<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D. C. 20549
                              -------------------

                                   FORM 10-Q


             [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                   OF THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended October 2, 1999

                                      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 Number 1 - 3506

                              -------------------

                          GEORGIA-PACIFIC CORPORATION
            (Exact Name of Registrant as Specified in its Charter)

            GEORGIA                                    93-0432081
     (State of Incorporation)                   (IRS Employer Id. Number)


              133 PEACHTREE STREET, N.E., ATLANTA, GEORGIA 30303
                   (Address of Principal Executive Offices)

                               (404) 652 - 4000
                       (Telephone Number of Registrant)

                              -------------------

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 and Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes  X  No
                                       ---    ---
As of the close of business on November 4, 1999, Georgia-Pacific Corporation
had 170,988,313 shares of Georgia-Pacific Group Common Stock outstanding and
82,476,033 shares of The Timber Company Common Stock outstanding.
<PAGE>

                                       2

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Georgia-Pacific Corporation and Subsidiaries


<TABLE>
<CAPTION>
                                                                         Three Months Ended            Nine Months Ended
                                                                      -------------------------    -------------------------
                                                                      October 2,      Sept. 30,    October 2,      Sept. 30,
(In millions, except per share amounts)                                   1999           1998         1999           1998
---------------------------------------                               ----------      ---------    ----------      ---------
<S>                                                                    <C>            <C>          <C>              <C>
Net sales                                                                $ 5,526        $ 3,398      $ 12,785        $ 9,928
                                                                      ----------      ---------    ----------      ---------
 Costs and expenses
     Cost of sales, excluding depreciation, amortization
       and cost of timber harvested
       shown below                                                         4,192          2,572         9,445          7,572
     Depreciation, amortization and cost of
       timber harvested                                                      260            261           735            752
     Selling and distribution                                                263            145           547            412
     General and administrative                                              230            165           582            478
     Interest                                                                133            113           350            338
     Other income                                                              -              -           (84)             -
                                                                      ----------      ---------    ----------      ---------
Total costs and expenses                                                   5,078          3,256        11,575          9,552
                                                                      ----------      ---------    ----------      ---------

Income before income taxes and
     extraordinary item                                                      448            142         1,210            376
Provision for income taxes                                                   169             62           474            160
                                                                      ----------      ---------    ----------      ---------
Income before extraordinary item                                             279             80           736            216
Extraordinary item, net of taxes,                                              -              -             -            (15)
                                                                      ----------      ---------    ----------      ---------
Net income                                                               $   279        $    80      $    736        $   201
                                                                      ==========      =========    ==========      =========
Georgia-Pacific Group
Income before extraordinary item                                         $   230        $    39      $    541        $    85
Extraordinary item, net of taxes                                               -              -             -            (13)
                                                                      ----------      ---------    ----------      ---------
Net income                                                               $   230        $    39      $    541        $    72
                                                                      ==========      =========    ==========      =========
Basic per common share:
  Income before extraordinary item                                       $  1.34        $  0.22      $   3.15        $  0.47
  Extraordinary item, net of taxes                                             -              -             -          (0.07)
                                                                      ----------      ---------    ----------      ---------
  Net income                                                             $  1.34        $  0.22      $   3.15        $  0.40
                                                                      ==========      =========    ==========      =========
Diluted per common share:
  Income before extraordinary item                                       $  1.31        $  0.22      $   3.07        $  0.46
  Extraordinary item, net of taxes                                             -              -             -          (0.07)
                                                                      ----------      ---------    ----------      ---------
  Net income                                                             $  1.31        $  0.22      $   3.07        $  0.39
                                                                      ==========      =========    ==========      =========
Average number of shares outstanding:
     Basic                                                                 171.4          180.5         171.9          181.5
     Diluted                                                               175.9          181.0         176.2          183.2
                                                                      ==========      =========    ==========      =========
The Timber Company
Income before extraordinary item                                         $    49        $    41      $    195        $   131
Extraordinary item, net of taxes                                               -              -             -             (2)
                                                                      ----------      ---------    ----------      ---------
Net income                                                               $    49        $    41      $    195        $   129
                                                                      ==========      =========    ==========      =========
Basic per common share:
  Income before extraordinary item                                       $  0.59        $  0.46      $   2.30        $  1.43
  Extraordinary item, net of taxes                                             -              -             -          (0.02)
                                                                      ----------      ---------    ----------      ---------
  Net income                                                             $  0.59        $  0.46      $   2.30        $  1.41
                                                                      ==========      =========    ==========      =========
Diluted per common share:
  Income before extraordinary item                                       $  0.59        $  0.46      $   2.29        $  1.42
  Extraordinary item, net of taxes                                             -              -             -          (0.02)
                                                                      ----------      ---------    ----------      ---------
  Net income                                                             $  0.59        $  0.46      $   2.29        $  1.40
                                                                      ==========      =========    ==========      =========

Average number of shares outstanding:
  Basic                                                                     82.8           89.6          84.6           91.4
  Diluted                                                                   83.4           89.9          85.1           92.0
                                                                      ==========      =========    ==========      =========
</TABLE>

The accompanying notes are an integral part of these financial statements.
<PAGE>

                                       3

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Georgia-Pacific Corporation and Subsidiaries


<TABLE>
<CAPTION>
                                                                                          Nine Months Ended
                                                                                          -----------------
(In millions)                                                              October 2, 1999               Sept. 30, 1998
-------------                                                              ---------------               --------------
<S>                                                                        <C>                           <C>
Cash flows from operating activities
   Net income                                                              $      736                    $      201
   Adjustments to reconcile net income to
   Cash provided by operations:
    Depreciation                                                                  552                           561
    Cost of timber harvested                                                      134                           134
    Other income                                                                  (84)                            -
    Deferred income taxes                                                          (5)                           56
    Amortization of goodwill                                                       49                            45
    Amortization of debt issue costs                                                9                            12
    Stock compensation programs                                                    (1)                            8
    Gain on sales of assets                                                       (28)                           (4)
    Increase in receivables                                                      (401)                          (40)
    (Increase) decrease in inventories                                            (26)                           67
    Decrease (increase) in other working
      capital                                                                     109                           (40)
    Change in other assets and other
      long-term liabilities                                                       (13)                           33
                                                                           ----------                    ----------
Cash provided by operations                                                     1,031                         1,033
                                                                           ----------                    ----------
Cash flows from investing activities
     Property, plant and equipment
         investments                                                             (411)                         (389)
     Timber and timberland purchases                                             (143)                         (165)
     Acquisitions                                                                (897)                         (102)
     Proceeds from sales of assets                                                 95                            91
     Other                                                                         (1)                            2
                                                                           ----------                    ----------
Cash used for investing activities                                             (1,357)                         (563)
                                                                           ----------                    ----------
Cash flows from financing activities
     Repayments of long-term debt                                                (528)                         (798)
     Additions to long-term debt                                                   87                           511
     Fees paid to issue debt                                                      (30)                           (5)
     Increase in bank overdrafts                                                   78                             4
     Increase in commercial paper and
         other short-term notes                                                   298                           322
     Issuance of senior deferrable notes                                          863                             -
     Stock repurchases                                                           (370)                         (376)
     Proceeds from option plan exercises                                          115                             8
     Cash dividends paid                                                         (128)                         (137)
                                                                           ----------                    ----------
Cash provided by (used for) financing
   activities                                                                     385                          (471)
                                                                           ----------                    ----------
Increase (decrease) in cash                                                        59                            (1)
Balance at beginning of period                                                      5                             8
                                                                           ----------                    ----------
Balance at end of period                                                   $       64                    $        7
                                                                           ==========                    ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.
<PAGE>

                                       4

CONSOLIDATED BALANCE SHEETS (Unaudited)
Georgia-Pacific Corporation and Subsidiaries
(In millions, except shares and per share amounts)

<TABLE>
<CAPTION>
                                                               October 2,           December 31,
                                                                 1999                  1998
                                                              -----------           ------------
<S>                                                           <C>                   <C>
ASSETS
Current assets
   Cash                                                       $        64           $          5
   Receivables, less allowances of $26
    and $25, respectively                                           2,394                  1,233
   Inventories                                                      1,740                  1,280
   Deferred income tax assets                                          61                     61
   Other current assets                                               151                     66
                                                              -----------           ------------
Total current assets                                                4,410                  2,645
                                                              -----------           ------------
Timber and timberlands, net                                         1,229                  1,210
                                                              -----------           ------------
Property, plant and equipment
  Land, buildings, machinery and
    equipment, at cost                                             14,996                 14,453
  Accumulated depreciation                                         (8,648)                (8,204)
                                                              -----------           ------------
Property, plant and equipment, net                                  6,348                  6,249
                                                              -----------           ------------
Goodwill, net                                                       2,430                  1,677
                                                              -----------           ------------
Other assets                                                        1,052                    919
                                                              -----------           ------------
Total assets                                                  $    15,469           $     12,700
                                                              ===========           ============
</TABLE>
<PAGE>

                                       5

LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<S>                                                                              <C>                  <C>
Current liabilities
 Bank overdrafts, net                                                            $      273           $      195
 Commercial paper and other short-term notes                                          1,708                1,209
 Current portion of long-term debt                                                       37                   22
 Accounts payable                                                                       970                  556
 Accrued compensation                                                                   305                  247
 Other current liabilities                                                              660                  419
                                                                                 ----------           ----------
Total current liabilities                                                             3,953                2,648
                                                                                 ----------           ----------
Long-term debt, excluding current portion                                             4,147                4,125
                                                                                 ----------           ----------
Senior deferrable notes                                                                 863                    -
                                                                                 ----------           ----------
Other long-term liabilities                                                           1,729                1,572
                                                                                 ----------           ----------
Deferred income tax liabilities                                                       1,272                1,231
                                                                                 ----------           ----------

Commitments and contingencies

Shareholders' equity
   Common stock                                                                         153                  150
     Georgia-Pacific Group, par value $.80; 400,000,000
       shares authorized; 190,725,000 and 186,564,000
       shares issued
     The Timber Company, par value $.80; 250,000,000 shares authorized;
       93,294,000 and 92,785,000 shares issued
   Treasury stock, at cost                                                             (863)                (492)
       19,493,000 and 13,525,000 shares of Georgia-Pacific
       Group common stock and 10,751,000 and 5,704,000
       shares of The Timber Company common stock
   Additional paid-in capital                                                         1,468                1,331
   Retained earnings                                                                  2,786                2,178
   Accumulated other comprehensive income                                               (39)                 (43)
                                                                                 ----------           ----------
Total shareholders' equity                                                            3,505                3,124
                                                                                 ----------           ----------
Total liabilities and shareholders' equity                                       $   15,469           $   12,700
                                                                                 ==========           ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.
<PAGE>

                                       6

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
Georgia-Pacific Corporation and Subsidiaries

<TABLE>
<CAPTION>
                                                                          Three Months Ended             Nine Months Ended
                                                                       ------------------------      -------------------------
                                                                       October 2,     Sept. 30,      October 2,      Sept. 30,
                                                                         1999           1998           1999            1998
(In millions)                                                            ----           ----           ----            ----
<S>                                                                    <C>            <C>            <C>             <C>
Net income                                                             $  279         $   80         $  736          $  201
 Other comprehensive income (loss) before tax:
 Foreign currency translation adjustments                                  (3)           (13)             7             (19)
 Income tax (expense) benefit related to
   items of other comprehensive income                                      1              5             (3)              7
                                                                       ------         ------         ------          ------
Comprehensive income                                                   $  277         $   72         $  740          $  189
                                                                       ======         ======         ======          ======
</TABLE>

The accompanying notes are an integral part of these financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
GEORGIA-PACIFIC CORPORATION

1.   PRINCIPLES OF PRESENTATION. The consolidated financial statements include
     the accounts of Georgia-Pacific Corporation and subsidiaries (the
     "Corporation"). All significant intercompany balances and transactions are
     eliminated in consolidation. The interim financial information included
     herein is unaudited; however, such information reflects all adjustments
     which are, in the opinion of management, necessary for a fair presentation
     of the Corporation's financial position, results of operations, and cash
     flows for the interim periods. All such adjustments are of a normal,
     recurring nature except for the item discussed in Note 3 below. Certain
     1998 amounts have been reclassified to conform with the 1999 presentation.
     The Timber Company's and the Georgia-Pacific Group's combined financial
     statements should be read in conjunction with the Corporation's
     consolidated financial statements.

     On or about April 22, 1999, the Corporation determined to change its fiscal
     year from December 31 to end on the Saturday closest to December 31.
     Additionally, the Corporation reports its quarterly periods on a 13-week
     basis ending on a Saturday. The impact of one less day and two additional
     days on the three months and nine months ended October 2, 1999,
     respectively, was not material. There will be no transition period on which
     to report.

2.   OTHER INCOME. During the second quarter of 1999, the Corporation sold
     approximately 390,000 acres of timberlands in the Canadian province of New
     Brunswick and approximately 440,000 acres of timberlands in Maine for
     approximately $92 million and recognized a pre-tax gain of $84 million ($50
     million after tax).

3.   EXTRAORDINARY ITEM. The Corporation redeemed approximately $600 million of
     its outstanding debt during the first nine months of 1998. As a result, the
     Corporation recognized an after-tax extraordinary loss of $15 million, of
     which $14 million was recognized in the first quarter of 1998 and $1
     million was recognized in the second quarter of 1998.

4.   EARNINGS PER SHARE. The Corporation's common stock was redesignated in
     December 1997 to reflect separately the performance of the Corporation's
     pulp, paper and building products businesses, which are now known as
     Georgia-Pacific Group. A separate class of common stock was distributed to
     reflect the performance of the Corporation's timber operating group, which
     is now known as The Timber Company. Basic earnings per share is computed
     based on net income and the weighted average number of common shares
     outstanding. Diluted earnings per share reflect the annual issuance of
     common shares under long-term incentive stock option and stock purchase
     plans. The computation of diluted earnings per share does not assume
     conversion or exercise of securities that would have an antidilutive effect
     on earnings per share. Earnings per share are computed for each class of
     common stock based on the separate earnings attributed to each of the
     respective businesses.
<PAGE>

                                       7

     The following table provides earnings and per share data for Georgia-
     Pacific Group and The Timber Company for 1999 and 1998.

<TABLE>
<CAPTION>
                                                                          Three Months Ended             Nine Months Ended
                                                                          ------------------             -----------------
(In millions, except                                                  October 2,      Sept. 30,      October 2,      Sept. 30,
per share amounts)                                                       1999           1998            1999           1998
                                                                         ----           ----            ----           ----
                                                                                      Georgia-Pacific Group
                                                                                      ---------------------
<S>                                                                  <C>              <C>            <C>             <C>
Basic and diluted income available to Shareholders (numerator):
     Income before extraordinary item                                $    230         $   39         $   541         $   85
     Extraordinary item, net of taxes                                       -              -               -            (13)

                                                                     --------         ------         -------         ------
     Net income                                                      $    230         $   39         $   541         $   72
                                                                     ========         ======         =======         ======
Shares (denominator):
   Average shares outstanding                                           171.4          180.5           171.9          181.5
     Dilutive securities:
     Stock incentive and option plans                                     4.0            0.5             3.8            1.6
     Employee stock purchase plans                                        0.5              -             0.5            0.1
                                                                     --------         ------         -------         ------
   Total assuming conversion                                            175.9          181.0           176.2          183.2
                                                                     ========         ======         =======         ======
Basic per share amounts:
     Income before extraordinary item                                $   1.34         $ 0.22         $  3.15         $ 0.47
     Extraordinary item, net of taxes                                       -              -               -          (0.07)
                                                                     --------         ------         -------         ------
     Net income                                                      $   1.34         $ 0.22         $  3.15         $ 0.40
                                                                     ========         ======         =======         ======
Diluted per share amounts:
     Income before extraordinary item                                $   1.31         $ 0.22         $  3.07         $ 0.46
     Extraordinary item, net of taxes                                       -              -               -          (0.07)
                                                                     --------         ------         -------         ------
     Net income                                                      $   1.31         $ 0.22         $  3.07         $ 0.39
                                                                     ========         ======         =======         ======
</TABLE>

<TABLE>
<CAPTION>
                                                                          Three Months Ended             Nine Months Ended
                                                                      -------------------------      -------------------------
(In millions, except                                                  October 2,      Sept. 30,      October 2,      Sept. 30,
per share amounts)                                                       1999           1998            1999           1998
                                                                         ----           ----            ----           ----
                                                                                       The Timber Company
                                                                                       ------------------
<S>                                                                   <C>            <C>            <C>             <C>
Basic and diluted income available to
 Shareholders (numerator):
     Income before extraordinary item                                 $    49        $    41        $    195        $   131
     Extraordinary item, net of taxes                                       -              -               -             (2)
                                                                      -------        -------        --------        -------
     Net income                                                       $    49        $    41        $    195        $   129
                                                                      =======        =======        ========        =======
Shares (denominator):
   Average shares outstanding                                            82.8           89.6            84.6           91.4
     Dilutive securities:
     Stock incentive and option plans                                     0.5            0.3             0.4            0.6
     Employee stock purchase plans                                        0.1              -             0.1              -
                                                                      -------        -------        --------        -------
   Total assuming conversion                                             83.4           89.9            85.1           92.0
                                                                      =======        =======        ========        =======
Basic per share amounts:
     Income before extraordinary item                                 $  0.59        $  0.46        $   2.30        $  1.43
     Extraordinary item, net of taxes                                       -              -               -          (0.02)
                                                                      -------        -------        --------        -------
     Net income                                                       $  0.59        $  0.46        $   2.30        $  1.41
                                                                      =======        =======        ========        =======
Diluted per share amounts:
     Income before extraordinary item                                 $  0.59        $  0.46        $   2.29        $  1.42
     Extraordinary item, net of taxes                                       -              -               -          (0.02)
                                                                      -------        -------        --------        -------
     Net income                                                       $  0.59        $  0.46        $   2.29        $  1.40
                                                                      =======        =======        ========        =======
</TABLE>
<PAGE>

                                       8

5.   SUPPLEMENTAL DISCLOSURES - STATEMENTS OF CASH FLOWS. The cash impact of
     interest and income taxes is reflected in the table below. The effect of
     foreign currency exchange rate changes on cash was not material in any
     period.

<TABLE>
<CAPTION>
                                             Nine Months Ended
                                         -------------------------
(In millions)                            October 2,      Sept. 30,
                                            1999           1998
                                            ----           ----
<S>                                      <C>             <C>
Total interest costs                     $   354         $  342
Interest capitalized                          (4)            (4)
                                         -------         ------
Interest Expense                         $   350         $  338
                                         =======         ======
Interest paid                            $   305         $  324
                                         =======         ======
Income taxes paid, net                   $   434         $   49
                                         =======         ======
Debt assumed in acquisition              $   669         $   58
                                         =======         ======
</TABLE>

6.   INVENTORY VALUATION. Inventories include costs of materials, labor, and
     plant overhead. The Corporation uses the dollar value pool method for
     computing LIFO inventories. The major components of inventories were as
     follows:

<TABLE>
<CAPTION>
(In millions)                           October 2,       December 31,
                                          1999              1998
                                        ----------       ------------
<S>                                     <C>              <C>
Raw materials                           $      389       $        418
Finished goods                               1,242                760
Supplies                                       319                311
LIFO reserve                                  (210)              (209)
                                        ----------       ------------
Total inventories                       $    1,740       $      1,280
                                        ==========       ============
</TABLE>

7.   ACQUISITIONS. At the end of the second quarter of 1999, the Corporation,
     through its wholly owned subsidiary Atlanta Acquisition Corp., conducted a
     tender offer for all of the outstanding shares of common stock of Unisource
     Worldwide, Inc. ("Unisource"), the largest independent marketer and
     distributor of printing and imaging paper and supplies in North America.
     Pursuant thereto, the Corporation acquired 90.7% of the then outstanding
     shares of Unisource. On July 6, 1999, Atlanta Acquisition Corp. was merged
     with and into Unisource and by virtue of such merger, shares of Unisource
     that were not tendered to the Corporation (other than shares held by
     Unisource and the Corporation and its subsidiaries) were converted into the
     right to receive $12.00 per Unisource share in cash, subject to dissenters
     rights. The Corporation is purchasing the remaining outstanding shares of
     Unisource as they are delivered to the exchange agent for cancellation.
     Through October 2, 1999, the Corporation paid approximately $828 million
     for shares of Unisource.

     Unisource's results of operations were consolidated with those of the
     Corporation beginning July 4, 1999. The Corporation has accounted for this
     transaction using the purchase method to record a new cost basis for assets
     acquired and liabilities assumed. The allocation of the purchase price and
     acquisition costs to the assets acquired and liabilities assumed is
     preliminary as of October 2, 1999, and is subject to change pending
     finalization of studies of fair value and the finalization of management's
     plans. The Corporation has begun to assess and formulate plans to
     restructure existing Unisource activities, including the consolidation of
     certain distribution centers, closure of the Unisource headquarters
     facility, termination of redundant headcount and the relocation of certain
     administrative functions. In connection with the acquisition of Unisource,
     the Corporation assumed liabilities totaling approximately $84 million for
     employee termination and relocation costs, and $15 million for facility
     closure costs. The Corporation has not yet completed its evaluation of
     Unisource activities; accordingly, finalization of the Corporation's plans
     may result in additional liabilities for termination, relocation or
     facility closure costs that could increase the amount of liabilities
     assumed in the acquisition. The difference between the purchase price and
     the fair market value of the assets acquired and liabilities assumed was
     recorded as goodwill and will be amortized over 40 years. The preliminary
     allocation of the purchase price of the acquisition is summarized as
     follows:

<TABLE>
<CAPTION>
     (In millions)
     ---------------
     <S>                                   <C>
     Current assets                        $ 1,061
     Property, plant and equipment             225
     Other non current assets                   16
     Goodwill                                  767
     Liabilities                            (1,241)
                                           -------
     Net cash paid for Unisource           $   828
                                           =======
</TABLE>

     The following unaudited pro forma financial data has been prepared assuming
     that the acquisition of Unisource and related financings were consummated
     on January 1, 1998. This pro forma financial data is presented for
     informational purposes and is not necessarily indicative of the operating
     results that would have occurred had the acquisition been consummated on
     January 1, 1998, nor does it include adjustments for expected synergies or
     cost savings. Accordingly, this pro forma data is not necessarily
     indicative of future operations.

<TABLE>
<CAPTION>
                                                              Nine Months Ended
                                                          -------------------------
                                                          October 2,      Sept. 30,
(In millions, except per share amount)                       1999           1998
-------------------------------------                        ----           ----
<S>                                                       <C>             <C>

Net sales                                                 $  17,505       $  15,175
Income before extraordinary items                         $     821       $     285
Net income                                                $     821       $     270
Georgia-Pacific Group data:
Income before extraordinary items                         $     626       $     154
Net income                                                $     626       $     141
Basic income before extraordinary items
    per share                                             $    3.64       $    0.85
Diluted income before extraordinary items
    per share                                             $    3.55       $    0.84
Basic earnings per share                                  $    3.64       $    0.78
Diluted earnings per share                                $    3.55       $    0.77
</TABLE>

     The Timber Company's results of operations are not impacted by the
     Unisource transaction.

     The 1998 pro forma financial data includes non-recurring restructuring and
     asset write-down charges of $202 million ($155 million after tax) taken by
     Unisource in the first nine months of 1998.

     In addition, during the first nine months of 1999, the Corporation
     completed the acquisition of a packaging plant, four treated lumber
     facilities and a chemical business for a total consideration of
     approximately $69 million in cash. The results of operations of the
     packaging plant and treated lumber facilities were consolidated with those
     of the Corporation beginning in the second quarter of 1999. The operating
     results of the chemical business were consolidated with those of the
     Corporation beginning in the third quarter of 1999. The Corporation has
     accounted for these business combinations using the purchase method to
     record a new cost basis for assets acquired and liabilities assumed.

     Effective October 3, 1999, the Corporation and Chesapeake Corp.
     ("Chesapeake") completed a previously announced agreement to create
     Georgia-Pacific Tissue, a joint venture in which the two companies have
     combined their away-from-home tissue businesses. The Corporation
     contributed substantially all of the assets of its commercial tissue
     business to the joint venture. The Corporation controls and manages the
     joint venture and owns 95 percent of the equity in joint venture.
     Chesapeake contributed the assets of its Wisconsin Tissue business to the
     joint venture, for which it received a 5 percent equity interest in the
     joint venture and an initial cash distribution of approximately $755
     million. The results of the Wisconsin Tissue operations will be
     consolidated with those of the Corporation beginning on October 3, 1999.

     On June 30, 1998, the Corporation completed its acquisition of CeCorr Inc.
     ("CeCorr"), a leading independent producer of corrugated sheets in the
     United States. On June 30, 1998, the Corporation paid approximately $93
     million in cash (net of $2 million of cash acquired) and issued
     approximately 3.2 million shares of Georgia-Pacific Group stock valued at
     approximately $28.94 per share for all the outstanding shares of CeCorr. In
     addition, the Corporation assumed approximately $92 million of CeCorr's
     debt, of which $34 million was owed to the Corporation ($58 million net
     debt assumed). On July 2, 1998, a former owner of CeCorr exercised his
     right to resell to the Corporation approximately 2.2 million shares of
     Georgia-Pacific Group stock issued in the transaction. CeCorr's results of
     operations were consolidated with those of the Corporation beginning July
     1, 1998. The Corporation accounted for the CeCorr acquisition using the
     purchase method to record a new cost basis for assets acquired and
     liabilities assumed.
<PAGE>

                                       9

8.   DEBT. In June 1999, the Corporation renegotiated its accounts receivable
     sale program and increased the amount outstanding under the program from
     $280 million to $750 million. The program expires in April 2000. In
     connection with the acquisition of Unisource, the Corporation retained
     former Unisource agreements to sell up to $150 million of certain
     qualifying U.S. accounts receivable and up to CN$70 million of certain
     eligible Canadian accounts receivable. The U.S. agreement expires in April
     2000 and the Canadian agreement expires in May 2004. At October 2, 1999,
     approximately $947 million was outstanding under the Corporation's and
     Unisource's programs in the aggregate. The receivables outstanding under
     these programs and the corresponding debt are included as current
     receivables and short-term debt, respectively on the accompanying balance
     sheets. The agreements are accounted for as a secured borrowing. As
     collections reduce previously sold interests, new receivables may be sold.

     Also in June 1999, the Board of Directors increased the corporate target
     debt level under which management can purchase shares of Georgia-Pacific
     Group and The Timber Company common stock on the open market from $5.75
     billion to $6.8 billion. In addition, the Board of Directors increased the
     Georgia-Pacific Group's target debt level from $4.75 billion to $5.8
     billion. The Timber Company's target debt level remains at $1.0 billion.

     On July 22, 1999, the Corporation increased the amount of its unsecured
     revolving credit facility from $1.5 billion to $2.0 billion. This unsecured
     revolving credit facility is used for direct borrowings and as support for
     commercial paper and other short-term borrowings. As of October 2, 1999,
     $1,239 million of committed credit was available in excess of all short-
     term borrowings outstanding under or supported by the facility. The
     revolving credit agreement contains certain restrictive covenants,
     including a maximum leverage ratio (funded indebtedness, including senior
     deferrable notes, to earnings before interest, taxes, depreciation and
     amortization ("EBITDA")) of 4.5 to 1.0, which is to be maintained
     throughout the term of the credit agreement. As of October 2, 1999, the
     leverage ratio was 2.3 to 1.0.

     During the second quarter of 1999, the Corporation registered for sale up
     to $2.975 billion of debt and equity securities under a shelf registration
     statement filed with the Securities and Exchange Commission. The
     Corporation registered $1.725 billion under such registration statement
     related to the PEPS Units ($862.5 million of which was received on July 7,
     1999 in exchange for senior deferrable notes, which notes will be converted
     into $862.5 million of equity (Georgia-Pacific Group common stock) upon
     exercise of the purchase contract) (see Note 9). The $862.5 million of cash
     (less expenses) raised in this sale of the PEPS Units was used to pay for
     the acquisition of Unisource.

     In connection with the formation of Georgia-Pacific Tissue (see Note 7),
     Georgia-Pacific Tissue financed the $755 million initial distribution to
     Chesapeake with short-term borrowings from a bank syndicate in October
     1999. In the fourth quarter of 1999, the Corporation expects to sell debt
     under the shelf registration statement filed with the Securities and
     Exchange Commission and loan or contribute the proceeds through the use of
     one or more subsidiaries to Georgia-Pacific Tissue in order for Georgia-
     Pacific Tissue to retire such syndicated bank debt. This short-term
     financing temporarily increased the Corporation's total debt above the $6.8
     billion target debt level for repurchasing stock. The Corporation expects
     to be able to repurchase stock again in the fourth quarter once the debt
     level falls below the target.

9.   SENIOR DEFERRABLE NOTES. On July 7, 1999, the Corporation issued 17,250,000
     of 7.5% Premium Equity Participating Security Units ("PEPS Units") for
     $862.5 million. Each PEPS Unit had an issue price of $50 and consists of a
     contract to purchase shares of Georgia-Pacific Group common stock on or
     prior to August 16, 2002 and a senior deferrable note of Georgia-Pacific
     Group due August 16, 2004. Each purchase contract yields interest of 0.35%
     per year, paid quarterly, on the $50 stated amount of the PEPS Unit. Each
     senior deferrable note yields interest of 7.15% per year, paid quarterly,
     until August 16, 2002. On August 16, 2002, following a remarketing of the
     senior deferrable notes, the interest rate will be reset at a rate that
     will be equal to or greater than 7.15%. The liability related to the PEPS
     Units is classified as Senior deferrable notes on the consolidated balance
     sheets and will not be included in the debt amount for purposes of
     determining the corporate and Georgia-Pacific Group debt targets.

10.  STOCK SPLIT. On May 4, 1999, the Board of Directors declared a two-for-one
     split of Georgia-Pacific Group's common stock in the form of a special
     dividend to shareholders of record on May 14, 1999. The special dividend
     was paid as one share of Georgia-Pacific Group common stock for each share
     of Georgia-Pacific Group outstanding on June 3, 1999. A total of 95,126,911
     additional shares were issued in conjunction with the stock split. The
     Georgia-Pacific Group's par value of $0.80 remained unchanged. As a result,
     $76 million of stockholders' equity was reclassified from Additional paid-
     in capital to Common stock. All historical share and per share amounts have
     been restated to reflect retroactively the stock split.

11.  SHARE REPURCHASES. During the first nine months of 1999, Georgia-Pacific
     Group purchased on the open market approximately 5,994,000 shares of
     Georgia-Pacific Group common stock at an aggregate price of $247 million
     ($41.22 average per share). Of these repurchased shares, approximately
     5,969,000 shares were held as treasury and 25,000 shares were purchased
     during the first nine months of 1999 and settled after October 2, 1999.
     During the first nine months of 1999, The Timber Company purchased on the
     open market approximately 5,047,000 shares of The Timber Company common
     stock, all of which were held as treasury stock at October 2, 1999, at an
     aggregate price of $124 million ($24.48 average per share).

     During the first nine months of 1998, the Georgia-Pacific Group purchased
     in private transactions and on the open market approximately 4,794,000
     shares of Georgia-Pacific Group common stock at an aggregate price of $277
     million ($57.78 average per share). Of these repurchased shares,
     approximately 3,586,000 shares were held as treasury, 284,000 shares were
     purchased during the first nine months of 1998 and settled after September
     30, 1998, and 924,000 shares were cancelled. In addition, during the first
     nine months of 1998, The Timber Company purchased on the open market
     4,860,000 shares of The Timber Company common stock at an aggregate price
     of $105 million ($21.60 average per share). Of these repurchased shares,
     approximately 4,829,000 shares were held as treasury and 31,000 shares were
     purchased during the first nine months of 1998 and settled after September
     30, 1998.

12.  COMMITMENTS AND CONTINGENCIES. The Corporation is a party to various legal
     proceedings incidental to its business and is subject to a variety of
     environmental and pollution control laws and regulations in all
     jurisdictions in which it operates. As is the case with other companies in
     similar industries, the Corporation faces exposure from actual or potential
     claims and legal proceedings involving environmental matters. Liability
     insurance in effect during the last several years provides only very
     limited coverage for environmental matters.

     The Corporation is involved in environmental remediation activities at
     approximately 184 sites, both owned by the Corporation and owned by others,
     where it has been notified that it is or may be a potentially responsible
     party under the Comprehensive Environmental Response, Compensation and
     Liability Act or similar state "superfund" laws. Of the known sites in
     which it is involved, the Corporation estimates that approximately 49
     percent are being investigated, approximately 27 percent are being
     remediated and approximately 24 percent are being monitored (an activity
     that occurs after either site investigation or remediation has been
     completed). The ultimate costs to the Corporation for the investigation,
     remediation and monitoring of many of these sites cannot be predicted with
     certainty, due to the often unknown magnitude of the pollution or the
     necessary cleanup, the varying costs of alternative cleanup methods, the
     amount of time necessary to accomplish such cleanups, the evolving nature
     of cleanup technologies and government regulations, and the inability to
     determine the Corporation's share of multiparty cleanups or the extent to
     which contribution will be available from other parties. The Corporation
     has established reserves for environmental remediation costs for these
     sites in amounts that it believes are probable and reasonably estimable.
     Based on analysis of currently available information and previous
     experience with respect to the cleanup of hazardous substances, the
     Corporation believes it is reasonably possible that costs associated with
     these sites may exceed current reserves by amounts that may prove
     insignificant or that could range, in the aggregate, up to approximately
     $56 million. This estimate of the range of reasonably possible additional
     costs is less certain than the estimates upon which reserves are based, and
     in order to establish the upper limit of such range, assumptions least
     favorable to the Corporation among the range of reasonably possible
     outcomes were used. In estimating both its current reserve for
     environmental remediation and the possible range of additional costs, the
     Corporation has not assumed it will bear the entire cost of remediation of
     every site to the exclusion of other known potentially responsible parties
     who may be jointly and severally liable. The ability of other potentially
     responsible parties to participate has been taken into account, based
     generally on the parties' financial condition and probable contribution on
     a per site basis.
<PAGE>

                                      10

     The Corporation and many other companies are defendants in suits brought in
     various courts around the nation by plaintiffs who allege that they have
     suffered personal injury as a result of exposure to asbestos-containing
     products. These suits allege a variety of lung and other diseases based on
     alleged exposure to products previously manufactured by the Corporation. In
     many cases, the plaintiffs are unable to demonstrate that they have
     suffered any compensable loss as a result of such exposure, or that any
     injuries they have incurred in fact resulted from exposure to the
     Corporation's products.

     The Corporation generally settles asbestos cases for amounts it considers
     reasonable given the facts and circumstances of each case. The amounts it
     has paid to date to defend and settle these cases have been substantially
     covered by product liability insurance. The Corporation is currently
     defending claims of approximately 77,000 such plaintiffs as of November 3,
     1999 and anticipates that additional suits will be filed against it over
     the next several years. The Corporation has insurance available in amounts
     that it believes are adequate to cover substantially all of the reasonably
     foreseeable damages and settlement amounts arising out of claims and suits
     currently pending. The Corporation has further insurance coverage available
     for the disposition of suits that may be filed against it in the future,
     but there can be no assurance that the amounts of such insurance will be
     adequate to cover all future claims. The Corporation has established
     reserves for liabilities and legal defense costs it believes are probable
     and reasonably estimable with respect to pending suits and claims, and has
     also established a receivable for expected insurance recoveries.

     On May 6, 1998, suit was filed in state court in Columbus, Ohio, against
     the Corporation and Georgia-Pacific Resins, Inc., a wholly owned subsidiary
     of the Corporation. The lawsuit was filed by eight plaintiffs who seek to
     represent a class of individuals who at any time from 1985 to the present
     lived, worked, resided, owned, frequented or otherwise occupied property
     located within a three-mile radius of the Corporation's resins
     manufacturing operation in Columbus, Ohio. The lawsuit alleges that the
     individual plaintiffs and putative class members have suffered personal
     injuries and/or property damage because of (i) alleged "continuing and
     long-term releases and threats of releases of noxious fumes, odors and
     harmful chemicals, including hazardous substances" from the Corporation's
     operations and/or (ii) a September 10, 1997 explosion at the Columbus
     facility and alleged release of hazardous material resulting from that
     explosion. Prior to the lawsuit, the Corporation had received a number of
     explosion-related claims from nearby residents and businesses. These claims
     were for property damage, personal injury and business interruption and
     were being reviewed and adjusted on a case-by-case basis. The Corporation
     has denied the material allegations of the lawsuit. While it is premature
     to evaluate the claims asserted in the lawsuit, the Corporation believes it
     has meritorious defenses.

     In May 1997, the Corporation and nine other companies were named as
     defendants in a suit brought by the Attorney General of the State of
     Florida alleging that they engaged in conspiracy to fix the prices of
     sanitary commercial paper products, such as towels and napkins, in
     violation of federal and state laws. Approximately 45 similar suits have
     been filed by private plaintiffs in federal courts in California, Florida,
     Georgia and Wisconsin, and in the state courts of California, Wisconsin,
     Minnesota and Tennessee. On July 28, 1999, the Corporation and the Attorney
     General of the State of Florida entered into a Settlement Agreement
     pursuant to which the State will dismiss its claims against the
     Corporation. The Settlement Agreement states that the Attorney General is
     dismissing its claims in the public interest and consistent with its
     responsibilities. The Agreement also provides that the Corporation
     continues to deny that there is any evidence that it engaged in the alleged
     price fixing conspiracy. In addition, the Corporation agreed to donate
     certain real property to the State of Florida, Board of Trustees of the
     Internal Improvement Trust. The value of this real property is not material
     to the results of operations or financial position of the Corporation.

     In addition, as part of the formation of the joint venture with Chesapeake
     described in Note 7, the Corporation and Wisconsin Tissue assigned, and
     Georgia-Pacific Tissue agreed to assume, the liabilities of both companies
     in connection with these cases. The Corporation and Wisconsin Tissue have
     denied that they have engaged in any of the illegal conduct alleged in
     these cases and intend to defend themselves vigorously.

     Although the ultimate outcome of these environmental matters and legal
     proceedings cannot be determined with certainty, based on presently
     available information, management believes that adequate reserves have been
     established for probable losses with respect thereto. Management further
     believes that the ultimate outcome of such environmental matters and legal
     proceedings could be material to operating results in any given quarter or
     year but will not have a material adverse effect on the long-term results
     of operations, liquidity or consolidated financial position of the
     Corporation.

13.  SUBSEQUENT EVENT. On November 1, 1999, the Corporation signed a definitive
     agreement to sell approximately 194,000 acres of its redwood and Douglas
     fir timberlands in northern California for a purchase price of
     approximately $397 million. The sale is expected to close by the end of the
     year, subject to the buyer obtaining required financing and approval by the
     Corporation's board of directors.
<PAGE>

                                      11

14.  OPERATING SEGMENT INFORMATION. The Corporation has six reportable operating
     segments: building products, building products distribution, timber,
     containerboard and packaging, pulp and paper, and paper distribution. The
     following represents selected operating data for each reportable segment
     for the three and nine months ended October 2, 1999 and September 30, 1998.

CONSOLIDATED SELECTED OPERATING SEGMENT DATA (Unaudited)
Georgia-Pacific Corporation and Subsidiaries

<TABLE>
<CAPTION>
                                                    Three Months Ended        Three Months Ended
(In millions)                                        October 2, 1999             Sept. 30, 1998
                                                    ------------------        ------------------
<S>                                                 <C>         <C>           <C>         <C>
NET SALES TO UNAFFILIATED CUSTOMERS
Building products                                   $  1,015        18%       $   866         25%
Building products distribution                         1,346        24          1,113         33
Timber                                                    49         1             38          1
Containerboard and packaging                             612        11            530         16
Pulp and paper                                           809        15            858         25
Paper distribution                                     1,698        31              -          -
Other                                                     (3)        -             (7)         -
                                                    --------    ------        -------     ------
Total net sales to
  unaffiliated customers                            $  5,526       100%       $ 3,398        100%
                                                    ========    ======        =======     ======
INTERSEGMENT SALES
Building products                                   $    591                  $   617
Building products distribution                             5                        2
Timber                                                    90                      105
Containerboard and packaging                              15                       15
Pulp and paper                                           122                        8
Paper distribution                                         2                        -
Other*                                                  (825)                    (747)
                                                    --------                  -------
Total intersegment sales                            $      -                  $     -
                                                    ========                  =======

TOTAL NET SALES
Building products                                   $  1,606        29%       $ 1,483         44%
Building products distribution                         1,351        24          1,115         33
Timber                                                   139         3            143          4
Containerboard and packaging                             627        11            545         16
Pulp and paper                                           931        17            866         25
Paper distribution                                     1,700        31              -          -
Other*                                                  (828)      (15)          (754)       (22)
                                                    --------    ------        -------     ------
Total net sales                                     $  5,526       100%       $ 3,398        100%
                                                    ========    ======        =======     ======

OPERATING PROFITS
Building products                                   $    333        57%       $   185         72%
Building products distribution                             4         1             17          7
Timber                                                    95        17             84         33
Containerboard and packaging                              88        15             33         13
Pulp and paper                                            81        14             18          7
Paper distribution                                        43         7              -          -
Other                                                    (63)      (11)           (82)       (32)
                                                    --------    ------        -------     ------
Total operating profits                                  581       100%           255        100%
                                                                ======                    ======
Interest expense                                        (133)                    (113)
Provision for income taxes                              (169)                     (62)
                                                    --------                  -------
Net income                                          $    279                  $    80
                                                    ========                  =======
</TABLE>
<PAGE>

                                      12

CONSOLIDATED SELECTED OPERATING SEGMENT DATA (Unaudited)
Georgia-Pacific Corporation and Subsidiaries

<TABLE>
<CAPTION>
                                                                          Nine Months Ended                Nine Months Ended
(In millions)                                                              October 2, 1999                  Sept. 30, 1998
                                                                       -----------------------          ----------------------
<S>                                                                    <C>             <C>              <C>             <C>
NET SALES TO UNAFFILIATED CUSTOMERS
Building products                                                        $ 2,953             23%        $ 2,451             25%
Building products distribution                                             3,761             30           3,208             32
Timber                                                                       153              1              99              1
Containerboard and packaging                                               1,708             13           1,515             15
Pulp and paper                                                             2,522             20           2,664             27
Paper distribution                                                         1,698             13               -              -
Other                                                                        (10)             -              (9)             -
                                                                        --------       --------         -------       --------
Total net sales to unaffiliated customers                               $ 12,785            100%        $ 9,928            100%
                                                                        ========       ========         =======       ========
INTERSEGMENT SALES
Building products                                                       $  1,765                        $ 1,848
Building products distribution                                                 9                              6
Timber                                                                       265                            308
Containerboard and packaging                                                  44                             45
Pulp and paper                                                               135                             24
Paper distribution                                                             2                              -
Other*                                                                    (2,220)                        (2,231)

                                                                        --------                        -------
Total intersegment sales                                                $      -                        $     -
                                                                        ========                        =======
TOTAL NET SALES
Building products                                                       $  4,718             37%        $ 4,299             43%
Building products distribution                                             3,770             29           3,214             32
Timber                                                                       418              3             407              4
Containerboard and packaging                                               1,752             14           1,560             16
Pulp and paper                                                             2,657             21           2,688             27
Paper distribution                                                         1,700             13               -              -
Other*                                                                    (2,230)           (17)         (2,240)           (22)
                                                                        --------       --------         -------       --------
Total net sales                                                         $ 12,785            100%        $ 9,928            100%
                                                                        ========       ========         =======       ========
OPERATING PROFITS
Building products                                                       $    945             60%        $   408             57%
Building products distribution                                                57              4               -              -
Timber                                                                       371             24             267             37
Containerboard and packaging                                                 209             13              97             14
Pulp and paper                                                               134              9             143             20
Paper distribution                                                            43              3               -              -
Other                                                                       (199)           (13)           (201)           (28)
                                                                        --------       --------         -------       --------
Total operating profits                                                    1,560            100%            714            100%
                                                                                       ========                       ========
Interest expense                                                            (350)                          (338)
Provision for income taxes                                                  (474)                          (160)
Extraordinary item, net of taxes                                               -                            (15)
                                                                        --------                        -------
Net income                                                              $    736                        $   201
                                                                        ========                        =======
</TABLE>

*Includes elimination of intersegment sales.
<PAGE>

                                      13

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

THIRD QUARTER 1999 COMPARED WITH THIRD QUARTER 1998

The Corporation reported net sales of approximately $5.5 billion for the third
quarter of 1999 and $3.4 billion for the third quarter of 1998. Included in 1999
are $1.7 billion of net sales from the recently acquired Unisource operations.
Net income for the 1999 third quarter was $279 million compared with $80 million
in 1998.

The remaining discussion refers to the "Combined Selected Operating Segment
Data" table (included in Note 14 to the Consolidated Financial Statements).

The Corporation's building products segment reported net sales of $1.6 billion
for the third quarter of 1999 compared with $1.5 billion in 1998. Operating
profits were $333 million in 1999 compared with $185 million in 1998. Return on
sales was 21 percent and 12 percent for the three months ended October 2, 1999
and September 30, 1998, respectively. The higher quarter-over-quarter profits
resulted principally from increases in average selling prices for most of this
segment's products. Lumber selling prices were up 15 percent from the prior
year's quarter; gypsum selling prices increased 25 percent; plywood selling
prices increased 23 percent; and oriented strand board selling prices increased
11 percent. The year-over-year improvement in selling prices was primarily a
result of continued strength in home building activity driven by a strong U.S.
economy. Selling prices for plywood, oriented strand board and lumber peaked in
July of 1999 and declined sharply during the last two months of the third
quarter. The Corporation expects selling prices for plywood, oriented strand
board and lumber to continue to decline through the remainder of the year, while
selling prices for gypsum are expected to remain strong through the fourth
quarter of 1999.

The Corporation's building products distribution segment reported net sales of
$1.4 billion for the third quarter of 1999 compared with $1.1 billion in 1998.
Operating profits for the distribution segment were $4 million in the third
quarter of 1999 compared with $17 million in the third quarter of 1998. The 1998
results included one-time gains, principally on sales of assets related to a
restructuring plan, of approximately $6 million. The decrease in the
distribution segment operating profits in 1999 reflects lower margins related
primarily to the sale of lumber, structural panels and oriented strand board
inventories at prices below the segment's cost.

The timber segment reported net sales of approximately $139 million and $143
million for the third quarter of 1999 and 1998, respectively. Operating income
increased $11 million to $95 million in the third quarter of 1999, compared with
$84 million in the third quarter of 1998. The 1998 third quarter results
included a $1.4 million write-off for the loss of pre-merchantable timber
destroyed by forest fires in Florida in June 1998. In addition, the pre-tax
impact from reduced selling prices for timber salvaged from these fires is
estimated to be approximately $5 million in the third quarter of 1998. Strong
Western sawtimber prices in 1999 offset lower prices for Southern sawtimber,
while total third quarter 1999 harvest volumes were almost identical to the
third quarter of 1998. Total 1999 harvest volumes are anticipated to remain
comparable to 1998. As a result, harvest volumes will decrease in the fourth
quarter of 1999 compared to the third quarter of 1998.

The Corporation's containerboard and packaging segment reported net sales of
$627 million and operating profits of $88 million in the third quarter of 1999,
compared with net sales of $545 million and operating profits of $33 million in
the third quarter of 1998. Return on sales was 14 percent and 6 percent in the
third quarter of 1999 and 1998, respectively. The improvement in earnings was
attributable to higher selling prices and volume, offset somewhat by higher
secondary fiber costs. Containerboard and packaging selling prices increased
steadily over the quarter, ending the quarter at higher levels than a year ago.
The Corporation expects continued selling price improvement in the
containerboard and packaging segment through the remainder of 1999.

The Corporation's pulp and paper segment reported net sales of $931 million and
operating profits of $81 million in the 1999 third quarter. For the same period
in 1998, the segment reported net sales of $866 million and operating profits of
$18 million. Return on sales was 9 percent and 2 percent in the third quarter of
1999 and 1998, respectively. During the third quarter of 1998, the Corporation
closed its hardwood pulp operations at its Port Hudson, Louisiana and Ashdown,
Arkansas facilities, resulting in a one-time, before tax charge of $15 million.
Excluding this one-time charge, return on sales in the third quarter of 1998 was
4 percent. Compared with a year ago, the Corporation has maintained lower levels
of inventory in 1999 for most pulp and paper products. Selling prices and demand
for pulp steadily increased during the third quarter of 1999 and ended the
period at levels higher than the prior year. Despite higher sales volume,
operating results for the tissue business were lower than in the 1998 third
quarter due primarily to lower selling prices. Communication papers 1999
operating results were higher than the third quarter of 1998, due principally to
higher demand. Although steadily improving during the third quarter of 1999,
average selling prices for communication papers were consistent with the third
quarter 1998. Average communication papers selling prices for the third quarter
of 1999 were above those of the 1999 second quarter. The Corporation expects
continued pricing improvements for products in this segment through the
remainder of the year.

The Corporation's paper distribution segment reported net sales of $1.7 billion
and operating profits of $43 million for the third quarter of 1999, which
represent the operating results of Unisource since its acquisition by the
Corporation at the end of the second quarter of 1999. Unisource sells and
distributes high quality printing, writing and copying papers to printers,
publishers, business forms manufacturers and direct mail firms, as well as
corporate and retail copy centers, in-plant print facilities, government
institutions and other paper-intensive businesses. Unisource also sells and
distributes a broad range of packaging and maintenance supplies, equipment and
services, principally to manufacturers, food processors and retail and other
institutional customers. Products distributed include disposable paper and
plastic products; maintenance supplies and equipment such as towels, tissues,
can liners and sanitation chemicals; packaging supplies and equipment such as
carton erectors, baggers and filers as well as films, shrinkwrap and cushioning
materials; shipping room supplies such as corrugated boxes, cushioning
materials, tapes and labeling; and food service supplies such as films and food
wraps, food containers and disposable apparel for food serviced workers.
Operating results for the paper distribution segment have historically been
seasonal, with the strongest operating results occurring in the third quarter.

The operating loss in the "Other" nonreportable segment, which includes some
miscellaneous businesses, certain goodwill amortization, unallocated corporate
operating expenses and the elimination of profit on intersegment sales,
decreased by $19 million to a loss of $63 million in 1999 from a loss of $82
million in the 1998 third quarter. This decrease is primarily the result of
income from insurance proceeds recorded in the 1999 third quarter and the write-
off of goodwill in the third quarter of 1998 related to the closure of the
hardwood pulp operations at the Ashdown, Arkansas facilities.

Interest expense increased $20 million to $133 million in the third quarter of
1999 compared with $113 million in the third quarter of 1998, principally as a
result of higher debt levels and the issuance of the senior deferrable notes.

The effective income tax rate was 38 percent and 44 percent for the three months
ended October 2, 1999 and September 30, 1998, respectively. The effective tax
rate in 1999 and 1998 was higher than the statutory tax rate primarily because
of nondeductible goodwill amortization expense. The reduction in the 1999
effective tax rate resulted principally from higher pre-tax income and an
increased utilization of foreign sales corporation tax benefits.
<PAGE>

                                      14

YEAR-TO-DATE THIRD QUARTER 1999 COMPARED WITH YEAR-TO-DATE THIRD QUARTER 1998

The Corporation reported net sales of $12.8 billion, including $1.7 billion of
net sales from the recently acquired Unisource operations, and net income of
$736 million for the nine months ended October 2, 1999. The Corporation reported
net sales of $9.9 billion and net income of $201 million for the nine months
ended September 30, 1998. The 1998 results included an extraordinary, after-tax
loss of $15 million for the early retirement of debt.

The remaining discussion refers to the "Combined Selected Operating Segment
Data" table (included in Note 14 to the Consolidated Financial Statements).

The Corporation's building products segment reported net sales of $4.7 billion
and operating profits of $945 million for the nine months ended October 2, 1999,
compared with net sales of $4.3 billion and operating profits of $408 million in
1998. Return on sales increased to 20 percent in 1999 from 9 percent a year ago,
resulting primarily from higher selling prices. Average selling prices for
plywood, oriented strand board, lumber and gypsum increased by 24 percent, 28
percent, 7 percent, and 20 percent, respectively, in the first nine months of
1999. Selling prices for plywood, oriented strand board and lumber peaked in
July of 1999 and sharply declined during the last two months of the third
quarter. The Corporation expects selling prices for plywood, oriented strand
board and lumber to continue to decline through the remainder of the year, while
selling prices for gypsum are expected to remain strong through the fourth
quarter of 1999.

The building products distribution division reported net sales of $3.8 billion
and operating profits of $57 million for the nine months ended October 2, 1999,
compared with net sales of $3.2 billion and break even operating profits in
1998. The 1998 results included one-time gains, principally on sales of assets
related to the restructuring plan, of approximately $19 million. The increase in
profitability is due primarily to higher margins in commodity and specialty
products and lower operating cost.

The Corporation's timber segment reported net sales of approximately $418
million and operating profits of $371 million for the nine-month period ended
October 2, 1999 compared to net sales of $407 million and operating profits of
$267 million for the nine months ended September 30, 1998. The 1999 results
included a one-time, pre-tax gain of $84 million from the sale of company
timberlands in Maine and New Brunswick. Excluding the gain on the sale of
timberlands in Maine and New Brunswick, operating profits increased $20 million
to $287 million in the first nine months of 1999 compared to the same period of
1998. The 7 percent increase resulted primarily from an increase in gains on
miscellaneous land sales of $12 million over the 1998 third quarter, and from
the negative impact on 1998 results of the forest fires in Florida. Overall, 9
percent higher total harvest volumes helped to offset the year over year 8
percent decline in average sales price.

The Corporation's containerboard and packaging segment reported net sales of
$1.8 billion and operating profits of $209 million in the first nine months of
1999 compared with net sales of $1.6 billion and operating profits of $97
million in the same 1998 period. Return on sales increased to 12 percent from 6
percent in 1998. Although year-to-date average prices are comparable to year ago
levels, pricing has increased throughout 1999 and, during the third quarter of
1999, was above year ago levels. Cost decreases in wood and energy as well as
higher sales volume contributed to the increased profit margins. The Corporation
expects continued price improvement in the containerboard and packaging segment
through the remainder of 1999.

The Corporation's pulp and paper segment reported net sales of $2.7 billion and
operating profits of $134 million for the nine-month period ended October 2,
1999, compared with net sales of $2.7 billion and operating profits of $143
million in 1998. Return on sales were 5 percent for the first nine months of
both 1999 and 1998. Excluding the one-time, $15 million charge in the third
quarter of 1998 for closure of two hardwood market pulp operations, return on
sales in 1998 was 6 percent. The decline in profitability was principally due to
a decrease in average prices for most of the Corporation's pulp and paper
products. Average selling prices in the first nine months of 1999 for pulp,
communication papers and tissue were approximately 2 percent, 8 percent and 4
percent, respectively, below selling prices in the same 1998 period. Prices for
most of the Corporation's pulp and communication paper products have increased
steadily throughout the first nine months of 1999 and the Corporation
anticipates this upward trend to continue through the remainder of 1999. During
the first nine months of 1999, the Corporation incurred market-related downtime
at its pulp and paper mills and reduced pulp production by 242,000 tons and
communication papers production by 14,000 tons. In the same 1998 period, the
Corporation incurred market-related downtime at its pulp and paper mills and
reduced pulp and communication papers production by 167,000 tons and 53,000
tons, respectively.

The Corporation's paper distribution segment reported net sales of $1.7 billion
and operating profits of $43 million for the third quarter of 1999, which
represent the operating results of Unisource since its acquisition by the
Corporation at the end of the second quarter of 1999. Operating results for the
paper distribution segment have historically been seasonal, with the strongest
operating results occurring in the third quarter.

The operating loss in the "Other" nonreportable segment, which includes some
miscellaneous businesses, certain goodwill amortization, unallocated corporate
operating expenses and the elimination of profit on intersegment sales,
decreased by $2 million to a loss of $199 million in the first nine months of
1999 from a loss of $201 million in the first nine months of 1998.

Interest expense increased $12 million to $350 million in the nine months of
1999, compared with $338 million in the first nine months of 1998, principally
as a result of higher debt levels and the issuance of the senior deferrable
notes, slightly offset by a decrease in average interest rates.

The effective income tax rate for the first nine months of 1999 and 1998 was 39
percent and 43 percent for the three months ended October 2, 1999 and September
30, 1998, respectively. The effective tax rate in 1999 and 1998 was higher than
the statutory tax rate primarily because of nondeductible goodwill amortization
expense. The reduction in the 1999 effective tax rate resulted principally from
higher pre-tax income and an increased utilization of foreign sales corporation
tax benefits.
<PAGE>

                                      15

LIQUIDITY AND CAPITAL RESOURCES

OPERATING ACTIVITIES. The Corporation generated cash from operations of $1.0
billion during the first nine months of both 1999 and 1998. Strong demand and
improved prices for several building products items were offset by higher
working capital levels related principally to accounts receivable associated
with the increase in net sales.

INVESTING ACTIVITIES. Capital expenditures for property, plant and equipment for
the nine months ended October 2, 1999 were $411 million, which included $159
million in the building products segment, $8 million in the building products
distribution segment, $1 million in the timber segment, $50 million in the
containerboard and packaging segment, $159 million in the pulp and paper
segment, $7 million in the paper distribution segment, and $27 million of other
and corporate. The Corporation expects to make capital expenditures for
property, plant and equipment of approximately $700 million in 1999, excluding
the cost of any acquisitions.

Cash paid for timber and timberlands was $143 million in the first nine months
of 1999 compared with $165 million in 1998.

At the end of the second quarter of 1999, the Corporation, through its wholly
owned subsidiary Atlanta Acquisition Corp., conducted a tender offer for all of
the outstanding shares of common stock of Unisource, the largest independent
marketer and distributor of printing and imaging paper and supplies in North
America. Pursuant thereto, the Corporation acquired 90.7% of the then
outstanding shares of Unisource. On July 6, 1999, Atlanta Acquisition Corp. was
merged with and into Unisource and by virtue of such merger, shares of Unisource
that were not tendered to the Corporation (other than shares held by Unisource
and the Corporation and its subsidiaries) were converted into the right to
receive $12.00 per Unisource share in cash, subject to dissenters rights. The
Corporation is purchasing the remaining outstanding shares of Unisource as they
are delivered to the exchange agent. Through October 2, 1999, the Corporation
paid approximately $828 million for shares of Unisource. Unisource's results of
operations were consolidated with those of the Corporation beginning July 4,
1999.

During the first nine months of 1999, the Corporation also completed the
acquisition of a packaging plant, four treated lumber facilities and a chemical
business for a total consideration of approximately $69 million in cash.

On June 30, 1998, the Corporation completed its acquisition of CeCorr, a leading
independent producer of corrugated sheets in the United States. On June 30,
1998, the Corporation paid approximately $93 million in cash (net of $2 million
of cash acquired) and issued approximately 3.2 million shares of Georgia-Pacific
Group stock valued at approximately $28.94 per share for all the outstanding
shares of CeCorr. In addition, the Corporation assumed approximately $92 million
of CeCorr's debt, of which $34 million was owed to the Corporation ($58 million
net debt assumed). On July 2, 1998, a former owner of CeCorr exercised his right
to resell to the Corporation approximately 2.2 million shares of Georgia-Pacific
Group stock issued in the transaction. CeCorr's results of operations were
consolidated with those of the Corporation beginning July 1, 1998.

During the first nine months of 1999, the Corporation received $95 million of
proceeds from the sale of assets, compared with $91 million in the same period
of 1998. During the second quarter of 1999, the Corporation sold approximately
390,000 acres of timberlands in the Canadian province of New Brunswick and
approximately 440,000 acres of timberlands in Maine for approximately $92
million and recognized a pre-tax gain of $84 million ($50 million after tax).
The 1998 proceeds were principally from sales of real estate development
properties located in South Carolina and Florida.

Effective October 3, 1999, the Corporation and Chesapeake completed a previously
announced agreement to create Georgia-Pacific Tissue, a joint venture in which
the two companies have combined their away-from-home tissue businesses. The
Corporation contributed substantially all of the assets of its commercial tissue
business to the joint venture. The Corporation controls and manages the joint
venture and owns 95 percent of the equity in joint venture. Chesapeake
contributed the assets of its Wisconsin Tissue business to the joint venture,
for which it received a 5 percent equity interest in the joint venture and an
initial cash distribution of approximately $755 million.

On November 1, 1999, the Corporation signed a definitive agreement to sell
approximately 194,000 acres of its redwood and Douglas fir timberlands in
northern California for a purchase price of approximately $397 million. The sale
is expected to close by the end of the year, subject to the buyer obtaining
required financing and approval by the Corporation's board of directors. In
conjunction with the sale, the Corporation expects to receive notes receivable
from the purchaser for the purchase price. The Corporation expects these notes
receivable to be fully secured by a stand by letter of credit with an
unaffiliated third party. Additionally, the Corporation expects to monetize
these notes through the issuance of notes payable in a private placement during
the first half of 2000. The Corporation expects to use the proceeds of the
monetization to repay debt. The estimated annual harvest from these California
timberlands for 1999 is approximately 83 million board feet of softwood
sawtimber. The estimated annual operating profit and capital expenditures for
1999 related to these timberlands is $30 million and $1 million, respectively.
The Fort Bragg sawmill has a wood supply agreement with The Timber Company
through 2000 that was transferred as part of the sale agreement.

In 1999, the Corporation expects its cash flow from operations, together with
proceeds from any asset sales and available financing sources, to be sufficient
to fund planned capital investments, pay dividends and make scheduled debt
payments.
<PAGE>

                                      16

FINANCING ACTIVITIES. The Corporation's total debt, excluding senior deferrable
notes, increased by $614 million to $6,165 million at October 2, 1999 from
$5,551 million at December 31, 1998. At October 2, 1999 and December 31, 1998,
$5,198 million and $4,568 million, respectively, of such total debt was Georgia-
Pacific Group's debt and $967 million and $983 million, respectively, was The
Timber Company's debt.

In June 1999, the Corporation renegotiated its accounts receivable sale program
and increased the amount outstanding under the program from $280 million to $750
million. The program expires in April 2000. In connection with the acquisition
of Unisource, the Corporation retained former Unisource agreements to sell up to
$150 million of certain qualifying U.S. accounts receivable and up to CN$70
million of certain eligible Canadian accounts receivable. The U.S. agreement
expires in April 2000 and the Canadian agreement expires in May 2004. At October
2, 1999, approximately $947 million was outstanding under the Corporation's and
Unisource's programs in the aggregate. The receivables outstanding under these
programs and the corresponding debt are included as current receivables and
short-term debt, respectively on the accompanying balance sheets. The agreements
are accounted for as a secured borrowing. As collections reduce previously sold
interests, new receivables may be sold.

Also in June 1999, the Board of Directors increased the corporate target debt
level under which management can purchase shares of Georgia-Pacific Group and
The Timber Company common stock on the open market from $5.75 billion to $6.8
billion. In addition, the Board of Directors increased the Georgia-Pacific
Group's target debt level from $4.75 billion to $5.8 billion. The Timber
Company's target debt level remains at $1.0 billion.

On July 22, 1999, the Corporation increased the amount of its unsecured
revolving credit facility from $1.5 billion to $2.0 billion. This unsecured
revolving credit facility is used for direct borrowings and as support for
commercial paper and other short-term borrowings. As of October 2, 1999, $1,239
million of committed credit was available in excess of all short-term borrowings
outstanding under or supported by the facility. The revolving credit agreement
contains certain restrictive covenants, including a maximum leverage ratio
(funded indebtedness, including senior deferrable notes, to earnings before
interest, taxes, depreciation and amortization ("EBITDA")) of 4.5 to 1.0, which
is to be maintained throughout the term of the credit agreement. As of October
2, 1999, the leverage ratio was 2.3 to 1.0.

On July 7, 1999, the Corporation issued 17,250,000 of 7.5% PEPS Units for $862.5
million. Each PEPS Unit had an issue price of $50 and consists of a contract to
purchase shares of Georgia-Pacific Group common stock on or prior to August 16,
2002 and a senior deferrable note of Georgia-Pacific Group due August 16, 2004.
Each purchase contract yields interest of 0.35% per year, paid quarterly, on the
$50 stated amount of the PEPS Unit. Each senior deferrable note yields interest
of 7.15% per year, paid quarterly, until August 16, 2002. On August 16, 2002,
following a remarketing of the senior deferrable notes, the interest rate will
be reset at a rate that will be equal to or greater than 7.15%. The liability
related to the PEPS Units is classified as Senior deferrable notes on the
consolidated balance sheets and will not be included in the debt amount for
purposes of determining the corporate and Georgia-Pacific Group debt targets.

During the first nine months of 1999, approximately $79 million of fixed and
floating rate industrial revenue bonds were replaced, of which $66 million were
refunded by fixed rate instruments and $13 million were refunded by variable
rate instruments.

In connection with the acquisition of Unisource, the Corporation retained former
Unisource industrial revenue bonds in the amount of $9 million and capital
leases in the amount of $12 million. These amounts are included in the
Corporation's total debt.

As of October 2, 1999, the Corporation had registered for sale up to $2.975
billion of debt and equity securities under a shelf registration statement filed
with the Securities and Exchange Commission. The Corporation registered $1.725
billion under such registration statement related to the PEPS Units ($862.5
million of which was received on July 7, 1999 in exchange for senior deferrable
notes, which notes will be converted into $862.5 million of equity (Georgia-
Pacific Group common stock) upon exercise of the purchase contracts. The $862.5
million of cash (less expenses) raised in the sale of the PEPS Units was used to
pay for the acquisition of Unisource. Proceeds from the issuance of securities
under this registration statement will be used for general corporate purposes,
including the reduction of short-term debt, acquisitions, investments in, or
extension of credit to, the Corporation's subsidiaries and the acquisition of
real property.

In connection with the formation of Georgia-Pacific Tissue, Georgia-Pacific
Tissue financed the $755 million initial distribution to Chesapeake with short-
term borrowings from a bank syndicate in October 1999. In the fourth quarter of
1999, the Corporation expects to sell debt under the shelf registration
statement filed with the Securities and Exchange Commission and loan or
contribute the proceeds through the use of one or more subsidiaries to Georgia-
Pacific Tissue in order for Georgia-Pacific Tissue to retire such syndicated
bank debt. This short-term financing temporarily increased the Corporation's
total debt above the $6.8 billion target debt level for repurchasing stock. The
Corporation expects to be able to repurchase stock again in the fourth quarter
once the debt level falls below the target.

On October 7, 1999, approximately $10 million of floating rate industrial
revenue bonds, due December 1, 2025, were replaced by $10 million fixed rate
industrial revenue bonds issued on October 1, 1999.
<PAGE>

                                      17

The Corporation's senior management establishes the parameters of the
Corporation's financial risk, which have been approved by the Board of
Directors. Hedging interest rate exposure through the use of swaps and options
and hedging foreign exchange exposure through the use of forward contracts are
specifically contemplated to manage risk in keeping with the management policy.
Derivative instruments, such as swaps, forwards, options or futures, which are
based directly or indirectly upon interest rates, currencies, equities and
commodities, may be used by the Corporation to manage and reduce the risk
inherent in price, currency and interest rate fluctuations.

The Corporation does not utilize derivatives for speculative purposes.
Derivatives are transaction-specific so that a specific debt instrument,
contract or invoice determines the amount, maturity and other specifics of the
hedge. Counterparty risk is limited to institutions with long-term debt ratings
of A or better.

The table below presents principal (or notional) amounts and related weighted
average interest rates by year of expected maturity for the Corporation's debt
obligations as of October 2, 1999. For obligations with variable interest rates,
the table sets forth payout amounts based on current rates and does not attempt
to project future interest rates.

Georgia-Pacific Corporation and Subsidiaries

<TABLE>
<CAPTION>

(In millions)                                                   1999              2000               2001              2002
-------------                                                   ----              ----               ----              ----
<S>                                                           <C>                <C>                 <C>            <C>
Debt
Commercial paper and other short-term
notes                                                              -                 -                  -                 -
   Average interest rates                                          -                 -                  -                 -
Notes and debentures                                               -                 -                  -           $   300
   Average interest rates                                          -                 -                  -                10%
Revenue bonds                                                 $   10             $  24               $  6           $    74
   Average interest rates                                        5.3%              4.2%               3.9%              3.8%
Other loans                                                        -             $  13                  -                 -
   Average interest rates                                          -               8.0%                 -                 -
Accounts receivable sale program                                   -                 -                  -                 -
   Average interest rates                                          -                 -                  -                 -
Senior deferrable notes                                            -                 -                  -                 -
   Average interest rates                                          -                 -                  -                 -
Notional principal amount of interest rate exchange
agreements                                                    $  100             $ 177                  -           $   131
   Average interest rate paid (fixed)                            6.4%              7.7%                 -               5.9%
   Average interest rate received (variable)                     5.5%              5.5%                 -               5.4%
</TABLE>

Georgia-Pacific Corporation and Subsidiaries

<TABLE>
<CAPTION>
                                                                                                             Fair value
(In millions)                                                  2003         Thereafter       Total          July 3, 1999
-------------                                                 ------        ----------      -------         ------------
<S>                                                           <C>           <C>             <C>             <C>
Debt
Commercial paper and other short-term notes                        -        $      761      $   761         $        761
   Average interest rates                                          -               5.7%         5.7%                 5.7%
Notes and debentures                                          $  300        $    2,900      $ 3,500         $      3,490
   Average interest rates                                        5.7%              8.6%         8.4%                 8.0%
Revenue bonds                                                      -        $      550      $   664         $        573
   Average interest rates                                          -               5.3%         5.1%                 8.0%
Other loans                                                   $   14                 -      $    27         $         27
   Average interest rates                                        5.7%                -          6.8%                 7.3%
Accounts receivable sale program                                   -        $      947      $   947         $        947
   Average interest rates                                          -               5.6%         5.6%                 5.6%
Senior deferrable notes                                            -        $      863      $   863         $        870
   Average interest rates                                          -              7.15%        7.15%                 7.3%
Notional principal amount of interest rate
exchange agreements                                           $  300                 -      $   708         $          4
   Average interest rate paid (fixed)                            5.9%                -          6.4%                 6.4%
   Average interest rate received (variable)                     5.9%                -          5.7%                 5.7%
</TABLE>

The Corporation has the intent and ability to refinance commercial paper, other
short-term notes and the accounts receivable sale program as they mature. The
Corporation intends to re-market the senior deferrable notes on or before August
16, 2002 at an interest rate that will be equal to or greater than 7.15%; thus
extending the maturity of the senior deferrable notes to August 16, 2004.
Therefore, maturities of these obligations are reflected as cash flows expected
to be made after 2003. The fair value of interest rate exchange agreements
exclude amounts used to determine the fair value of related notes and
debentures.

At October 2, 1999, the Corporation's weighted average interest rate on its
debt, excluding the senior deferrable notes, was 7.0% including the accounts
receivable sale program and outstanding interest rate exchange agreements. At
October 2, 1999, these interest rate exchange agreements effectively converted
approximately $708 million of floating rate obligations with a weighted average
interest rate of 5.7% to fixed rate obligations with an average effective
interest rate of 6.4%. These agreements have a weighted average maturity of
approximately 2.5 years. As of October 2, 1999, the Corporation's total floating
rate debt, including the accounts receivable sale program, exceeded related
interest rate exchange agreements by $1.6 billion.

The Corporation also enters into foreign currency exchange agreements and
commodity futures and swaps, the amounts of which were not material to the
consolidated financial position of the Corporation at October 2, 1999.

During the first nine months of 1999, Georgia-Pacific Group purchased on the
open market approximately 5,994,000 shares of Georgia-Pacific Group common stock
at an aggregate price of $247 million ($41.21 average per share). Of these
repurchased shares, approximately 5,969,000 shares were held as treasury and
25,000 shares were purchased during the first nine months of 1999 and settled
after October 2, 1999. During the first nine months of 1999, The Timber Company
purchased on the open market approximately 5,046,000 shares of The Timber
Company common stock, all of which were held as treasury stock at October 2,
1999, at an aggregate price of $124 million ($24.57 average per share).

During the first nine months of 1998, the Georgia-Pacific Group purchased in
private transactions and on the open market approximately 4,794,000 shares of
Georgia-Pacific Group common stock at an aggregate price of $277 million ($57.78
average per share). Of these repurchased shares, approximately 3,586,000 shares
were held as treasury, 284,000 shares were purchased during the first nine
months of 1998 and settled after September 30, 1998, and 924,000 shares were
cancelled. In addition, during the first nine months of 1998, The Timber Company
purchased on the open market 4,860,000 shares of The Timber Company common stock
at an aggregate price of $105 million ($21.60 average per share). Of these
repurchased shares, approximately 4,829,000 shares were held as treasury and
31,000 shares were purchased during the first nine months of 1998 and settled
after September 30, 1998.
<PAGE>

                                      18

Subsequent to October 2, 1999 through November 3, 1999, the Corporation
purchased on the open market approximately 178,000 shares of the Georgia-Pacific
Group stock at an aggregate price of $7 million ($38.12 average per share) and
approximately 53,000 shares of The Timber Company stock at an aggregate price of
$1 million ($23.68 average per share). The Corporation expects to repurchase
shares of the Georgia-Pacific Group and The Timber Company stock throughout 1999
as long as debt levels are below the established thresholds.

During the first nine months of 1999, the Corporation received $106 million and
$9 million from the exercise of stock options of Georgia-Pacific Group common
stock and The Timber Company common stock, respectively.

During the first nine months of 1999 and 1998, the Corporation paid $128 million
and $137 million, respectively, in dividends. On May 4, 1999, the Board of
Directors declared a two-for-one split of Georgia-Pacific Group's common stock
in the form of a special dividend to shareholders of record on May 14, 1999. The
special dividend was paid as one share of Georgia-Pacific Group common stock for
each share of Georgia-Pacific Group outstanding on June 3, 1999. A total of
95,126,911 additional shares were issued in conjunction with the stock split.
The Georgia-Pacific Group's par value of $0.80 remained unchanged. As a result,
$76 million of stockholders' equity was reclassified from Additional paid-in
capital to Common stock. All historical share and per share amounts have been
restated to reflect retroactively the stock split.

OTHER. In July 1999, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 137, providing for a one year delay of the effective date of SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities"("SFAS No.
133"). SFAS No. 133 establishes accounting and reporting standards for
derivative instrument and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities on the balance sheet
and measure those instruments at fair value. Georgia-Pacific Corporation will be
required to adopt SFAS No. 133 in 2001. Management is evaluating the effect of
this statement on Georgia-Pacific's derivative instruments: primarily interest
rate swaps, foreign currency forward contracts and long-term purchase
commitments. The impact of adjustments to fair value is not expected to be
material to the Corporation's consolidated financial position.

The Corporation has worked to resolve the effects of the Year 2000 problem on
its information systems, the operating systems used in its manufacturing
operations as well as its facilities systems. The Year 2000 problem, which is
common to most businesses, concerns the inability of such systems to properly
recognize and process dates and date-sensitive information on and beyond January
1, 2000. In 1996, the Corporation began a company wide assessment of the
vulnerability of its systems to the Year 2000 problem. Based on such assessment,
the Corporation developed a Year 2000 plan, under which all key systems were
tested, and noncompliant software or technology was modified or replaced. The
Corporation is continuing to survey and assess the Year 2000 readiness status
and compatibility of customers' and suppliers' systems and processes that
interface with the Corporation's systems or could otherwise impact the
Corporation's operations.
<PAGE>

                                      19

The Corporation completed the necessary revisions and unit testing to most
systems and processes in 1998 with the few remaining systems completed in March
1999. Full integration testing and verification of such systems and processes
for Year 2000 readiness was completed in September 1999 and follow-up
reverification testing will continue as necessary throughout the remainder of
1999 and into 2000. At the end of September 1999, 99.8 percent of the
Corporation's information systems are considered fully Year 2000 ready, and less
than 1 percent are in the final stages of full integration testing. The systems
in final stages of testing are not considered critical. Early in 1998, the
Corporation completed an inventory of the process control systems and embedded
chips used in its manufacturing operations and believes that only a small
percentage of such systems and chips could be subject to Year 2000 problems. At
the end of September 1999, over 97 percent of the process control and embedded
chip inventory has been fully analyzed and remediated as necessary with the
remaining 3 percent of the inventory in the repair or test phase. Final post-
repair testing on these non-critical outstanding items is scheduled to be
complete by mid November 1999. Due to system acquisitions and the number and
complexity of existing systems, the Corporation expects some continuing
additions of noncritical systems to the inventory list.

The Corporation has contacted each of its critical suppliers and service
providers including government services, transportation, energy and
communication providers to ascertain their respective levels of readiness to
address and remediate Year 2000 problems and is continuing to review their
responses and conduct follow-up reviews as necessary. The Corporation has
identified and contacted critical customers to ascertain their respective levels
of Year 2000 readiness and will continue to assess the need for further testing
with customers as appropriate. While the Corporation currently believes that it
will be able to modify or replace its affected systems in time to minimize any
detrimental effects on its operations, failure to do so, or the failure of the
Corporation's major customers, suppliers and service providers to modify or
replace their affected systems, could have a material adverse impact on the
Corporation's results of operations, liquidity or consolidated financial
position in the future. The most reasonably likely worst-case scenario of
failure by the Corporation or its customers or suppliers to resolve the Year
2000 problem would be a temporary slowdown or cessation of manufacturing
operations at one or more of the Corporation's facilities, including its limited
foreign operations, and a temporary inability on the part of the Corporation to
process orders and billings in a timely manner and to deliver finished products
to customers. The Corporation's individual business units and corporate offices
have developed plans for various contingency options, including identification
of alternate suppliers, vendors and service providers as well as direct access
to qualified vendor technical support and manual alternatives to systems
operations. These options will allow them to minimize the risks of any
unresolved Year 2000 problems on their operations and to minimize the effect of
any unforeseen Year 2000 failures in areas outside the Corporation's control.
The primary goal of the Corporation's contingency plan is to minimize the
adverse impact to personnel safety, environmental safety and assets.

The Corporation currently estimates the incremental cost of the work needed to
resolve the Year 2000 problem at approximately $32 million (including
approximately $4 million of capital costs), of which $24 million has been
incurred to date and $1 million is included for the impact of contingency
activities and unexpected events. As the Corporation has effectively completed
its Year 2000 readiness efforts, prior estimates of total costs and
contingencies for unknowns have been adjusted accordingly. In addition, the
Corporation expects to incur internal costs totaling approximately $20 million
related to the Year 2000 problem, of which approximately $16 million has been
incurred to date. Although the costs were not as high as expected because of
warranties or lower cost corrections, the bulk of the incremental costs relate
to replacement or modification of affected process control systems in the
Corporation's manufacturing operations and the cost of creating and maintaining
isolated test environments for its information systems. The majority of the
internal costs relates to code or process system assessment, remediation and
testing and is projected to be incurred through 1999 and first quarter 2000.
These incremental and internal costs will be expensed as incurred, except for
new systems purchased that will be capitalized in accordance with corporate
policy. Such costs may be material to the Corporation's results of operations in
one or more fiscal quarters or years but are not expected to have a material
adverse effect on the long-term results of operations, liquidity or consolidated
financial position of the Corporation.

The Corporation has reviewed Unisource's Year 2000 project methodology and
progress, including its foreign operations. All mission critical systems have
been remediated and tested and final certification was completed in October
1999. Unisource has contacted its technology and service providers as well as
its key customers and suppliers to determine the extent to which their systems
are Year 2000 ready and the extent to which Unisource could be affected if they
are not. Contingency planning activities are ongoing and are scheduled to be
reviewed by executive management by mid-November. Unisource estimates the total
incremental cost of its Year 2000 project to be approximately $13 million. Of
this amount, approximately $12 million has been incurred through October 2,
1999. Unisource expects to incur internal costs totaling approximately $1
million related to the Year 2000 problem, $0.7 million of which was incurred
through October 2, 1999.

The Corporation has reviewed Wisconsin Tissue's Year 2000 project methodology
and progress, including its foreign operations. All mission critical systems
have been remediated and tested and final certification has been completed.
Wisconsin Tissue has contacted its technology and service providers as well as
its key customers and suppliers to determine the extent to which their systems
are Year 2000 ready and the extent to which Wisconsin Tissue could be affected
if they are not. Contingency plans have been developed.

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. The statements under "Management's
Discussion and Analysis" and other statements contained herein that are not
historical facts are forward-looking statements (as such term is defined under
the Private Securities Litigation Reform Act of 1995) based on current
expectations. The accuracy of such statements is subject to a number of risks,
uncertainties and assumptions. In addition to the risks, uncertainties and
assumptions discussed elsewhere herein, factors that could cause or contribute
to actual results differing materially from such forward-looking statements
include the following: the Corporation's production capacity continuing to
exceed demand for its pulp and paper products, necessitating market-related
downtime; the ability of the Corporation, and its customers and suppliers, to
address the Year 2000 problem in a timely and efficient manner; changes in the
productive capacity and production levels of other building products and pulp
and paper producers; the effect on the Corporation of changes in environmental
and pollution control laws and regulations; the general level of economic
activity in U.S. and export markets, particularly the Asian markets; variations
in the level of housing starts and home remodeling in the United States;
fluctuations in interest rates and currency exchange rates; the availability and
cost of wood fiber; material variation in the Corporation's earnings or cash
flow as a result of the Unisource acquisition, including its inability to
integrate and rationalize the business of Unisource into the Corporation in a
manner that realizes cost savings and synergies, and effective continuing
implementation of the Unisource restructuring announced July 29, 1998; and other
risks, uncertainties and assumptions discussed in the Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998, the
Corporation's Quarterly Report on Form 10-Q/A for the quarter ended July 3,
1999, and the Corporation's Form 8-K dated October 17, 1996.

For a discussion of commitments and contingencies refer to Note 12 of the Notes
to Consolidated Financial Statements.
<PAGE>

                                      20

COMBINED STATEMENTS OF INCOME (Unaudited)
Georgia-Pacific Corporation--Georgia-Pacific Group

<TABLE>
<CAPTION>
                                                                            Three Months Ended            Nine Months Ended
                                                                        -------------------------     -------------------------
                                                                        October 2,      Sept. 30,     October 2,      Sept. 30,
(In millions, except per share amounts)                                   1999           1998            1999           1998
---------------------------------------                                  -------        -------       --------         -------
<S>                                                                     <C>             <C>            <C>             <C>
Net sales                                                               $  5,483       $  3,368       $ 12,644         $ 9,840
                                                                        --------       --------       --------         -------
Costs and expenses
     Cost of sales excluding depreciation, amortization and
       cost of timber harvested shown below
         The Timber Company                                                   30             27             75              70
         Third parties                                                     4,178          2,540          9,392           7,501
                                                                        --------       --------       --------         -------
     Total cost of sales                                                   4,208          2,567          9,467           7,571
                                                                        --------       --------       --------         -------
     Depreciation, amortization and cost
       of timber harvested
         The Timber Company                                                   60             78            190             238
         Third parties                                                       248            250            701             720
                                                                        --------       --------       --------         -------
     Total depreciation, amortization and cost of
       timber harvested                                                      308            328            891             958
                                                                        --------       --------       --------         -------
     Selling and distribution                                                263            145            547             412
     General and administrative                                              218            157            550             452
     Interest                                                                116             96            298             286
                                                                        --------       --------       --------         -------
Total costs and expenses                                                   5,113          3,293         11,753           9,679
                                                                        --------       --------       --------         -------
Income before income taxes                                                   370             75            891             161
     and extraordinary item
Provision for income taxes                                                   140             36            350              76
                                                                        --------       --------       --------         -------
Income before extraordinary item                                             230             39            541              85
Extraordinary item, net of taxes                                               -              -              -             (13)
                                                                        --------       --------       --------         -------
Net income                                                              $    230       $     39       $    541         $    72
                                                                        ========       ========       ========         =======
Basic per common share:
     Income before extraordinary item                                   $   1.34       $   0.22       $   3.15         $  0.47
     Extraordinary item, net of taxes                                          -              -              -           (0.07)
                                                                        --------       --------       --------         -------
     Net income                                                         $   1.34       $   0.22       $   3.15         $  0.40
                                                                        ========       ========       ========         =======
Diluted per common share:
     Income before extraordinary item                                   $   1.31       $   0.22       $   3.07         $  0.46
     Extraordinary item, net of taxes                                          -              -              -           (0.07)
                                                                        --------       --------       --------         -------
     Net income                                                         $   1.31       $   0.22       $   3.07         $  0.39
                                                                        ========       ========       ========         =======
Average number of shares outstanding:
     Basic                                                                 171.4          180.5          171.9           181.5
     Diluted                                                               175.9          181.0          176.2           183.2
                                                                        ========       ========       ========         =======
</TABLE>

The accompanying notes are an integral part of these financial statements.
<PAGE>

                                       21

COMBINED STATEMENTS OF CASH FLOWS  (Unaudited)
Georgia-Pacific Corporation--Georgia-Pacific Group

<TABLE>
<CAPTION>
                                                                                          Nine Months Ended
                                                                                      ------------------------
(In millions)                                                              October 2, 1999                Sept. 30, 1998
----------------                                                           ---------------                --------------
<S>                                                                        <C>                            <C>
Cash flows from operating activities
   Net income                                                                   $      541                    $       72
     Adjustments to reconcile net income to
       cash provided by operations:
       Depreciation                                                                    547                           557
       Cost of timber harvested - The Timber Company                                   190                           238
       Cost of timber harvested - Third Parties                                        105                           106
       Deferred income taxes                                                           (24)                           53
       Amortization of goodwill                                                         49                            45
       Stock compensation programs                                                      (3)                            8
       Gain on sales of assets                                                           -                            12
       Increase in receivables                                                        (400)                          (36)
       (Increase) decrease in inventories                                              (26)                           67
       (Increase) decrease in other working capital                                     97                           (49)
       Change in other assets and other
         long-term liabilities                                                         (56)                           45
                                                                           ---------------                --------------
Cash provided by operations                                                          1,020                         1,118
                                                                           ---------------                --------------
Cash flows from investment activities
     Property, plant and equipment investments                                        (410)                         (386)
     Timber purchases from The Timber Company                                         (179)                         (252)
     Timber contract purchases from third parties                                      (95)                         (118)
     Acquisitions                                                                     (897)                         (102)
     Proceeds from sales of assets                                                      15                            53
     Other                                                                              26                             1
                                                                           ---------------                --------------
Cash used for investment activities                                                 (1,540)                         (804)
                                                                           ---------------                --------------
Cash flows from financing activities
     (Repayments of) additions to long-term debt                                       (79)                           17
     Common stock repurchased                                                         (246)                         (272)
     Issuance of senior deferrable notes                                               863                             -
     Cash dividends paid                                                               (65)                          (68)
     Proceeds from option plan exercises                                               106                             8
                                                                           ---------------                --------------
Cash provided by (used for) financing activities                                       579                          (315)
                                                                           ---------------                --------------
Increase (decrease) in cash                                                             59                            (1)
Balance at beginning of period                                                           5                             8
                                                                           ---------------                --------------
Balance at end of period                                             $                  64                             7
                                                                           ===============                ==============
</TABLE>

The accompanying notes are an integral part of these financial statements.
<PAGE>

                                       22

COMBINED BALANCE SHEETS (Unaudited)
Georgia-Pacific Corporation--Georgia-Pacific Group

<TABLE>
<CAPTION>
(In millions)                                                                 October 2,             December 31,
                                                                                1999                    1998
                                                                             -----------             ------------
<S>                                                                          <C>                     <C>
ASSETS
Current assets
     Cash                                                                    $        64             $          5
     Receivables, less allowances of $26
        and $25, respectively                                                      2,391                    1,231
     Inventories                                                                   1,739                    1,278
     Deferred income tax assets                                                       61                       61
     Other current assets                                                            132                       65
                                                                             -----------             ------------
Total current assets                                                               4,387                    2,640
                                                                             -----------             ------------
Timber contracts                                                                      60                       78
                                                                             -----------             ------------
Property, plant and equipment
     Land and improvements, buildings,
       machinery and equipment and construction
         in progress, at cost                                                     14,928                   14,387
     Accumulated depreciation                                                     (8,602)                  (8,162)
                                                                             -----------             ------------
Property, plant and equipment, net                                                 6,326                    6,225
                                                                             -----------             ------------
Goodwill, net                                                                      2,430                    1,677
                                                                             -----------             ------------
Other assets                                                                       1,050                      918
                                                                             -----------             ------------
Total assets                                                                 $    14,253             $     11,538
                                                                             ===========             ============
</TABLE>


<TABLE>
<CAPTION>
<S>                                                                          <C>                     <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
   Short-term debt                                                           $     1,701             $      1,173
   Accounts payable                                                                  964                      553
   Accrued compensation                                                              299                      243
   Other current liabilities                                                         629                      412
                                                                             -----------             ------------
Total current liabilities                                                          3,593                    2,381
                                                                             -----------             ------------
Long-term debt, excluding current portion                                          3,497                    3,395
                                                                             -----------             ------------
Senior deferrable notes                                                              863                        -
                                                                             -----------             ------------
Other long-term liabilities                                                        1,720                    1,566
                                                                             -----------             ------------
Deferred income tax liabilities                                                    1,009                      987
                                                                             -----------             ------------
Commitments and contingencies

Shareholders' equity                                                               3,571                    3,209
                                                                             -----------             ------------
Total liabilities and shareholders' equity                                   $    14,253             $     11,538
                                                                             ===========             ============
</TABLE>

The accompanying notes are an integral part of these financial statements.
<PAGE>

                                      23

COMBINED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
Georgia-Pacific Corporation--Georgia-Pacific Group

<TABLE>
<CAPTION>
                                                                          Three Months Ended              Nine Months Ended
                                                                       -------------------------      -------------------------
                                                                       October 2,      Sept. 30,      October 2,      Sept. 30,
(In millions)                                                            1999           1998            1999            1998
-------------                                                          -------        -------         -------         -------
<S>                                                                    <C>            <C>             <C>             <C>
Net income                                                               $  230        $   39         $   541         $    72
  Other comprehensive income (loss) before tax:
  Foreign currency translation adjustments                                   (3)          (13)              7             (19)
  Income tax (expense) benefit related to
    items of other comprehensive income                                       1             5              (3)              7
                                                                         ------        ------         -------         -------
Comprehensive income                                                     $  228        $   31         $   545         $    60
                                                                         ======         =====         =======         =======
</TABLE>

The accompanying notes are an integral part of these financial statements.


NOTES TO COMBINED FINANCIAL STATEMENTS (Unaudited)
Georgia-Pacific Corporation--Georgia-Pacific Group

1.   PRINCIPLES OF PRESENTATION. The combined financial statements include the
     accounts of Georgia-Pacific Group and subsidiaries. All significant
     intercompany balances and transactions are eliminated in consolidation. The
     interim financial information included herein is unaudited; however, such
     information reflects all adjustments which are, in the opinion of
     management, necessary for a fair presentation of the Georgia-Pacific
     Group's financial position, results of operations, and cash flows for the
     interim periods. All such adjustments are of a normal, recurring nature
     except for the item discussed in Note 2 below. Certain 1998 amounts have
     been reclassified to conform with the 1999 presentation. The Georgia-
     Pacific Group's combined financial statements should be read in conjunction
     with the Corporation's consolidated financial statements and The Timber
     Company's combined financial statements.

     On or about April 22, 1999, the Georgia-Pacific Group determined to change
     its fiscal year from December 31 to end on the Saturday closest to December
     31. Additionally, the Georgia-Pacific Group reports its quarterly periods
     on a 13-week basis ending on a Saturday. The impact of one less day and two
     additional days on the three months and nine months ended October 2, 1999,
     respectively, was not material. There will be no transition period on which
     to report.

2.   EXTRAORDINARY ITEM. The Corporation redeemed approximately $600 million of
     its outstanding debt during the first nine months of 1998. As a result, an
     after-tax extraordinary charge of $13 million ($0.07 per share) was
     allocated to the Georgia-Pacific Group based on the ratio of the Georgia-
     Pacific Group's debt to the Corporation's total debt, of which $12 million
     was recognized in the first quarter of 1998 and $1 million was recognized
     in the second quarter of 1998.

3.   EARNINGS PER SHARE. The Corporation's common stock was redesignated in
     December 1997 to reflect separately the performance of the Corporation's
     pulp, paper and building products businesses, which are now known as
     Georgia-Pacific Group. A separate class of common stock was distributed to
     reflect the performance of the Corporation's timber operating group, which
     is now known as The Timber Company. Basic earnings per share is computed
     based on net income and the weighted average number of common shares
     outstanding. Diluted earnings per share reflect the annual issuance of
     common shares under long-term incentive stock option and stock purchase
     plans. The computation of diluted earnings per share does not assume
     conversion or exercise of securities that would have an antidilutive effect
     on earnings per share.

     The following table provides earnings and per share data for the Georgia-
Pacific Group for 1999 and 1998.

<TABLE>
<CAPTION>
                                                            Three Months Ended              Six Months Ended
                                                         -------------------------      -------------------------
                                                         October 2,      Sept. 30,      October 2,      Sept. 30,
(In millions, except per share amounts)                     1999            1998           1999            1998
--------------------------------------                     -------        -------        -------         -------
<S>                                                      <C>              <C>           <C>             <C>
Basic and diluted income available to
 shareholders (numerator):
     Income before extraordinary item                    $     230        $    39       $    541         $    85
     Extraordinary item, net of taxes                            -              -              -             (13)
                                                         ---------        -------       --------         -------
     Net income                                          $     230        $    39       $    541         $    72
                                                         =========        =======       ========         =======
Shares (denominator):
   Average shares outstanding                                171.4          180.5          171.9           181.5
   Dilutive securities:
     Stock incentive and option plans                          4.0            0.5            3.8             1.6
     Employee stock purchase plans                             0.5              -            0.5             0.1
                                                         ---------        -------       --------         -------
   Total assuming conversion                                 175.9          181.0          176.2           183.2
                                                         =========        =======       ========         =======

Basic per share amounts:
     Income before extraordinary item                    $    1.34        $  0.22       $   3.15         $  0.47
     Extraordinary item, net of taxes                            -              -              -           (0.07)
                                                         ---------        -------       --------         -------
     Net income                                          $    1.34        $  0.22       $   3.15         $  0.40
                                                         =========        =======       ========         =======

Diluted per share amounts:
     Income before extraordinary item                    $    1.31        $  0.22       $   3.07         $  0.46
     Extraordinary item, net of taxes                            -              -              -           (0.07)
                                                         ---------        -------       --------         -------
     Net income                                          $    1.31        $  0.22       $   3.07         $  0.39
                                                         =========        =======       ========         =======
</TABLE>
<PAGE>

                                      24

4.   INVENTORY VALUATION. Inventories include costs of materials, labor, and
     plant overhead. The Georgia-Pacific Group uses the dollar value pool method
     for computing LIFO inventories. The major components of inventories were as
     follows:

<TABLE>
<CAPTION>
                                               October 2,                     December 31,
(In millions)                                        1999                           1998
-------------                                  ----------                    ------------
<S>                                            <C>                           <C>
Raw materials                                  $      389                    $       417
Finished goods                                      1,242                            760
Supplies                                              318                            310
LIFO reserve                                         (210)                          (209)
                                               ----------                    -----------
Total inventories                              $    1,739                    $     1,278
                                               ==========                    ===========
</TABLE>

5.   ACQUISITIONS. At the end of the second quarter of 1999, the Georgia-
     Pacific Group, through its wholly owned subsidiary Atlanta Acquisition
     Corp., conducted a tender offer for all of the outstanding shares of common
     stock of Unisource, the largest independent marketer and distributor of
     printing and imaging paper and supplies in North America. Pursuant thereto,
     the Georgia-Pacific Group acquired 90.7% of the then outstanding shares of
     Unisource. On July 6, 1999, Atlanta Acquisition Corp. was merged with and
     into Unisource and by virtue of such merger, shares of Unisource that were
     not tendered to the Georgia-Pacific Group (other than shares held by
     Unisource and the Georgia-Pacific Group and its subsidiaries) were
     converted into the right to receive $12.00 per Unisource share in cash,
     subject to dissenters rights. The Georgia-Pacific Group is purchasing the
     remaining outstanding shares of Unisource as they are delivered to the
     exchange agent for cancellation. Through October 2, 1999, the Georgia-
     Pacific Group paid approximately $828 million for shares of Unisource.

     Unisource's results of operations were consolidated with those of the
     Georgia-Pacific Group beginning July 4, 1999. The Georgia-Pacific Group has
     accounted for this transaction using the purchase method to record a new
     cost basis for assets acquired and liabilities assumed. The allocation of
     the purchase price and acquisition costs to the assets acquired and
     liabilities assumed is preliminary as of October 2, 1999, and is subject to
     change pending finalization of studies of fair value and the finalization
     of management's plans. The Georgia-Pacific Group has begun to assess and
     formulate plans to restructure existing Unisource activities, including the
     consolidation of certain distribution centers, closure of the Unisource
     headquarters facility, termination of redundant headcount and the
     relocation of certain administrative functions. In connection with the
     acquisition of Unisource, the Georgia-Pacific Group assumed liabilities
     totaling approximately $84 million for employee termination and relocation
     costs, and $15 million for facility closure costs. The Georgia-Pacific
     Group has not yet completed its evaluation of Unisource activities;
     accordingly, finalization of the Georgia-Pacific Group's plans may result
     in additional liabilities for termination, relocation or facility closure
     costs that could increase the amount of liabilities assumed in the
     acquisition. The difference between the purchase price and the fair market
     value of the assets acquired and liabilities assumed was recorded as
     goodwill and will be amortized over 40 years. The preliminary allocation of
     the purchase price of the acquisition is summarized as follows:

<TABLE>
<CAPTION>
     (In millions)
     -------------
     <S>                                           <C>
     Current assets                                $  1,061
     Property, plant and equipment                      225
     Other non current assets                            16
     Goodwill                                           767
     Liabilities                                     (1,241)
                                                   --------
     Net cash paid for Unisource                   $    828
                                                   ========
</TABLE>

     The following unaudited pro forma financial data has been prepared assuming
     that the acquisition of Unisource and related financings were consummated
     on January 1, 1998. This pro forma financial data is presented for
     informational purposes and is not necessarily indicative of the operating
     results that would have occurred had the acquisition been consummated on
     January 1, 1998, nor does it include adjustments for expected synergies or
     cost savings. Accordingly, this pro forma data is not necessarily
     indicative of future operations.

<TABLE>
<CAPTION>
                                                                        Nine Months Ended
                                                                    ------------------------
                                                                    October 2,     Sept. 30,
     (In millions, except per share amounts)                           1999          1998
     ---------------------------------------                          ------        -------
     <S>                                                            <C>            <C>
     Net sales                                                      $ 17,364        $15,087
     Income before extraordinary items                              $    626        $   154
     Net income                                                     $    626        $   141
     Basic income before extraordinary
       items per share                                              $   3.64        $  0.85
     Diluted income before extraordinary
       items per share                                              $   3.55        $  0.84
     Basic earnings per share                                       $   3.64        $  0.78
     Diluted earnings per share                                     $   3.55        $  0.77
</TABLE>

     The 1998 pro forma financial data includes non-recurring restructuring and
     asset write-down charges of $202 million ($155 million after tax) taken by
     Unisource in the first nine months of 1998.
<PAGE>

                                      25

     In addition, during the first nine months of 1999, the Georgia-Pacific
     Group completed the acquisition of a packaging plant, four treated lumber
     facilities and a chemical business for a total consideration of
     approximately $69 million in cash. The results of operations of the
     packaging plant and treated lumber facilities were consolidated with those
     of the Georgia-Pacific Group beginning in the second quarter of 1999. The
     operating results of the chemical business were consolidated with those of
     the Georgia-Pacific Group beginning in the third quarter of 1999. The
     Georgia-Pacific Group has accounted for these business combinations using
     the purchase method to record a new cost basis for assets acquired and
     liabilities assumed.

     Effective October 3, 1999, the Georgia-Pacific Group and Chesapeake
     completed a previously announced agreement to create Georgia-Pacific
     Tissue, a joint venture in which the two companies have combined their
     away-from-home tissue businesses. The Georgia-Pacific Group contributed
     substantially all of the assets of its commercial tissue business to the
     joint venture. The Georgia-Pacific Group controls and manages the joint
     venture and owns 95 percent of the equity in joint venture. Chesapeake
     contributed the assets of its Wisconsin Tissue business to the joint
     venture, for which it received a 5 percent equity interest in the joint
     venture and an initial cash distribution of approximately $755 million. The
     results of the Wisconsin Tissue operations will be consolidated with those
     of the Georgia-Pacific Group beginning on October 4, 1999.

     On June 30, 1998, the Georgia-Pacific Group completed its acquisition of
     CeCorr Inc., a leading independent producer of corrugated sheets in the
     United States. On June 30, 1998, the Georgia-Pacific Group paid
     approximately $93 million in cash (net of $2 million of cash acquired) and
     issued approximately 3.2 million shares of Georgia-Pacific Group stock
     valued at approximately $28.94 per share for all the outstanding shares of
     CeCorr. In addition, the Georgia-Pacific Group assumed approximately $92
     million of CeCorr's debt, of which $34 million was owed to the Corporation
     ($58 million net debt assumed). On July 2, 1998, a former owner of CeCorr
     exercised his right to resell to the Georgia-Pacific Group approximately
     2.2 million shares of Georgia-Pacific Group stock issued in the
     transaction. CeCorr's results of operations were consolidated with those of
     the Georgia-Pacific Group beginning July 1, 1998. The Georgia-Pacific Group
     accounted for the CeCorr acquisition using the purchase method to record a
     new cost basis for assets acquired and liabilities assumed.

6.   DEBT. In June 1999, the Corporation renegotiated its accounts receivable
     sale program and increased the amount outstanding under the program from
     $280 million to $750 million. The program expires in April 2000. In
     connection with the acquisition of Unisource, the Corporation retained
     former Unisource agreements to sell up to $150 million of certain
     qualifying U.S. accounts receivable and up to CN$70 million of certain
     eligible Canadian accounts receivable. The U.S. agreement expires in April
     2000 and the Canadian agreement expires in May 2004. At October 2, 1999,
     approximately $947 million was outstanding under the Corporation's and
     Unisource's programs in the aggregate. The receivables outstanding under
     these programs and the corresponding debt are included as current
     receivables and short-term debt, respectively on the accompanying balance
     sheets. The agreements are accounted for as a secured borrowing. As
     collections reduce previously sold interests, new receivables may be sold.

     Also in June 1999, the Board of Directors increased the corporate target
     debt level under which management can purchase shares of Georgia-Pacific
     Group and The Timber Company common stock on the open market from $5.75
     billion to $6.8 billion. In addition, the Board of Directors increased the
     Georgia-Pacific Group's target debt level from $4.75 billion to $5.8
     billion. The Timber Company's target debt level remains at $1.0 billion.

     On July 22, 1999, the Corporation increased the amount of its unsecured
     revolving credit facility from $1.5 billion to $2.0 billion. This unsecured
     revolving credit facility is used for direct borrowings and as support for
     commercial paper and other short-term borrowings. As of October 2, 1999,
     $1,239 million of committed credit was available in excess of all short-
     term borrowings outstanding under or supported by the facility. The
     revolving credit agreement contains certain restrictive covenants,
     including a maximum leverage ratio (funded indebtedness, including senior
     deferrable notes, to earnings before interest, taxes, depreciation and
     amortization ("EBITDA")) of 4.5 to 1.0, which is to be maintained
     throughout the term of the credit agreement. As of October 2, 1999, the
     leverage ratio was 2.3 to 1.0.

     During the second quarter of 1999, the Corporation registered for sale up
     to $2.975 billion of debt and equity securities under a shelf registration
     statement filed with the Securities and Exchange Commission. The
     Corporation registered $1.725 billion under such registration statement
     related to the PEPS Units ($862.5 million of which was received on July 7,
     1999 in exchange for senior deferrable notes, which notes will be converted
     into $862.5 million of equity (Georgia-Pacific Group common stock) upon
     exercise of the purchase contract) (see Note 7). The $862.5 million of cash
     (less expenses) raised in this sale of the PEPS Units was used to pay for
     the acquisition of Unisource.

     In connection with the formation of Georgia-Pacific Tissue (see Note 5),
     Georgia-Pacific Tissue financed the $755 million initial distribution to
     Chesapeake with short-term borrowings from a bank syndicate in October
     1999. In the fourth quarter of 1999, the Corporation expects to sell debt
     under the shelf registration statement filed with the Securities and
     Exchange Commission and loan or contribute the proceeds through the use of
     one or more subsidiaries to Georgia-Pacific Tissue in order for Georgia-
     Pacific Tissue to retire such syndicated bank debt. This short-term
     financing temporarily increased the Corporation's total debt above the $6.8
     billion target debt level for repurchasing stock. The Corporation expects
     to be able to repurchase stock again in the fourth quarter once the debt
     level falls below the target.

7.   SENIOR DEFERRABLE NOTES. On July 7, 1999, the Corporation issued 17,250,000
     of 7.5% PEPS Units for $862.5 million. Each PEPS Unit had an issue price of
     $50 and consists of a contract to purchase shares of Georgia-Pacific Group
     common stock on or prior to August 16, 2002 and a senior deferrable note of
     Georgia-Pacific Group due August 16, 2004. Each purchase contract yields
     interest of 0.35% per year, paid quarterly, on the $50 stated amount of the
     PEPS Unit. Each senior deferrable note yields interest of 7.15% per year,
     paid quarterly, until August 16, 2002. On August 16, 2002, following a
     remarketing of the senior deferrable notes, the interest rate will be reset
     at a rate that will be equal to or greater than 7.15%. The liability
     related to the PEPS Units is classified as Senior deferrable notes on the
     condensed balance sheets and will not be included in the debt amount for
     purposes of determining the corporate and Georgia-Pacific Group debt
     targets.

8.   STOCK SPLIT. On May 4, 1999, the Board of Directors declared a two-for-one
     split of Georgia-Pacific Group's common stock in the form of a special
     dividend to shareholders of record on May 14, 1999. The special dividend
     was paid as one share of Georgia-Pacific Group common stock for each share
     of Georgia-Pacific Group outstanding on June 3, 1999. A total of 95,126,911
     additional shares were issued in conjunction with the stock split. The
     Georgia-Pacific Group's par value of $0.80 remained unchanged. As a result,
     $76 million of stockholders' equity was reclassified from Additional paid-
     in capital to Common stock. All historical share and per share amounts have
     been restated to reflect retroactively the stock split.

9.   SHARE REPURCHASES. During the first nine months of 1999, Georgia-Pacific
     Group purchased on the open market approximately 5,994,000 shares of
     Georgia-Pacific Group common stock at an aggregate price of $247 million
     ($41.22 average per share). Of these repurchased shares, approximately
     5,969,000 shares were held as treasury and 25,000 shares were purchased
     during the first nine months of 1999 and settled after October 2, 1999.

     During the first nine months of 1998, the Georgia-Pacific Group purchased
     in private transactions and on the open market approximately 4,794,000
     shares of Georgia-Pacific Group common stock at an aggregate price of $277
     million ($57.78 average per share). Of these repurchased shares,
     approximately 3,586,000 shares were held as treasury, 284,000 shares were
     purchased during the first nine months of 1998 and settled after September
     30, 1998, and 924,000 shares were cancelled.

10.  COMMITMENTS AND CONTINGENCIES. The Georgia-Pacific Group is subject to
     various legal proceedings and claims that arise in the ordinary course of
     its business. As is the case with other companies in similar industries,
     the Georgia-Pacific Group faces exposure from actual or potential claims
     and legal proceedings involving environmental matters. Liability insurance
     in effect during the last several years provides very limited coverage for
     environmental matters.

     The following sets forth legal proceedings and claims arising out of the
     operations of the Georgia-Pacific Group to which the Corporation is a
     party. The holders of Georgia-Pacific Group stock are shareholders of the
     Corporation and are subject to all of the risks associated with an
     investment in the Corporation, including any legal proceedings and claims
     involving The Timber Company.

     The Corporation is involved in environmental remediation activities at
     approximately 184 sites, both owned by the Corporation and owned by others,
     where it has been notified that it is or may be a potentially responsible
     party under the Comprehensive Environmental Response, Compensation and
     Liability Act or similar state "superfund" laws. Of the known sites in
     which it is involved, the Corporation estimates that approximately 49
     percent are being investigated, approximately 27 percent are being
     remediated and approximately 24 percent are being monitored (an activity
     that occurs after either site investigation or remediation has been
     completed). The ultimate costs to the Corporation for the investigation,
     remediation and monitoring of many of these sites cannot be predicted with
     certainty, due to the often unknown magnitude of the pollution or the
     necessary cleanup, the varying costs of alternative cleanup methods, the
     amount of time necessary to accomplish such cleanups, the evolving nature
     of cleanup technologies and government regulations, and the inability to
     determine the Corporation's share of multiparty cleanups or the extent to
     which contribution will be available from other parties. The Corporation
     has established reserves for environmental remediation costs for these
     sites in amounts that it believes are probable and reasonably estimable.
     Based on analysis of currently available information and previous
     experience with respect to the cleanup of hazardous substances, the
     Corporation believes it is reasonably possible that costs associated with
     these sites may exceed current reserves by amounts that may prove
     insignificant or that could range, in the aggregate, up to approximately
     $56 million. This estimate of the range of reasonably possible additional
     costs is less certain than the estimates upon which reserves are based, and
     in order to establish the upper limit of such range, assumptions least
     favorable to the Corporation among the range of reasonably possible
     outcomes were used. In estimating both its current reserve for
     environmental remediation and the possible range of additional costs, the
     Corporation has not assumed it will bear the entire cost of remediation of
     every site to the exclusion of other known potentially responsible parties
     who may be jointly and severally liable. The ability of other potentially
     responsible parties to participate has been taken into account, based
     generally on the parties' financial condition and probable contribution on
     a per site basis.
<PAGE>

                                      26

     The Corporation and many other companies are defendants in suits brought in
     various courts around the nation by plaintiffs who allege that they have
     suffered personal injury as a result of exposure to asbestos-containing
     products. These suits allege a variety of lung and other diseases based on
     alleged exposure to products previously manufactured by the Corporation. In
     many cases, the plaintiffs are unable to demonstrate that they have
     suffered any compensable loss as a result of such exposure, or that any
     injuries they have incurred in fact resulted from exposure to the
     Corporation's products.

     The Corporation generally settles asbestos cases for amounts it considers
     reasonable given the facts and circumstances of each case. The amounts it
     has paid to date to defend and settle these cases have been substantially
     covered by product liability insurance. The Corporation is currently
     defending claims of approximately 77,000 such plaintiffs as of November 3,
     1999 and anticipates that additional suits will be filed against it over
     the next several years. The Corporation has insurance available in amounts
     that it believes are adequate to cover substantially all of the reasonably
     foreseeable damages and settlement amounts arising out of claims and suits
     currently pending. The Corporation has further insurance coverage available
     for the disposition of suits that may be filed against it in the future,
     but there can be no assurance that the amounts of such insurance will be
     adequate to cover all future claims. The Corporation has established
     reserves for liabilities and legal defense costs it believes are probable
     and reasonably estimable with respect to pending suits and claims, and has
     also established a receivable for expected insurance recoveries.

     On May 6, 1998, suit was filed in state court in Columbus, Ohio, against
     the Corporation and Georgia-Pacific Resins, Inc., a wholly owned subsidiary
     of the Corporation. The lawsuit was filed by eight plaintiffs who seek to
     represent a class of individuals who at any time from 1985 to the present
     lived, worked, resided, owned, frequented or otherwise occupied property
     located within a three-mile radius of the Corporation's resins
     manufacturing operation in Columbus, Ohio. The lawsuit alleges that the
     individual plaintiffs and putative class members have suffered personal
     injuries and/or property damage because of (i) alleged "continuing and
     long-term releases and threats of releases of noxious fumes, odors and
     harmful chemicals, including hazardous substances" from the Corporation's
     operations and/or (ii) a September 10, 1997 explosion at the Columbus
     facility and alleged release of hazardous material resulting from that
     explosion. Prior to the lawsuit, the Corporation had received a number of
     explosion-related claims from nearby residents and businesses. These claims
     were for property damage, personal injury and business interruption and
     were being reviewed and adjusted on a case-by-case basis. The Corporation
     has denied the material allegations of the lawsuit. While it is premature
     to evaluate the claims asserted in the lawsuit, the Corporation believes it
     has meritorious defenses.

     In May 1997, the Corporation and nine other companies were named as
     defendants in a suit brought by the Attorney General of the State of
     Florida alleging that they engaged in conspiracy to fix the prices of
     sanitary commercial paper products, such as towels and napkins, in
     violation of federal and state laws. Approximately 45 similar suits have
     been filed by private plaintiffs in federal courts in California, Florida,
     Georgia and Wisconsin, and in the state courts of California, Wisconsin,
     Minnesota and Tennessee. On July 28, 1999, the Corporation and the Attorney
     General of the State of Florida entered into a Settlement Agreement
     pursuant to which the State will dismiss its claims against the
     Corporation. The Settlement Agreement states that the Attorney General is
     dismissing its claims in the public interest and consistent with its
     responsibilities. The Agreement also provides that the Corporation
     continues to deny that there is any evidence that it engaged in the alleged
     price fixing conspiracy. In addition, the Corporation agreed to donate
     certain real property to the State of Florida, Board of Trustees of the
     Internal Improvement Trust. The value of this real property is not material
     to the results of operations or financial position of the Corporation.

     In addition, as part of the formation of the joint venture with Chesapeake
     described in Note 7, the Corporation and Wisconsin Tissue assigned, and
     Georgia-Pacific Tissue agreed to assume, the liabilities of both companies
     in connection with these cases. The Corporation and Wisconsin Tissue have
     denied that they have engaged in any of the illegal conduct alleged in
     these cases and intend to defend themselves vigorously.

     Although the ultimate outcome of these environmental matters and legal
     proceedings cannot be determined with certainty, based on presently
     available information, management believes that adequate reserves have been
     established for probable losses with respect thereto. Management further
     believes that the ultimate outcome of such environmental matters and legal
     proceedings could be material to operating results in any given quarter or
     year but will not have a material adverse effect on the long-term results
     of operations, liquidity or consolidated financial position of the
     Corporation.
<PAGE>

                                       27


11.  OPERATING SEGMENT INFORMATION. Georgia-Pacific Group has five reportable
     operating segments: building products, building products distribution,
     containerboard and packaging, pulp and paper, and paper distribution. The
     following represents selected operating data for each reportable segment
     for the three and nine months ended October 2, 1999 and September 30, 1998.

COMBINED SELECTED OPERATING SEGMENT DATA (Unaudited)
Georgia-Pacific Group

<TABLE>
<CAPTION>
                                                                          Three Months Ended            Three Months Ended
(In millions)                                                              October 2, 1999                Sept. 30, 1998
-------------                                                             ------------------            ------------------
<S>                                                                       <C>        <C>                <C>        <C>
NET SALES TO UNAFFILIATED CUSTOMERS
Building products                                                         $  1,015        18%           $    866        26%
Building products distribution                                               1,346        25               1,113        33
Containerboard and packaging                                                   612        11                 530        16
Pulp and paper                                                                 809        15                 858        25
Paper distribution                                                           1,698        31                   -         -
Other                                                                            3         -                   1         -
                                                                          --------   -------            --------   -------
Total net sales to
  unaffiliated customers                                                  $  5,483       100%           $  3,368       100%
                                                                          --------   -------            --------   -------
INTERSEGMENT SALES
Building products                                                         $    591                      $    617
Building products distribution                                                   5                             2
Containerboard and packaging                                                    15                            15
Pulp and paper                                                                 122                             8
Paper distribution                                                               2                             -
Other*                                                                        (735)                         (642)
                                                                          --------                      --------
Total intersegment sales                                                  $      -                             -
                                                                          ========                      ========
TOTAL NET SALES
Building products                                                         $  1,606        29%           $  1,483        44%
Building products distribution                                               1,351        25               1,115        33
Containerboard and packaging                                                   627        11                 545        16
Pulp and paper                                                                 931        17                 866        26
Paper distribution                                                           1,700        31                   -         -

Other*                                                                        (732)      (13)               (641)      (19)
                                                                          --------   -------            --------   -------
Total net sales                                                           $  5,483       100%           $  3,368       100%
                                                                          ========   =======            ========   =======
OPERATING PROFITS
Building products                                                         $    333        68%           $    185       108%
Building products distribution                                                   4         1                  17        10
Containerboard and packaging                                                    88        18                  33        19
Pulp and paper                                                                  81        17                  18        10
Paper distribution                                                              43         9                   -         -
Other                                                                         (63)       (13)                (82)      (47)
                                                                          --------   -------            --------   -------
Total operating profits                                                        486       100%                171       100%
                                                                                     =======                       =======
Interest expense                                                              (116)                          (96)
Provision for income taxes                                                    (140)                          (36)
Extraordinary item, net of taxes                                                 -                             -
                                                                          --------                      --------
Net income                                                                $    230                      $     39
                                                                          ========                      ========
</TABLE>
<PAGE>

                                       28

COMBINED SELECTED OPERATING SEGMENT DATA (Unaudited)
Georgia-Pacific Group

<TABLE>
<CAPTION>
                                                                          Nine Months Ended             Nine Months Ended
(In millions)                                                              October 2, 1999                Sept. 30, 1998
-------------                                                           ----------------------       ------------------------
<S>                                                                     <C>            <C>           <C>             <C>
NET SALES TO UNAFFILIATED CUSTOMERS
Building products                                                       $   2,953           23%      $   2,451             25%
Building products distribution                                              3,761           30           3,208             33
Containerboard and packaging                                                1,708           14           1,515             15
Pulp and paper                                                              2,522           20           2,664             27
Paper distribution                                                          1,698           13               -              -
Other                                                                           2            -               2              -
                                                                        ---------      -------       ---------       --------
Total net sales to Unaffiliated customers                               $  12,644          100%      $   9,840            100%
                                                                        =========      =======       =========       ========
INTERSEGMENT SALES
Building products                                                       $   1,765                    $   1,848
Building products distribution                                                  9                            6
Containerboard and packaging                                                   44                           45
Pulp and paper                                                                135                           24
Paper distribution                                                              2                            -
Other*                                                                     (1,955)                      (1,923)
                                                                        ---------                    ---------
Total intersegment sales                                                $       -                    $       -
                                                                        =========                    =========
TOTAL NET SALES
Building products                                                       $   4,718           37%      $   4,299             44%
Building products distribution                                              3,770           30           3,214             33
Containerboard and packaging                                                1,752           14           1,560             16
Pulp and paper                                                              2,657           21           2,688             27
Paper distribution                                                          1,700           14               -              -
Other*                                                                    (1,953)          (16)         (1,921)           (20)
                                                                        ---------      -------       ---------       --------
Total net sales                                                         $  12,644          100%      $   9,840            100%
                                                                        =========      =======       =========       ========
OPERATING PROFITS
Building products                                                       $     945           79%      $     408             91%
Building products distribution                                                 57            5               -              -
Containerboard and packaging                                                  209           18              97             22
Pulp and paper                                                                134           11             143             32
Paper distribution                                                             43            4               -              -
Other                                                                        (199)         (17)           (201)           (45)
                                                                        ---------      -------       ---------       --------
Total operating profits                                                     1,189          100%            447            100%
                                                                                       =======                       ========
Interest expense                                                             (298)                        (286)
Provision for income taxes                                                   (350)                         (76)
Extraordinary item, net of taxes                                                -                          (13)
                                                                        ---------                    ---------
Net income                                                              $     541                    $      72
                                                                        =========                    =========
</TABLE>

*Includes elimination of intersegment sales.
<PAGE>

                                       29

Item 2.   Management's Discussion and Analysis of Financial Condition and
Results of Operations

THIRD QUARTER 1999 COMPARED WITH THIRD QUARTER 1998

The Georgia-Pacific Group reported net sales of approximately $5.5 billion for
the third quarter of 1999 and $3.4 billion for the third quarter of 1998.
Included in 1999 are $1.7 billion of net sales from the recently acquired
Unisource operations. Net income for the 1999 third quarter was $230 million
compared with $39 million in 1998.

The remaining discussion refers to the "Combined Selected Operating Segment
Data" table (included in Note 11 to the Combined Financial Statements).

The Georgia-Pacific Group's building products segment reported net sales of $1.6
billion for the third quarter of 1999 compared with $1.5 billion in 1998.
Operating profits were $333 million in 1999 compared with $185 million in 1998.
Return on sales was 21 percent and 12 percent for the three months ended October
2, 1999 and September 30, 1998, respectively. The higher quarter-over-quarter
profits resulted principally from increases in average selling prices for most
of this segment's products. Lumber selling prices were up 15 percent from the
prior year's quarter; gypsum selling prices increased 25 percent; plywood
selling prices increased 23 percent; and oriented strand board selling prices
increased 11 percent. The year-over-year improvement in selling prices was
primarily a result of continued strength in home building activity driven by a
strong U.S. economy. Selling prices for plywood, oriented strand board and
lumber peaked in July of 1999 and declined sharply during the last two months of
the third quarter. The Georgia-Pacific Group expects selling prices for plywood,
oriented strand board and lumber to continue to decline through the remainder of
the year, while selling prices for gypsum are expected to remain strong through
the fourth quarter of 1999.

The Georgia-Pacific Group's building products distribution segment reported net
sales of $1.4 billion for the third quarter of 1999 compared with $1.1 billion
in 1998. Operating profits for the distribution segment were $4 million in the
third quarter of 1999 compared with $17 million in the third quarter of 1998.
The 1998 results included one-time gains, principally on sales of assets related
to a restructuring plan, of approximately $6 million. The decrease in the
distribution segment operating profits in 1999 reflects lower margins related
primarily to the sale of lumber, structural panels and oriented strand board
inventories at prices below the segment's cost.

The Georgia-Pacific Group's containerboard and packaging segment reported net
sales of $627 million and operating profits of $88 million in the third quarter
of 1999, compared with net sales of $545 million and operating profits of $33
million in the third quarter of 1998. Return on sales was 14 percent and 6
percent in the third quarter of 1999 and 1998, respectively. The improvement in
earnings was attributable to higher selling prices and volume, offset somewhat
by higher secondary fiber costs. Containerboard and packaging selling prices
increased steadily over the quarter, ending the quarter at higher levels than a
year ago. The Georgia-Pacific Group expects continued selling price improvement
in the containerboard and packaging segment through the remainder of 1999.

The Georgia-Pacific Group's pulp and paper segment reported net sales of $931
million and operating profits of $81 million in the 1999 third quarter. For the
same period in 1998, the segment reported net sales of $866 million and
operating profits of $18 million. Return on sales was 9 percent and 2 percent in
the third quarter of 1999 and 1998, respectively. During the third quarter of
1998, the Georgia-Pacific Group closed its hardwood pulp operations at its Port
Hudson, Louisiana and Ashdown, Arkansas facilities, resulting in a one-time,
before tax charge of $15 million. Excluding this one-time charge, return on
sales in the third quarter of 1998 was 4 percent. Compared with a year ago, the
Georgia-Pacific Group has maintained lower levels of inventory in 1999 for most
pulp and paper products. Selling prices and demand for pulp steadily increased
during the third quarter of 1999 and ended the period at levels higher than the
prior year. Despite higher sales volume, operating results for the tissue
business were lower than in the 1998 third quarter due primarily to lower
selling prices. Communication papers 1999 operating results were higher than the
third quarter of 1998, due principally to higher demand. Although steadily
improving during the third quarter of 1999, average selling prices for
communication papers were consistent with the third quarter 1998. Average
communication papers selling prices for the third quarter of 1999 were above
those of the 1999 second quarter. The Georgia-Pacific Group expects continued
pricing improvements for products in this segment through the remainder of the
year.

The Georgia-Pacific Group's paper distribution segment reported net sales of
$1.7 billion and operating profits of $43 million for the third quarter of 1999,
which represent the operating results of Unisource since its acquisition by the
Corporation at the end of the second quarter of 1999. Unisource sells and
distributes high quality printing, writing and copying papers to printers,
publishers, business forms manufacturers and direct mail firms, as well as
corporate and retail copy centers, in-plant print facilities, government
institutions and other paper-intensive businesses. Unisource also sells and
distributes a broad range of packaging and maintenance supplies, equipment and
services, principally to manufacturers, food processors and retail and other
institutional customers. Products distributed include disposable paper and
plastic products; maintenance supplies and equipment such as towels, tissues,
can liners and sanitation chemicals; packaging supplies and equipment such as
carton erectors, baggers and filers as well as films, shrinkwrap and cushioning
materials; shipping room supplies such as corrugated boxes, cushioning
materials, tapes and labeling; and food service supplies such as films and food
wraps, food containers and disposable apparel for food serviced workers.
Operating results for the paper distribution segment have historically been
seasonal, with the strongest operating results occurring in the third quarter.

The operating loss in the "Other" nonreportable segment, which includes some
miscellaneous businesses, certain goodwill amortization, unallocated corporate
operating expenses and the elimination of profit on intersegment sales,
decreased by $19 million to a loss of $63 million in 1999 from a loss of $82
million in the 1998 third quarter. This decrease is primarily the result of
income from insurance proceeds recorded in the 1999 third quarter and the
write-off of goodwill in the third quarter of 1998 related to the closure of the
hardwood pulp operations at the Ashdown, Arkansas facilities.

Interest expense increased $20 million to $116 million in the third quarter of
1999 compared with $96 million in the third quarter of 1998, principally as a
result of higher debt levels and the issuance of the senior deferrable notes.

The effective income tax rate was 38 percent and 48 percent for the three months
ended October 2, 1999 and September 30, 1998, respectively. The effective tax
rate in 1999 and 1998 was higher than the statutory tax rate primarily because
of nondeductible goodwill amortization expense. The reduction in the 1999
effective tax rate resulted principally from higher pre-tax income and an
increased utilization of foreign sales corporation tax benefits.
<PAGE>

                                       30

YEAR-TO-DATE THIRD QUARTER 1999 COMPARED WITH YEAR-TO-DATE THIRD QUARTER 1998

The Georgia-Pacific Group reported net sales of $12.6 billion, including $1.7
billion of net sales from the recently acquired Unisource operations, and net
income of $541 million for the nine months ended October 2, 1999.
Georgia-Pacific Group reported net sales of $9.8 billion and net income of $72
million for the nine months ended September 30, 1998. The 1998 results included
an extraordinary, after-tax loss of $13 million for the early retirement of
debt.

The remaining discussion refers to the "Combined Selected Operating Segment
Data" table (included in Note 11 to the Combined Financial Statements).

The Georgia-Pacific Group's building products segment reported net sales of $4.7
billion and operating profits of $945 million for the nine months ended October
2, 1999, compared with net sales of $4.3 billion and operating profits of $408
million in 1998. Return on sales increased to 20 percent in 1999 from 9 percent
a year ago, resulting primarily from higher selling prices. Average selling
prices for plywood, oriented strand board, lumber and gypsum increased by 24
percent, 28 percent, 7 percent, and 20 percent, respectively, in the first nine
months of 1999. Selling prices for plywood, oriented strand board and lumber
peaked in July of 1999 and declined sharply during the last two months of the
third quarter. The Georgia-Pacific Group expects selling prices for plywood,
oriented strand board and lumber to continue to decline through the remainder of
the year, while selling prices for gypsum are expected to remain strong through
the fourth quarter of 1999.

The building products distribution division reported net sales of $3.8 billion
and operating profits of $57 million for the nine months ended October 2, 1999,
compared with net sales of $3.2 billion and break even operating profits in
1998. The 1998 results included one-time gains, principally on sales of assets
related to the restructuring plan, of approximately $19 million. The increase in
profitability is due primarily to higher margins in commodity and specialty
products and lower operating cost.

The Georgia-Pacific Group's containerboard and packaging segment reported net
sales of $1.8 billion and operating profits of $209 million in the first nine
months of 1999 compared with net sales of $1.6 billion and operating profits of
$97 million in the same 1998 period. Return on sales increased to 12 percent
from 6 percent in 1998. Although year-to-date average prices are comparable to
year ago levels, pricing has increased throughout 1999 and, during the third
quarter of 1999, was above year ago levels. Cost decreases in wood and energy as
well as higher sales volume contributed to the increased profit margins. The
Georgia-Pacific Group expects continued price improvement in the containerboard
and packaging segment through the remainder of 1999.

The Georgia-Pacific Group's pulp and paper segment reported net sales of $2.7
billion and operating profits of $134 million for the nine-month period ended
October 2, 1999, compared with net sales of $2.7 billion and operating profits
of $143 million in 1998. Return on sales were 5 percent for the first nine
months of both 1999 and 1998. Excluding the one-time, $15 million charge in the
third quarter of 1998 for closure of two hardwood market pulp operations, return
on sales in 1998 was 6 percent. The decline in profitability was principally due
to a decrease in average prices for most of the Georgia-Pacific Group's pulp and
paper products. Average selling prices in the first nine months of 1999 for
pulp, communication papers and tissue were approximately 2 percent, 8 percent
and 4 percent, respectively, below selling prices in the same 1998 period.
Prices for most of the Georgia-Pacific Group's pulp and communication papers
products have increased steadily throughout the first nine months of 1999 and
the Georgia-Pacific Group anticipates this upward trend to continue through the
remainder of 1999. During the first nine months of 1999, the Georgia-Pacific
Group incurred market-related downtime at its pulp and paper mills and reduced
pulp production by 242,000 tons and communication papers production by 14,000
tons. In the same 1998 period, the Georgia-Pacific Group incurred market-related
downtime at its pulp and paper mills and reduced pulp and communication papers
production by 167,000 tons and 53,000 tons, respectively.

The Georgia-Pacific Group's paper distribution segment reported net sales of
$1.7 billion and operating profits of $43 million for the third quarter of 1999,
which represent the operating results of Unisource since its acquisition by the
Corporation at the end of the second quarter of 1999. Operating results for the
paper distribution segment have historically been seasonal, with the strongest
operating results occurring in the third quarter.

The operating loss in the "Other" nonreportable segment, which includes some
miscellaneous businesses, certain goodwill amortization, unallocated corporate
operating expenses and the elimination of profit on intersegment sales,
decreased by $2 million to a loss of $199 million in the first nine months of
1999 from a loss of $201 million in the first nine months of 1998.

Interest expense increased $12 million to $298 million in the first nine months
of 1999, compared with $286 million in the first nine months of 1998, primarily
as a result of higher debt levels and the issuance of the senior deferrable
notes, slightly offset by a decrease in average interest rates.

The effective income tax rate for the first nine months of 1999 and 1998 was 39
percent and 47 percent for the three months ended October 2, 1999 and September
30, 1998, respectively. The effective tax rate in 1999 and 1998 was higher than
the statutory tax rate primarily because of nondeductible goodwill amortization
expense. The reduction in the 1999 effective tax rate resulted principally from
higher pre-tax income and an increased utilization of foreign sales corporation
tax benefits.

LIQUIDITY AND CAPITAL RESOURCES

OPERATING ACTIVITIES. The Georgia-Pacific Group generated cash from operations
of $1.0 billion for the nine months ended October 2, 1999 compared with $1.1
billion a year ago. The decrease in cash provided from operating activities is
primarily a result of higher working capital levels, principally accounts
receivable associated with the increase in net sales; offset somewhat by strong
demand and improved prices for several building products items.

INVESTING ACTIVITIES. Capital expenditures for property, plant and equipment for
the nine months ended October 2, 1999 were $410 million, which included $159
million in the building products segment, $8 million in the building products
distribution segment, $50 million in the containerboard and packaging segment,
$159 million in the pulp and paper segment, $7 million in the paper distribution
segment, and $27 million of other and corporate. The Georgia-Pacific Group
expects to make capital expenditures for property, plant and equipment of
approximately $700 million in 1999, excluding the cost of any acquisitions.

Cash paid for timber and timber contracts in the first nine months of 1999 and
1998 was $274 million and $370 million, respectively.

At the end of the second quarter of 1999, the Georgia-Pacific Group, through its
wholly owned subsidiary Atlanta Acquisition Corp., conducted a tender offer for
all of the outstanding shares of common stock of Unisource, the largest
independent marketer and distributor of printing and imaging paper and supplies
in North America. Pursuant thereto, the Georgia-Pacific Group acquired 90.7% of
the then outstanding shares of Unisource. On July 6, 1999, Atlanta Acquisition
Corp. was merged with and into Unisource and by virtue of such merger, shares of
Unisource that were not tendered to the Georgia-Pacific Group (other than shares
held by Unisource and the Georgia-Pacific Group and its subsidiaries) were
converted into the right to receive $12.00 per Unisource share in cash, subject
to dissenters rights. The Georgia-Pacific Group is purchasing the remaining
outstanding shares of Unisource as they are delivered to the exchange agent.
Through October 2, 1999, the Georgia-Pacific Group paid approximately $828
million for shares of Unisource. Unisource's results of operations were
consolidated with those of the Georgia-Pacific Group beginning July 4, 1999.

During the first nine months of 1999, the Georgia-Pacific Group also completed
the acquisition of a packaging plant, four treated lumber facilities and a
chemical business for a total consideration of approximately $69 million in
cash.

On June 30, 1998, the Georgia-Pacific Group completed its acquisition of CeCorr,
a leading independent producer of corrugated sheets in the United States. On
June 30, 1998, the Georgia-Pacific Group paid approximately $93 million in cash
(net of $2 million of cash acquired) and issued approximately 3.2 million shares
of Georgia-Pacific Group stock valued at approximately $28.94 per share for all
the outstanding shares of CeCorr. In addition, the Georgia-Pacific Group assumed
approximately $92 million of CeCorr's debt, of which $34 million was owed to the
Georgia-Pacific Group ($58 million net debt assumed). On July 2, 1998, a former
owner of CeCorr exercised his right to resell to the Georgia-Pacific Group
approximately 2.2 million shares of Georgia-Pacific Group stock issued in the
transaction. CeCorr's results of operations were consolidated with those of the
Georgia-Pacific Group beginning July 1, 1998.

Effective October 3, 1999, the Georgia-Pacific Group and Chesapeake completed a
previously announced agreement to create Georgia-Pacific Tissue, a joint venture
in which the two companies have combined their away-from-home tissue businesses.
The Georgia-Pacific Group contributed substantially all of the assets of its
commercial tissue business to the joint venture. The Georgia-Pacific Group
controls and manages the joint venture and owns 95 percent of the equity in
joint venture. Chesapeake contributed the assets of its Wisconsin Tissue
business to the joint venture, for which it received a 5 percent equity interest
in the joint venture and an initial cash distribution of approximately $755
million.

On November 1, 1999, The Timber Company signed a definitive agreement to sell
approximately 194,000 acres of its redwood and Douglas fir timberlands in
northern California for a purchase price of approximately $397 million. The sale
is expected to close by the end of the year, subject to the buyer obtaining
required financing and approval by the Corporation's board of directors. The
Fort Bragg sawmill has a wood supply agreement with The Timber Company through
2000 that was transferred as part of the sale agreement.

In 1999, the Georgia-Pacific Group expects its cash flow from operations,
together with proceeds from any asset sales and available financing sources, to
be sufficient to fund planned capital investments, pay dividends and make
scheduled debt payments.

FINANCING ACTIVITIES. The Corporation's total debt, excluding senior deferrable
notes, increased by $614 million to $6,165 million at October 2, 1999 from
$5,551 million at December 31, 1998. At October 2, 1999 and December 31, 1998,
$5,198 million and $4,568 million, respectively, of such total debt was
Georgia-Pacific Group's debt and $967 million and $983 million, respectively,
was The Timber Company's debt.

In June 1999, the Corporation renegotiated its accounts receivable sale program
and increased the amount outstanding under the program from $280 million to $750
million. The program expires in April 2000. In connection with the acquisition
of Unisource, the Corporation retained former Unisource agreements to sell up to
$150 million of certain qualifying U.S. accounts receivable and up to CN$70
million of certain eligible Canadian accounts receivable. The U.S. agreement
expires in April 2000 and the Canadian agreement expires in May 2004. At October
2, 1999, approximately $947 million was outstanding under the Corporation's and
Unisource's programs in the aggregate. The receivables outstanding under these
programs and the corresponding debt are included as current receivables and
short-term debt, respectively on the accompanying balance sheets. The agreements
are accounted for as a secured borrowing. As collections reduce previously sold
interests, new receivables may be sold.

Also in June 1999, the Board of Directors increased the corporate target debt
level under which management can purchase shares of Georgia-Pacific Group and
The Timber Company common stock on the open market from $5.75 billion to $6.8
billion. In addition, the Board of Directors increased the Georgia-Pacific
Group's target debt level from $4.75 billion to $5.8 billion. The Timber
Company's target debt level remains at $1.0 billion.

On July 22, 1999, the Corporation increased the amount of its unsecured
revolving credit facility from $1.5 billion to $2.0 billion. This unsecured
revolving credit facility is used for direct borrowings and as support for
commercial paper and other short-term borrowings. As of October 2, 1999, $1,239
million of committed credit was available in excess of all short-term borrowings
outstanding under or supported by the facility. The revolving credit agreement
contains certain restrictive covenants, including a maximum leverage ratio
(funded indebtedness, including senior deferrable notes, to earnings before
interest, taxes, depreciation and amortization ("EBITDA")) of 4.5 to 1.0, which
is to be maintained throughout the term of the credit agreement. As of October
2, 1999, the leverage ratio was 2.3 to 1.0.

On July 7, 1999, the Corporation issued 17,250,000 of 7.5% PEPS Units for $862.5
million. Each PEPS Unit had an issue price of $50 and consists of a contract to
purchase shares of Georgia-Pacific Group common stock on or prior to August 16,
2002 and a senior deferrable note of Georgia-Pacific Group due August 16, 2004.
Each purchase contract yields interest of 0.35% per year, paid quarterly, on the
$50 stated amount of the PEPS Unit. Each senior deferrable note yields interest
of 7.15% per year, paid quarterly, until August 16, 2002. On August 16, 2002,
following a remarketing of the senior deferrable notes, the interest rate will
be reset at a rate that will be equal to or greater than 7.15%. The liability
related to the PEPS Units is classified as Senior deferrable notes in the
combined balance sheets and will not be included in the debt amount for purposes
of determining the corporate and Georgia-Pacific Group debt targets.

During the first nine months of 1999, approximately $79 million of fixed and
floating rate industrial revenue bonds were replaced, of which $66 million were
refunded by fixed rate instruments and $13 million were refunded by variable
rate instruments.

In connection with the acquisition of Unisource, the Corporation retained former
Unisource industrial revenue bonds in the amount of $9 million and capital
leases in the amount of $12 million. These amounts are included in the
Corporation's total debt.

As of October 2, 1999, the Corporation had registered for sale up to $2.975
billion of debt and equity securities under a shelf registration statement filed
with the Securities and Exchange Commission. The Corporation registered $1.725
billion under such registration statement related to the PEPS Units ($862.5
million of which was received on July 7, 1999 in exchange for senior deferrable
notes, which notes will be converted into $862.5 million of equity
(Georgia-Pacific Group common stock) upon exercise of the purchase contracts.
The $862.5 million of cash (less expenses) raised in the sale of the PEPS Units
was used to pay for the acquisition of Unisource. Proceeds from the issuance of
securities under this registration statement will be used for general corporate
purposes, including the reduction of short-term debt, acquisitions, investments
in, or extension of credit to, the Corporation's subsidiaries and the
acquisition of real property.

In connection with the formation of Georgia-Pacific Tissue, Georgia-Pacific
Tissue financed the $755 million initial distribution to Chesapeake with
short-term borrowings from a bank syndicate in October 1999. In the fourth
quarter of 1999, the Corporation expects to sell debt under the shelf
registration statement filed with the Securities and Exchange Commission and
loan or contribute the proceeds through the use of one or more subsidiaries to
Georgia-Pacific Tissue in order for Georgia-Pacific Tissue to retire such
syndicated bank debt. This short-term financing temporarily increased the
Corporation's total debt above the $6.8 billion target debt level for
repurchasing stock. The Corporation expects to be able to repurchase stock again
in the fourth quarter once the debt level falls below the target.

On October 7, 1999, approximately $10 million of floating rate industrial
revenue bonds, due December 1, 2025, were replaced by $10 million fixed rate
industrial revenue bonds issued on October 1, 1999.
<PAGE>

                                       31

The Corporation's senior management establishes the parameters of the
Corporation's financial risk, which have been approved by the Board of
Directors. Hedging interest rate exposure through the use of swaps and options
and hedging foreign exchange exposure through the use of forward contracts are
specifically contemplated to manage risk in keeping with the management policy.
Derivative instruments, such as swaps, forwards, options or futures, which are
based directly or indirectly upon interest rates, currencies, equities and
commodities, may be used by the Corporation to manage and reduce the risk
inherent in price, currency and interest rate fluctuations.

The Corporation does not utilize derivatives for speculative purposes.
Derivatives are transaction-specific so that a specific debt instrument,
contract or invoice determines the amount, maturity and other specifics of the
hedge. Counterparty risk is limited to institutions with long-term debt ratings
of A or better.

The table below presents principal (or notional) amounts and related weighted
average interest rates by year of expected maturity for the Corporation's debt
obligations as of October 2, 1999. For obligations with variable interest rates,
the table sets forth payout amounts based on current rates and does not attempt
to project future interest rates.

Georgia-Pacific Corporation and Subsidiaries

<TABLE>
<CAPTION>
(In millions)                                               1999              2000              2001              2002
-------------                                              ------            ------            ------            ------
<S>                                                        <C>               <C>               <C>               <C>
Debt
Commercial paper and other short-term notes                      -                 -                 -                 -
   Average interest rates                                        -                 -                 -                 -
Notes and debentures                                             -                 -                 -            $  300
   Average interest rates                                        -                 -                 -                10%
Revenue bonds                                              $    10           $    24            $    6            $   74
   Average interest rates                                      5.3%              4.2%              3.9%              3.8%
Other loans                                                      -           $    13                 -                 -
   Average interest rates                                        -               8.0%                -                 -
Accounts receivable sale program                                 -                 -                 -                 -
   Average interest rates                                        -                 -                 -                 -
Senior deferrable notes                                          -                 -                 -                 -
   Average interest rates                                        -                 -                 -                 -
Notional principal amount of interest rate exchange
agreements                                                 $   100           $   177                 -            $  131
   Average interest rate paid (fixed)                          6.4%              7.7%                -               5.9%
   Average interest rate received (variable)                   5.5%              5.5%                -               5.4%
</TABLE>

Georgia-Pacific Corporation and Subsidiaries

<TABLE>
<CAPTION>
                                                                                                             Fair value July
(In millions)                                               2003           Thereafter           Total            3, 1999
-------------                                              -------        -------------        --------      ---------------
<S>                                                        <C>            <C>                  <C>           <C>
Debt
Commercial paper and other short-term notes                      -          $       761         $  761         $          761
   Average interest rates                                        -                  5.7%           5.7%                   5.7%
Notes and debentures                                        $  300          $     2,900         $3,500         $        3,490
   Average interest rates                                      5.7%                 8.6%           8.4%                   8.0%
Revenue bonds                                                    -          $       550         $  664         $          573
   Average interest rates                                        -                  5.3%           5.1%                   8.0%
Other loans                                                 $   14                    -         $   27         $           27
    Average interest rates                                     5.7%                   -            6.8%                   7.3%
Accounts receivable sale program                                 -          $       947         $  947         $          947
   Average interest rates                                        -                  5.6%           5.6%                   5.6%
Senior deferrable notes                                          -          $       863         $  863         $          870
   Average interest rates                                        -                 7.15%          7.15%                   7.3%
Notional principal amount of interest rate exchange
agreements                                                  $  300                    -         $  708         $            4
   Average interest rate paid (fixed)                          5.9%                   -            6.4%                   6.4%
   Average interest rate received (variable)                   5.9%                   -            5.7%                   5.7%
</TABLE>

The Corporation has the intent and ability to refinance commercial paper, other
short-term notes and the accounts receivable sale program as they mature. The
Corporation intends to re-market the senior deferrable notes on or before August
16, 2002 at an interest rate that will be equal to or greater than 7.15%; thus
extending the maturity of the senior deferrable notes to August 16, 2004.
Therefore, maturities of these obligations are reflected as cash flows expected
to be made after 2003. The fair value of interest rate exchange agreements
exclude amounts used to determine the fair value of related notes and
debentures.

At October 2, 1999, the Corporation's weighted average interest rate on its
debt, excluding the senior deferrable notes, was 7.0% including the accounts
receivable sale program and outstanding interest rate exchange agreements. At
October 2, 1999, these interest rate exchange agreements effectively converted
approximately $708 million of floating rate obligations with a weighted average
interest rate of 5.7% to fixed rate obligations with an average effective
interest rate of 6.4%. These agreements have a weighted average maturity of
approximately 2.5 years. As of October 2, 1999, the Corporation's total floating
rate debt, including the accounts receivable sale program, exceeded related
interest rate exchange agreements by $1.6 billion.

The Corporation also enters into foreign currency exchange agreements and
commodity futures and swaps, the amounts of which were not material to the
consolidated financial position of the Corporation at October 2, 1999.

During the first nine months of 1999, the Georgia-Pacific Group purchased on the
open market approximately 5,994,000 shares of Georgia-Pacific Group common stock
at an aggregate price of $247 million ($41.21 average per share). Of these
repurchased shares, approximately 5,969,000 shares were held as treasury, 25,000
shares were purchased during the first nine months of 1998 and settled after
October 2, 1999. During the first nine months of 1998, the Georgia-Pacific Group
purchased in private transactions on the open market approximately 4,794,000
shares of Georgia-Pacific Group common stock at an aggregate price of $277
million ($57.78 average per share). Of these repurchased shares, approximately
3,586,000 shares were held as treasury and 284,000 shares were purchased during
the first nine months of 1998 and settled after September 30, 1998, and 924,000
shares were cancelled.
<PAGE>

                                       32

Subsequent to October 2, 1999 through November 3, 1999, the Georgia-Pacific
Group purchased on the open market approximately 178,000 shares of the
Georgia-Pacific Group stock at an aggregate price of $7 million ($38.12 average
per share). The Georgia-Pacific Group expects to repurchase shares of the
Georgia-Pacific Group stock throughout 1999 as long as debt levels are below the
established thresholds.

During the first nine months of 1999, the Georgia-Pacific Group received $106
million from the exercise of Georgia-Pacific Group common stock options.

During the first nine months of 1999 and 1998, the Georgia-Pacific Group was
paid $65 million and $68 million, respectively, in dividends. On May 4, 1999,
the Board of Directors declared a two-for-one split of Georgia-Pacific Group's
common stock in the form of a special dividend to shareholders of record on May
14, 1999. The special dividend was paid as one share of Georgia-Pacific Group
common stock for each share of Georgia-Pacific Group outstanding on June 3,
1999. A total of 95,126,911 additional shares were issued in conjunction with
the stock split. The Georgia-Pacific Group's par value of $0.80 remained
unchanged. As a result, $76 million of stockholders' equity was reclassified
from Additional paid-in capital to Common stock. All historical share and per
share amounts have been restated to reflect retroactively the stock split.

OTHER. In July 1999, ("FASB") issued SFAS No. 133, providing for a one year
delay of the effective date of SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133" establishes accounting and
reporting standards for derivative instrument and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities on the balance sheet and measure those instruments at fair value.
Georgia-Pacific Group will be required to adopt SFAS No. 133 in 2001. Management
is evaluating the effect of this statement on Georgia-Pacific's derivative
instruments: primarily interest rate swaps, foreign currency forward contracts
and long-term purchase commitments. The impact of adjustments to fair value is
not expected to be material to the Group's consolidated financial position.

The Georgia-Pacific Group has worked to resolve the effects of the Year 2000
problem on its information systems, the operating systems used in its
manufacturing operations as well as its facilities systems. The Year 2000
problem, which is common to most businesses, concerns the inability of such
systems to properly recognize and process dates and date-sensitive information
on and beyond January 1, 2000. In 1996, the Georgia-Pacific Group began a
company wide assessment of the vulnerability of its systems to the Year 2000
problem. Based on such assessment, the Georgia-Pacific Group developed a Year
2000 plan, under which all key systems were tested, and noncompliant software or
technology was modified or replaced. The Georgia-Pacific Group is continuing to
survey and assess the Year 2000 readiness status and compatibility of customers'
and suppliers' systems and processes that interface with the Georgia-Pacific
Group's systems or could otherwise impact the Georgia-Pacific Group's
operations.

The Georgia-Pacific Group completed the necessary revisions and unit testing to
most systems and processes in 1998 with the few remaining systems completed in
March 1999. Full integration testing and verification of such systems and
processes for Year 2000 readiness was completed in September 1999 and follow-up
reverification testing will continue as necessary throughout the remainder of
1999 and into 2000. At the end of September 1999, 99.8 percent of the Georgia-
Pacific Group's information systems are considered fully Year 2000 ready, and
less than 1 percent are in the final stages of full integration testing. The
systems in final stages of testing are not considered critical. Early in 1998,
the Georgia-Pacific Group completed an inventory of the process control systems
and embedded chips used in its manufacturing operations and believes that only a
small percentage of such systems and chips could be subject to Year 2000
problems. At the end of September 1999, over 97 percent of the process control
and embedded chip inventory has been fully analyzed and remediated as necessary
with the remaining 3 percent of the inventory in the repair or test phase. Final
post-repair testing on these non-critical outstanding items is scheduled to be
complete by mid November 1999. Due to system acquisitions and the number and
complexity of existing systems, the Georgia-Pacific Group expects some
continuing additions of noncritical systems to the inventory list.

The Georgia-Pacific Group has contacted each of its critical suppliers and
service providers including government services, transportation, energy and
communication providers to ascertain their respective levels of readiness to
address and remediate Year 2000 problems and is continuing to review their
responses and conduct follow-up reviews as necessary. The Georgia-Pacific Group
has identified and contacted critical customers to ascertain their respective
levels of Year 2000 readiness and will continue to assess the need for further
testing with customers as appropriate. While the Georgia-Pacific Group currently
believes that it will be able to modify or replace its affected systems in time
to minimize any detrimental effects on its operations, failure to do so, or the
failure of the Georgia-Pacific's Group's major customers, suppliers and service
providers to modify or replace their affected systems, could have a material
adverse impact on the Georgia-Pacific Group's results of operations, liquidity
or consolidated financial position in the future. The most reasonably likely
worst-case scenario of failure by the Georgia-Pacific Group or its customers or
suppliers to resolve the Year 2000 problem would be a temporary slowdown or
cessation of manufacturing operations at one or more of the Georgia-Pacific
Group 's facilities, including its limited foreign operations, and a temporary
inability on the part of the Georgia-Pacific Group to process orders and
billings in a timely manner and to deliver finished products to customers. The
Georgia-Pacific Group individual business units and corporate offices have
developed plans for various contingency options, including identification of
alternate suppliers, vendors and service providers as well as direct access to
qualified vendor technical support and manual alternatives to systems
operations. These options will allow them to minimize the risks of any
unresolved Year 2000 problems on their operations and to minimize the effect of
any unforeseen Year 2000 failures in areas outside the Georgia-Pacific Group
control. The primary goal of the Georgia-Pacific Group's contingency plan is to
minimize the adverse impact to personnel safety, environmental safety and assets


The Georgia-Pacific Group currently estimates the incremental cost of the work
needed to resolve the Year 2000 problem at approximately $32 million (including
approximately $4 million of capital costs), of which $24 million has been
incurred to date and $1 million is included for the impact of contingency
activities and unexpected events. As the Georgia-Pacific Group has effectively
completed its Year 2000 readiness efforts, prior estimates of total costs and
contingencies for unknowns have been adjusted accordingly. In addition, the
Georgia-Pacific Group expects to incur internal costs totaling approximately $20
million related to the Year 2000 problem, of which approximately $16 million has
been incurred to date. Although the costs were not as high as expected because
of warranties or lower cost corrections, the bulk of the incremental costs
relate to replacement or modification of affected process control systems in the
Georgia-Pacific Group's manufacturing operations and the cost of creating and
maintaining isolated test environments for its information systems. The majority
of the internal costs relates to code or process system assessment, remediation
and testing and is projected to be incurred through 1999 and first quarter 2000.
These incremental and internal costs will be expensed as incurred, except for
new systems purchased that will be capitalized in accordance with corporate
policy. Such costs may be material to the Georgia-Pacific Group's results of
operations in one or more fiscal quarters or years but are not expected to have
a material adverse effect on the long-term results of operations, liquidity or
consolidated financial position of the Georgia-Pacific Group .

The Georgia-Pacific Group reviewed Unisource's Year 2000 project methodology
and progress, including its foreign operations. All mission critical systems
have been remediated and tested and final certification was completed in October
1999. Unisource has contacted its technology and service providers as well as
its key customers and suppliers to determine the extent to which their systems
are Year 2000 ready and the extent to which Unisource could be affected if they
are not. Contingency planning activities are ongoing and are scheduled to be
reviewed by executive management by mid-November. Unisource estimates the total
incremental cost of its Year 2000 project to be approximately $13 million. Of
this amount, approximately $12 million has been incurred through October 2,
1999. Unisource expects to incur internal costs totaling approximately $1
million related to the Year 2000 problem, $0.7 million of which was incurred
through October 2, 1999.

The Georgia-Pacific Group has reviewed Wisconsin Tissue's Year 2000 project
methodology and progress, including its foreign operations. All mission critical
systems have been remediated and tested and final certification has been
completed. Wisconsin Tissue has contacted its technology and service providers
as well as its key customers and suppliers to determine the extent to which
their systems are Year 2000 ready and the extent to which Wisconsin Tissue could
be affected if they are not. Contingency plans have been developed.

For a discussion of commitments and contingencies refer to Note 10 of the Notes
to Combined Financial Statements.

REFER TO THE "CAUTIONARY STATEMENT FOR PURPOSES OF THE 'SAFE HARBOR' PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995" ON PAGE 19 OF THIS FORM
10-Q.
<PAGE>

                                       33

COMBINED STATEMENTS OF INCOME (Unaudited)
Georgia-Pacific Corporation--The Timber Company

<TABLE>
<CAPTION>
                                                                          Three Months Ended             Nine Months Ended
                                                                       -------------------------      ------------------------
                                                                        October 2,      Sept. 30,      October 2,      Sept. 30,
(In millions, except per share amounts)                                   1999           1998            1999           1998
---------------------------------------                                 -------         -------        -------         -------
<S>                                                                    <C>              <C>           <C>              <C>
Net sales
     Timber-Georgia-Pacific Group                                           $  90         $  105          $  265         $ 308
     Timber-third parties
         Delivered                                                             10             17              36            42
         Stumpage                                                              32             12             100            39
     Other                                                                      7              9              17            18
                                                                          -------        -------         -------       -------
Total net sales                                                               139            143             418           407
                                                                          -------        -------         -------       -------
Costs and expenses
     Cost of sales, excluding depreciation, amortization
         and cost of timber harvested shown below                              20             40              65            82
     Depreciation, amortization and cost
       of timber harvested                                                     12             11              34            32
     General and administrative                                                12              8              32            26
     Interest                                                                  17             17              52            52
     Other income                                                               -              -            (84)             -
                                                                          -------        -------         -------       -------
Total costs and expenses                                                       61             76              99           192
                                                                          -------        -------         -------       -------
Income before income taxes and
     extraordinary item                                                        78             67             319           215
Provision for income taxes                                                     29             26             124            84
                                                                          -------        -------         -------       -------
Income before extraordinary item                                               49             41             195           131
Extraordinary item, net of taxes                                                -              -               -            (2)
                                                                          -------        -------         -------       -------
Net income                                                                  $  49          $  41          $  195         $ 129
                                                                          =======        =======         =======       =======
Basic per share:
     Income before extraordinary item                                      $ 0.59         $ 0.46          $ 2.30        $ 1.43
     Extraordinary item, net of taxes                                           -              -               -         (0.02)
                                                                          -------        -------         -------       -------
     Net income                                                            $ 0.59         $ 0.46          $ 2.30        $ 1.41
                                                                          =======        =======         =======       =======
Diluted per share:
     Income before extraordinary item                                      $ 0.59         $ 0.46          $ 2.29        $ 1.42
     Extraordinary item, net of taxes                                           -              -               -         (0.02)
                                                                          -------        -------         -------       -------
     Net income                                                            $ 0.59         $ 0.46          $ 2.29        $ 1.40
                                                                          =======        =======         =======       =======
Average number of shares outstanding:
     Basic                                                                   82.8           89.6            84.6          91.4
     Diluted                                                                 83.4           89.9            85.1          92.0
                                                                          =======        =======         =======       =======
</TABLE>

The accompanying notes are an integral part of these financial statements.
<PAGE>

                                       34

COMBINED STATEMENTS OF CASH FLOWS  (Unaudited)
Georgia-Pacific Corporation--The Timber Company

<TABLE>
<CAPTION>
                                                                                          Nine Months Ended
                                                                                      ------------------------
(In millions)                                                              October 2, 1999              September 30, 1998
---------------                                                          -------------------         ------------------------
<S>                                                                      <C>                         <C>
Cash flows from operations
     Net income                                                                    $  195                        $  129
     Adjustments to reconcile net income to
        cash provided by operations:
       Depreciation                                                                     5                             4
       Cost of timber harvested                                                        29                            28
       Other income                                                                   (84)                            -
       Deferred income taxes                                                           19                             3
       Gain on sales of assets                                                        (28)                          (16)
       Change in other assets and other
             liabilities                                                                3                            19
                                                                                  -------                       -------
Cash provided by operations                                                           139                           167
                                                                                  -------                       -------
Cash flows from investment activities
         Property, plant and equipment
                  investments                                                          (1)                           (3)
         Timber and timberlands purchases                                             (48)                          (47)
     Proceeds from sales of assets                                                    104                            39
                                                                                  -------                       -------
Cash provided by(used for)investment activities                                        55                           (11)
                                                                                  -------                       -------
Cash flows from financing activities
     Share repurchases                                                               (124)                         (104)
     Proceeds from option plan exercises                                                9                             -
     (Repayments of) additions to debt                                                (16)                           17
     Cash dividends paid                                                              (63)                          (69)
                                                                                  -------                       -------
Cash used for financing activities                                                   (194)                         (156)
                                                                                  -------                       -------
Increase in cash                                                                        -                             -
     Balance at beginning of period                                                     -                             -
                                                                                  -------                       -------
     Balance at end of period                                                      $    -                        $    -
                                                                                  =======                       =======
</TABLE>

The accompanying notes are an integral part of these financial statements.
<PAGE>

                                       35

COMBINED BALANCE SHEETS (Unaudited)
Georgia-Pacific Corporation--The Timber Company

<TABLE>
<CAPTION>
                                                                                      October 2,          December 31,
(In millions)                                                                            1999                 1998
---------------                                                                      ------------         ------------
<S>                                                                                  <C>                  <C>
ASSETS
Timber and timberlands
     Timberlands                                                                      $      302            $     303
     Fee timber                                                                              563                  580
     Reforestation                                                                           253                  227
     Other                                                                                    53                   34
                                                                                      ----------            ---------
Total timber and timberlands                                                               1,171                1,144
                                                                                      ----------            ---------
Property, plant and equipment, less accumulated
     depreciation of $46 and $42, respectively                                                22                   24
                                                                                      ----------            ---------
Other assets                                                                                  25                    6
                                                                                      ----------            ---------
Total assets                                                                          $    1,218            $   1,174
                                                                                      ==========            =========
</TABLE>

<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S>                                                                                    <C>                  <C>
Debt                                                                                   $     967            $     983
                                                                                       ---------            ---------
Other liabilities                                                                             54                   32
                                                                                       ---------            ---------
Deferred income tax liabilities                                                              263                  244
                                                                                       ---------            ---------

Total liabilities                                                                          1,284                1,259

Commitments and contingencies

Shareholders' equity                                                                         (66)                 (85)
                                                                                       ---------            ---------
Total liabilities and shareholders' equity                                             $   1,218            $   1,174
                                                                                       =========            =========
</TABLE>

The accompanying notes are an integral part of these financial statements.
<PAGE>

                                       36

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
GEORGIA-PACIFIC CORPORATION

1.   PRINCIPLES OF PRESENTATION. The consolidated financial statements include
     the accounts of Georgia-Pacific Corporation and subsidiaries (the
     "Corporation"). All significant intercompany balances and transactions are
     eliminated in consolidation. The interim financial information included
     herein is unaudited; however, such information reflects all adjustments
     which are, in the opinion of management, necessary for a fair presentation
     of the Corporation's financial position, results of operations, and cash
     flows for the interim periods. All such adjustments are of a normal,
     recurring nature except for the item discussed in Note 3 below. Certain
     1998 amounts have been reclassified to conform with the 1999 presentation.
     The Timber Company's and the Georgia-Pacific Group's combined financial
     statements should be read in conjunction with the Corporation's
     consolidated financial statements.

     On or about April 22, 1999, the Corporation determined to change its fiscal
     year from December 31 to end on the Saturday closest to December 31.
     Additionally, the Corporation reports its quarterly periods on a 13-week
     basis ending on a Saturday. The impact of one less day and two additional
     days on the three months and nine months ended October 2, 1999,
     respectively, was not material. There will be no transition period on which
     to report.

2.   OTHER INCOME. During the second quarter of 1999, the Corporation sold
     approximately 390,000 acres of timberlands in the Canadian province of New
     Brunswick and approximately 440,000 acres of timberlands in Maine for
     approximately $92 million and recognized a pre-tax gain of $84 million ($50
     million after tax).

3.   EXTRAORDINARY ITEM. The Corporation redeemed approximately $600 million of
     its outstanding debt during the first nine months of 1998. As a result, the
     Corporation recognized an after-tax extraordinary loss of $15 million, of
     which $14 million was recognized in the first quarter of 1998 and $1
     million was recognized in the second quarter of 1998.

4.   EARNINGS PER SHARE. The Corporation's common stock was redesignated in
     December 1997 to reflect separately the performance of the Corporation's
     pulp, paper and building products businesses, which are now known as
     Georgia-Pacific Group. A separate class of common stock was distributed to
     reflect the performance of the Corporation's timber operating group, which
     is now known as The Timber Company. Basic earnings per share is computed
     based on net income and the weighted average number of common shares
     outstanding. Diluted earnings per share reflect the annual issuance of
     common shares under long-term incentive stock option and stock purchase
     plans. The computation of diluted earnings per share does not assume
     conversion or exercise of securities that would have an antidilutive effect
     on earnings per share. Earnings per share are computed for each class of
     common stock based on the separate earnings attributed to each of the
     respective businesses.

The following table provides earnings and per share data for Georgia-Pacific
Group and The Timber Company for 1999 and 1998.

<TABLE>
<CAPTION>
                                                       Three Months Ended             Nine Months Ended
                                                       ------------------            ------------------
(In millions, except                               October 2,      Sept. 30,      October 2,      Sept. 30,
per share amounts)                                    1999           1998            1999           1998
                                                      ----           ----            ----           ----
<S>                                                <C>             <C>            <C>             <C>
Basic and diluted income available to
  Shareholders (numerator):
     Income before extraordinary item              $      49       $     41       $     195       $    131
     Extraordinary item, net of taxes                      -              -               -             (2)
                                                   ---------      ---------       ---------       --------
     Net income                                    $      49      $      41       $     195       $    129
                                                   =========      =========       =========       ========
Shares (denominator):                                   82.8           89.6            84.6           91.4
  Average shares outstanding
  Dilutive securities:
     Stock incentive and option plans                    0.5           0.3           0.4               0.6
     Employee stock purchase plans                       0.1             -           0.1                 -
                                                   ---------      ---------       ---------       --------
   Total assuming conversion                            83.4          89.9          85.1              92.0
                                                   =========      =========       =========       ========
Basic per share amounts:
     Income before extraordinary item              $    0.59      $   0.46        $ 2.30          $   1.43
     Extraordinary item, net of taxes                      -             -             -             (0.02)
                                                   ---------      ---------       ---------       --------
                                                   $    0.59      $   0.46        $ 2.30          $   1.41
                                                   =========      =========       =========       ========
     Net income

Diluted per share amounts:
     Income before extraordinary item              $    0.59      $   0.46        $ 2.29          $   1.42
     Extraordinary item, net of taxes                      -             -             -             (0.02)
                                                   ---------      ---------       ---------       --------
     Net income                                    $    0.59      $   0.46        $ 2.29          $   1.40
                                                   =========      =========       =========       ========
</TABLE>
<PAGE>

                                       37

5.   COMPREHENSIVE INCOME. The Timber Company's total comprehensive income was
     $49 million and $195 million, respectively, for the three months and nine
     months ended October 2, 1999 and was $41 million and $129 million,
     respectively, for the three months and nine months ended September 30,
     1998. Other comprehensive income was insignificant for The Timber Company
     during each of the three and nine months ended October 2, 1999 and
     September 30, 1998.

6.   DEBT. At June 30, 1997, $1.0 billion of the Corporation's total debt was
     allocated to The Timber Company for financial statement purposes, and the
     balance of the Corporation's total debt was allocated to the Georgia-
     Pacific Group. The Corporation's debt was allocated between the groups
     based upon a number of factors including expected future cash flows,
     volatility of earnings, and the ability to pay debt service and dividends.
     In addition, the Corporation considered certain measures of
     creditworthiness, such as coverage ratios and various tests of liquidity,
     as a means of ensuring that each group could continue to pay debt service
     during a business downcycle. Management believes that such allocation is
     equitable and reasonable. The Timber Company's debt increases or decreases
     by the amount of any cash provided by or used for its operating activities,
     investing activities, dividend payments, share repurchases or issuances and
     other nondebt-related financing activities.

     On June 1999, the Corporation renegotiated its accounts receivable sale
     program and increased the amount outstanding under the program from $280
     million to $750 million. The program expires in April 2000. In connection
     with the acquisition of Unisource, the Corporation retained former
     Unisource agreements to sell up to $150 million of certain qualifying U.S.
     accounts receivable and up to CN$70 million of certain eligible Canadian
     accounts receivable. The U.S. agreement expires in April 2000 and the
     Canadian agreement expires in May 2004. At October 2, 1999, approximately
     $947 million was outstanding under the Corporation's and Unisource's
     programs in the aggregate. The receivables outstanding under these programs
     and the corresponding debt are included as current receivables and short-
     term debt, respectively on the accompanying balance sheets. The agreements
     are accounted for as a secured borrowing. As collections reduce previously
     sold interests, new receivables may be sold.

     Also in June 1999, the Board of Directors increased the corporate target
     debt level under which management can purchase shares of Georgia-Pacific
     Group and The Timber Company common stock on the open market from $5.75
     billion to $6.8 billion. In addition, the Board of Directors increased the
     Georgia-Pacific Group's target debt level from $4.75 billion to $5.8
     billion. The Timber Company's target debt level remains at $1.0 billion.

     On July 22, 1999, the Corporation increased the amount of its unsecured
     revolving credit facility from $1.5 billion to $2.0 billion. This unsecured
     revolving credit facility is used for direct borrowings and as support for
     commercial paper and other short-term borrowings. As of October 2, 1999,
     $1,239 million of committed credit was available in excess of all short-
     term borrowings outstanding under or supported by the facility. The
     revolving credit agreement contains certain restrictive covenants,
     including a maximum leverage ratio (funded indebtedness, including senior
     deferrable notes, to earnings before interest, taxes, depreciation and
     amortization ("EBITDA")) of 4.5 to 1.0, which is to be maintained
     throughout the term of the credit agreement. As of October 2, 1999, the
     leverage ratio was 2.3 to 1.0.

     During the second quarter of 1999, the Corporation registered for sale up
     to $2.975 billion of debt and equity securities under a shelf registration
     statement filed with the Securities and Exchange Commission. The
     Corporation registered $1.725 billion under such registration statement
     related to the PEPS Units ($862.5 million of which was received on July 7,
     1999 in exchange for senior deferrable notes, which notes will be converted
     into $862.5 million of equity (Georgia-Pacific Group common stock) upon
     exercise of the purchase contract) (see Note 7). The $862.5 million of cash
     (less expenses) raised in this sale of the PEPS Units was used to pay for
     the acquisition of Unisource.

     Effective October 3, 1999, the Corporation and Chesapeake completed a
     previously announced agreement to create Georgia-Pacific Tissue, a joint
     venture in which the two companies have combined their away-from-home
     tissue businesses. In connection with the formation of Georgia-Pacific
     Tissue, Georgia-Pacific Tissue financed the $755 million initial
     distribution to Chesapeake with short-term borrowings from a bank syndicate
     in October 1999. In the fourth quarter of 1999, the Corporation expects to
     sell debt under the shelf registration statement filed with the Securities
     and Exchange Commission and loan or contribute the proceeds through the use
     of one or more subsidiaries to Georgia-Pacific Tissue in order for Georgia-
     Pacific Tissue to retire such syndicated bank debt. This short-term
     financing temporarily increased the Corporation's total debt above the $6.8
     billion target debt level for repurchasing stock. The Corporation expects
     to be able to repurchase stock again in the fourth quarter once the debt
     level falls below the target.

7.   SENIOR DEFERRABLE NOTES. On July 7, 1999, the Corporation issued 17,250,000
     of 7.5% PEPS Units for $862.5 million. Each PEPS Unit had an issue price of
     $50 and consists of a contract to purchase shares of Georgia-Pacific Group
     common stock on or prior to August 16, 2002 and a senior deferrable note of
     Georgia-Pacific Group due August 16, 2004. Each purchase contract yields
     interest of 0.35% per year, paid quarterly, on the $50 stated amount of the
     PEPS Unit. Each senior deferrable note yields interest of 7.15% per year,
     paid quarterly, until August 16, 2002. On August 16, 2002, following a
     remarketing of the senior deferrable notes, the interest rate will be reset
     at a rate that will be equal to or greater than 7.15%. The liability
     related to the PEPS Units will not be included in the debt amount for
     purposes of determining the corporate and Georgia-Pacific Group debt
     targets.

8.   SHARE REPURCHASES. During the first nine months of 1999, The Timber Company
     purchased on the open market approximately 5,047,000 shares of The Timber
     Company common stock, all of which were held as treasury stock at October
     2, 1999, at an aggregate price of $124 million ($24.48 average per share).
     During the first nine months of 1998, The Timber Company purchased on the
     open market 4,860,000 shares of The Timber Company common stock at an
     aggregate price of $105 million ($21.60 average per share). Of these
     repurchased shares, approximately 4,829,000 shares were held as treasury
     and 31,000 shares were purchased during the first nine months of 1998 and
     settled after September 30, 1998.

9.   COMMITMENTS AND CONTINGENCIES. The Corporation is a party to various legal
     proceedings incidental to the businesses of the Georgia-Pacific Group and
     The Timber Company and is subject to a variety of environmental and
     pollution control laws and regulations in all jurisdictions in which it
     operates. As is the case with other companies in similar industries, the
     Corporation faces exposure from actual or potential claims and legal
     proceedings involving environmental matters. Liability insurance in effect
     during the last several years provides very limited coverage for
     environmental matters. The management of The Timber Company believes that
     the Corporation has established adequate reserves for probable losses with
     respect to such environmental matters and legal proceedings. However,
     holders of The Timber Company stock are shareholders of the Corporation and
     are subject to all of the risks associated with an investment in the
     Corporation, including the environmental matters and legal proceedings
     involving the Georgia-Pacific Group discussed below.

     COMMITMENTS AND CONTINGENCIES WITH RESPECT TO THE TIMBER COMPANY. The
     Timber Company is subject to various legal proceedings and claims that
     arise in the ordinary course of its business. Although the ultimate outcome
     of these matters and legal proceedings cannot be determined with certainty,
     based on presently available information, management of the Corporation
     believes that the final outcome of such matters and legal proceedings could
     be material to the operating results of The Timber Company in any given
     quarter or year, but will not have a material adverse effect on the long-
     term results of operations, liquidity or financial position of The Timber
     Company.

     COMMITMENTS AND CONTINGENCIES WITH RESPECT TO GEORGIA-PACIFIC GROUP. The
     following sets forth legal proceedings to which the Corporation is a party
     and claims related to the operations of the Georgia-Pacific Group.

     The Corporation is involved in environmental remediation activities at
     approximately 184 sites, both owned by the Corporation and owned by others,
     where it has been notified that it is or may be a potentially responsible
     party under the Comprehensive Environmental Response, Compensation and
     Liability Act or similar state "superfund" laws. Of the known sites in
     which it is involved, the Corporation estimates that approximately 49
     percent are being investigated, approximately 27 percent are being
     remediated and approximately 24 percent are being monitored (an activity
     that occurs after either site investigation or remediation has been
     completed). The ultimate costs to the Corporation for the investigation,
     remediation and monitoring of many of these sites cannot be predicted with
     certainty, due to the often unknown magnitude of the pollution or the
     necessary cleanup, the varying costs of alternative cleanup methods, the
     amount of time necessary to accomplish such cleanups, the evolving nature
     of cleanup technologies and government regulations, and the inability to
     determine the Corporation's share of multiparty cleanups or the extent to
     which contribution will be available from other parties. The Corporation
     has established reserves for environmental remediation costs for these
     sites in amounts that it believes are probable and reasonably estimable.
     Based on analysis of currently available information and previous
     experience with respect to the cleanup of hazardous substances, the
     Corporation believes it is reasonably possible that costs associated with
     these sites may exceed current reserves by amounts that may prove
     insignificant or that could range, in the aggregate, up to approximately
     $56 million. This estimate of the range of reasonably possible additional
     costs is less certain than the estimates upon which reserves are based, and
     in order to establish the upper limit of such range, assumptions least
     favorable to the Corporation among the range of reasonably possible
     outcomes were used. In estimating both its current reserve for
     environmental remediation and the possible range of additional costs, the
     Corporation has not assumed it will bear the entire cost of remediation of
     every site to the exclusion of other known potentially responsible parties
     who may be jointly and severally liable. The ability of other potentially
     responsible parties to participate has been taken into account, based
     generally on the parties' financial condition and probable contribution on
     a per site basis.
<PAGE>

                                       38

     The Corporation and many other companies are defendants in suits brought in
     various courts around the nation by plaintiffs who allege that they have
     suffered personal injury as a result of exposure to asbestos-containing
     products. These suits allege a variety of lung and other diseases based on
     alleged exposure to products previously manufactured by the Corporation. In
     many cases, the plaintiffs are unable to demonstrate that they have
     suffered any compensable loss as a result of such exposure, or that any
     injuries they have incurred in fact resulted from exposure to the
     Corporation's products.

     The Corporation generally settles asbestos cases for amounts it considers
     reasonable given the facts and circumstances of each case. The amounts it
     has paid to date to defend and settle these cases have been substantially
     covered by product liability insurance. The Corporation is currently
     defending claims of approximately 77,000 such plaintiffs as of November 3,
     1999 and anticipates that additional suits will be filed against it over
     the next several years. The Corporation has insurance available in amounts
     that it believes are adequate to cover substantially all of the reasonably
     foreseeable damages and settlement amounts arising out of claims and suits
     currently pending. The Corporation has further insurance coverage available
     for the disposition of suits that may be filed against it in the future,
     but there can be no assurance that the amounts of such insurance will be
     adequate to cover all future claims. The Corporation has established
     reserves for liabilities and legal defense costs it believes are probable
     and reasonably estimable with respect to pending suits and claims, and has
     also established a receivable for expected insurance recoveries.

     On May 6, 1998, suit was filed in state court in Columbus, Ohio, against
     the Corporation and Georgia-Pacific Resins, Inc., a wholly owned subsidiary
     of the Corporation. The lawsuit was filed by eight plaintiffs who seek to
     represent a class of individuals who at any time from 1985 to the present
     lived, worked, resided, owned, frequented or otherwise occupied property
     located within a three-mile radius of the Corporation's resins
     manufacturing operation in Columbus, Ohio. The lawsuit alleges that the
     individual plaintiffs and putative class members have suffered personal
     injuries and/or property damage because of (i) alleged "continuing and
     long-term releases and threats of releases of noxious fumes, odors and
     harmful chemicals, including hazardous substances" from the Corporation's
     operations and/or (ii) a September 10, 1997 explosion at the Columbus
     facility and alleged release of hazardous material resulting from that
     explosion. Prior to the lawsuit, the Corporation had received a number of
     explosion-related claims from nearby residents and businesses. These claims
     were for property damage, personal injury and business interruption and
     were being reviewed and adjusted on a case-by-case basis. The Corporation
     has denied the material allegations of the lawsuit. While it is premature
     to evaluate the claims asserted in the lawsuit, the Corporation believes it
     has meritorious defenses.

     In May 1997, the Corporation and nine other companies were named as
     defendants in a suit brought by the Attorney General of the State of
     Florida alleging that they engaged in conspiracy to fix the prices of
     sanitary commercial paper products, such as towels and napkins, in
     violation of federal and state laws. Approximately 45 similar suits have
     been filed by private plaintiffs in federal courts in California, Florida,
     Georgia and Wisconsin, and in the state courts of California, Wisconsin,
     Minnesota and Tennessee. On July 28, 1999, the Corporation and the Attorney
     General of the State of Florida entered into a Settlement Agreement
     pursuant to which the State will dismiss its claims against the
     Corporation. The Settlement Agreement states that the Attorney General is
     dismissing its claims in the public interest and consistent with its
     responsibilities. The Agreement also provides that the Corporation
     continues to deny that there is any evidence that it engaged in the alleged
     price fixing conspiracy. In addition, the Corporation agreed to donate
     certain real property to the State of Florida, Board of Trustees of the
     Internal Improvement Trust. The value of this real property is not material
     to the results of operations or financial position of the Corporation.

     In addition, as part of the formation of the joint venture with Chesapeake
     described in Note 7, the Corporation and Wisconsin Tissue assigned, and
     Georgia-Pacific Tissue agreed to assume, the liabilities of both companies
     in connection with these cases. The Corporation and Wisconsin Tissue have
     denied that they have engaged in any of the illegal conduct alleged in
     these cases and intend to defend themselves vigorously.

     Although the ultimate outcome of these environmental matters and legal
     proceedings cannot be determined with certainty, based on presently
     available information, management believes that adequate reserves have been
     established for probable losses with respect thereto. Management further
     believes that the ultimate outcome of such environmental matters and legal
     proceedings could be material to operating results in any given quarter or
     year but will not have a material adverse effect on the long-term results
     of operations, liquidity or consolidated financial position of the
     Corporation.
<PAGE>

                                       39

10.      RELATED PARTY TRANSACTIONS. During 1999 and 1998, The Timber Company
         sold timber deeds to Georgia-Pacific Group. The Timber Company
         recognizes revenues and earnings from these related party timber deed
         contracts as the timber is cut by the Georgia-Pacific Group. Had The
         Timber Company recognized revenues and earnings on these related party
         timber deed contracts at the time of the agreement (which is the
         accounting policy for timber deed sales to third parties), pro forma
         net sales, depreciation and cost of timber harvested, income before
         income taxes and extraordinary item, net income and basic and diluted
         earnings per share would have been as follows:

<TABLE>
<CAPTION>
Georgia-Pacific Corporation--The Timber Company
                                                                          Three Months Ended            Three Months Ended
                                                                           October 2, 1999              September 30, 1998
                                                                       ------------------------     ----------------------------
(In millions, except per share amounts)                               As Reported   Pro forma (a)   As Reported     Pro forma (a)
--------------------------------------                                -----------   ------------    -----------    -------------
<S>                                                                   <C>           <C>             <C>            <C>
Net Sales                                                             $      139    $       139     $       143    $      133
Depreciation and cost of timber harvested                                     12             12              11            10
Income before income taxes and
   Extraordinary item                                                         78             78              67            58
Net income                                                                    49             49              41            35
Basic earnings per share                                                    0.59           0.59            0.46          0.39
Diluted earnings per share                                                  0.59           0.59            0.46          0.39
</TABLE>

<TABLE>
<CAPTION>
                                                                          Nine Months Ended               Nine Months Ended
                                                                           October 2, 1999                September 30, 1998
                                                                       -----------------------       ---------------------------
In millions, except per share amounts)                                As Reported   Pro forma (a)   As Reported     Pro forma (a)
-------------------------------------                                 -----------   ------------    -----------    -------------
<S>                                                                   <C>           <C>             <C>            <C>
Net Sales                                                             $      418    $       412     $       407    $      421
Depreciation and cost of timber harvested                                     34             33              32            34
Income before income taxes and
   Extraordinary item                                                        319            314             215           277
Net income                                                                   195            192             129           136
Basic earnings per share                                                    2.30           2.27            1.41          1.49
Diluted earnings per share                                                  2.29           2.26            1.40          1.48
</TABLE>

     (a) Reported on a pro forma basis as if The Timber Company had recognized
         revenues and earnings on timber deed sales to Georgia-Pacific Group at
         the time of the contract, which is the accounting treatment utilized in
         the case of timber deeds sold to third parties.

11.      SUBSEQUENT EVENT. On November 1, 1999, The Timber Company signed a
         definitive agreement to sell approximately 194,000 acres of its redwood
         and Douglas fir timberlands in northern California for a purchase price
         of approximately $397 million. The sale is expected to close by the end
         of the year, subject to the buyer obtaining required financing and
         approval by the Corporation's board of directors.
<PAGE>

                                       40

SELECTED COMBINED SALES DATA (Unaudited)
Georgia-Pacific Corporation--The Timber Company

<TABLE>
<CAPTION>
                                                                          Three Months Ended            Nine Months Ended
                                                                      -------------------------      ------------------------
                                                                      October 2,      Sept. 30,      October 2,     Sept. 30,
                                                                         1999           1998            1999           1998
                                                                      ----------     ----------      ----------    ----------
<S>                                                                   <C>            <C>             <C>           <C>
VOLUME (in thousand tons)
Southern softwood sawtimber                                                1,582          1,506           5,233         4,376
Western softwood sawtimber                                                   413            491           1,110         1,260
Softwood pulpwood                                                          1,126          1,208           3,319         3,195
Hardwood sawtimber                                                           181            139             409           297
Hardwood pulpwood                                                            679            665           1,621         1,601
                                                                      ----------     ----------      ----------    ----------
Total volume                                                               3,981          4,009          11,692        10,729
                                                                      ==========     ==========      ==========    ==========
SELLING PRICES (per ton)
Southern softwood sawtimber                                           $       46     $       48      $       47    $       51
Western softwood sawtimber                                                    87             69              82            71
Softwood pulpwood                                                             11             12              12            15
Hardwood sawtimber                                                            36             41              34            37
Hardwood pulpwood                                                              6             10               7            11

Weighted average price                                                        34             33              34            37
</TABLE>


Item 2.  Management's Discussion and Analysis of Financial Condition and Results
of Operations

THIRD QUARTER 1999 COMPARED WITH THIRD QUARTER 1998

The Timber Company reported net sales of approximately $139 and $143 million for
the third quarter of 1999 and 1998, respectively. Net income for the 1999 third
quarter was $49 million, or $0.59 diluted earnings per share, compared with $41
million, or $0.46 diluted earnings per share, in 1998. The 1998 third quarter
results included a $1.4 million write-off for the loss of pre-merchantable
timber destroyed by forest fires in Florida in June 1998. In addition, the
pre-tax impact from reduced selling prices for timber salvaged from these fires
is estimated to be approximately $5 million in the third quarter of 1998.

Timber sales were relatively unchanged from the prior year third quarter,
decreasing $2 million, from $134 million in the third quarter of 1998 to $132
million in the third quarter of 1999. This is primarily a result of strong
Western sawtimber prices offset by slightly lower prices for Southern sawtimber.
Western sawtimber volumes decreased 16 percent compared to the third quarter of
1998, due in part to harvesting restrictions brought about by dry weather and
associated fire hazards in the Northwest. The decline in volume for Western
sawtimber was more than offset by a 26 percent increase in price for the same
period. Southern sawtimber harvest volumes were approximately 5 percent higher
than the third quarter of 1998. Total third quarter harvest volumes in 1999 were
almost identical to the third quarter of 1998.

Total 1999 harvest volumes are anticipated to remain comparable to 1998.
Year-to-date harvest volumes are ahead of plan and, as a result, harvest volumes
will decrease in the fourth quarter of 1999 compared to the third quarter of
1999. Additionally, as a result of the land sales in the Northeast, The Timber
Company expects hardwood pulpwood harvest volumes to be slightly lower for the
year. In the fourth quarter 1999, revenues from hunting permits will be minimal
as these revenues are seasonal, with the majority of the revenues recognized
when received in the second and third quarters of each year.

Western sawtimber prices increased 26 percent quarter over quarter, primarily
due to a shift in product mix and a significant increase in Douglas Fir prices
early in the third quarter of 1999. These price increases were due in part to
recovering Asian markets and the related effect of export log markets. Douglas
Fir prices declined and leveled off as the quarter came to a close. Southern
sawtimber prices decreased slightly from 1998, reaching their seasonal lows and
began trending upward towards the end of the quarter. Softwood pulpwood prices
were down 8 percent compared to the third quarter of 1998 due in part to dry
weather. Hardwood pulpwood prices also continued to drop, as expected.

The Timber Company expects Southern sawtimber prices to continue to trend upward
in the fourth quarter, though the prices will vary across the basins. In the
south, seasonally wet weather impacts available harvestable timber supply which
may translate into rising prices. Prices for pulpwood are beginning to trend
upward, but notable increases are not anticipated before the end of the year
without significant wet weather conditions. The Timber Company expects pricing
of Western sawtimber to continue to be good, with some seasonal moderation in
both price and volume.

Earnings before interest and taxes increased $11 million from the same period a
year ago to $95 million in the third quarter of 1999. The 13 percent increase
resulted primarily from an increase in gains on miscellaneous land sales of $15
million over the 1998 third quarter.

General and administrative expense was $12 million for the third quarter 1999
compared with $8 million for the same period in 1998. The 1999 third quarter
includes $2 million of one-time, non-recurring charges, primarily related to
charitable contributions.

Interest expense remained unchanged at $17 million for both the third quarters
of 1999 and 1998. Interest on slightly higher average debt levels in the third
quarter of 1999 compared with the 1998 third quarter, was offset by a decrease
in the weighted average interest rate.

YEAR-TO-DATE THIRD QUARTER 1999 COMPARED WITH YEAR-TO-DATE THIRD QUARTER 1998

The Timber Company reported net sales of approximately $418 million and net
income of $195 million, or $2.29 diluted earnings per share, for the nine-month
period ended October 2, 1999 compared to net sales of $407 million and net
income of $129 million, or $1.40 cents diluted earnings per share, for the nine
months ended September 30, 1998. The 1999 results included a one-time, after-tax
gain of $50 million ($0.59 cents diluted earnings per share) from the sale of
company timberlands in Maine and New Brunswick. The 1998 results included an
extraordinary, after-tax loss of $2 million, or $0.02 diluted earnings per
share, for the early retirement of debt.

Timber sales increased $12 million year-to-date, from $389 million as of
September 30, 1998 to $401 million as of October 2, 1999, primarily as a result
of strong Southern sawtimber harvest volumes and an increase in Western
sawtimber prices. Southern sawtimber harvest volumes increased 20 percent
compared to the first nine months of 1998, which substantially offset the
decrease in price for the same period. Total harvest volumes were up by 9
percent due to strong demand for building products as well as recovering Asian
markets in 1999; however, full year 1999 harvest volumes are expected to remain
relatively constant with 1998 full year harvest levels. Year-to-date harvest
volumes are ahead of plan and as a result, harvest volumes will decrease in the
fourth quarter of 1999. In addition, softwood pulpwood volume increased 4
percent compared to the first nine months of 1998. Western sawtimber volumes
decreased 12 percent compared to the first nine months of 1998 due in part to
weather conditions which restricted harvesting in the Northwest during the first
nine months of 1999. The decline in Western sawtimber volume was offset by an
increase in price for the same period. Additionally, The Timber Company
increased its total sales revenue to third parties from 21 percent in the first
nine months of 1998 to 34 percent in the first nine months of 1999.

Southern sawtimber prices decreased 8 percent from record levels in 1998 due in
part to the dry ground conditions in the south and a change in the operating
policy between The Timber Company and The Georgia-Pacific Group. This operating
policy change, which was effective July 1, 1998, impacted the prices for
southern timber by adjusting them monthly, rather than quarterly. The decline in
Southern sawtimber prices was offset by increased harvest volumes due in part to
strong demand in the building products business. Softwood pulpwood prices were
down 20 percent compared to the first nine months of 1998 due to a combination
of dry weather, the change in the operating policy between The Timber Company
and The Georgia-Pacific Group (as described above) and pulp mill curtailments
and/or shutdowns in the first half of 1999. Though pulp and paper pricing is
beginning to recover, prices for these products remain below last year levels.
Increased harvest volumes helped to mitigate the impact of this softening in
price. Hardwood pulpwood prices also continued to drop, as anticipated. Western
sawtimber prices increased 15 percent year over year, primarily due to
recovering western markets. Also contributing was the increased demand in the
building products business that was experienced during the first half of 1999.

Excluding the pre-tax gain on the sale of timberlands in Maine and New Brunswick
of $84 million in the second quarter of 1999, earnings before interest and taxes
increased $20 million to $287 million in the first nine months of 1999 compared
with $267 million in the first nine months of 1998. The 7 percent increase
resulted primarily from an increase in gains on miscellaneous land sales of $12
million over the 1998 third quarter and the negative impact on 1998 of the
forest fires in Florida. Overall, 9 percent higher total harvest volumes helped
to offset the year over year 8 percent decline in average sales price.

General and administrative expense was $32 million for the first nine months of
1999 compared with $26 million for the same period in 1998. The increase is due
to higher incentive compensation accruals, higher litigation costs and $2
million of one-time, non-recurring charges in the third quarter of 1999,
primarily related to charitable contributions.

Interest expense remained unchanged at $52 million for both the first nine
months of 1999 and 1998. Interest on slightly higher average debt levels during
1999 compared with the 1998, was offset by a decrease in the weighted average
interest rate.
<PAGE>

                                       41

LIQUIDITY AND CAPITAL RESOURCES

OPERATING ACTIVITIES. The Timber Company generated cash from operations of $139
million during the nine months ended October 2, 1999 compared with $167 million
for the same period a year ago. The decrease is due in part to the cash received
from the sale of a timber deed sold to The Georgia-Pacific Group in the second
quarter of 1998 for approximately $23 million and to taxes paid on gains from
the 1999 timberland sales.

INVESTING ACTIVITIES. Expenditures during the first nine months of 1999,
including acquisitions, were $49 million of which $32 is related to
silvicultural investments. Expenditures for the same period in 1998 totaled $50
million, with $32 million related to silvicultural investments. The Timber
Company expects to invest approximately $50 million in 1999, without considering
the cost of any acquisitions, primarily for silvicultural investments.

Proceeds from sales of assets were $104 million for the first nine months of
1999. In addition to miscellaneous land sales, during the year, The Timber
Company sold approximately 390,000 acres of timberlands in the Canadian province
of New Brunswick and approximately 440,000 acres of timberlands in Maine for
approximately $92 million. In conjunction with the sale of the Maine
timberlands, the Corporation received notes receivable from the purchaser for
approximately $51 million. The Corporation expects to monetize these notes
through the issuance of notes payable in a private placement during the fourth
quarter of 1999. These notes are included in "Other Assets" on the Corporation's
balance sheet at October 2, 1999. The proceeds from both these timberland sales
are reflected as "Proceeds from sales of assets" on The Timber Company's
Statements of Cash Flows. The proceeds received by The Timber Company were used
primarily to repurchase shares of The Timber Company's stock. During the first
nine months of 1998, The Timber Company received $39 million in proceeds from
the sale of assets, principally real estate development properties located in
South Carolina and Florida. These proceeds were used to repay outstanding debt.

On November 1, 1999, The Timber Company signed a definitive agreement to sell
approximately 194,000 acres of its redwood and Douglas fir timberlands in
northern California for a purchase price of approximately $397 million. The sale
is expected to close by the end of the year, subject to the buyer obtaining
required financing and approval by the Corporation's board of directors. In
conjunction with the sale, the Corporation expects to receive notes receivable
from the purchaser for the purchase price. The Corporation expects these notes
receivable to be fully secured by a stand by letter of credit with an
unaffiliated third party. Additionally, the Corporation expects to monetize
these notes through the issuance of notes payable in a private placement during
the first half of 2000. The Timber Company expects to use the proceeds of the
monetization to repay debt. This sale concludes The Timber Company's strategic
repositioning of its timberland portfolio. The estimated annual harvest from
these California timberlands for 1999 is approximately 83 million board feet of
softwood sawtimber. The estimated annual operating profit and capital
expenditures for 1999 related to these timberlands is $30 million and $1
million, respectively. The Georgia-Pacific's Fort Bragg sawmill has a wood
supply agreement with The Timber Company through 2000 which was transferred as
part of the sale agreement.

The Timber Company expects to continue to optimize its timber portfolio for the
remainder of 1999, selling selected properties that have a greater alternative
value, as conservation, commercial or recreational sites. There are currently
approximately 130,000 acres of scattered parcels which have been identified for
such sales.

FINANCING ACTIVITIES. The Corporation's total debt, excluding senior deferrable
notes, increased by $614 million to $6,165 million at October 2, 1999 from
$5,551 million at December 31, 1998. At October 2, 1999 and December 31, 1998,
$5,198 million and $4,568 million, respectively, of such total debt was
Georgia-Pacific Group's debt and $967 million and $983 million, respectively,
was The Timber Company's debt.

In June 1999, the Corporation renegotiated its accounts receivable sale program
and increased the amount outstanding under the program from $280 million to $750
million. The program expires in April 2000. In connection with the acquisition
of Unisource, the Corporation retained former Unisource agreements to sell up to
$150 million of certain qualifying U.S. accounts receivable and up to CN$70
million of certain eligible Canadian accounts receivable. The U.S. agreement
expires in April 2000 and the Canadian agreement expires in May 2004. At October
2, 1999, approximately $947 million was outstanding under the Corporation's and
Unisources programs in the aggregate. The receivables outstanding under these
programs and the corresponding debt are included as current receivables and
short-term debt, respectively on the accompanying balance sheets. The agreements
are accounted for as a secured borrowing. As collections reduce previously sold
interests, new receivables may be sold.

Also in June 1999, the Board of Directors increased the corporate target debt
level under which management can purchase shares of Georgia-Pacific Group and
The Timber Company common stock on the open market from $5.75 billion to $6.8
billion. In addition, the Board of Directors increased the Georgia-Pacific
Group's target debt level from $4.75 billion to $5.8 billion. The Timber
Company's target debt level remains at $1.0 billion.

On July 22, 1999, the Corporation increased the amount of its unsecured
revolving credit facility from $1.5 billion to $2.0 billion. This unsecured
revolving credit facility is used for direct borrowings and as support for
commercial paper and other short-term borrowings. As of October 2, 1999, $1,239
million of committed credit was available in excess of all short-term borrowings
outstanding under or supported by the facility. The revolving credit agreement
contains certain restrictive covenants, including a maximum leverage ratio
(funded indebtedness, including senior deferrable notes, to earnings before
interest, taxes, depreciation and amortization ("EBITDA")) of 4.5 to 1.0, which
is to be maintained throughout the term of the credit agreement. As of October
2, 1999, the leverage ratio was 2.3 to 1.0.

On July 7, 1999, the Corporation issued 17,250,000 of 7.5% PEPS Units for $862.5
million. Each PEPS Unit had an issue price of $50 and consists of a contract to
purchase shares of Georgia-Pacific Group common stock on or prior to August 16,
2002 and a senior deferrable note of Georgia-Pacific Group due August 16, 2004.
Each purchase contract yields interest of 0.35% per year, paid quarterly, on the
$50 stated amount of the PEPS Unit. Each senior deferrable note yields interest
of 7.15% per year, paid quarterly, until August 16, 2002. On August 16, 2002,
following a remarketing of the senior deferrable notes, the interest rate will
be reset at a rate that will be equal to or greater than 7.15%. The liability
related to the PEPS Units will not be included in the debt amount for purposes
of determining the corporate and Georgia-Pacific Group debt targets.

During the first nine months of 1999, approximately $79 million of fixed and
floating rate industrial revenue bonds were replaced, of which $66 million were
refunded by fixed rate instruments and $13 million were refunded by variable
rate instruments.

In connection with the acquisition of Unisource, the Corporation retained former
Unisource industrial revenue bonds in the amount of $9 million and capital
leases in the amount of $12 million. These amounts are included in the
Corporation's total debt.

As of October 2, 1999, the Corporation had registered for sale up to $2.975
billion of debt and equity securities under a shelf registration statement filed
with the Securities and Exchange Commission. The Corporation registered $1.725
billion under such registration statement related to the PEPS Units ($862.5
million of which was received on July 7, 1999 in exchange for senior deferrable
notes, which notes will be converted into $862.5 million of equity
(Georgia-Pacific Group common stock) upon exercise of the purchase contracts.
The $862.5 million of cash (less expenses) raised in the sale of the PEPS Units
was used to pay for the acquisition of Unisource. Proceeds from the issuance of
securities under this registration statement may be used for general corporate
purposes, including the reduction of short-term debt, acquisitions, investments
in, or extension or credit to, the Corporation's subsidiaries and the
acquisition of real property.

In connection with the formation of Georgia-Pacific, Georgia-Pacific Tissue
financed the $755 million initial distribution to Chesapeake with short-term
borrowings from a bank syndicate in October 1999. In the fourth quarter of 1999,
the Corporation expects to sell debt under the shelf registration statement
filed with the Securities and Exchange Commission and loan or contribute the
proceeds through the use of one or more subsidiaries to Georgia-Pacific Tissue
in order for Georgia-Pacific Tissue to retire such syndicated bank debt. This
short-term financing temporarily increased the Corporation's total debt above
the $6.8 billion target debt level for repurchasing stock. The Corporation
expects to be able to repurchase stock again in the fourth quarter once the debt
level falls below the target.

On October 7, 1999, approximately $10 million of floating rate industrial
revenue bonds, due December 1, 2025, were replaced by $10 million fixed rate
industrial revenue bonds issued on October 1, 1999.
<PAGE>

                                       42

The Corporation's senior management establishes the parameters of the
Corporation's financial risk, which have been approved by the Board of
Directors. Hedging interest rate exposure through the use of swaps and options
and hedging foreign exchange exposure through the use of forward contracts are
specifically contemplated to manage risk in keeping with the management policy.
Derivative instruments, such as swaps, forwards, options or futures, which are
based directly or indirectly upon interest rates, currencies, equities and
commodities, may be used by the Corporation to manage and reduce the risk
inherent in price, currency and interest rate fluctuations.

The Corporation does not utilize derivatives for speculative purposes.
Derivatives are transaction-specific so that a specific debt instrument,
contract or invoice determines the amount, maturity and other specifics of the
hedge. Counterparty risk is limited to institutions with long-term debt ratings
of A or better.

The table below presents principal (or notional) amounts and related weighted
average interest rates by year of expected maturity for the Corporation's debt
obligations as of October 2, 1999. For obligations with variable interest rates,
the table sets forth payout amounts based on current rates and does not attempt
to project future interest rates.

Georgia-Pacific Corporation and Subsidiaries

<TABLE>
<CAPTION>

(In millions)                                               1999               2000              2001              2002
------------                                               ------             ------            ------            ------
<S>                                                        <C>                <C>               <C>               <C>
Debt
Commercial paper and other short-term notes                        -                 -                  -                 -
   Average interest rates                                          -                 -                  -                 -
Notes and debentures                                               -                 -                  -           $   300
   Average interest rates                                          -                 -                  -                10%
Revenue bonds                                                $    10            $   24            $      6          $    74
   Average interest rates                                        5.3%              4.2%               3.9%              3.8%
Other loans                                                        -            $   13                  -                 -
   Average interest rates                                          -               8.0%                 -                 -
Accounts receivable sale program                                   -                 -                  -                 -
   Average interest rates                                          -                 -                  -                 -
Senior deferrable notes                                            -                 -                  -                 -
   Average interest rates                                          -                 -                  -                 -
Notional principal amount of interest rate exchange
agreements                                                   $   100            $  177                  -           $   131
   Average interest rate paid (fixed)                            6.4%              7.7%                 -               5.9%
   Average interest rate received (variable)                     5.5%              5.5%                 -               5.4%
</TABLE>

Georgia-Pacific Corporation and Subsidiaries

<TABLE>
<CAPTION>
                                                                                                             Fair value July
(In millions)                                               2003            Thereafter          Total            3, 1999
-------------                                              -------        -------------        -------       ---------------
<S>                                                        <C>            <C>                  <C>           <C>
Debt
Commercial paper and other short-term notes                      -        $      761           $     761        $     761
   Average interest rates                                        -               5.7%                5.7%             5.7%
Notes and debentures                                        $  300        $    2,900           $   3,500        $   3,490
   Average interest rates                                      5.7%              8.6%                8.4%             8.0%
Revenue bonds                                                    -        $      550           $     664        $     573
   Average interest rates                                        -               5.3%                5.1%             8.0%
Other loans                                                 $   14                 -           $      27        $      27
   Average interest rates                                      5.7%                -                 6.8%             7.3%
Accounts receivable sale program                                 -        $      947           $     947        $     947
   Average interest rates                                        -               5.6%                5.6%             5.6%
Senior deferrable notes                                          -        $      863           $     863        $     870
   Average interest rates                                        -              7.15%               7.15%             7.3%
Notional principal amount of interest rate exchange                                            $
agreements                                                  $  300                 -                 708        $       4
   Average interest rate paid (fixed)                          5.9%                -                 6.4%             6.4%
   Average interest rate received (variable)                   5.9%                -                 5.7%             5.7%
</TABLE>

The Corporation has the intent and ability to refinance commercial paper, other
short-term notes and the accounts receivable sale program as they mature. The
Corporation intends to re-market the senior deferrable notes on or before August
16, 2002 at an interest rate that will be equal to or greater than 7.15%; thus
extending the maturity of the senior deferrable notes to August 16, 2004.
Therefore, maturities of these obligations are reflected as cash flows expected
to be made after 2003. The fair value of interest rate exchange agreements
exclude amounts used to determine the fair value of related notes and
debentures.

At October 2, 1999, the Corporation's weighted average interest rate on its
debt, excluding the senior deferrable notes, was 7.0% including the accounts
receivable sale program and outstanding interest rate exchange agreements. At
October 2, 1999, these interest rate exchange agreements effectively converted
approximately $708 million of floating rate obligations with a weighted average
interest rate of 5.7% to fixed rate obligations with an average effective
interest rate of 6.4%. These agreements have a weighted average maturity of
approximately 2.5 years. As of October 2, 1999, the Corporation's total floating
rate debt, including the accounts receivable sale program, exceeded related
interest rate exchange agreements by $1.6 billion.

The Corporation also enters into foreign currency exchange agreements and
commodity futures and swaps, the amounts of which were not material to the
consolidated financial position of the Corporation at October 2, 1999.

During the first nine months of 1999, The Timber Company purchased on the open
market approximately 5,046,000 shares of The Timber Company common stock, all of
which were held as treasury stock at October 2, 1999, at an aggregate price of
$124 million ($24.57 average per share).

During the first nine months of 1998, The Timber Company purchased on the open
market 4,860,000 shares of The Timber Company common stock at an aggregate price
of $105 million ($21.60 average per share). Of these repurchased shares,
approximately 4,829,000 shares were held as treasury and 31,000 shares were
purchased during the first nine months of 1998 and settled after September 30,
1998
<PAGE>

                                       43

Subsequent to October 2, 1999 through November 3, 1999, The Timber Company
purchased on the open market approximately 53,000 shares of The Timber Company
stock at an aggregate price of $1 million ($23.68 average per share). The Timber
Company expects to repurchase shares of The Timber Company common stock
throughout 1999 as long as debt levels are below the established thresholds.

During the first nine months of 1999, The Timber Company received $9 million
from the exercise of options to purchase The Timber Company common stock.

During the first nine months of 1999 and 1998, The Timber Company paid $63
million and $69 million, respectively, in dividends.

In 1999, The Timber Company expects its cash flow from operations, together with
proceeds from any asset sales and available financing sources, to be sufficient
to fund planned capital investments, pay dividends and make scheduled debt
payments.

OTHER. In July 1999, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 137, providing for a one year delay of the effective date of SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities"("SFAS No.
133"). SFAS No. 133 establishes accounting and reporting standards for
derivative instrument and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities on the balance sheet
and measure those instruments at fair value. Georgia-Pacific Corporation will be
required to adopt SFAS No. 133 in 2001. Management is evaluating the effect of
this statement on Georgia-Pacific's derivative instruments: primarily interest
rate swaps, foreign currency forward contracts and long-term purchase
commitments. The impact of adjustments to fair value is not expected to be
material to The Timber financial position.

The Timber Company has worked to resolve the effects of the Year 2000 problem on
its information systems. The Year 2000 problem, which is common to most
businesses, concerns the inability of such systems to properly recognize and
process dates and date-sensitive information on and beyond January 1, 2000. In
1996, the Corporation began a companywide assessment of the vulnerability of its
systems to the Year 2000 problem. Based on such assessment, The Timber Company
has developed a Year 2000 plan, under which all of its key information systems
were tested, and noncompliant software or technology has being modified or
replaced. The Timber Company is also surveying the Year 2000 compliance status
and compatibility of customers' and suppliers' systems that interface with The
Timber Company's systems or could otherwise impact The Timber Company's
operations.

The Timber Company has completed testing and verification of its systems and
processes for Year 2000 readiness. The Timber Company completed an inventory of
the systems and embedded chips used in its operations and found that only a
small percentage of such systems and chips could be subject to Year 2000
problems. The work needed to resolve the Year 2000 problem with regard to its
operations was performed as part of normal systems maintenance and replacement
practices. The Timber Company did not accelerate its internal maintenance
schedule or incur any incremental cost for such work. The Timber Company
continues its process of identifying critical suppliers and customers and
communicating with each of them to ascertain their level of readiness to address
and remediate Year 2000 problems. The most reasonably likely worst-case scenario
of failure by The Timber Company or its customers or suppliers to resolve the
Year 2000 problem would be a temporary inability on the part of The Timber
Company to process timber sales and billings in a timely manner. The Timber
Company continues to identify and consider various contingency options,
including identification of alternate suppliers, vendors and service providers,
and manual alternatives to systems operations, which will allow it to minimize
the risks of any unresolved Year 2000 problems on its operations and to minimize
the effect of any unforeseen Year 2000 failures.

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR' PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. The statements under this
"Management's Discussion and Analysis" and other statements contained herein
that are not historical facts, including statements regarding pricing trends,
expected harvest rotations and The Timber Company's expectations regarding
resolution of issues associated with the Year 2000 problem, are forward-looking
statements (as such term is defined under the Private Securities Litigation
Reform Act of 1995) based on current expectations. The accuracy of such
statements is subject to a number of risks, uncertainties and assumptions. In
addition to the risks, uncertainties and assumptions discussed elsewhere herein,
factors that could cause or contribute to actual results differing materially
from such forward-looking statements include the following: the effect on The
Timber Company of government, legislative and environmental restrictions;
catastrophic losses from fires, floods, windstorms, earthquakes, volcanic
eruptions, insect infestations or diseases; material variations in regional
market demand for timber products; fluctuations in interest rates; the ability
of The Timber Company, and its customers and suppliers, to address the Year 2000
problem in a timely and efficient manner; and other risks, uncertainties and
assumptions discussed in the Corporation's filings with the Securities and
Exchange Commission, including the Corporation's Form 10-K dated December 31,
1998, the Corporation's Quarterly Report on Form 10-Q/A for the quarter ended
July 3, 1999, and the Corporation's Form 8-K dated October 17, 1996.

For a discussion of commitments and contingencies refer to Note 8 of the Notes
to Combined Financial Statements.
<PAGE>


                          PART II - OTHER INFORMATION
                               -----------------
                          GEORGIA-PACIFIC CORPORATION
                                October 2, 1999

Item 1.           Legal Proceedings.

                  The information contained in Note 12 "Commitments and
                  Contingencies" of the Notes to Consolidated Financial
                  Statements--Georgia-Pacific Corporation, Note 10 "Commitments
                  and Contingencies" of the Notes to Combined Financial
                  Statements--Georgia-Pacific Group and Note 9 "Commitments and
                  Contingencies" of the Notes to Consolidated Financial
                  Statements--The Timber Company filed as part of this Quarterly
                  Report on Form 10-Q is incorporated herein by reference.

                  Representatives from the United States Environmental
                  Protection Agency completed an extended inspection of the
                  Nekoosa, Wisconsin mill the week of November 1 as part of the
                  Agency's announced Pulp and Paper Enforcement Initiative
                  designed to seek out alleged shortcomings in preconstruction
                  permitting and controls for plant modifications made over the
                  last two decades. This is a follow up to an extensive
                  Information Request pursuant to Section 114 of the Clean Air
                  Act this part summer.

                  The Corporation recently discovered and disclosed to the
                  Louisiana Department of Environmental Quality some lapses in
                  appropriate air permitting for modifications made over ten
                  years ago at the Port Hudson pulp and paper mill. Negotiations
                  with the state on how to resolve the issue are currently
                  underway.

Item 5.           Other Information.

                  Effective as of October 3, 1999, the Company and Wisconsin
                  Tissue Mills Inc. ("WTM"), a wholly owned subsidiary of
                  Chesapeake Corporation ("Chesapeake), completed the formation
                  of a joint venture through which the two companies combined
                  their commercial tissue businesses. WTM contributed
                  substantially all of its assets and certain related
                  liabilities to the joint venture, known as Georgia-Pacific
                  Tissue, LLC (the "JV"), and received a 5% equity interest in
                  the JV and a cash distribution of approximately $755 million.
                  The Company contributed certain of its commercial tissue
                  assets and related liabilities to the JV in return for a 95%
                  equity interest.

Item 6.           Exhibits and Reports on Form 8-K

                  (a)    Exhibits

                         Exhibit 10.1   Joint Venture Agreement Among Georgia-
                                        Pacific Corporation, Chesapeake
                                        Corporation, Wisconsin Tissue Mills
                                        Inc., and Georgia-Pacific Tissue, LLC
                                        dated as of October 4, 1999.

                         Exhibit 10.2   Operating Agreement of Georgia-Pacific
                                        Tissue, LLC, dated as of October 4,
                                        1999, among Wisconsin Tissue Mills Inc.
                                        and Georgia-Pacific Corporation.

                         Exhibit 12.1   Statements re Computation of Ratios

                         Exhibit 27.1   Financial Data Schedule.

                 (b)     The Corporation filed the following Current Reports on
                         Form 8-K during and subsequent to the end of the
                         quarter ended October 2, 1999:

                         Date 8-K       Description of 8-K

                         July 15, 1999     Filed pursuant to Item 7 - Financial
                                           Statements, Pro Forma Financial
                                           Information and Exhibits, regarding
                                           the unaudited pro forma consolidated
                                           statements of operations data based
                                           on historical financial statements of
                                           the Corporation and on the historical
                                           financial statements of Unisource
                                           Worldwide, Inc., adjusted to give
                                           effect to the acquisition of
                                           Unisource by the Corporation under
                                           the purchase method of accounting.

                         October 4, 1999   Submitted a copy of the Corporation's
                                           News Release issued October 4, 1999,
                                           reporting Georgia-Pacific Group's
                                           regarding the completion of the joint
                                           venture with Chesapeake Corporation
                                           in their respective away-from-home
                                           tissue businesses.


<PAGE>

                                       45





                                  SIGNATURES

Pursuant to the requirements 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.

Date: November 9, 1999                     GEORGIA-PACIFIC CORPORATION
                                           (Registrant)



                                           by /s/Danny W. Huff
                                              ----------------------------
                                              Danny W. Huff,
                                              Executive Vice President -
                                               Finance and Chief
                                               Financial Officer

                                           by /s/James E. Terrell
                                              ----------------------------
                                              James E. Terrell,
                                              Vice President and Controller
                                               (Chief Accounting Officer)
<PAGE>


                          GEORGIA-PACIFIC CORPORATION
                               -----------------
                               INDEX TO EXHIBITS
                        FILED WITH THE QUARTERLY REPORT
                             ON FORM 10-Q FOR THE
                         QUARTER ENDED OCTOBER 2, 1999


Number               Description
------               -----------

10.1                 Joint Venture Agreement among Georgia-Pacific Corporation,
                     Chesapeake Corporation, Wisconsin Tissue Mills Inc. and
                     Georgia-Pacific Tissue Company, LLC dated as of October 4,
                     1999.

10.2                 Operating Agreement of Georgia-Pacific Tissue, LLC, dated
                     as of October 4, 1999, among Wisconsin Tissue Mills Inc.
                     and Georgia-Pacific Corporation.

12.1                 Statements re Computation of Ratios.

27.1                 Financial Data Schedule.





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(1)  Filed by EDGAR