr. Sigler as amended as of February 19, 1987 (filed by incorporation by reference to Exhibit 10.12 to the Company's Form 10-K for the fiscal year ended December 31, 1991, Commission File No. 1-3053). +10.14 Agreement dated as of August 18, 1988 between the Company and Mr. Heist providing certain employment, severance and retirement arrangements (filed by incorporation by reference to Exhibit 10.17 to the Company's Form 10-K for the fiscal year ended December 31, 1988, Commission File No. 1-3053). +10.15 Agreement Relating to Legal Expenses dated August 18, 1988 between the Company and Mr. Heist providing reimbursement of certain legal expenses following a change in control of the Company (filed by incorporation by reference to Exhibit 10.18 to the Company's Form 10-K for the fiscal year ended December 31, 1988, Commission File No. 1-3053). +10.16 Amendment dated as of September 19, 1991 to Agreement dated as of August 18, 1988 between the Company and Mr. Heist (filed by incorporation by reference to Exhibit 10.15 to the Company's Form 10-K for the fiscal year ended December 31, 1991, Commission File No. 1-3053). +10.17 Agreement dated as of October 18, 1990 between the Company and Mr. Nichols providing certain employment, severance and retirement arrangements (filed by incorporation by reference to Exhibit 10.16 to the Company's Form 10-K for the fiscal year ended December 31, 1990, Commission File No. 1-3053). +10.18 Agreement Relating to Legal Expenses dated October 18, 1990 between the Company and Mr. Nichols providing reimbursement of certain legal expenses following a change in 16 EXHIBIT NUMBER DESCRIPTION - ------ ------------ control of the Company (filed by incorporation by reference to Exhibit 10.17 to the Company's Form 10-K for the fiscal year ended December 31, 1990, Commission File No. 1-3053). +10.19 Amendment dated as of September 19, 1991 to Agreement dated as of October 18, 1990 between the Company and Mr. Nichols (filed by incorporation by reference to Exhibit 10.18 to the Company's Form 10-K for the fiscal year ended December 31, 1991, Commission File No. 1-3053). +10.20 Agreement dated as of February 19, 1987 between the Company and Mr. Burchfield providing certain severance arrangements (filed by incorporation by reference to Exhibit 10.15 to the Company's Form 10-K for the fiscal year ended December 31, 1987, Commission File No. 1-3053). +10.21 Agreement Relating to Legal Expenses dated February 19, 1987 between the Company and Mr. Burchfield providing reimbursement of certain legal expenses following a change in control of the Company (filed by incorporation by reference to Exhibit 10.16 to the Company's Form 10-K for the fiscal year ended December 31, 1987, Commission File No. 1-3053). +10.22 Amendment dated as of April 21, 1988 to Agreement dated as of February 19, 1987 between the Company and Mr. Burchfield (filed by incorporation by reference to Exhibit 19.5 to the Company's Form 10-Q for the quarter ended June 30, 1988, Commission File No. 1-3053). +10.23 Amendment dated as of September 19, 1991 to Agreement dated as of February 19, 1987 between the Company and Mr. Burchfield (filed by incorporation by reference to Exhibit 10.22 to the Company's Form 10-K for the fiscal year ended December 31, 1991, Commission File No. 1-3053). +10.24 Agreement dated as of August 18, 1988 between the Company and Mr. Olson providing certain severance arrangements (filed by incorporation by reference to Exhibit 10.23 to the Company's Form 10-K for the fiscal year ended December 31, 1990, Commission File No. 1-3053). +10.25 Agreement Relating to Legal Expenses dated August 18, 1988 between the Company and Mr. Olson providing reimbursement of certain legal expenses following a change in control of the Company (filed by incorporation by reference to Exhibit 10.24 to the Company's Form 10-K for the fiscal year ended December 31, 1990, Commission File No. 1-3053). +10.26 Amendment dated as of September 19, 1991 to Agreement dated as of August 18, 1988 between the Company and Mr. Olson (filed by incorporation by reference to Exhibit 10.28 to the Company's Form 10-K for the fiscal year ended December 31, 1991, Commission File No. 1-3053). +10.27 Trust Agreement dated as of February 19, 1987 between the Company and Connecticut National Bank securing certain payments under the contracts listed as Exhibit Numbers 10.8 through 10.26, among others, following a change in control of the Company (filed by incorporation by reference to Exhibit 19.11 to the Company's Form 10-Q for the quarter ended June 30, 1987, Commission File No. 1- 3053). 17 EXHIBIT NUMBER DESCRIPTION - ------ ------------ +10.28 Amendment dated as of August 18, 1988 to Trust Agreement dated as of February 19, 1987 between the Company and Connecticut National Bank (filed by incorporation by reference to Exhibit 10.29 to the Company's Form 10-K for the fiscal year ended December 31, 1988, Commission File No. 1-3053). +10.29 Champion International Corporation Executive Life Insurance Plan (filed by incorporation by reference to Exhibit 10.27 to the Company's Form 10-K for the fiscal year ended December 31, 1990, Commission File No. 1-3053). 10.30 Extract from the minutes of the meeting of the Board of Directors of the Company held on October 18, 1979 relating to the $50,000 of group term life insurance provided by the Company for non- employee directors (filed by incorporation by reference to Exhibit 10.28 to the Company's Form 10-K for the fiscal year ended December 31, 1990, Commission File No. 1-3053). 10.31 Resolutions of the Board of Directors of the Company adopted on September 19, 1991 relating to the compensation of directors (filed by incorporation by reference to Exhibit 19 to the Company's Form 10-Q for the quarter ended September 30, 1991, Commission File No. 1-3053). 10.32 Retirement Plan for Outside Directors (filed by incorporation by reference to Exhibit 19 to the Company's Form 10-Q for the quarter ended September 30, 1992, Commission File No. 1-3053). *11 Schedule showing calculation of primary earnings per common share and fully diluted earnings per common share. *13 Portions of the Annual Report to Shareholders of Champion International Corporation for the fiscal year ended December 31, 1993, which are incorporated herein by reference. *21 List of significant subsidiaries of the Company. *23.1 Opinion and Consent of the Senior Vice President and General Counsel of the Company. *23.2 Consent of Arthur Andersen & Co. *24 Power of Attorney relating to the execution and filing of this Annual Report on Form 10-K and all amendments hereto. (d) REPORTS ON FORM 8-K. No Reports on Form 8-K were filed during the last quarter of the period covered by this Report. 18 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON THE 30TH DAY OF MARCH, 1994. CHAMPION INTERNATIONAL CORPORATION (Registrant) By Lawrence A. Fox ----------------------------------- (LAWRENCE A. FOX) VICE PRESIDENT AND SECRETARY PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- Andrew C. Sigler* Chairman of the Board, March 30, 1994 - --------------------------------------- Chief Executive Officer (ANDREW C. SIGLER) and Director (Principal Executive Officer) Kenwood C. Nichols* Vice Chairman and March 30, 1994 - --------------------------------------- Director (Principal (KENWOOD C. NICHOLS) Accounting Officer) Gerald J. Beiser* Senior Vice President- March 30, 1994 - --------------------------------------- Finance (Principal (GERALD J. BEISER) Financial Officer) Robert A. Charpie* Director March 30, 1994 - --------------------------------------- (ROBERT A. CHARPIE) Alice F. Emerson* Director March 30, 1994 - --------------------------------------- (ALICE F. EMERSON) Allan E. Gotlieb* Director March 30, 1994 - --------------------------------------- (ALLAN E. GOTLIEB) L.C. Heist* Director March 30, 1994 - ---------------------------------------- (L.C. HEIST) Sybil C. Mobley* Director March 30, 1994 - ----------------------------------------- (SYBIL C. MOBLEY)
19
SIGNATURE TITLE DATE --------- ----- ---- ________________________________________ Director (H. BARCLAY MORLEY) Lawrence G. Rawl* Director March 30, 1994 - ---------------------------------------- (LAWRENCE G. RAWL) Walter V. Shipley* Director March 30, 1994 - ----------------------------------------- (WALTER V. SHIPLEY) James S. Tisch* Director March 30, 1994 - ------------------------------------------ (JAMES S. TISCH) Richard E. Walton* Director March 30, 1994 - ------------------------------------------ (RICHARD E. WALTON) John L. Weinberg* Director March 30, 1994 - ------------------------------------------- (JOHN L. WEINBERG) *By Lawrence A. Fox March 30, 1994 - ------------------------------------------- (LAWRENCE A. FOX)
A POWER OF ATTORNEY AUTHORIZING LAWRENCE A. FOX, MARVIN H. GINSKY AND ANDREW C. SIGLER AND EACH OF THEM TO SIGN THIS REPORT AND ALL AMENDMENTS HERETO AS ATTORNEYS-IN-FACT FOR OFFICERS AND DIRECTORS OF THE REGISTRANT IS FILED AS EXHIBIT 24 HERETO. 20 SCHEDULE V CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES PROPERTY, PLANT AND EQUIPMENT For the Years Ended December 31, 1993, 1992 and 1991 (in thousands of dollars)
Column A Column B Column C Column D Column E Column F -------- ---------- --------- ---------- ----------------------- --------- Balance at Other Changes Balance Beginning Additions ----------------------- at End Classification (1) of Period at Cost Retirements Debit Credit of Period - ------------------ ---------- ---------- ----------- ---------- -------- --------- For the Year Ended December 31, 1993: Land and land improvements $ 273,625 $ 37,502 $ 8,317 $ 1,082 (3) $ 301 (2) $ 303,591 Buildings and leasehold improvements 812,249 103,664 24,878 14,487 (3) 2,708 (2) 902,814 Machinery and equipment 6,370,952 827,747 183,874 71,770 (3) 20,967 (2) 7,065,628 572 (2) Construction in progress 762,077 (493,280) 3,545 --- 68,957 (3) 195,723 ---------- ---------- ---------- ---------- -------- ---------- $8,218,903 $ 475,633 $ 220,614 $ 87,339 $ 93,505 $8,467,756 ========== ========== ========== ========== ======== ========== Timber and Timberlands, 263 (2) less cost of timber 6,218 (3) harvested $2,011,567 $ 130,147 $ 213,489 $ --- $ 83,194 (4) $1,838,550 ========== ========== ========== ========== ======== ========== For the Year Ended December 31, 1992: Land and land 4,710 (3) improvements $ 234,704 $ 13,405 $ 4,740 $ 26,370 (5) $ 824 (2) $ 273,625 Buildings and leasehold 4,009 (3) improvements 786,435 31,796 7,874 4,838 (5) 6,955 (2) 812,249 18,204 (3) Machinery and equipment 5,953,897 271,650 80,434 261,141 (5) 53,506 (2) 6,370,952 1,067 (2) Construction in progress 486,916 306,125 856 --- 29,041 (3) 762,077 ---------- ---------- ---------- ---------- -------- ---------- $7,461,952 $ 622,976 $ 93,904 $ 319,272 $ 91,393 $8,218,903 ========== ========== ========== ========== ======== ========== Timber and Timberlands, less cost of timber 11,337 (3) 636 (2) harvested $1,665,876 $ 95,313 $ 27,726 $ 339,899 (5) $ 72,496 (4) $2,011,567 ========== ========== ========== ========== ======== ========== For the Year Ended December 31, 1991: 27 (2) Land and land improvements $ 192,240 $ 47,331 $ 1,530 $ --- $ 3,310 (3) $ 234,704 Buildings and leasehold improvements 614,880 169,526 7,442 9,496 (3) 25 (2) 786,435 1,312 (2) Machinery and equipment 5,437,297 575,262 97,245 37,271 (3) --- 5,953,897 Construction in progress 758,018 (188,451) 6,333 1,315 (2) 77,633 (3) 486,916 ---------- ---------- ---------- ---------- -------- ---------- $7,002,435 $ 603,668 $ 112,550 $ 49,394 $ 80,995 $7,461,952 ========== ========== ========== ========== ======== ========== Timber and Timberlands, less cost of timber 184 (2) harvested $1,645,421 $ 57,801 $ 28,382 $ 50,113 (3) $ 59,261 (4) $1,665,876 ========== ========== ========== ========== ======== ==========
- ----------------- Notes: (1) Property, plant and equipment is carried at cost. (2) Effect of foreign currency translation. (3) Reclassifications and transfers to and from other accounts. (4) Cost of timber harvested charged to costs and expenses. (5) As the result of adopting, as of January 1, 1992, Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," assets formerly acquired in purchase business combinations were revalued to reflect gross values. Prior to adoption of this standard, these assets were valued net of related tax effects. S-1 SCHEDULE VI CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT For the Years Ended December 31, 1993, 1992 and 1991 (in thousands of dollars)
Column A Column B Column C Column D Column E Column F - -------- -------- -------- -------- -------- -------- Additions Balance at Charged to Other Balance Beginning Costs and Changes - at End Classification of Period Expenses (5) Retirements Add (Deduct) of Period - ------------------------------------- ---------- ---------- ----------- ----------- ---------- For the Year Ended December 31, 1993: 1,051 (1) Land improvements $ 70,482 $ 14,041 $ 6,433 $ (130)(2) $ 79,011 (483)(1) Buildings and leasehold improvements 224,986 26,270 16,588 (1,357)(2) 232,828 16,002 (1) Machinery and equipment 2,160,575 319,929 134,331 (8,294)(2) 2,353,881 ---------- ---------- ---------- ---------- ---------- $2,456,043 $ 360,240 (4) $ 157,352 $ 6,789 $2,665,720 ========== ========== ========== ========== ========== For the Year Ended December 31, 1992: (40)(1) (360)(2) Land improvements $ 55,127 $ 8,472 $ 2,139 $ 9,422 (3) $ 70,482 (47)(1) Buildings and leasehold (3,422)(2) improvements 186,757 24,034 5,164 22,828 (3) 224,986 3,687 (1) (19,127)(2) Machinery and equipment 1,834,029 305,498 57,573 94,061 (3) 2,160,575 ---------- ---------- ---------- ---------- ---------- $2,075,913 $ 338,004 (4) $ 64,876 $ 107,002 $2,456,043 ========== ========== ========== ========== ========== For the Year Ended December 31, 1991: 929 (1) Land improvements $ 46,571 $ 8,217 $ 692 $ 102 (2) $ 55,127 Buildings and leasehold 3,097 (1) improvements 168,115 19,596 3,999 (52)(2) 186,757 (12,644)(1) Machinery and equipment 1,670,319 254,497 77,428 (715)(2) 1,834,029 ---------- ---------- ---------- ---------- ---------- $1,885,005 $ 282,310 (4) $ 82,119 $ (9,283) $2,075,913 ========== ========== ========== ========== ==========
Notes: (1) Reclassifications and transfers to and from other accounts. (2) Effect of foreign currency translation. (3) As the result of adopting, as of January 1, 1992, Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," assets formerly acquired in purchase business combinations were revalued to reflect gross values. Prior to adoption of this standard, these assets were valued net of related tax effects. S-2 (4) Reference is made to Note 1 of Notes to Financial Statements in the Company's Annual Report to Shareholders for the fiscal year ended December 31, 1993, which Note is incorporated by reference herein, for the Company's policies in providing for depreciation, cost of timber harvested and amortization. The reconciliations of depreciation, cost of timber harvested and amortization, as shown above and on Schedule V, with the amounts in the statement of income follow:
Years Ended December 31 -------------------------------------- 1993 1992 1991 ---------- ---------- ---------- (in thousands of dollars) Depreciation and amortization credited to reserves as above $ 360,240 $ 338,004 $ 282,310 Cost of timber harvested credited directly to asset accounts 83,194 72,496 59,261 ---------- ---------- ---------- $ 443,434 $ 410,500 $ 341,571 ========== ========== ==========
(5) For financial reporting purposes, property, plant and equipment are depreciated on the straight-line method over the estimated service lives of the individual assets as follows: Land improvements 2 to 20% Buildings 2 to 20% Machinery and equipment 3 to 33% Leasehold improvements are amortized over the shorter of the leases or estimated service lives. S-3 SCHEDULE VIII CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS For the Years Ended December 31, 1993 and 1992 (in thousands of dollars)
Column A Column B Column C Column D Column E - ------------------------------------- ---------- -------- -------- --------- Balance at Balance Beginning at End Description of Period Additions Deductions of Period - ------------------------------------- ---------- --------- ---------- --------- For the Year Ended December 31, 1993: Included in liability accounts: Deferred Income Tax Valuation Allowance (1) $ 39,800 $ 2,491 $ --- $ 42,291 ========== ========= ========= ========= For the Year Ended December 31, 1992: Included in liability accounts: Deferred Income Tax Valuation Allowance (1) $ --- $ 39,800 $ --- $ 39,800 ========== ========= ========= =========
- ----------------------- Note: (1) The deferred income tax valuation allowance primarily relates to general business credit carryforwards. S-4 SCHEDULE IX CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES SHORT-TERM BORROWINGS For the Years Ended December 31, 1993, 1992 and 1991 (in thousands of dollars)
Column A Column B Column C Column D Column E Column F - -------- -------- -------- -------- -------- -------- Weighted Maximum Average Average Weighted Amount Amount Interest Balance Average Outstanding Outstanding Rate Category of Aggregate at End Interest During the During the During the Short-Term Borrowings of Period (1) Rate (1) Period (1) Period (1,2) Period (1,3) - ---------------------- --------- -------- ----------- ----------- ----------- For the Year Ended December 31, 1993: Short-term bank borrowings $ 88,258 1.4% $ 110,258 $ 95,570 1.2% For the Year Ended December 31, 1992: Short-term bank borrowings $ 110,113 1.1% $ 110,113 $ 88,788 1.3% For the Year Ended December 31, 1991: Short-term bank borrowings $ 68,029 0.6% $ 93,695 $ 76,814 1.3%
- ----------------------------------- Notes: (1) Variations in weighted average interest rates and in outstanding balances for 1993, 1992 and 1991 are attributable to book cash overdrafts. (2) Average amount of short-term borrowings is determined by utilizing the average month-end balances. (3) Weighted average interest rate for the year is determined by dividing average interest expense for the year by the average of month-end short-term borrowings for the year. S-5 SCHEDULE X CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INCOME STATEMENT INFORMATION For the Years Ended December 31, 1993, 1992 and 1991 (in thousands of dollars)
Column A Column B - -------- ---------------------------------------- Charged to Costs and Expenses Years Ended December 31 ---------------------------------------- Item 1993 1992 1991 - ---- ---------- ---------- ---------- Maintenance and repairs $ 465,079 $ 478,842 $ 458,513 ========== ========== ========== Real and personal property taxes $ 61,154 $ 61,005 $ 58,438 ========== ========== ==========
Royalties, advertising costs, and amortization of intangible assets and pre- operating costs were not material. S-6 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES To Champion International Corporation: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Champion International Corporation's 1993 Annual Report to Shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated January 17, 1994. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed in Item 14(b) are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN & CO. New York, N.Y. January 17, 1994 S-7 EXHIBIT INDEX Each Exhibit is listed according to the number assigned to it in the Exhibit Table of Item 601 of Regulation S-K. The Exhibit numbers preceded by an asterisk (*) indicate Exhibits physically filed with this Annual Report on Form 10-K. All other Exhibit numbers indicate Exhibits filed by incorporation by reference herein. Exhibit numbers 10.1 through 10.29, which are preceded by a plus sign (+), are management contracts or compensatory plans or arrangements. EXHIBIT NUMBER DESCRIPTION - -------------- ----------- 3.1 Restated Certificate of Incorporation of the Company, filed in the State of New York on October 20, 1986 (filed by incorporation by reference to Exhibit 3.1 to the Company's Form 10-K for the fiscal year ended December 31, 1986, Commission File No. 1-3053). 3.2 Certificate of Amendment of Restated Certificate of Incorporation of the Company, filed in the State of New York on July 18, 1988 (filed by incorporation by reference to Exhibit 4.1 to the Company's Form 10-Q for the quarter ended June 30, 1988, Commission File No. 1-3053). 3.3 Certificate of Amendment of Restated Certificate of Incorporation of the Company, filed in the State of New York on December 6, 1989 (filed by incorporation by reference to Exhibit 4.1 to the Company's Form 8-K dated December 14, 1989, Commission File No. 1-3053). 3.4 Certificate of Amendment of Restated Certificate of Incorporation of the Company, filed in the State of New York on December 21, 1989 (filed by incorporation by reference to Exhibit 3.4 to the Company's Form 10-K for the fiscal year ended December 31, 1989, Commission File No. 1-3053). 3.5 By-Laws of the Company (filed by incorporation by reference to Exhibit 3(ii).1 to the Company's Form 10-Q for the quarter ended March 31, 1993, Commission File No. 1-3053). 4.1 Letter agreement dated March 29, 1991 of the Company to furnish to the Commission upon request copies of certain instruments with respect to long-term debt (filed by incorporation by reference to Exhibit 4 to the Company's Form 10-K for the fiscal year ended December 31, 1990, Commission File No. 1-3053). 4.2 Agreement dated February 2, 1994 between the Company and Loews Corporation (filed by incorporation by reference to Exhibit 4.7 to the Company's Registration Statement on Form S-3, Commission Registration No. 33-52123). +10.1 Champion International Corporation 1986 Management Incentive Program, consisting of the 1986 Stock Option Plan and the 1986 Contingent Compensation Plan (filed by incorporation by reference to Exhibit 19.1 to the Company's Form 10-Q for the quarter ended June 30, 1986, Commission File No. 1-3053). +10.2 Amendment to Champion International Corporation 1986 Management Incentive Program (filed by incorporation by reference to Exhibit 10.1 to the Company's Form 10-Q for the quarter ended March 31, 1993, Commission File No. 1-3053). EXHIBIT NUMBER DESCRIPTION - -------------- ----------- +10.3 Champion International Corporation Restricted Share Performance Plan, as amended (filed by incorporation by reference to Exhibit 10.2 to the Company's Form 10-K for the fiscal year ended December 31, 1989, Commission File No.1-3053). +10.4 Champion International Corporation Management Incentive Program, as amended, consisting of the Amended 1976 Incentive Stock Option Plan and the Contingent Compensation Plan (filed by incorporation by reference to Exhibit 4.3 to the Company's Registration Statement on Form S-8, Commission Registration No. 2-77129). +10.5 Resolutions of the Board of Directors of the Company adopted on August 16, 1984 amending the Amended 1976 Incentive Stock Option Plan (filed by incorporation by reference to Exhibit 10(b) to the Company's Registration Statement on Form S-14, Commission Registration No. 2-94030). +10.6 Champion International Corporation Supplemental Retirement Income Plan (filed by incorporation by reference to Exhibit 10.7 to the Company's Form 10-K for the fiscal year ended December 31, 1989, Commission File No. 1-3053). +10.7 Supplemental Retirement and Death Payments Agreement dated as of August 1, 1964, as amended by letter agreement dated January 9, 1965, between the Company and Mr. Sigler (filed by incorporation by reference to Exhibit 10.8 to the Company's Form 10-K for the fiscal year ended December 31, 1990, Commission File No. 1-3053). +10.8 Restated Agreement between the Company and Mr. Sigler, as amended as of February 19, 1987, providing certain employment, severance and retirement arrangements (filed by incorporation by reference to Exhibit 19.1 to the Company's Form 10-Q for the quarter ended June 30, 1987, Commission File No. 1-3053). +10.9 Agreement Relating to Legal Expenses dated February 19, 1987 between the Company and Mr. Sigler providing reimbursement of certain legal expenses following a change in control of the Company (filed by incorporation by reference to Exhibit 19.2 to the Company's Form 10-Q for the quarter ended June 30, 1987, Commission File No. 1-3053). +10.10 Amendment dated as of April 21, 1988 to Restated Agreement between the Company and Mr. Sigler as amended as of February 19, 1987 (filed by incorporation by reference to Exhibit 19.1 to the Company's Form 10-Q for the quarter ended June 30, 1988, Commission File No. 1-3053). +10.11 Amendment dated as of August 18, 1988 to Restated Agreement between the Company and Mr. Sigler as amended as of February 19, 1987 (filed by incorporation by reference to Exhibit 10.10 to the Company's Form 10-K for the fiscal year ended December 31, 1988, Commission File No. 1-3053). +10.12 Amendment dated as of August 18, 1988 to Agreement Relating to Legal Expenses dated February 19, 1987 between the Company and Mr. Sigler (filed by incorporation by reference to Exhibit 10.11 to the Company's Form 10-K for the fiscal year ended December 31, 1988, Commission File No. 1-3053). EXHIBIT NUMBER DESCRIPTION - -------------- ----------- +10.13 Amendment dated as of September 19, 1991 to Restated Agreement between the Company and Mr. Sigler as amended as of February 19, 1987 (filed by incorporation by reference to Exhibit 10.12 to the Company's Form 10-K for the fiscal year ended December 31, 1991, Commission File No. 1-3053). +10.14 Agreement dated as of August 18, 1988 between the Company and Mr. Heist providing certain employment, severance and retirement arrangements (filed by incorporation by reference to Exhibit 10.17 to the Company's Form 10-K for the fiscal year ended December 31, 1988, Commission File No. 1-3053). +10.15 Agreement Relating to Legal Expenses dated August 18, 1988 between the Company and Mr. Heist providing reimbursement of certain legal expenses following a change in control of the Company (filed by incorporation by reference to Exhibit 10.18 to the Company's Form 10-K for the fiscal year ended December 31, 1988, Commission File No. 1-3053). +10.16 Amendment dated as of September 19, 1991 to Agreement dated as of August 18, 1988 between the Company and Mr. Heist (filed by incorporation by reference to Exhibit 10.15 to the Company's Form 10-K for the fiscal year ended December 31, 1991, Commission File No. 1-3053). +10.17 Agreement dated as of October 18, 1990 between the Company and Mr. Nichols providing certain employment, severance and retirement arrangements (filed by incorporation by reference to Exhibit 10.16 to the Company's Form 10-K for the fiscal year ended December 31, 1990, Commission File No. 1-3053). +10.18 Agreement Relating to Legal Expenses dated October 18, 1990 between the Company and Mr. Nichols providing reimbursement of certain legal expenses following a change in control of the Company (filed by incorporation by reference to Exhibit 10.17 to the Company's Form 10-K for the fiscal year ended December 31, 1990, Commission File No. 1-3053). +10.19 Amendment dated as of September 19, 1991 to Agreement dated as of October 18, 1990 between the Company and Mr. Nichols (filed by incorporation by reference to Exhibit 10.18 to the Company's Form 10-K for the fiscal year ended December 31, 1991, Commission File No. 1-3053). +10.20 Agreement dated as of February 19, 1987 between the Company and Mr. Burchfield providing certain severance arrangements (filed by incorporation by reference to Exhibit 10.15 to the Company's Form 10-K for the fiscal year ended December 31, 1987, Commission File No. 1-3053). +10.21 Agreement Relating to Legal Expenses dated February 19, 1987 between the Company and Mr. Burchfield providing reimbursement of certain legal expenses following a change in control of the Company (filed by incorporation by reference to Exhibit 10.16 to the Company's Form 10-K for the fiscal year ended December 31, 1987, Commission File No. 1-3053). +10.22 Amendment dated as of April 21, 1988 to Agreement dated as of February 19, 1987 between the Company and Mr. Burchfield (filed by incorporation by reference to Exhibit 19.5 to the Company's Form 10-Q for the quarter ended June 30, 1988, Commission File No. 1-3053). EXHIBIT NUMBER DESCRIPTION - -------------- ----------- +10.23 Amendment dated as of September 19, 1991 to Agreement dated as of February 19, 1987 between the Company and Mr. Burchfield (filed by incorporation by reference to Exhibit 10.22 to the Company's Form 10-K for the fiscal year ended December 31, 1991, Commission File No. 1-3053). +10.24 Agreement dated as of August 18, 1988 between the Company and Mr. Olson providing certain severance arrangements (filed by incorporation by reference to Exhibit 10.23 to the Company's Form 10-K for the fiscal year ended December 31, 1990, Commission File No. 1-3053). +10.25 Agreement Relating to Legal Expenses dated August 18, 1988 between the Company and Mr. Olson providing reimbursement of certain legal expenses following a change in control of the Company (filed by incorporation by reference to Exhibit 10.24 to the Company's Form 10-K for the fiscal year ended December 31, 1990, Commission File No. 1-3053). +10.26 Amendment dated as of September 19, 1991 to Agreement dated as of August 18, 1988 between the Company and Mr. Olson (filed by incorporation by reference to Exhibit 10.28 to the Company's Form 10-K for the fiscal year ended December 31, 1991, Commission File No. 1-3053). +10.27 Trust Agreement dated as of February 19, 1987 between the Company and Connecticut National Bank securing certain payments under the contracts listed as Exhibit Numbers 10.8 through 10.26, among others, following a change in control of the Company (filed by incorporation by reference to Exhibit 19.11 to the Company's Form 10-Q for the quarter ended June 30, 1987, Commission File No. 1-3053). +10.28 Amendment dated as of August 18, 1988 to Trust Agreement dated as of February 19, 1987 between the Company and Connecticut National Bank (filed by incorporation by reference to Exhibit 10.29 to the Company's Form 10-K for the fiscal year ended December 31, 1988, Commission File No. 1-3053). +10.29 Champion International Corporation Executive Life Insurance Plan (filed by incorporation by reference to Exhibit 10.27 to the Company's Form 10-K for the fiscal year ended December 31, 1990, Commission File No. 1-3053). 10.30 Extract from the minutes of the meeting of the Board of Directors of the Company held on October 18, 1979 relating to the $50,000 of group term life insurance provided by the Company for non-employee directors (filed by incorporation by reference to Exhibit 10.28 to the Company's Form 10-K for the fiscal year ended December 31, 1990, Commission File No. 1-3053). 10.31 Resolutions of the Board of Directors of the Company adopted on September 19, 1991 relating to the compensation of directors (filed by incorporation by reference to Exhibit 19 to the Company's Form 10-Q for the quarter ended September 30, 1991, Commission File No. 1-3053). 10.32 Retirement Plan for Outside Directors (filed by incorporation by reference to Exhibit 19 to the Company's Form 10-Q for the quarter ended September 30, 1992, Commission File No. 1-3053). EXHIBIT NUMBER DESCRIPTION - -------------- ----------- *11 Schedule showing calculation of primary earnings per common share and fully diluted earnings per common share. *13 Portions of the Annual Report to Shareholders of Champion International Corporation for the fiscal year ended December 31, 1993 which are incorporated herein by reference. *21 List of significant subsidiaries of the Company. *23.1 Opinion and Consent of the Senior Vice President and General Counsel of the Company. *23.2 Consent of Arthur Andersen & Co. *24 Power of Attorney relating to the execution and filing of this Annual Report on Form 10-K and all amendments hereto. 28:exhibt93.10k EX-11 2 CALCULATION OF EARNINGS EXHIBIT 11 CHAMPION INTERNATIONAL CORPORATION AND SUBSIDIARIES CALCULATION OF PRIMARY EARNINGS (LOSS) PER COMMON SHARE AND FULLY DILUTED EARNINGS (LOSS) PER COMMON SHARE
Years Ended December 31 -------------------------------------------- 1993 1992 1991 ---- ---- ---- (in thousands, except per share amounts) Primary earnings (loss) per common share (1): Net income (loss) $ (156,243) $ (440,394) $ 40,343 Dividends on preference shares 27,750 27,750 27,750 ---------- ---------- ---------- Net income (loss) applicable to common stock $ (183,993) $ (468,144) $ 12,593 ========== ========== ========== Average number of common shares outstanding 92,788 92,639 92,588 ========== ========== ========== Per share $ (1.98) $ (5.05) $ .14 ========== ========== ========== Fully diluted earnings (loss) per common share (2): Net income (loss) applicable to common stock $ (183,993) $ (468,144) $ 12,593 Add income effect, assuming conversion of dilutive convertible securities --- --- --- ---------- ---------- ---------- Net income (loss) on a fully diluted basis $ (183,993) $ (468,144) $ 12,593 ========== ========== ========== Average number of common shares outstanding 92,788 92,639 92,588 Add common share effect, assuming conversion of dilutive convertible securities --- --- --- ---------- ---------- ---------- Average number of common shares outstanding on a fully diluted basis 92,788 92,639 92,588 ========== ========= ========== Per share $ (1.98) $ (5.05) $ .14 ========== ========= ==========
- -------------------------- Notes: (1) Common stock equivalents have not been included in the above calculation since their effect is insignificant. (2) The computation of fully diluted earnings per common share assumes that the average number of common shares outstanding during the year is increased by the conversion of securities having a dilutive effect, and that net income applicable to common stock is increased by dividends and after-tax interest on such securities. EX-13 3 ANNUAL REPORT EXHIBIT 13 Paper - -------------------------------------------------------------------------------- Years Ended December 31
Net Sales (in millions of dollars) 1993 % 1992 % 1991 % - ------------------------------------ ------ ---- ------ --- ------ --- Product Category: Printing and writing papers......... $1,830 48 $1,795 47 $1,818 47 Publication papers.................. 801 21 785 20 793 20 Newsprint........................... 342 9 318 8 368 10 Bleached kraft market pulp.......... 289 7 374 10 320 8 Milk cartons........................ 267 7 268 7 255 7 Paperboard and kraft paper.......... 192 5 194 5 195 5 Industrial products................. 69 2 70 2 73 2 Miscellaneous products.............. 28 1 31 1 30 1 ------ --- ------ --- ------ --- $3,818 100 $3,835 100 $3,852 100 ====== === ====== === ====== ===
1 Wood Products - ------------------------------------------------------------------------------- Years Ended December 31
Net Sales (in millions of dollars) 1993 % 1992 % 1991 % - ---------------------------------------- ------ --- ------ --- ----- --- Product Category: Lumber.................................. $ 480 38 $ 368 34 $ 288 31 Softwood plywood and waferboard......... 333 27 301 28 234 25 Logs and stumpage....................... 272 22 257 23 260 28 Sidings and industrial plywood.......... 85 7 80 7 69 7 Hardwood plywood, related sheet and hardboard......................... 32 2 30 3 29 3 Miscellaneous products.................. 49 4 56 5 54 6 ------ --- ------ --- ----- --- $1,251 100 $1,092 100 $ 934 100 ====== === ====== === ===== ===
2 Champion International Corporation and Subsidiaries - ------------------------------------------------------------------------------- Consolidated Income (in thousands, except per share amounts)
Years Ended December 31 1993 1992 1991 ----------------------- ---------- ---------- ---------- Net Sales .................................... $5,068,833 $4,926,471 $4,786,403 Cost of products sold ........................ 4,709,757 4,564,637 4,331,957 Selling, general and administrative expenses ................................... 292,684 288,463 275,262 ---------- ---------- ---------- Income from Operations ....................... 66,392 73,371 179,184 Interest and debt expense (Notes 3 and 6) .... 224,658 206,295 210,527 Other (income) expense -- net (Note 10) ...... 7,410 (142,516) (109,541) ---------- ---------- ---------- Income (Loss) before Income Taxes, Extradordinary Item and Cumulative Effect of Accounting Changes ......................... (165,676) 9,592 78,198 Income Taxes (Benefit) (Note 11) ............. (31,222) (4,328) 37,855 ---------- ---------- ---------- Income (Loss) before Extraordinary Item and Cumulative Effect of Accounting Changes .... (134,454) 13,920 40,343 Extraordinary Item -- Loss on Early Retirement of Debt, Net of Taxes (Note 6) ............. (14,266) --- --- Cumulative Effect of Accounting Changes, Net of Taxes (Notes 1, 11 and 12) .......... (7,523) (454,314) --- ---------- ---------- ---------- Net Income (Loss) ............................ $ (156,243) $ (440,394) $ 40,343 ========== ========== ========== Dividends on Preference Stock (Note 8) ....... 27,750 27,750 27,750 ---------- ---------- ---------- Net Income (Loss) Applicable to Common Stock $ (183,993) $ (468,144) $ 12,593 ========== ========== ========== Average Number of Common Shares Outstanding .. 92,788 92,639 92,588 ========== ========== ========== Earnings (Loss) Per Common Share: Income (Loss) before Extraordinary Item and Cumulative Effect of Accounting Changes .................................. $ (1.75) $ (.15) $ .14 Extraordinary Item -- Loss on Early Retirement of Debt ....................... (.15) --- --- Cumulative Effect of Accounting Changes .... (.08) (4.90) --- ---------- ---------- ---------- Net Income (Loss) .......................... $ (1.98) $ (5.05) $ .14 ========== ========== ==========
The accompanying notes are an integral part of this statement. 3 Champion International Corporation and Subsidiaries - ------------------------------------------------------------------------------- Consolidated Retained Earnings (in thousands, except per share amounts)
Years Ended December 31 1993 1992 1991 ----------------------- ---------- ---------- ---------- Beginning Balance........................... $2,064,120 $2,550,836 $2,561,854 Net Income (Loss)........................... (156,243) (440,394) 40,343 Redemption of Preference Stock Purchase Rights.................................... --- --- (5,041) Cash Dividends Declared: $92.50 Convertible Preference Stock - $92.50 per share in 1993, 1992 and 1991.......... (27,750) (27,750) (27,750) Common Stock -- $.20 per share in 1993, 1992 and 1991.................................. (18,592) (18,572) (18,570) ---------- ---------- ---------- Ending Balance.............................. $1,861,535 $2,064,120 $2,550,836 ========== ========== ==========
The accompanying notes are an integral part of this statement. 4 Champion International Corporation and Subsidiaries - ------------------------------------------------------------------------------- Consolidated Balance Sheet (in thousands of dollars)
Assets December 31 1993 1992 - ------ ----------- ---------- ---------- Current Assets: Cash and cash equivalents............................. $ 55,653 $ 36,678 Short-term investments................................ 7,197 54,932 Receivables........................................... 494,426 469,846 Inventories (Note 2).................................. 469,269 479,511 Prepaid expenses...................................... 22,818 24,622 Deferred income taxes (Note 11)....................... 65,064 76,911 ---------- ---------- Total Current Assets................................ 1,114,427 1,142,500 ---------- ---------- Timber and Timberlands, at cost -- less cost of timber harvested (Note 6).................................. 1,838,550 2,011,567 ---------- ---------- Property, Plant and Equipment, at cost (Notes 3, 6 and 7).................................. 8,467,756 8,218,903 Less -- Accumulated depreciation...................... 2,665,720 2,456,043 ---------- ---------- 5,802,036 5,762,860 ---------- ---------- Other Assets and Deferred Charges..................... 387,756 464,505 ---------- ---------- $9,142,769 $9,381,432 ========== ==========
The accompanying notes are an integral part of this statement. 5 Champion International Corporation and Subsidiaries - ------------------------------------------------------------------------------- Consolidated Balance Sheet (in thousands of dollars)
Liabilities and Shareholders' Equity December 31 1993 1992 - ------------------------------------ ----------- ---------- ---------- Current Liabilities: Current installments of long-term debt................ $ 88,052 $ 21,147 Short-term bank borrowings............................ 88,258 110,113 Accounts payable and accrued liabilities (Note 5)..... 591,153 646,979 Income taxes (Note 11)................................ 4,841 8,132 ---------- ---------- Total Current Liabilities........................... 772,304 786,371 ---------- ---------- Long-Term Debt (Note 6)............................... 3,316,165 3,290,875 ---------- ---------- Other Liabilities (Notes 12 and 15)................... 672,788 637,275 ---------- ---------- Deferred Income Taxes (Note 11)....................... 1,077,234 1,159,244 ---------- ---------- Minority Interest in Subsidiaries..................... 54,160 48,864 ---------- ---------- Commitments and Contingent Liabilities (Notes 7, 15 and 16)................................ --- --- ---------- ---------- Preference Stock, $1.00 par value, $92.50 Cumulative Convertible Series; 300,000 shares issued and outstanding (redeemable at maturity for $300,000) (Note 8)............................................ 300,000 300,000 ---------- ---------- Shareholders' Equity: Preference Stock, 8,231,431 shares authorized but unissued (Note 8)................................... --- --- Capital Shares (Notes 8 and 9): Common stock, $.50 par value: 250,000,000 authorized shares; 96,367,755 and 96,157,112 issued shares..... 48,184 48,079 Capital surplus..................................... 1,163,555 1,158,150 Retained earnings (Note 6)............................ 1,861,535 2,064,120 ---------- ---------- 3,073,274 3,270,349 Treasury shares, at cost (Note 8)..................... (100,233) (100,201) Cumulative translation adjustment..................... (22,923) (11,345) ---------- ---------- 2,950,118 3,158,803 ---------- ---------- $9,142,769 $9,381,432 ========== ==========
The accompanying notes are an integral part of this statement. 6 Champion International Corporation and Subsidiaries - ------------------------------------------------------------------------------- Consolidated Cash Flows (in thousands of dollars)
Years Ended December 31 1993 1992 1991 ----------------------- ----------- --------- ---------- Cash flows from operating activities: Net Income (Loss).................... $ (156,243) $(440,394) $ 40,343 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Extraordinary item................. 14,266 --- --- Cumulative effect of accounting changes.......................... 7,523 454,314 --- Depreciation expense............... 360,240 338,004 282,310 Cost of timber harvested........... 83,194 72,496 59,261 Gain on sale of assets............. (9,973) (103,778) (92,705) Deferrals of pre-operating and start-up costs................... (18,819) (16,999) (42,340) (Increase) decrease in receivables. (28,235) (11,274) 18,514 (Increase) in inventories.......... (13,529) (4,830) (1,194) (Increase) decrease in prepaid expenses......................... (2,789) 5,091 5,502 (Decrease) in accounts payable and accrued liabilities.............. (61,296) (10,263) (887) (Decrease) increase in income taxes payable.......................... (3,032) (1,517) 1,895 Increase (decrease) in other liabilities...................... 21,164 (2,027) (2,252) (Decrease) increase in deferred income taxes..................... (26,843) (11,904) 17,197 All other -- net.................... 35,167 (9,144) 84,068 ----------- --------- ---------- Net cash provided by operating activities......................... 200,795 257,775 369,712 ----------- --------- ---------- Cash flows from investing activities: Expenditures for property, plant and equipment.................... (475,633) (622,976) (603,668) Timber and timberlands expenditures..................... (130,147) (95,313) (57,801) Purchase of investments............ (123,978) (203,424) (59,627) Proceeds from redemption of investments...................... 230,561 145,461 43,457 Proceeds from sales of property, plant and equipment and timber and timberlands.................. 304,773 174,417 130,328 All other -- net.................... (17,448) (9,096) 49,578 ----------- --------- ---------- Net cash used in investing activities (211,872) (610,931) (497,733) ----------- --------- ---------- Cash flows from financing activities: Proceeds from issuance of long-term debt............................. 1,382,715 770,052 1,247,611 Payments of current installments of long-term debt and long-term debt............................. (1,307,909) (439,646) (991,320) Cash dividends paid................ (46,334) (46,326) (67,273) All other -- net.................... 1,580 (6,942) (7,281) ----------- --------- ---------- Net cash provided by financing activities......................... 30,052 277,138 181,737 ----------- --------- ---------- Increase (decrease) in cash and cash equivalents........................ 18,975 (76,018) 53,716 Cash and cash equivalents: Beginning of period................ 36,678 112,696 58,980 ----------- --------- ---------- End of period...................... $ 55,653 $ 36,678 $ 112,696 =========== ========= ========== Supplemental cash flow disclosures: Cash paid during the year for: Interest (net of capitalized amounts)....................... $ 225,764 $ 201,925 $ 196,463 Income taxes (net of refunds) (Note 11)...................... 11,867 15,181 (6,075)
The accompanying notes are an integral part of this statement. 7 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Notes to Financial Statements Note 1. Summary of Significant Accounting Policies A. Consolidation The consolidated financial statements include the accounts of the company and all of its domestic and foreign subsidiaries. Affiliates which are 20% to 50% owned are reflected using the equity method of accounting, with the related investments included in Other Assets and Deferred Charges. All significant intercompany transactions have been eliminated. Certain amounts have been reclassified to conform to the current year's presentation. B. Accounting Changes During the fourth quarter of 1993, the company adopted, retroactive to January 1, 1993, Statement of Financial Accounting Standards ("SFAS") No. 112, "Employers' Accounting for Postemployment Benefits" (Note 12). During the fourth quarter of 1992, the company adopted, retroactive to January 1, 1992, SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions" (Note 12) and SFAS No. 109, "Accounting for Income Taxes" (Note 11). C. Cash and Cash Equivalents Cash and cash equivalents includes all highly liquid investments with original maturities of three months or less. Short-term investments are investments which mature within twelve months but which do not meet the criteria of cash equivalents. D. Inventories Inventories are generally stated at the lower of average cost or market (market approximates net realizable value), except for certain inventories of the paper segment which are stated on the last-in, first-out (LIFO) method. E. Capitalization and Amortization of Certain Costs Pre-operating expenses and start-up costs incurred in connection with the construction of major properties are deferred until such properties become operational. These expenses and costs are then amortized over a five-year period. F. Fair Value of Financial Instruments The company has, where appropriate, estimated the fair values of financial instruments. Where these estimates approximate carrying value, no separate disclosure of fair value is shown. The fair values of the company's long-term debt are estimated using discounted cash flow analyses, based on the company's incremental borrowing rates for similar types of borrowings. 8 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Notes to Financial Statements G. Fixed Assets Property, Plant and Equipment, which includes capitalized leases, is stated at cost. Timber and Timberlands, which includes original costs, road construction costs, and reforestation costs, such as site preparation and planting costs, is stated at unamortized cost. Property taxes, surveying, fire control and other forest management expenses are charged to expense as incurred. When fixed assets are sold or retired, cost and accumulated depreciation are eliminated from the accounts and gains or losses are recorded in income. For financial reporting purposes, plant and equipment are depreciated using the straight-line method over the estimated service lives of the individual assets. Leasehold improvements are amortized over the shorter of the lives of the leases or estimated service lives. Cost of timber harvested is based on the estimated quantity of timber available during the growth cycle and is credited directly to the asset accounts (Notes 3, 6 and 7). H. Revenue Recognition The company recognizes revenues as products are shipped. I. Earnings Per Common Share Primary earnings per common share are computed by dividing net income, after deducting dividends on preference shares, by the average number of common shares and dilutive common share equivalents outstanding during the year. The computation of fully diluted earnings per common share assumes that the average number of common shares and dilutive common share equivalents outstanding is increased by the conversion of securities having a dilutive effect and that net income applicable to common stock is increased by dividends and after-tax interest on such securities. J. Foreign Currency Translation The assets and liabilities of the company's Canadian subsidiary are translated into U.S. dollars using year-end exchange rates. The resulting translation gains or losses are included with the cumulative translation adjustment in the Shareholders' Equity section of the balance sheet. Due to the high inflation rate in Brazil, the company's Brazilian subsidiary uses the U.S. dollar as its functional currency. Except for certain items translated at historical exchange rates, assets and liabilities are translated using year-end exchange rates. Gains or losses from balance sheet translation are included in net income. Gains or losses resulting from foreign currency transactions are included in net income. 9 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Notes to Financial Statements Note 2. Inventories
December 31 (in thousands of dollars) 1993 1992 - ---------------------------------------------------- -------- -------- Paper, pulp and packaging products.................. $182,569 $178,944 Wood products....................................... 35,495 41,777 Logs................................................ 65,603 68,336 Pulpwood............................................ 17,152 22,712 Raw materials, parts and supplies................... 168,450 167,742 -------- -------- $469,269 $479,511 ======== ========
At December 31, 1993 and 1992, inventories stated using the last-in, first-out (LIFO) method, representing approximately 22% and 17% of total inventories, were $102,339,000 and $82,048,000, respectively. If the lower of average cost or market method (which approximates current cost) had been utilized for inventories carried at LIFO, inventory balances would have been increased by $59,961,000 and $65,206,000 at December 31, 1993 and 1992, respectively. 10 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Notes to Financial Statements Note 3. Property, Plant and Equipment
December 31 (in thousands of dollars) 1993 1992 - ----------- ------------------------- ----------- ----------- Land and land improvements............. $ 303,591 $ 273,625 Buildings.............................. 902,814 812,249 Machinery and equipment................ 7,065,628 6,370,952 Construction in progress............... 195,723 762,077 ----------- ----------- 8,467,756 8,218,903 Accumulated depreciation............... (2,665,720) (2,456,043) ----------- ----------- $ 5,802,036 $ 5,762,860 =========== ===========
Interest capitalized into construction in progress during 1993, 1992 and 1991 was $33,784,000, $39,628,000 and $53,119,000, respectively. 11 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Notes to Financial Statements Note 4. Lines of Credit At December 31, 1993, the company had unused U.S. lines of credit of approximately $791 million ($559 million of which supported short-term borrowings classified as long-term debt as discussed in Note 6) and unused foreign lines of credit of approximately $174 million. At December 31, 1993, interest rates on the U.S. and foreign lines were no higher than the prime rate or its equivalent. Commitment fees of 1/4% are required on the $1,015 million U.S. lines of credit, which are available to September 30, 1996 on a revolving basis, at which time amounts owed, if any, become payable. Commitment fees of no more than 1/5% are required on the $208 million foreign lines of credit. Commitments under the credit agreements cannot be withdrawn provided the company continues to meet required conditions. 12 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Notes to Financial Statements Note 5. Accounts Payable and Accrued Liabilities
December 31 (in thousands of dollars) 1993 1992 - ------------------------------------------------------- -------- -------- Accounts payable....................................... $243,920 $271,928 -------- -------- Dividends payable...................................... 4,654 4,646 -------- -------- Accrued liabilities: Payrolls and commissions............................. 104,520 107,860 Employee benefits.................................... 50,668 50,643 Interest............................................. 49,611 53,223 Taxes, other than income taxes....................... 25,462 30,955 Other................................................ 112,318 127,724 -------- -------- Total accrued liabilities....................... 342,579 370,405 -------- -------- $591,153 $646,979 ======== ========
13 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Notes to Financial Statements Note 6. Long-Term Debt (exclusive of current installments)
December 31 (in thousands of dollars) 1993 1992 - ------------------------------------------------------- ---------- ---------- Secured debt, 5.1% average rate, payable through 2012 (a)..................................... $ 39,183 $ 50,070 Unsecured debt, 6.8% average rate, payable through 2028 (b)............................................. 3,030,816 3,019,713 Lease obligations, 7.0% average rate, payable through 2029......................................... 236,566 184,724 Timber cutting obligation.............................. --- 26,763 Other contractual obligations, 5.9% average rate, payable through 1998................................. 9,600 9,605 ---------- ---------- Total (c,d)..................................... $3,316,165 $3,290,875 ========== ==========
(a) Such debt is secured by certain assets with a net book value at December 31, 1993 of approximately $67 million. (b) Unsecured debt includes borrowings payable in less than one year. The company has the ability to refinance these borrowings under the credit agreements discussed in Note 4. At December 31, 1993, $331 million of U.S. commercial paper and $228 million of U.S. short-term obligations have been classified as long-term debt since the company intends to renew or refinance these obligations through 1994 and into future periods. Unsecured debt at December 31, 1993 and 1992 includes $150 million of the company's 6 1/2% convertible subordinated debentures due April 15, 2011. The conversion rate for these debentures is 28.777 shares of the company's common stock for each $1,000 principal amount of debentures. (c) The annual principal payment requirements under the terms of all long-term debt agreements for the years 1994 through 1998 are $88 million, $361 million, $919 million, $246 million and $247 million, respectively. (d) The estimated fair value of long-term debt at December 31, 1993 was approximately $242 million higher than carrying value due to recent declines in interest rates. The indentures and agreements relating to long-term debt arrangements, as well as the company's Certificate of Incorporation, contain restrictions on the payment of cash dividends. Under the most restrictive of these provisions, approximately $454 million of consolidated retained earnings at December 31, 1993 is free of such restrictions. 14 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Notes to Financial Statements During the fourth quarter of 1993, the company sold approximately 870,000 acres of timberlands in Montana and its wood products facilities at Bonner and Libby, Montana. Net cash proceeds of approximately $284 million from these sales were used primarily to reduce long-term debt, including redemption of $77.5 million principal amount of 10 5/8% Sinking Fund Debentures and $100 million principal amount of 9 1/2% Sinking Fund Debentures. The company has recorded an extraordinary loss of $23 million ($14 million net of taxes), consisting of redemption premiums and the write-off of deferred financing costs, related to early retirement of debt. The impact of the Montana sales on 1993 net income was not material. 15 Champion International Corporation and Subsidiaries Notes to Financial Statements Note 7. Commitments
Future Minimum Lease Payments ----------------------------- Capitalized Non-Cancelable Period (in thousands of dollars) Leases Operating Leases - --------------------------------------------- ----------- ---------------- 1994......................................... $ 18,246 $ 22,916 1995......................................... 17,384 20,890 1996......................................... 17,328 19,043 1997......................................... 17,272 17,720 1998......................................... 17,215 15,644 Thereafter................................... 558,859 250,094 ----------- ---------------- Total payments............................... 646,304 346,307 Less: Sublease rental income................ --- 73,329 ---------------- Net operating lease payments................. $272,978 ================ Less: Amount representing interest.......... 405,414 ----------- Present value of capitalized lease payments ($1,600 current; $239,290 long-term)....... $240,890 ===========
The following schedule shows the composition of total rental expense for all operating leases:
Years Ended December 31 (in thousands of dollars) 1993 1992 1991 - --------------------------------------------------- ------- ------- ------- Minimum rentals.................................... $25,204 $26,082 $27,734 Less: Sublease rental income...................... 573 970 1,291 ------- ------- ------- $24,631 $25,112 $26,443 ======= ======= =======
16 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Notes to Financial Statements Note 8. Capital Shares Redeemable Preference Stock - --------------------------- On December 6, 1989, the company issued 300,000 shares of Preference Stock, $92.50 Cumulative Convertible Series, $1.00 par value ("$92.50 Preference Stock"). In preference to shares of common stock, each share is entitled to cumulative cash dividends of $92.50 per year and $1,000 upon liquidation. Each share is convertible into approximately 26.3 shares of common stock and has approximately 26.3 votes on all matters submitted to shareholders. In the event of arrearages in $92.50 Preference Stock dividends, the company is prohibited from declaring or paying any cash dividends on its common stock. Although interest rates have declined since the issuance of these securities, the company believes that their fair value does not exceed $1,150 per share plus accrued dividends, which represents the amount at which the company has a right, except in certain circumstances, to redeem the shares. On December 6, 1999, all outstanding shares must be redeemed at $1,000 per share plus accrued dividends. Except under certain circumstances, the company has the right to purchase any securities, including common stock, owned by the original holders of the $92.50 Preference Stock before such securities are sold to third parties. Unissued Preference Stock - ------------------------- At December 31, 1993 and 1992, 6,731,431 preference shares for which no series has been designated were authorized and unissued. At December 31, 1993 and 1992, 1,500,000 additional authorized and unissued shares were designated and reserved for the issuance of the company's Preference Stock, Participating Cumulative Series or Participating Cumulative Series B, $1.00 par value. 17 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Notes to Financial Statements Common Stock - ------------ Changes in common shares during the three years ended December 31, 1993 are as follows: (in shares and thousands of dollars)
Treasury Shares Issued Shares (at cost) ---------------------------------- ----------------------- Par Capital Shares Value Surplus Shares Amount ----------- -------- ----------- ---------- ---------- Balance at December 31, 1990.. 96,060,347 $48,030 $1,155,850 (3,092,070) $(100,108) Exercise of stock options..... 12,750 6 296 --- --- Compensation plans............ 18,946 10 497 (77,912) (39) Other......................... (2,326) (1) (4) --- --- ---------- ------- ---------- ---------- --------- Balance at December 31, 1991.. 96,089,717 48,045 1,156,639 (3,169,982) (100,147) Exercise of stock options..... 40,750 20 962 --- --- Compensation plans............ 20,368 10 550 (107,563) (54) Other......................... 6,277 4 (1) --- --- ---------- ------- ---------- ---------- --------- Balance at December 31, 1992.. 96,157,112 48,079 1,158,150 (3,277,545) (100,201) Exercise of stock options..... 182,950 91 4,751 --- --- Compensation plans............ 23,078 12 639 (63,810) (32) Other......................... 4,615 2 15 --- --- ---------- ------- ---------- ---------- --------- Balance at December 31, 1993.. 96,367,755 $48,184 $1,163,555 (3,341,355) $(100,233) ========== ======= ========== ========== =========
At December 31, 1993, common shares of the company were reserved for issue as follows: $92.50 Preference Stock....................... 7,894,737 Stock options granted or available for grant.. 8,468,650 Conversion of long-term debt.................. 4,318,695 Compensation plans............................ 2,682,361 ---------- 23,364,443 ==========
18 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Notes to Financial Statements Note 9. Stock Options The company has granted to officers and key employees options to purchase common shares at the market price of the shares on the date of grant. Certain options granted to officers and to key employees are accompanied by stock appreciation rights. The options expire ten years or ten years and 31 days from the date of grant and generally become exercisable subsequent to a period of 12 calendar months from date of grant. Transactions under the plans are summarized below:
Shares Option Price ---------- ---------------- Balance at January 1, 1991................ 2,533,375 $17.50 to $38.25 Granted.............................. 907,000 26.38 to 26.88 Exercised............................ (20,550) 17.50 to 24.13 Surrendered or canceled.............. (67,100) 22.13 to 38.25 --------- Balance at December 31, 1991.............. 3,352,725 17.50 to 38.25 Granted.............................. 606,600 27.50 Exercised............................ (78,525) 17.50 to 28.13 Surrendered or canceled.............. (96,300) 17.50 to 38.25 --------- Balance at December 31, 1992.............. 3,784,500 18.88 to 38.25 Granted.............................. 598,200 31.00 Exercised............................ (266,300) 22.13 to 31.50 Surrendered or canceled.............. (103,400) 24.00 to 38.25 --------- Balance at December 31, 1993.............. 4,013,000 $18.88 to $38.25 ========= ================ Options exercisable at December 31, 1993.. 3,130,500
At December 31, 1993, the stock options had an aggregate option price of $117,796,088. 19 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Notes to Financial Statements Note 10. Other (Income) Expense -- Net
Years Ended December 31 (in thousands of dollars) 1993 1992 1991 - --------------------------------------- --------- --------- --------- Interest income........................ $(30,135) $ (23,825) $ (27,777) Foreign currency losses -- net......... 24,717 5,116 1,466 Minority interest in income of subsidiaries......................... 7,288 2,856 (4,315) Equity in net income of affiliates..... (463) (972) (1,931) Royalty, rental and commission income............................... (8,276) (13,950) (11,951) Net gain on disposal of fixed assets, timberlands and investments (a)...... (9,973) (103,778) (92,705) Miscellaneous -- net (b)............... 24,252 (7,963) 27,672 -------- --------- --------- $ 7,410 $(142,516) $(109,541) ======== ========= =========
(a) 1992 and 1991 included gains of $107 million and $93 million, respectively, from sales of portions of the company's West Coast timberlands, including the 1992 sale of its wood products facility in Roseburg, Oregon. (b) Miscellaneous - net for 1992 included income of $30 million from the favorable resolution of certain issues in Brazil. 20 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Notes to Financial Statements Note 11. Income Taxes The provision for income taxes includes the following components:
Years Ended December 31 (in thousands of dollars) 1993 1992 1991 - --------------------------------------------------- -------- -------- ------- Provision for income taxes currently payable (receivable): Federal.......................................... $(15,206) $ --- $12,720 State and local.................................. 1,680 1,820 1,800 Foreign.......................................... 9,147 5,756 6,138 -------- -------- ------- (4,379) 7,576 20,658 -------- -------- ------- Provision for deferred income taxes: Federal.......................................... (34,005) (40,233) 16,735 State and local.................................. (8,821) (2,071) 3,500 Foreign.......................................... 15,983 30,400 (3,038) -------- -------- ------- (26,843) (11,904) 17,197 -------- -------- ------- $(31,222) $ (4,328) $37,855 ======== ======== =======
Domestic and foreign income (loss) before income taxes, extraordinary item and cumulative effect of accounting changes are as follows:
Years Ended December 31 (in thousands of dollars) 1993 1992 1991 - --------------------------------------------------- --------- --------- ------- Domestic........................................... $(250,755) $(114,450) $51,051 Foreign............................................ 85,079 124,042 27,147 --------- --------- ------- Total income before income taxes, extraordinary item and cumulative effect of accounting changes.......................................... $(165,676) $ 9,592 $78,198 ========= ========= =======
21 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Notes to Financial Statements Principal reasons for the variation between the effective rate and the statutory federal income tax rate are as follows:
Years Ended December 31 1993 1992 1991 - -------------------------------------------------- ------ ------ ----- Statutory rate -- provision (benefit)............. (35.0)% 34.0 % 34.0 % Rate difference -- foreign subsidiaries........... (1.0) 28.5 (11.5) Foreign dividends................................. 1.3 45.7 4.2 State and local taxes, net of federal tax effect.. (2.8) (1.7) 4.5 Adjustment to prior years' income taxes........... 4.1 (106.2) --- Amortization of excess of amounts allocated in purchase accounting over tax basis.............. --- --- 10.0 Adjustment of purchase accounting liabilities..... (0.4) (63.7) 4.2 Statutory rate change adjustments................. 14.1 --- --- All other -- net.................................. 0.9 18.3 3.0 ------ ------ ----- Effective income tax rate......................... (18.8)% (45.1)% 48.4 % ====== ====== =====
Deferred tax liabilities (assets) are composed of the following:
Years Ended December 31 (in thousands of dollars) 1993 1992 - -------------------------------------------------- ---------- ---------- Depreciation and cost of timber harvested......... $1,671,507 $1,657,165 Capitalization of interest and deferral of pre-operating and start-up costs (net).......... 52,362 52,929 Other............................................. 44,696 64,066 ---------- ---------- Gross Liabilities.......................... 1,768,565 1,774,160 ---------- ---------- Loss and other carryforwards...................... (388,780) (317,220) Accrued liabilities and reserves.................. (181,932) (177,159) Postretirement benefits other than pensions....... (144,044) (137,562) Other............................................. (83,930) (99,686) ---------- ---------- Gross Assets............................... (798,686) (731,627) ---------- ---------- Valuation allowance............................... 42,291 39,800 ---------- ---------- $1,012,170 $1,082,333 ========== ==========
22 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Notes to Financial Statements As of December 31, 1993, the company had available, for U.S. income tax return purposes, general business credit carryforwards of $53,000,000, which expire from 2000 through 2007; net operating loss carryforwards of $558,400,000, which expire from 2006 through 2008; and alternative minimum tax credit carryforwards of $104,300,000, which do not expire. In addition, the company had available in Canada net operating loss carryforwards of $5,600,000 which will expire in 1998 and investment tax credit carryforwards of $8,700,000, which expire from 1996 through 2002. It is the company's intention to reinvest undistributed earnings of certain of its foreign subsidiaries and thereby indefinitely postpone their remittance. Accordingly, no provision has been made for income taxes on undistributed earnings of $689,700,000 at December 31, 1993. Computation of the potential deferred tax liability associated with these undistributed earnings is not practicable. The valuation allowance primarily relates to general business credit carryforwards. The increase in the valuation allowance of $2,491,000 for 1993 is primarily due to uncertainty with respect to the utilization of state net operating loss carryforwards. In the fourth quarter of 1992, the company adopted, retroactive to January 1, 1992, SFAS No. 109. The adoption of SFAS No. 109 changed the company's method of accounting for income taxes from the deferred method to an asset and liability approach. The company adopted the standard using a cumulative effect adjustment and recorded a charge to 1992 net income of $242 million ($2.61 per share) principally as the result of changes to the tax provision for years prior to 1988. The effect of the adoption on 1992 results, after recording the cumulative effect for the years prior to 1992, was to record additional pre-tax expense of approximately $27 million, primarily as the result of an increase in depreciation expense, and a reduction to net income of approximately $9 million. For the year prior to adoption of SFAS No. 109, the deferred income tax provision resulted from the following:
Year Ended December 31 (in thousands of dollars) 1991 - ------------------------------------------------ -------- Excess of tax over financial depreciation expense and cost of timber harvested.............. $ 81,268 Capitalization of interest and deferral of pre-operating and start-up costs (net) -- deductible for tax purposes as incurred........... 3,897 Provision for accrued liabilities -- deductible for tax purposes when paid........................ (3,196) Effect on deferred taxes of net operating loss, general business credit and alternative minimum tax credit carryforwards.................. (74,156) Provision for restructuring......................... 3,345 All other - net..................................... 6,039 -------- $ 17,197 ========
23 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Notes to Financial Statements Note 12. Pension and Other Benefit Plans The company and its subsidiaries have a number of noncontributory pension plans covering substantially all employees. The plans covering salaried employees provide pension benefits that generally are based on the employee's compensation during the 60 months before retirement. Plans covering hourly employees generally provide benefits of stated amounts for each year of service. The company bases domestic pension contributions on funding standards established by the Employee Retirement Income Security Act of 1974. The net periodic pension cost of these plans in 1993, 1992 and 1991 included the following:
(in thousands of dollars) 1993 1992 1991 - ------------------------------------------------- --------- --------- --------- Service cost--benefits earned during the period.. $ 25,256 $ 24,257 $ 21,366 Interest cost on projected benefit obligation.... 98,667 96,248 93,152 Actual return on plan assets..................... (208,714) (105,909) (255,479) Net amortization and deferral.................... 90,806 (3,662) 154,711 --------- --------- --------- Net periodic pension cost........................ $ 6,015 $ 10,934 $ 13,750 ========= ========= ========= Assumptions used in determining 1993, 1992 and 1991 net periodic pension cost were: Expected long-term rate of return on assets...... 10.0% 10.0% 10.0% Discount rate.................................... 8.3% 8.5% 9.3% Long-term rate of increase in compensation levels 5.3% 5.5% 6.3%
24 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Notes to Financial Statements The accrued pension cost at December 31, 1993 and 1992 for defined benefit plans is shown below. The measurement dates used to determine the funded status were September 30, 1993 and 1992. Benefit obligations for 1993 and 1992 were determined using an assumed discount rate of 7.25% and 8.25%, respectively, and an assumed average long-term rate of increase in compensation levels of 4.25% and 5.25%, respectively. Plan assets consist primarily of listed stocks and bonds.
Assets Exceed Accumulated Benefits ---------------------------------- 1993 1992 --------------- ---------------- (in thousands of dollars) - ------------------------- Actuarial present value of benefit obligations: Vested benefit obligation.................... $1,179,538 $1,080,935 ========== ========== Accumulated benefit obligation............... $1,214,997 $1,112,708 ========== ========== Projected benefit obligation................. $1,330,228 $1,212,997 Plan assets at fair value........................ 1,362,952 1,231,022 ---------- ---------- Plan assets in excess of the projected benefit obligation..................................... 32,724 18,025 Unrecognized net (gain).......................... (43,014) (39,984) Prior service cost not yet recognized in net periodic pension cost.......................... 23,437 21,209 Unrecognized net transitional (asset)............ (18,369) (19,990) ---------- ---------- Pension (liability).............................. $ (5,222) $ (20,740) ========== ==========
25 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Notes to Financial Statements Other Retiree Benefits - ---------------------- The company provides certain health care and life insurance benefits to eligible retired employees. Employees are generally eligible for benefits upon retirement and completion of a specified number of years of service. These benefit plans are unfunded. Summary information on the company's plans providing postretirement benefits other than pensions is as follows:
December 31 (in thousands of dollars) 1993 1992 - ------------------------------------------------ -------- -------- Accumulated postretirement benefit obligation: Retirees...................................... $308,000 $288,300 Fully eligible, active plan participants...... 42,100 52,400 Other active plan participants................ 53,500 60,000 -------- -------- Accumulated postretirement benefit obligation 403,600 400,700 Unrecognized prior service (cost) benefit....... 30,400 --- Unrecognized net (loss)......................... (57,600) (31,900) -------- -------- Accrued postretirement benefit obligation....... $376,400 $368,800 ======== ========
Net periodic postretirement benefit cost for 1993 and 1992 includes the following components:
(in thousands of dollars) 1993 1992 - --------------------------------------------- -------- -------- Service cost................................. $ 4,800 $ 4,300 Interest cost on accumulated postretirement benefit obligation......................... 32,700 30,500 ------- ------- Net periodic postretirement benefit cost..... $37,500 $34,800 ======= =======
The accumulated postretirement benefit obligation at December 31, 1993 and 1992 was determined using an assumed discount rate of 7.5% and 8.5%, respectively. The assumed health care cost trend rate used for measurement purposes was 10% for 1994, declining ratably to an ultimate rate of 5% over a period of eight years. If the health care cost trend rate assumptions were increased by 1%, the accumulated postretirement benefit obligation as of December 31, 1993 would be increased by approximately 10%. The effect of this change on the aggregate of service and interest cost for 1993 would be an increase of approximately 10%. 26 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Notes to Financial Statements In the fourth quarter of 1992, the company adopted, retroactive to January 1, 1992, SFAS No. 106. This statement requires that the cost of retiree benefits other than pensions be recognized in the financial statements during the employee's working career. The company's previous practice was generally to expense the cost of these benefits as they were paid. The cumulative effect of adopting SFAS No. 106 as of January 1, 1992 resulted in an after-tax charge of $213 million ($2.30 per share) to 1992 earnings, after reduction of approximately $126 million for income tax effects. The effect of adoption on 1992 results, after recording the cumulative effect for the years prior to 1992, was to recognize additional pre-tax expense of approximately $13 million. Postretirement benefit cost charged to expense in 1991 was $19,046,000. Postemployment Benefits - ----------------------- In the fourth quarter of 1993, the company adopted, retroactive to January 1, 1993, SFAS No. 112. The standard requires an accrual method of accounting for postemployment benefits. Prior to adoption, the company was on a cash basis of accounting for certain of these postemployment benefits. The cumulative effect of adopting SFAS No. 112 as of January 1, 1993 resulted in an after-tax charge of $7.5 million ($.08 per share) to 1993 earnings after reduction of approximately $4.7 million for income taxes. The effect of adoption on 1993 results, after recording the cumulative effect, was not material. 27 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Notes to Financial Statements Note 13. Business Segments Information about the company's operations in different businesses for the three years ended December 31, 1993 is as follows:
Timber, Timberlands and Wood Corporate Consolidated (in thousands of dollars) Paper Products and Other Total - ------------------------- ----------- ----------- --------- ------------ Net Sales to Unaffiliated Customers: 1993..................... $3,817,579 $1,251,254 $ --- $5,068,833 1992..................... 3,834,585 1,091,886 --- 4,926,471 1991..................... 3,852,438 933,965 --- 4,786,403 Income from Operations: 1993..................... $ (133,774) $ 247,989 $(47,823) $ 66,392 1992..................... (7,490) 125,071 (44,210) 73,371 1991..................... 216,018 5,921 (42,755) 179,184 Identifiable Assets: 1993..................... $6,563,263 $2,148,921 $430,585 $9,142,769 1992..................... 6,556,177 2,344,257 480,998 9,381,432 1991..................... 6,125,084 2,046,919 483,874 8,655,877 Capital Expenditures: 1993..................... $ 417,407 $ 182,785 $ 5,588 $ 605,780 1992..................... 614,795 95,993 7,501 718,289 1991..................... 581,368 60,872 19,229 661,469 Depreciation Expense and Cost of Timber Harvested: 1993..................... $ 358,294 $ 72,513 $ 12,627 $ 443,434 1992..................... 324,010 72,562 13,928 410,500 1991..................... 261,391 67,011 13,169 341,571
The company's domestic and Canadian timber and timberlands assets and related capital expenditures support both business segments but were not allocated to the paper segment because identification of the specific timber and timberlands assets associated with either segment is impossible. The timber that has been harvested has been included at cost in the results of the business segments. 28 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Notes to Financial Statements Information about the company's operations in different geographic areas for the three years ended December 31, 1993 is as follows:
Corporate Consolidated (in thousands of dollars) U.S. Canada Brazil and Other Total - ------------------------- ----------- --------- -------- ---------- ------------ Net Sales to Unaffiliated Customers: 1993..................... $4,185,388 $610,947 $272,498 $ --- $5,068,833 1992..................... 4,114,609 532,623 279,239 --- 4,926,471 1991..................... 4,034,237 494,019 258,147 --- 4,786,403 Income from Operations: 1993..................... $ (18,063) $ 53,674 $ 78,604 $(47,823) $ 66,392 1992..................... (11,418) 37,778 91,221 (44,210) 73,371 1991..................... 165,818 (20,327) 76,448 (42,755) 179,184 Identifiable Assets: 1993..................... $7,454,454 $744,631 $513,099 $430,585 $9,142,769 1992..................... 7,588,478 718,695 593,261 480,998 9,381,432 1991..................... 6,878,365 780,677 512,961 483,874 8,655,877 Capital Expenditures: 1993..................... $ 486,074 $ 65,035 $ 49,083 $ 5,588 $ 605,780 1992..................... 638,392 16,974 55,422 7,501 718,289 1991..................... 585,589 18,323 38,328 19,229 661,469 Depreciation Expense and Cost of Timber Harvested: 1993..................... $ 376,456 $ 32,513 $ 21,838 $ 12,627 $ 443,434 1992..................... 342,769 33,366 20,437 13,928 410,500 1991..................... 273,737 35,128 19,537 13,169 341,571
As of December 31, 1993, net assets located outside of the United States included in the consolidated financial statements were approximately $760,000,000. Of this amount, $457,000,000, which includes $48,000,000 of cash and cash equivalents and short-term investments, is owned by the company's Brazilian subsidiary. 29 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Notes to Financial Statements Note 14. Quarterly Results of Operations (Unaudited)
(in millions of dollars, except per share amounts) - -------------------------------------------------- March 31 June 30 September 30 December 31 -------- -------- ------------ ----------- Net Sales 1993 $1,267.0 $1,256.3 $1,245.3 $1,300.2 1992 1,200.3 1,229.6 1,259.2 1,237.4 Gross Profit 1993 $ 103.8 $ 92.5 $ 68.7 $ 94.1 1992 93.3 89.0 103.3 76.2 Income Taxes (Benefit) (a) 1993 $ (18.7) $ (14.9) $ 4.7 $ (2.3) 1992 (10.4) (9.2) 24.5 (9.2) Income (Loss) before Extraordinary Item and Cumulative Effect of Accounting Changes (b) 1993 $ (28.1) $ (22.3) $ (53.5) $ (30.6) 1992 (6.8) 2.0 47.6 (28.9) Net Income (Loss) (c) 1993 $ (35.6) $ (22.3) $ (53.5) $ (44.8) 1992 (461.1) 2.0 47.6 (28.9) Earnings (Loss) Per Common Share before Extraordinary Item and Cumulative Effect of Accounting Changes 1993 $ (.38) $ (.31) $ (.65) $ (.41) 1992 (.15) (.05) .43 (.38) Earnings (Loss) Per Common Share (c) 1993 $ (.46) $ (.31) $ (.65) $ (.56) 1992 (5.05) (.05) .43 (.38)
(a) Income taxes (benefit) for the three-month periods ended September 30 and December 31, 1993 included provisions of $23 million and $11 million, respectively, to reflect one-time adjustments to the company's deferred tax liability. (b) Other (income) expense - net for the three-month period ending December 31, 1993, included non-recurring pre-tax income of $10 million. Other (income) expense - net for the three-month periods ended March 31, June 30 and September 30, 1992 included non-recurring pre-tax income of $20 million, $26 million and $90 million, respectively, primarily from the sale of timberlands, and 30 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Notes to Financial Statements for the three-month period ended December 31, 1992 included a net charge of $18 million related to several non-recurring items and income of $30 million from the favorable resolution of certain issues in Brazil. The $30 million favorable resolution was after-tax and, therefore, reduced the effective tax rate for the period. (c) Net income (loss) and earnings (loss) per common share for the three months ended March 31, 1993 have been restated to include the one-time charge for the cumulative effect of an accounting change of $8 million, or $.08 per share, for the adoption as of January 1, 1993 of SFAS No. 112 (Note 12). Net income (loss) and earnings (loss) per common share for the three months ended December 31, 1993 included the after-tax charge of $14 million, or $.15 per share, respectively, for the loss on early retirement of debt. Net income (loss) and earnings (loss) per common share for the three months ended March 31, 1992 included the one-time charge for the cumulative effect of accounting changes of $454 million, or $4.90 per share, respectively, to reflect the adoption as of January 1, 1992 of SFAS No. 106 (Note 12) and SFAS No. 109 (Note 11). 31 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Notes to Financial Statements Note 15. Environmental Liabilities The company has been designated as a potentially responsible party by the U.S. Environmental Protection Agency (the "EPA") under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, and by certain states under applicable state laws, with respect to the cleanup of hazardous substances at several sites. In the case of many of these sites, other potentially responsible parties also have been so designated. In addition, the company and, in certain instances, other responsible parties have entered into agreements with the EPA and certain states regarding the cleanup of hazardous substances at various other locations. Also, the company is involved in the remediation of certain other sites which are not the subject of investigation by federal or state agencies. The company cannot predict with certainty the total cost of such cleanups, the company's share of the total cost of multiparty cleanups or the extent to which contribution will be available from other parties, or the amount of time necessary to accomplish such cleanups. However, based upon, among other things, its previous experience with respect to the cleanup of hazardous substances as well as the regular detailed review of known hazardous waste sites by the company, the company has accrued $83 million at December 31, 1993, which represents its current estimate of the probable cleanup liabilities, including remediation and legal costs, at all known sites. This accrual does not reflect any possible future insurance recoveries, which are not expected to be significant, but does reflect a reasonable estimate of cost-sharing at multiparty sites. Although the company's probable liabilities have been accrued for currently, hazardous substance cleanup expenditures generally are incurred over an extended period of time, in some cases possibly more than 30 years. Annual cleanup expenditures during the period from 1991 through 1993 were approximately $5.3 million, $6.6 million and $6.9 million, respectively. 32 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Notes to Financial Statements Note 16. Legal Proceedings The company was a defendant in a class action which originally sought $5 billion in damages allegedly resulting from the purported discharge of hazardous substances, including dioxin, from the company's Canton, North Carolina mill into the Pigeon River. In October 1992, a mistrial was declared after the jury was unable to reach a unanimous verdict. In May 1993, the court approved a settlement of the action providing for the payment of $6.5 million by the company. In June 1993, the court's approval of the settlement was appealed. The company, Simpson Pasadena Paper Company, the Gulf Coast Waste Disposal Authority and others were defendants in two separate actions by several individuals engaged primarily in seafood-related businesses. Each of these actions sought unspecified damages allegedly resulting from the purported discharge of dioxin into the Brazos River, Galveston Bay and the Neches River from the company's Sheldon, Texas mill, the company's former mill in Pasadena, Texas and the other defendants' mills. Each of these actions was settled for an immaterial amount in December 1993. The company is a defendant in a purported class action which originally sought $500 million in damages allegedly resulting from the purported discharge of hazardous substances, including dioxin, from the company's Pensacola, Florida mill into Eleven Mile Creek, which flows into Perdido Bay. The plaintiffs are now seeking not more than $50,000 for each class member. It is anticipated that the class, if certified, will consist of approximately 1,000 members. The company and many other corporations, municipalities and individuals are defendants in three separate actions filed in Texas by numerous individuals. Each of these actions seeks damages in excess of $5 billion, allegedly resulting from the purported disposal of waste materials, including hazardous substances, into the McGinnis Waste Disposal Site located at Hall's Bayou Ranch. The company is vigorously defending each of the pending actions described above. The company is also involved in other legal and administrative proceedings and claims of various types. While any litigation contains an element of uncertainty, management, based upon the opinion of the company's General Counsel, presently believes that the outcome of each such proceeding or claim which is pending or known to be threatened (including the actions described above), or all of them combined, will not have a material adverse effect on the company. 33 Report of Independent Public Accountants - -------------------------------------------------------------------------------- To the Shareholders and Board of Directors of Champion International Corporation: We have audited the accompanying consolidated balance sheet of Champion International Corporation (a New York corporation) and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of income, retained earnings and cash flows for each of the three years in the period ended December 31, 1993. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Champion International Corporation and subsidiaries as of December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. As explained in Notes 1, 11 and 12 of Notes to Financial Statements, the company adopted new accounting standards promulgated by the Financial Accounting Standards Board, changing its methods of accounting for income taxes and for postretirement benefits other than pensions, effective January 1, 1992, and changing its method of accounting for postemployment benefits, effective January 1, 1993. Arthur Andersen & Co. New York, N.Y. January 17, 1994 34 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - --------------------- Overall Annual Results In 1993, the company incurred a loss of $156 million or $1.98 per share. This compared with a loss of $440 million or $5.05 per share in 1992 and net income of $40 million and earnings per share of 14 cents in 1991. Excluding non-recurring income and expense items, an extraordinary item and the cumulative effect of the adoption of certain new accounting standards, as described below, results declined moderately from 1992 and significantly from 1991. Excluding all such items, the company incurred a loss of $106 million or $1.44 per share in 1993, compared with a loss of $95 million or $1.33 per share in 1992 and net income of $8 million and a loss per share of 20 cents in 1991. Results for 1993 included several non-recurring income and expense items, primarily a one-time adjustment to the company's deferred tax liability to reflect the impact of changes during the year in the corporate income tax rates in the United States and Canada. The net effect of all such items was to reduce net income by approximately $28 million or 31 cents per share. Results for 1993 also included an extraordinary charge to earnings of $14 million or 15 cents per share in connection with the redemption of certain debt. In addition, in 1993 the company adopted a new accounting standard relating to postemployment benefits, the cumulative effect of which resulted in a charge to earnings of $8 million or 8 cents per share. Results for 1992 included several non-recurring income and expense items, principally sales of timberlands, the net effect of which was to add approximately $109 million to net income or $1.18 to earnings per share. Also in 1992, the company adopted two new accounting standards relating to income taxes and postretirement benefits other than pensions, the cumulative effect of which resulted in a charge to earnings of $454 million or $4.90 per share. Results for 1991 included several non-recurring income and expense items, primarily sales of timberlands and various litigation settlements received by the company. The net effect of all such items was to add approximately $32 million to net income or 34 cents to earnings per share. Significant Line Item Changes Net sales for 1993 of $5.1 billion were up from $4.9 billion in 1992 and $4.8 billion in 1991. The improvement in sales reflected higher prices for wood products and increased shipments of paper. Operating income declined slightly from 1992 and substantially from 1991, principally due to lower prices for pulp and certain of the company's paper grades, which more than offset production and productivity gains in pulp and paper manufacturing and significantly higher earnings in the wood products business. In addition, as a result of increased pulp and paper production and shipments, the aggregate cost of products sold increased substantially from 1992 and 1991. 35 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Interest and debt expense was higher than in 1992 and 1991 due to additional borrowings primarily associated with the company's capital improvement program as well as the expensing of interest that had been capitalized during the construction of various capital projects. Other income was substantially lower than in 1992 and 1991, principally reflecting gains from the sales of timberlands as well as the litigation settlements in the prior years referred to above. Also, the effective income tax rate in 1993 was unfavorable compared to 1992 and 1991 due mainly to the one-time adjustment to the company's deferred tax liability in 1993 referred to above. Quarterly Results Excluding non-recurring items in each quarter, the 35-cent loss in the fourth quarter of 1993 improved from the losses of 56 cents in the fourth quarter of 1992 and 40 cents in the third quarter of 1993. Higher earnings in the wood products segment more than offset declines in the paper segment. Paper Segment The paper segment incurred an operating loss of $134 million, compared with a loss of $7 million in 1992 and income of $216 million in 1991. A fourth quarter 1993 loss of $24 million compared with losses of $16 million in the fourth quarter of 1992 and $22 million in the third quarter of 1993. In general, the paper business tends to follow overall economic trends. The decline in paper segment earnings reflected relatively weak demand attributable to slow economic growth in the United States, combined with recessions in Europe and Japan. For example, demand for publication papers and newsprint was adversely affected by continued low levels of advertising in magazines and newspapers. In addition, on the supply side, there have been significant capacity increases in the industry in pulp and certain paper grades in recent years. This unfavorable demand/supply relationship in 1993 resulted in lower prices for pulp and certain of the company's paper grades, which more than offset the paper segment's improvements in production, productivity and quality. Results for domestic printing and writing papers declined substantially from 1992 and 1991, with a large operating loss recorded for the year. Prices for coated papers were lower than in 1992 and 1991, while prices for uncoated papers were even with 1992 levels but lower than in 1991. Volumes were above 1992 and 1991 levels for both coated and uncoated papers. Fourth quarter 1993 results, while a loss, represented an improvement from the fourth quarter of 1992 and the third quarter of 1993, due primarily to increased volumes for uncoated papers and, as compared to the third quarter of 1993, favorable inventory valuation adjustments. Prices for coated and uncoated papers remain weak. In the third quarter of 1993, the No. 35 paper machine started up at the Courtland, Alabama, mill. The No. 35 machine, when fully operational, will have an annual capacity of 245,000 tons of uncoated free sheet paper. In mid-January 1994, a weather- related outage occurred at the Canton, North Carolina, mill. 36 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Operating income at the Brazilian subsidiary, Champion Papel e Celulose Ltda., declined from 1992 but improved slightly from 1991. Prices were somewhat lower than in 1992 but somewhat higher than in 1991. Reflecting weak overall results at the company's U.S. operations, approximately 69% of the company's 1993 consolidated operating income, before general corporate expense, was attributable to the Brazilian subsidiary. Fourth quarter 1993 results were below the levels of the prior and year-ago quarters due to lower prices. New capacity additions by various competitors in Brazil have caused a decline in domestic prices, and the recession in Europe has caused a decline in export prices. Earnings for the publication papers business improved substantially from the 1992 loss, but were down significantly from the operating income in 1991. Higher prices for coated groundwood papers, increased volumes for coated free sheet papers, and lower purchased pulp and other operating costs were primarily responsible for the improvement from 1992. Lower prices for coated and uncoated groundwood grades resulted in the decline from 1991. Fourth quarter 1993 results improved significantly from the fourth quarter of 1992 and moderately from the third quarter of 1993, principally due to higher volumes and lower purchased pulp and other operating costs. The operating loss for the U.S. and Canadian market pulp operations represented a substantial decline from the operating income in 1992 and 1991. Weak demand and excess industry capacity kept prices well below 1992 and 1991 levels. The fourth quarter 1993 loss was significantly below the operating income in the fourth quarter of 1992 and slightly larger than the loss in the third quarter of 1993, as the result of lower prices. Early in 1994, pulp prices began to improve somewhat. Since the company is a net seller of pulp, overall profits are adversely affected by lower pulp prices; however, the company's publication papers mills and the printing and writing papers mills in Hamilton, Ohio, and Canton, North Carolina, purchase pulp from outside suppliers and benefit from lower pulp prices. The sizeable 1993 operating loss for newsprint operations slightly exceeded the loss in 1992 and substantially exceeded the small loss in 1991. Volumes and prices for newsprint were somewhat higher than in 1992. However, this was more than offset by lower volumes and prices for uncoated groundwood papers and higher energy costs. Prices for newsprint and uncoated groundwood papers were significantly below 1991 levels due to continued weak demand and excess industry capacity. The fourth quarter 1993 loss was larger than those of the prior and year-ago quarters due to lower prices. Earnings for the packaging business declined from 1992 and 1991 primarily as the result of lower prices for kraft paper and linerboard. Volumes were above 1992 and 1991 levels for both products. Fourth quarter 1993 results were down from the fourth quarter of 1992, mainly due to lower prices for kraft paper and linerboard. However, results improved from the third quarter of 1993, due to price increases for both products. 37 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Wood Products Segment For the company's wood products segment, which includes the wood-related operations of the Canadian subsidiary, Weldwood of Canada Limited, income from operations of $248 million improved substantially from $125 million in 1992 and $6 million in 1991. Fourth quarter 1993 income of $57 million was up from $32 million in both the fourth quarter of 1992 and the third quarter of 1993. The profitability of the company's U.S. and Canadian wood products operations has improved considerably since early 1991, due primarily to supply factors such as industry timber shortages in the United States attributable to environmental considerations. In addition, demand has improved as housing starts in the United States, which in 1991 had reached their lowest level in 36 years, continued to increase in 1993. Prices for lumber, plywood and timber were substantially higher than in 1992 and 1991. Volumes for lumber and plywood were lower than in 1992, due primarily to the sale in the third quarter of 1992 of the Roseburg, Oregon, facility and the fourth quarter 1993 sales of the Lumber City, Georgia, and Bonner and Libby, Montana, facilities. However, lumber and plywood volumes improved from 1991 levels, as certain facilities which had taken downtime in 1991 due to market conditions increased production in 1992 and 1993. Volumes for timber were lower than in 1992 and 1991. Labor Contracts The company has labor agreements, which expire between 1994 and 1998, at ten of its eleven domestic paper mills. Facilities at which labor agreements expire in 1994 include the Sheldon and Lufkin, Texas, newsprint mills and the Roanoke Rapids, North Carolina, kraft mill. The Quinnesec, Michigan, pulp and publication papers mill is a non-union facility. 1994 Outlook The paper and wood products businesses are cyclical, tending to follow overall economic trends. The supply factors that were primarily responsible for the profitability of the wood products operations in 1993 are expected to continue into 1994. With recent substantial improvements in production, productivity and quality, results for the company's pulp and paper businesses in 1994 will depend largely upon prices. Financial Condition - ------------------- General The company's current ratio was 1.4 to 1 at year-end 1993, down from 1.5 to 1 at year-end 1992 and 1991. Total debt to total capitalization was 44% at year-end 1993, as compared to 42% at year-end 1992 and 40% at year-end 1991. 38 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- As discussed below, in each of 1993, 1992 and 1991, the company's net cash provided by operating activities was not sufficient to meet the cash requirements of its investing activities (principally capital expenditures) and its financing activities (principally debt payments and cash dividends). Each year the approximate difference was financed through borrowings and, in 1992, through the use of cash and cash equivalents. In 1993, net borrowings generated cash proceeds of $75 million, while cash and cash equivalents increased by $19 million. In 1992, net borrowings generated cash proceeds of $330 million, and cash and cash equivalents decreased by $76 million. In 1991, net borrowings generated cash proceeds of $256 million, while cash and cash equivalents increased by $54 million. Looking ahead, the company anticipates that net cash provided by operating activities supplemented by borrowings, including borrowings under or supported by its bank lines of credit, will be sufficient to meet the capital expenditure, debt payment and dividend requirements of the company. With the completion of the company's extensive capital improvement program in the third quarter of 1993, the company has reduced capital spending to levels required for routine capital replacements, environmental compliance and incremental improvements. Operating Activities Net cash provided by operating activities of $201 million declined from $258 million in 1992 and $370 million in 1991. The decrease from 1992 was due primarily to changes in certain components of working capital. The decrease from 1991 was primarily the result of significantly lower results before non- recurring items. Investing Activities Net cash used in investing activities of $212 million declined from $611 million in 1992 and $498 million in 1991. The decrease from both prior years was due to lower capital expenditures, higher asset sale proceeds and net proceeds from sales of investments in marketable securities. In 1993, the company received net proceeds of $305 million from sales of timberlands and fixed assets, including $284 million from the sale of 870,000 acres of timberlands in Montana and the wood products facilities in Bonner and Libby, Montana. In addition, the company received net proceeds of $107 million from sales of investments in marketable securities. In 1992 and 1991, the company received net proceeds of $174 million and $130 million, respectively, primarily from sales of timberlands and the sale in 1992 of the wood products facility in Roseburg, Oregon. The company had net expenditures of $58 million and $16 million for investments in marketable securities in 1992 and 1991, respectively. The timberlands and wood products facilities sold by the company did not support any of its pulp and paper mills. These sales reflect the company's strategy to concentrate on the manufacture of pulp and paper. 39 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Financing Activities Net cash provided by financing activities of $30 million was down from $277 million in 1992 and $182 million in 1991. The decline was primarily the result of a decrease in net borrowings, which reflected the lower capital expenditures and the asset sale and marketable securities proceeds discussed above. Long-term debt increased by $25 million in 1993, $313 million in 1992 and $289 million in 1991. At December 31, 1993, the company had $559 million of U.S. commercial paper and other short-term obligations outstanding, all of which are classified as long- term debt, down from $721 million at year-end 1992 but up from $225 million at year-end 1991. In addition, at December 31, 1993, the company had $224 million of notes outstanding under its U.S. bank lines of credit, up from $178 million at year-end 1992 and $25 million at year-end 1991. Domestically, at December 31, 1993, $559 million of the company's unused bank lines of credit of $791 million supported the classification of commercial paper and other short-term obligations as long-term debt. During 1993, the company (i) issued $200 million of non-redeemable 7.7% notes due in 1999, and $100 million of 7.625% debentures due in 2023 which are redeemable beginning in 2003, (ii) borrowed $150 million through variable rate term loans due in 1997 and (iii) borrowed $94 million through the issuance of long-term tax-exempt bonds. The annual principal payment requirements under the terms of all long-term debt agreements for the years 1994 through 1998 are $88 million, $361 million, $919 million, $246 million and $247 million, respectively. Capital Expenditures Capital spending was $491 million in 1993, down from $611 million in 1992 and $575 million in 1991. A significant portion of such capital spending was devoted to the expansion and modernization project at Courtland, Alabama; the environmental improvement and modernization project at Canton, North Carolina; the de-inking project at Sheldon, Texas; and the construction of a new sawmill at Hinton, Alberta, Canada. As noted, the company completed its extensive capital improvement program in 1993. The company has no present plans for major capital projects, although expenditures for routine capital replacements, environmental compliance and incremental improvements will continue. The company presently anticipates that capital spending will decline to approximately $260 million in 1994, all of which is expected to be financed through internally generated funds. 40 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- The Environment - --------------- Environmental Capital Expenditures The company is subject to various federal, state and local laws and regulations relating to the discharge of materials into the environment and to the disposal of solid wastes. These laws and regulations require the company to obtain permits and licenses from appropriate governmental authorities with respect to its properties and to operate its properties in compliance with such permits and licenses. In order to meet the standards established by the various federal, state and local environmental laws and regulations to which the company is subject, the company is required to invest substantial amounts in pollution abatement facilities. During the period from 1989 through 1993, the company spent approximately $369 million in its domestic operations to purchase and install systems to control the discharge of pollutants into air and water and to dispose of solid wastes. In 1993, capital expenditures incurred for such environmental purposes were $71 million. In view of changing environmental laws and regulations and their interpretation, as well as the uncertainties and variables inherent in business planning, it is not possible for the company to predict with certainty the amount of capital expenditures to be incurred for environmental purposes in the future. However, the company estimates that capital expenditures for air and water pollution control systems and solid waste disposal systems in the United States will be approximately $56 million in 1994 and $120 million in 1995. In carrying forward its environmental program, the company will commit additional amounts for environmental purposes in years subsequent to 1995. Preliminary estimates indicate that for the period from 1996 through 1998, capital expenditures for air and water pollution control facilities and solid waste disposal facilities in the United States will aggregate approximately $80 million. In addition, as noted above, in 1993, the company completed a $285 million environmental improvement and modernization project at its Canton, North Carolina, paper mill. The environmental capital expenditures described in the two preceding paragraphs are included in the respective past and estimated 1994 capital spending amounts set forth above under "Capital Expenditures." Although some pollution abatement and solid waste disposal facilities produce improvements in operating efficiency, most increase product costs without enhancing capacity or operating efficiency. However, since other paper and forest products companies also are subject to environmental laws and regulations, the company does not believe that compliance with such laws and regulations will have a material adverse effect on its competitive position. 41 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Proposed EPA Air and Water Regulations In December 1993, the U.S. Environmental Protection Agency (the "EPA") proposed regulations pursuant to the federal Clean Air Act Amendments of 1990 (the "Clean Air Act") and the federal Water Pollution Control Act (the "Clean Water Act") (collectively, the "Acts"). Certain additional Clean Air Act regulations are expected to be proposed in 1994. It is anticipated that all of these regulations will become final in 1995, with compliance required no later than 1998. As previously reported, trace amounts of dioxin were found in the pulp, sludge and effluent at some bleached kraft mills in the United States and Canada, including certain of the company's mills. The proposed regulations under the Clean Water Act provide for oxygen delignification and chlorine dioxide substitution as the preferred technology option to reduce the potential for the formation of dioxin in the pulp bleaching process. The company has implemented and is continuing to implement this technology at its bleached kraft mills. If the final regulations continue to designate oxygen delignification and chlorine dioxide substitution as the preferred technology option, the company presently anticipates that it will incur capital expenditures to meet the requirements of the Clean Water Act regulations, additional to those set forth above under "Capital Expenditures" and "Environmental Capital Expenditures," of approximately $20 million over the period of approximately 1995 to 1998. Assuming that the Clean Air Act regulations to be proposed in 1994 use a range of standards currently expected by the company and that all of the regulations pursuant to the Clean Air Act are adopted as proposed, the company presently anticipates that it will incur capital expenditures to meet the requirements of the Clean Air Act and state air toxics regulations, additional to those set forth above under "Capital Expenditures" and "Environmental Capital Expenditures," of $100 million to $200 million over the period of approximately 1995 to 1998. Great Lakes Initiative The company may incur capital expenditures, additional to those set forth above under "Capital Expenditures" and "Environmental Capital Expenditures," in order to meet the requirements of the Great Lakes Water Quality Agreement of 1978 and the Great Lakes Critical Programs Act of 1990. Pursuant thereto, in April 1993, the EPA issued proposed guidance to the states regarding water quality standards for the waters of the Great Lakes and their tributaries. The company is awaiting the issuance of implementing regulations by the environmental agencies of the affected states in order to determine the extent of any additional costs and the period over which they will be incurred. As a result, the company is not yet in a position to provide a meaningful estimate of any such costs. 42 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- Federal Executive Order In October 1993, President Clinton issued an executive order covering the purchase of uncoated printing and writing papers by the federal government. The order establishes a minimum post-consumer recycled content for such paper purchased by federal agencies of 20% commencing at the end of 1994, increasing to 30% at the end of 1998. In addition, for certain types of such paper, the order requires a minimum content of 50% recovered materials (i.e., waste materials and by-products). Although the federal government purchases less than 2% of the paper produced in the United States, federal government procurement standards sometimes are adopted by state and local governments and private industry. The sale of uncoated printing and writing papers by the company to the federal government accounts for an immaterial portion of total company sales. However, the sale of domestic uncoated printing and writing papers by the company to all customers accounted for approximately 15% of total company sales in 1993. The company currently is reviewing the executive order and its possible implications, including the extent to which additional facilities would be required to meet its standards and the extent to which purchasers other than the federal government are likely to adopt similar standards. The company may incur capital expenditures, additional to those set forth above under "Capital Expenditures" and "Environmental Capital Expenditures," to meet the recycled content requirements of the executive order and of the marketplace generally. However, in view of the uncertainties, the company is not yet in a position to provide a meaningful estimate of any such costs or of the impact of the executive order on demand for virgin market pulp produced by the company. Hazardous Substance Cleanup The company has been designated as a potentially responsible party by the EPA under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, and by certain states under applicable state laws, with respect to the cleanup of hazardous substances at several sites. In the case of many of these sites, other potentially responsible parties also have been so designated. In addition, the company and, in certain instances, other responsible parties have entered into agreements with the EPA and certain states regarding the cleanup of hazardous substances at various other locations. Also, the company is involved in the remediation of certain other sites which are not the subject of investigation by federal or state agencies. The cost of all such cleanups is not capitalized and, accordingly, is not included in the capital expenditure information set forth above under "Capital Expenditures" and "Environmental Capital Expenditures." The company cannot predict with certainty the total cost of such cleanups, the company's share of the total cost of multiparty cleanups or the extent to which contribution will be available from other parties, or the amount of time necessary to accomplish such cleanups. However, based upon, among other things, its previous experience with respect to the cleanup of hazardous substances as well as the regular detailed review of known hazardous waste sites by the company, the company has 43 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- developed an estimate of its probable cleanup liabilities. This estimate includes remediation and legal costs with respect to properties presently or formerly owned or operated by the company or its predecessors as well as properties, such as municipal or county landfills, owned and operated by third parties to which the company or its contractor sent waste material. The company has accrued $83 million at December 31, 1993, on a non-discounted basis, which represents its current estimate of the probable cleanup liabilities at all known sites. This accrual does not reflect any possible insurance recoveries, which are not expected to be significant, but does reflect a reasonable estimate of cost-sharing at multiparty sites. Although the company's probable liabilities have been accrued for currently, hazardous substance cleanup expenditures generally are incurred over an extended period of time, in some cases possibly more than 30 years. Annual cleanup expenditures during the period from 1991 through 1993 were approximately $5.3 million, $6.6 million and $6.9 million, respectively. Environmental Legal Proceedings The company was a defendant in a class action which originally sought $5 billion in damages allegedly resulting from the purported discharge of hazardous substances, including dioxin, from the company's Canton, North Carolina mill into the Pigeon River. In October 1992, a mistrial was declared after the jury was unable to reach a unanimous verdict. In May 1993, the court approved a settlement of the action providing for the payment of $6.5 million by the company. In June 1993, the court's approval of the settlement was appealed. The company, Simpson Pasadena Paper Company, the Gulf Coast Waste Disposal Authority and others were defendants in two separate actions by several individuals engaged primarily in seafood-related businesses. Each of these actions sought unspecified damages allegedly resulting from the purported discharge of dioxin into the Brazos River, Galveston Bay and the Neches River from the company's Sheldon, Texas mill, the company's former mill in Pasadena, Texas and the other defendants' mills. Each of these actions was settled for an immaterial amount in December 1993. The company is a defendant in a purported class action which originally sought $500 million in damages allegedly resulting from the purported discharge of hazardous substances, including dioxin, from the company's Pensacola, Florida mill into Eleven Mile Creek, which flows into Perdido Bay. The plaintiffs are now seeking not more than $50,000 for each class member. It is anticipated that the class, if certified, will consist of approximately 1,000 members. The company and many other corporations, municipalities and individuals are defendants in three separate actions filed in Texas by numerous individuals. Each of these actions seeks damages in excess of $5 billion, allegedly resulting from the purported disposal of waste materials, including hazardous substances, into the McGinnis Waste Disposal Site located at Hall's Bayou Ranch. The company is vigorously defending each of the pending actions described above. 44 Champion International Corporation and Subsidiaries - -------------------------------------------------------------------------------- While any litigation contains an element of uncertainty, management, based upon the opinion of the company's General Counsel, presently believes that the outcome of these actions will not have a material adverse effect on the company. Other The industry in which the company operates is capital intensive. Due to inflation, the company's property, plant and equipment and timber and timberlands could not be replaced for the historical cost value at which they are reflected in the company's financial statements. On a current cost basis, depreciation expense and cost of timber harvested would be greater than reported on a historical cost basis. 45 Champion International Corporation and Subsidiaries - --------------------------------------------------------------------------------
Eleven-Year Selected Financial Data (in millions, except per share amounts and ratio data) 1993 1992 1991 1990 1989 ------ ------ ------ ------ ------ Earnings: Net sales.................................................... $5,069 $4,926 $4,786 $5,090 $5,163 Depreciation expense and cost of timber harvested............ 443 411 342 323 279 Provision for wood products restructuring.................... --- --- --- --- --- Gross profit................................................. 359 362 454 800 1,048 Income from operations....................................... 66 73 179 491 769 Interest and debt expense.................................... 224 206 211 156 136 Other (income) expense -- net................................ 7 (143) (110) (85) (93) Income (loss) before income taxes, extraordinary item and cumulative effect of accounting changes..................... (165) 10 78 420 726 Income taxes (benefit)....................................... (31) (4) 38 197 294 Income (loss) before extraordinary item and cumulative effect of accounting changes....................................... (134) 14 40 223 432 Extraordinary item, net of taxes............................. (14) --- --- --- --- Cumulative effect of accounting changes, net of taxes........ (8) (454) --- --- --- Net income (loss)............................................ (156) (440) 40 223 432 Per Common Share: * Primary earnings (loss)...................................... $(1.98) $(5.05) $ .14 $ 2.11 $ 4.56 Fully diluted earnings (loss)................................ (1.98) (5.05) .14 2.08 4.43 Cash dividends declared...................................... .20 .20 .20 1.10 1.10 Cash dividends paid.......................................... .20 .20 .425 1.10 1.075 Shareholders' equity......................................... 31.23 33.53 39.02 39.10 38.12 Financial Position: Current assets............................................... $1,114 $1,142 $1,162 $1,104 $1,074 Timber and timberlands -- net................................ 1,839 2,012 1,666 1,645 1,613 Property, plant and equipment -- net......................... 5,802 5,763 5,386 5,117 4,404 Other assets and deferred charges............................ 388 464 442 485 440 ------ ------ ------ ------ ------ Total assets............................................... $9,143 $9,381 $8,656 $8,351 $7,531 ====== ====== ====== ====== ====== Current liabilities.......................................... $ 772 $ 786 $ 794 $ 801 $ 804 Long-term debt and other liabilities......................... 3,990 3,928 3,162 2,864 2,175 Deferred income taxes........................................ 1,077 1,159 678 651 605 Minority interest in subsidiaries............................ 54 49 51 56 58 $92.50 convertible preference stock.......................... 300 300 300 300 300 Shareholders' equity......................................... 2,950 3,159 3,671 3,679 3,589 ------ ------ ------ ------ ------ Total liabilities and shareholders' equity................. $9,143 $9,381 $8,656 $8,351 $7,531 ====== ====== ====== ====== ====== Other Statistics: Expenditures for property, plant and equipment............... $ 476 $ 623 $ 604 $ 959 $ 916 Timber and timberlands expenditures.......................... $ 130 $ 95 $ 58 $ 88 $ 78 U.S. timber acreage owned or controlled...................... 5.1 6.0 6.2 6.4 6.4 Common shares outstanding at year-end........................ 93 93 93 93 93 Dividends declared on preference shares...................... $ 28 $ 28 $ 28 $ 28 $ 2 Dividends declared on common shares.......................... $ 19 $ 19 $ 19 $ 102 $ 104 Current ratio................................................ 1.4 1.5 1.5 1.4 1.3 Ratio of total debt to total capitalization.................. .44:1 .42:1 .40:1 .38:1 .32:1 Return on average shareholders' equity and $92.50 convertible preference stock before extraordinary item and cumulative effect of accounting changes................................ (4.0)% 0.4% 1.0% 5.6% 12.2%
* Primary and fully diluted earnings (loss) per share for 1993 include the cumulative effect of an accounting change of $(.08) and extraordinary item for early retirement of debt of $(.15). Primary and fully diluted earnings (loss) per share for 1992 include the cumulative effect of accounting changes of $(4.90). 46 - -------------------------------------------------------------------------------- 1988 1987 1986 1985 1984 1983 - ------ ------ ------ ------ ------ ------ $5,129 $4,615 $4,388 $5,770 $5,121 $4,264 260 252 270 263 204 187 --- --- --- --- 220 --- 1,141 872 798 903 585 588 861 598 438 364 82 155 161 177 170 171 102 66 (30) (198) (45) (52) --- (41) 730 619 313 245 (20) 130 274 237 112 82 (14) 48 456 382 201 163 (6) 82 --- --- --- --- --- --- --- --- --- --- --- --- 456 382 201 163 (6) 82 $ 4.80 $ 4.03 $ 2.08 $ 1.59 $ (.36) $ 1.22 4.65 3.92 2.05 1.59 (.36) 1.22 .95 .72 .52 .46 .40 .40 .90 .65 .52 .43 .40 .40 35.06 30.82 27.52 26.08 25.27 29.65 $ 986 $ 896 $ 811 $1,041 $1,681 $ 954 1,581 1,554 1,555 1,569 1,527 472 3,702 3,340 3,309 3,143 3,287 1,944 431 389 432 345 320 206 - ------ ------ ------ ------ ------ ------ $6,700 $6,179 $6,107 $6,098 $6,815 $3,576 ====== ====== ====== ====== ====== ====== $ 699 $ 657 $ 734 $1,118 $1,904 $ 510 2,133 2,120 2,462 2,057 2,169 1,080 474 415 281 290 197 168 49 51 38 34 48 36 --- --- --- --- --- --- 3,345 2,936 2,592 2,599 2,497 1,782 - ------ ------ ------ ------ ------ ------ $6,700 $6,179 $6,107 $6,098 $6,815 $3,576 ====== ====== ====== ====== ====== ====== $ 585 $ 340 $ 446 $ 443 $ 405 $ 202 $ 88 $ 62 $ 53 $ 43 $ 34 $ 31 6.4 6.5 6.5 6.5 6.8 3.3 95 95 94 93 93 55 $ --- $ --- $ 6 $ 15 $ 15 $ 15 $ 91 $ 69 $ 49 $ 43 $ 26 $ 22 1.4 1.4 1.1 .9 .9 1.9 .34:1 .36:1 .44:1 .42:1 .50:1 .34:1 14.5% 13.8% 7.8% 6.4% (0.3)% 4.7%
47 Common Stock Prices and Dividends Paid - -------------------------------------- Quarterly sales prices for the company's common stock as reported on the New York Stock Exchange composite tape, and quarterly dividends paid in 1993 and 1992 were:
March 31 June 30 Sept. 30 Dec. 31 -------- ------- -------- ------- 1993 - ---- High $33 $34 5/8 $34 1/8 $34 Low 27 1/8 29 7/8 29 1/4 28 5/8 Dividends Paid .05 .05 .05 .05 -------- ------- -------- ------- 1992 - ---- High $28 7/8 $30 1/4 $27 7/8 $29 7/8 Low 23 1/2 25 1/8 23 3/4 23 7/8 Dividends Paid .05 .05 .05 .05 -------- ------- -------- -------
48 EX-21 4 SIGNIFICANT SUBSIDIARIES EXHIBIT 21 LIST OF SIGNIFICANT SUBSIDIARIES --------------------------------
Subsidiary Jurisdiction of Incorporation - ---------- ----------------------------- Champion Papel e Celulose Ltda ................. Brazil Weldwood of Canada Limited ..................... British Columbia
_________________________________ All subsidiaries of the Company other than those listed above, considered in the aggregate as a single subsidiary, do not constitute a significant subsidiary as of December 31, 1993. EX-23.1 5 OPINION OF COMPANY EXHIBIT 23.1 CHAMPION INTERNATIONAL CORPORATION One Champion Plaza Stamford, CT 06921 March 30, 1994 Champion International Corporation One Champion Plaza Stamford, CT 06921 Dear Sirs: As Senior Vice President and General Counsel of Champion International Corporation (the "Company"), I advise you as follows in connection with legal and administrative claims and proceedings which are pending or known to be threatened against the Company. I call your attention to the fact that, as Senior Vice President and General Counsel of the Company, I have general supervision of the Company's legal affairs. In such capacity, I have reviewed litigation and claims threatened or asserted involving the Company and have consulted with outside legal counsel with respect thereto where I have deemed it appropriate. On January 4, 1991, a class action was brought against the Company in state court in Tennessee. The class consisted of all Tennessee residents who own or lease land around Douglas Lake or along the Pigeon River. Subsequently, the case was transferred to the United States District Court for the Eastern District of Tennessee. While the original complaint sought $5 billion in compensatory and punitive damages, immediately prior to trial the plaintiffs reduced their demand to $367.9 million. The plaintiffs originally claimed damages for both personal injury and property damage, but the personal injury claims were dismissed. The case proceeded to trial on plaintiffs' theory that discharges of hazardous materials, including dioxin, from the Company's Canton, North Carolina mill had decreased property values along the river and the lake. The trial began on September 14, 1992 and ended in a mistrial on October 16, 1992, when the jury was unable to reach a unanimous verdict. On May 3, 1993, the court approved a settlement of the action providing for the payment of $6.5 million by the Company. On June 1, 1993, the court's approval of the settlement was appealed. March 30, 1994 Page 2 On July 17, 1991, an action was brought in the United States District Court for the District of Colorado against Weldwood of Canada Limited, the Company's 85%-owned subsidiary, and fourteen other Canadian forest products companies, purportedly on behalf of a class of United States purchasers of Canadian lumber. The action, seeking injunctive relief and unspecified treble damages, alleged a conspiracy by the defendants and others to fix freight charges for, and to sell on a delivered price basis, Western Canadian softwood lumber, thereby allegedly artificially raising, maintaining, fixing or stabilizing prices in violation of United States antitrust laws. On January 8, 1993, the action was dismissed, upon the motion of the defendants, for reasons of comity. On January 20, 1993, the plaintiff filed a notice of appeal. In February 1994, the action was settled for an immaterial amount. On November 9, 1992, an action was brought against the Company in the Circuit Court for Baldwin County, Alabama, purportedly on behalf of a class consisting of all persons who own land along Perdido Bay in Florida and Alabama. The action originally sought $500 million in compensatory and punitive damages for personal injury, intentional infliction of emotional distress and diminution in property value allegedly resulting from the purported discharge of hazardous substances, including dioxin, from the Company's Pensacola, Florida mill into Eleven Mile Creek, which flows into Perdido Bay. However, in February 1994, the plaintiffs reduced their demand to not more than $50,000 for each class member. It is anticipated that the class, if certified, will consist of approximately 1,000 members. The parties are currently engaged in discovery. The Company and many other corporations, municipalities and individuals are defendants in three separate actions filed in the District Court of Galveston County, Texas, by numerous individuals on March 8, 1993, April 20, 1993 and May 13, 1993, respectively. Each of these actions seeks compensatory and punitive damages in excess of $5 billion for personal injury and property damage allegedly resulting from the purported disposal of waste materials, including hazardous substances, into the McGinnis Waste Disposal Site located at Hall's Bayou Ranch. The Company is vigorously defending each of the pending actions described above. While any litigation contains an element of uncertainty, subject to the foregoing, it is my opinion that the outcome of each such proceeding or claim which is now pending or known to be threatened, or all of them combined, including the actions described above, will not have a material adverse effect on the Company. March 30, 1994 Page 3 I hereby consent to the reference to this opinion in the Company's Annual Report to Shareholders for the fiscal year ended December 31, 1993, and in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (the "Form 10-K"), and to the filing of this opinion as an exhibit to the Form 10-K. Very truly yours, Marvin H. Ginsky Senior Vice President and General Counsel MHG/col 28:exhibit.231 EX-23.2 6 CONSENT OF ACCOUNTANTS EXHIBIT 23.2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of (a) our report dated January 17, 1994 included in Champion International Corporation's (the "Company's") Annual Report to Shareholders for the year ended December 31, 1993 and incorporated by reference in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (the "Form 10-K") and (b) our report dated January 17, 1994 included in the Form 10-K, into the Company's previously filed Registration Statements on Form S-3 (Registration No. 33-51217 and No. 33-52123) and on Form S-8 (Registration No. 33-63126). Arthur Andersen & Co. New York, N.Y. March 30, 1994 EX-24 7 POWER OF ATTORNEY EXHIBIT 24 POWER OF ATTORNEY ----------------- Each of the undersigned Directors and Officers of CHAMPION INTERNATIONAL CORPORATION (the "Company") hereby constitutes and appoints LAWRENCE A. FOX, MARVIN H. GINSKY and ANDREW C. SIGLER his or her true and lawful attorneys-in- fact and agents, each of them with full power to act without the others, for him or her and in his or her name, place and stead, in any and all capacities, to sign the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 and any and all amendments and other documents relating thereto, and to file such Annual Report on Form 10-K and such amendments with all exhibits thereto, and any and all other information and documents in connection therewith, with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys- in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the 30th day of March, 1994. ANDREW C. SIGLER KENWOOD C. NICHOLS - ------------------------------------- ----------------------------------- Andrew C. Sigler Kenwood C. Nichols Chairman of the Board, Chief Vice Chairman and Director Executive Officer, and Director (Principal Accounting Officer) (Principal Executive Officer) GERALD J. BEISER ---------------------------------- Gerald J. Beiser Senior Vice President -- Finance (Principal Financial Officer) ROBERT A. CHARPIE - ------------------------------------- --------------------------------- Robert A. Charpie, Director H. Barclay Morley, Director ALICE F. EMERSON LAWRENCE G. RAWL - ------------------------------------- -------------------------------- Alice F. Emerson, Director Lawrence G. Rawl, Director ALLAN E. GOTLIEB WALTER V. SHIPLEY - ------------------------------------- -------------------------------- Allan E. Gotlieb, Director Walter V. Shipley, Director L. C. HEIST JAMES S. TISCH - ------------------------------------- ------------------------------- L. C. Heist, Director James S. Tisch, Director SYBIL C. MOBLEY RICHARD E. WALTON - ------------------------------------- --------------------------------- Sybil C. Mobley, Director Richard E. Walton, Director JOHN L. WEINBERG --------------------------------- John L. Weinberg, Director 28/power.aty(p.3-4) -----END PRIVACY-ENHANCED MESSAGE-----