FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
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: 1-3203
CHESAPEAKE CORPORATION
Incorporated under the I.R.S. Employer
laws of Virginia Identification
No. 54-0166880
1021 East Cary Street
P. O. Box 2350
Richmond, Virginia 23218-2350
Telephone Number (804) 697-1000
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. Yes X . No .
The number of shares outstanding of each of the issuer's classes of common
stock, as of the close of period covered by this report:
Common stock of $1 par value, 23,535,180 shares.
Page 1 of 19 Pages.
PART I
<TABLE>
CHESAPEAKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE SECOND QUARTER AND YEAR TO DATE ENDED
JUNE 30, 1994 AND 1993
<CAPTION>
Second Quarter Year to Date
1994 1993 1994 1993
(In millions, except per share data)
<S> <C> <C> <C> <C>
Net sales $236.9 $236.4 $448.9 $445.7
Costs and expenses:
Cost of products sold 174.6 182.6 332.2 341.3
Depreciation and cost
of timber harvested 18.3 18.1 36.4 36.3
Selling, general and
administrative expenses 29.9 25.6 55.2 51.5
Income from operations 14.1 10.1 25.1 16.6
Other income and expenses, net 2.6 .2 4.3 .9
Interest expense (7.7) (8.0) (16.0) (16.4)
Income before taxes 9.0 2.3 13.4 1.1
Income taxes 3.4 1.0 5.1 .6
Net income $ 5.6 $ 1.3 $ 8.3 $ .5
Earnings per share $ .24 $ .05 $ .35 $ .02
Weighted average number of
common shares and
equivalents outstanding 23.6 23.3 23.6 23.3
Cash dividends declared per
share of common stock $ .18 $ .18 $ .36 $ .36
</TABLE>
See accompanying notes.
2
<TABLE>
CHESAPEAKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<CAPTION>
June 30, 1994 Dec. 31, 1993
(In millions)
<S> <C> <C>
ASSETS
Current assets:
Cash $ .6 $ .7
Accounts receivable, less
allowances for doubtful
accounts of $4.3 and $3.0 110.5 87.5
Inventories, at lower of cost
or market 86.1 79.7
Deferred income taxes 12.2 12.2
Other 6.9 6.1
Total current assets 216.3 186.2
Property, plant and equipment, at cost:
Land, buildings, machinery
and equipment 1,206.6 1,159.5
Less accumulated depreciation 596.2 545.5
610.4 614.0
Timber and timberlands, net 40.1 39.8
Net property, plant and equipment 650.5 653.8
Goodwill, net 44.3 28.0
Other assets 52.6 51.3
$ 963.7 $ 919.3
</TABLE>
3
<TABLE>
<CAPTION>
June 30, 1994 Dec. 31, 1993
(In millions)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 98.5 $ 90.5
Current maturities of long-term debt 1.6 1.5
Dividends payable 4.2 4.2
Income taxes payable 1.6 2.9
Total current liabilities 105.9 99.1
Long-term debt 365.5 333.1
Postretirement benefits other than pensions 22.6 20.5
Deferred income taxes 102.4 98.6
Stockholders' equity:
Preferred stock, $100 par value,
issuable in series;
authorized, 500,000 shares;
issued, none
Common stock, $1 par value;
authorized 60,000,000 shares;
outstanding 23,535,180 and
23,514,378 shares 23.5 23.5
Additional paid-in capital 102.1 102.6
Retained earnings 241.7 241.9
367.3 368.0
$963.7 $919.3
</TABLE>
See accompanying notes.
<TABLE>
4<PAGE>
CHESAPEAKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR TO DATE ENDED JUNE 30, 1994 AND 1993
<CAPTION>
1994 1993
(In millions)
<S> <C> <C>
Operating activities
Net income $ 8.3 $ .5
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation, cost of timber harvested and
amortization of intangibles 37.9 37.4
Deferred income taxes .8 (.8)
Gain on sale of property, plant and equipment ( .6) (1.0)
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable (17.6) (10.7)
Inventories (1.7) 12.7
Other assets (1.1) (3.8)
Accounts payable and accrued expenses 2.8 11.7
Income taxes payable (1.3) ( .3)
Other payables 2.1 .4
Net cash provided by operating activities 29.6 46.1
Investing activities
Purchases of property, plant and equipment (21.5) (37.8)
Acquisition (net of notes issued to sellers of $15.9) (16.3) -
Proceeds from sale of property, plant and
equipment .7 1.5
Other 3.5 -
Net cash used in investing activities (33.6) (36.3)
Financing activities
Net borrowings (payments) on credit lines (3.1) (41.3)
Payments on long-term debt (33.0) (52.1)
Proceeds from long-term debt 49.0 91.9
Proceeds from issuances of common stock .4 -
Dividends paid (8.5) (8.4)
Other (.9) -
Net cash provided by (used in) financing activities 3.9 (9.9)
Increase (decrease) in cash (.1) (.1)
Cash at beginning of period .7 .7
Cash at end of period $ .6 $ .6
Supplemental cash flow information:
Interest payments $15.2 $16.7
Income tax payments, net of refunds $ 5.8 $ 1.3
</TABLE>
See accompanying notes.
5
<TABLE>
CHESAPEAKE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<CAPTION>
1. The condensed consolidated financial statements included
herein are unaudited, except for the December 31, 1993
consolidated balance sheet, have been prepared by the
Company pursuant to the rules and regulations of the
Securities and Exchange Commission, and, in the opinion of
management, reflect all adjustments, all of a normal
recurring nature, necessary to present fairly the Company's
consolidated financial position, results of operations and
cash flows. It is suggested that these condensed
consolidated financial statements be read in conjunction
with the consolidated financial statements and the notes
thereto included or incorporated by reference in the
Company's latest Annual Report on Form 10-K. The results of
operations for the 1994 interim period should not be
regarded as necessarily indicative of the results that may
be expected for the entire year.
2. Inventories:
June 30, 1994 Dec. 31, 1993
<S> <C> <C> (In millions)
Inventories consist of:
Finished goods and work
in process $ 49.0 $ 49.3
Materials and supplies 37.1 30.4
Totals $ 86.1 $ 79.7
</TABLE>
The amount of work in process inventories is insignificant
in relation to total inventories.
3. Commitments and Other Matters:
At June 30, 1994, commitments, primarily for capital
expenditures, approximated $37 million. These commitments
include anticipated expenditures of $6 million in 1994
related to environmental protection in connection with
planned expansions and upgrades mainly at the Company's
paper mills in West Point, Virginia and Menasha, Wisconsin.
The remaining commitments of $31 million are for various
capital projects, none of which is individually material.
Uncommitted environmental protection projects may cost the
Company another $9 million during the next several years.
Additional non-determinable environmental protection
expenditures could be required in the future when facilities
are expanded or if more stringent standards become
applicable. See Note 6.
6
3. Commitments and Other Matters (continued):
In the second quarter of 1994, Chesapeake Paper Products
Company and Chesapeake Forest Products Company implemented a
previously announced enhanced retirement program which
resulted in a second quarter pre-tax charge of approximately
$4.9 million. Anticipated pre-tax savings from implemention
of the program are projected to be $1 million in 1994 and
$3.5 million annually thereafter.
4. Litigation:
The Company is a party to various legal actions which are
ordinary and incidental to its business. While the outcome
of legal actions cannot be predicted with certainty, the
Company believes the outcome of any of these proceedings, or
all of them combined, will not have a materially adverse
effect on its consolidated financial position or results of
operations.
5. Income Taxes:
The Company's effective income tax rate was 38.2% in 1994
compared to 54.9% in 1993. The differences between the
Company's effective income tax rate and the statutory
federal income tax rate are due to state income taxes and
purchase accounting adjustments resulting from acquisitions.
6. Environmental Matters:
Chesapeake operates under, and is in substantial compliance
with, the terms of various air emission and water and
effluent discharge permits and other environmental
regulations.
On June 23, 1994, Wisconsin Tissue Mills Inc., a wholly-
owned subsidiary of the Company, received a notice from the
United States Fish and Wildlife Service that it had been
identified as a potentially responsible party ("PRP") under
the Comprehensive Environmental Response, Compensation and
Liability Act with respect to possible natural resource
liability relating to polychlorinated biphenyl in the Fox
River and Green Bay System. The notice invites the PRPs to
participate in the development and performance of a natural
resource damage assessment with respect to the alleged
discharges. Wisconsin Tissue and the four other PRPs have
requested an extension of the time for filing a response to
the notice and have not yet responded. The ultimate cost to
Wisconsin Tissue, if any, associated with this matter cannot
be predicted with certainty at this time, due to: the
unknown magnitude of any contamination; the varying costs of
7
6. Environmental Matters (continued):
alternative clean-up methods; the evolving nature of clean-
up technologies and governmental regulations; and the
inability to determine the company's share of any multi-
party clean-up, the extent to which contribution will be
available from other parties and the scope of potential
recoveries from insurance carriers and prior owners of
Wisconsin Tissue.
The U.S. Environmental Protection Agency ("EPA") has
published draft rules under the Clean Water Act and the
Clean Air Act which would impose new air and water quality
standards for pulp and paper mills (the "Cluster Rules").
The EPA has indicated that it intends to issue the final
Cluster Rules in the fall of 1995. The definitive Cluster
Rules are expected to require compliance within three years
after the date of their adoption. Based on the Company's
preliminary estimates, if the Cluster Rules were adopted in
substantially their present form, compliance would require
capital expenditures totaling approximately $55 million at
the Company's two paper mills. The Company has joined with
the American Forest & Paper Products Association and most of
its members in stating that they believe that the Cluster
Rules, as proposed, are inappropriate, unjustified and do
not comply with applicable law. The eventual capital
expense impact to the Company of compliance with the
definitive Cluster Rules is not presently determinable, and
will depend on a number of factors, including: the scope of
the standards imposed and time permitted for compliance; the
Company's strategic decisions related to compliance,
including potential changes in product mix and markets; and
developments in compliance technology. The additional
effect, if any, on the Company's business of compliance with
the definitive Cluster Rules will depend on a number of
other factors, including: the domestic and international
competitive effects of compliance and the effect of evolving
consumer demands related to environmental issues on the
Company and its competitors.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
2nd Quarter 1994 vs. 2nd Quarter 1993
Net sales for the three months ended June 30, 1994 were
$236.9 million, a second quarter record and up slightly over net
sales of $236.4 million in the second quarter of 1993. Sales of
$15 million from Lawless Holding Corporation, acquired in January
1994, partially offset the absence of $37 million in sales from
the Company's former treated wood business. Sales from
continuing businesses were up 11%, as each major business--kraft
products, tissue and packaging--experienced second quarter gains
over 1993 levels. Increased shipments from each major business
and some sales price relief, especially for kraft products,
contributed to the increase.
A onetime pre-tax charge of $4.9 million, or $.13 a share
after tax, for the previously announced enhanced retirement
program in the kraft products segment lowered second quarter 1994
results. Pre-tax savings from the enhanced retirement program
are expected to be about $1 million in 1994 and approximately
$3.5 million annually thereafter. After the onetime charge, net
income for the second quarter was $5.6 million, or $.24 a share,
compared to $1.3 million, or $.05 a share, in the second quarter
of 1993. Continued solid operating performance, effective cost
control and some price relief lowered cost of products sold as a
percentage of net sales from 77% in the 1993 quarter to 74% in
the 1994 quarter. Selling, general and administrative expenses
were up from last year primarily due to the enhanced retirement
program. Depreciation and cost of timber harvested for 1994
approximated 1993 amounts. Other income was up $2.4 million,
primarily as a result of a nonrecurring gain from the settlement
of indemnification issues related to a prior business acquisition
and the sale of equipment that was no longer used by the Company.
Excluding small amounts of capitalized interest, interest expense
for 1994 was down 2% compared to 1993, due primarily to lower
debt levels.
Kraft Products
Shipments of kraft products improved to 212,000 tons, an
increase of 4% from second quarter of 1993. Productivity and
quality continued to improve, with second quarter 1994 production
volume averaging 2,150 tons per day, compared to slightly over
2,000 tons per day for second quarter of last year. Results of
the second quarters of both 1994 and 1993 included planned
9
maintenance shutdowns that lowered production and earnings.
Containerboard and market pulp price increases implemented during
the first half of 1994 resulted in pricing levels for the second
quarter of 1994 above those of the second quarter of 1993. The
largest gains were from market pulp. Results of the kraft
products segment for the second quarter of 1994 include a pre-tax
charge of $4.9 million for an enhanced retirement program
implemented at Chesapeake Paper Products and Chesapeake Forest
Products Company during the quarter. Second quarter 1994
earnings were also negatively impacted by the rapid increase in
wastepaper costs which put considerable pressure on margins for
recycled products. The kraft products segment includes the
results of the building products business, a small part of
Chesapeake's total operations, which improved over 1993's solid
results, as sales volumes increased and prices for lumber
continued to be strong. Second quarter 1993 net sales for the
kraft products segment includes $37 million in sales from the
Company's former treated wood business.
Tissue
Tissue shipments were at record levels for the second
quarter. Shipments of converted products for the second quarter
of 1994 were up 11% compared to the second quarter of 1993.
Overall tissue shipments were 5% above second quarter 1993
levels, as fewer non-converted parent rolls were sold. The
Company's goal is to convert all parent rolls into higher value
finished products. Tissue pricing was 6% above second quarter
1993 levels as a result of sales price improvements implemented
in the second half of last year and improved product mix. These
higher prices, together with continued high productivity and cost
reduction, resulted in record second quarter earnings for the
tissue segment. Results of the tissue segment were also
positively impacted by the nonrecurring settlement gain of
approximately $1.3 million. Second quarter net sales of the
consumer products business increased 21% and operating losses
were reduced by $.8 million, or 97%, compared to last year's
second quarter.
Packaging
Second quarter 1994 packaging net sales were up 29% compared
to the second quarter of 1993. Volume gains were made in graphic
packaging as a result of the completion of the final phase of a
capital expansion program at Color-Box to double the capacity of
this facility. The integration of Lawless Holding Corporation
continued to proceed well, with these operations adding $15
million to net sales for the 1994 quarter. Rising containerboard
costs caused margins to be under pressure during most of the
quarter.
10
<TABLE>
BUSINESS SEGMENT HIGHLIGHTS
<CAPTION>
Second Quarter
Second Quarter First Quarter Year-to-Date
1994 1993 1994 1994 1993
<S> <C> <C> <C> <C> <C>
Net Sales:
Kraft products $ 78.7 $103.8 $ 71.1 $149.8 $191.8
Tissue 77.7 70.1 64.7 142.4 132.4
Packaging 79.7 62.0 74.0 153.7 120.2
Corporate .8 .5 2.2 3.0 1.3
$236.9 $236.4 $212.0 $448.9 $445.7
EBIT:
Kraft products $ 1.6 $ 1.6 $ 2.9 $ 4.5 $ 6.0
Tissue 14.3 6.3 8.1 22.4 9.2
Packaging 4.8 5.2 4.3 9.1 7.5
20.7 13.1 15.3 36.0 22.7
Corporate (4.0) (2.8) (2.6) (6.6) (5.2)
$ 16.7 $ 10.3 $ 12.7 $ 29.4 $ 17.5
</TABLE>
2nd Quarter Year-to-date 1994 vs. 2nd Quarter Year-to-date 1993
Net sales for the six months ended June 30, 1994 were $448.9
million, a first half record and up 1% over net sales of $445.7
million in the first half of 1993. Sales of Lawless Holding
Corporation, acquired in January 1994, of $27 million partially
offset the absence of approximately $60 million in sales from the
Company's former treated wood business. Sales from continuing
businesses were up 10%, as each major business--kraft products,
tissue and packaging--experienced gains for the current year-to-
date over 1993 levels. Increased shipments of kraft products,
improved product mix for tissue and some sales price relief for
tissue and kraft products accounted for much of the increase.
The onetime pre-tax charge of $4.9 million for the enhanced
retirement program in the kraft products segment lowered 1994
results. After the onetime charge, year-to-date net income was
$8.3 million, or $.35 a share, compared to $.5 million, or $.02 a
share, in 1993. Continued solid operating performance, effective
cost control and some price relief lowered cost of products sold
as a percentage of net sales from 77% in 1993 to 74% in 1994.
Selling, general and administrative expenses were up from last
year primarily due to the enhanced retirement program.
Depreciation and cost of timber harvested for 1994 approximated
1993 amounts. Other income was up $3.4 million, primarily as a
result of sale of land that was no longer considered strategic,
the settlement gain and the sale of equipment that was no longer
used by the Company. Excluding small amounts of capitalized
interest, interest expense for 1994 was down 1% compared to 1993,
due primarily to lower debt levels.
11
Kraft Products
Shipments of kraft products for the first half of 1994 were
421,000 tons, an increase of 5% from the first half of 1993.
Productivity and quality improved over the previous year, with
1994 production volume averaging 2,150 tons per day, compared to
slightly under 2,000 tons per day for 1993. Containerboard and
market pulp price increases implemented during the first half of
this year resulted in pricing levels that were 5% above those of
the first half of 1993. However, at mid-year 1993 pricing levels
were trending down for most kraft products as opposed to an
upward trend at mid-year 1994. The largest price gains have come
from market pulp. Results of the kraft products segment for 1994
include a charge for the enhanced retirement program at
Chesapeake Paper Products and Chesapeake Forest Products Company.
Earnings in 1994 have been negatively impacted by the rapid
increase in wastepaper costs which puts considerable pressure on
margins for recycled products. The kraft products segment
includes the results of the building products business, which
improved over 1993's solid results, as sales volumes and prices
for lumber increased 21% and 5%, respectively, compared to the
first half of 1993. Year-to-date net sales for the kraft
products segment in 1993 included $61 million in sales from the
Company's former treated wood business.
Tissue
Year-to-date tissue shipments for the first six months of
1994 were at record levels. Shipments of converted products for
1994 were up 6% compared to 1993. Overall tissue shipments
approximated 1993 levels, as fewer non-converted parent rolls
were sold. Tissue pricing for the first half of 1994 was 7%
above 1993 levels as a result of sales price increases
implemented in the second half of last year and improved product
mix. This improved pricing, together with continued high
productivity and cost reduction, resulted in record first half
earnings for the tissue segment. Results of the tissue segment
in 1994 were also positively impacted by the nonrecurring
settlement gain. Net sales of the consumer products business
increased 5% compared to last year and operating losses were
reduced by $2.1 million, or 88%.
Packaging
Year-to-date packaging net sales for 1994 were up 28%
compared to 1993. Lawless Holding Corporation, acquired by
Chesapeake in January 1994, added $27 million to 1994 first half
net sales. Volume from Color-Box, a graphic packaging
subsidiary, increased from the prior year with the completion
late in 1993 of the final phase of a capital expansion program
which doubled the capacity of this facility. Second quarter 1994
price increases were partly offset by rising containerboard costs
which caused margins to be under pressure.
12
2nd Quarter 1994 vs. 1st Quarter 1994
Net sales for the second quarter of 1994 were up $24.9
million, or 12%, from net sales of $212.0 million for the first
quarter of 1994. This improvement is due to the normal
seasonally slower first quarter and some sales price relief,
especially for market pulp and containerboard. Improved volume
for each of the three major businesses also contributed to the
increase in sales over the first quarter.
Net income for the second quarter of 1994 was $2.9 million
greater than net income for the first quarter, despite the pre-
tax charge for the enhanced retirement package. The improvement
resulted from higher selling prices, improved sales volumes and
lower interest expense. Depreciation and cost of timber harvested
approximated first quarter levels. Other income was up because
of the settlement gain received in the second quarter. Interest
expense for the first quarter included $.8 million of expenses
consisting of the call premium and write-off of the remaining
deferred debt expense on retired debt. Without these charges,
interest expense for the second quarter would have been just
above first quarter levels.
Kraft Products
Shipments of kraft products for the second quarter of 1994
increased 2% compared to the first quarter, with the greatest
increase occurring in white top paperboard. Price increases were
implemented for some products, while productivity and quality
continued to improve, as second quarter production volume
approximated that of the first quarter despite a planned
maintenance outage in the second quarter. Wastepaper costs,
which began to escalate in the first quarter, continued to climb
rapidly in the second quarter, with no near-term relief in sight.
Logging expenses, which were higher than normal in the first
quarter due to exceptionally harsh weather conditions, moderated
in the second quarter. Second quarter results include a charge
related to the enhanced retirement program. Earnings of the
building products business were up 5% compared to the first
quarter. Additional sales price improvements are expected for
kraft products in the second half of the year, which should
continue the upward earnings momentum. If prices for recycled
fiber remain at current levels, costs for this raw material will
be approximately $3 million a quarter higher than at the
beginning of the year.
Tissue
Tissue shipments for the second quarter of 1994 compared to
the first quarter of 1994 were up 17%, while tissue pricing was
up 3%. Productivity gains and costs reductions continued.
13
Results of the consumer products business improved somewhat
compared to the first quarter. These factors contributed to a
77% increase in EBIT for this segment compared to the first
quarter. The third quarter is normally the seasonal peak for the
tissue business. Additional price increases implemented late in
the second quarter of 1994 are expected to result in increased
earnings for this segment, despite pressure from higher
wastepaper costs and a planned maintenance outage that are
expected to have a $3 million to $4 million negative impact on
the third quarter. Also, the third quarter will not have the
nonrecurring settlement gain realized in the second quarter.
Packaging
Sales volume for the packaging segment in the second quarter
of 1994 approximated first quarter levels, before additional
sales related to Lawless Holding Corporation. Average pricing
was about the same as in the previous quarter. Margins continued
to be under pressure for most of the quarter due to the increases
in containerboard costs. Strong growth is expected to continue
in the graphic packaging area, and both the Lawless facilities
and a new assembly plant operation are performing in line with
Company expectations.
Capital Expenditures
Capital expenditures for the second quarter of 1994 were
$11.7 million, or $1.9 million greater than first quarter 1994
spending. Capital expenditures for the first six months of 1994
were $21.5 million, down 43% compared to the first six months of
1993, as spending programs focused on smaller incremental
additions rather than large projects. Planned capital
expenditures for 1994 are expected to be $55 million to $65
million. Capital expenditures for 1993 were $64 million. The
1994 planned capital expenditures are for various operational
improvements throughout the Company, with no 1994 capital project
individually more than 5% of the total planned spending. Capital
expenditures for 1994 are expected to be financed with internally
generated funds supplemented by proceeds from borrowings.
Liquidity and Capital Structure
Working capital at the end of the second quarter of 1994 was
at approximately the same level as at the end of the first
quarter, as increases in accounts receivable were offset by
declines in inventories and increases in accounts payable.
Accounts receivable increased $9.1 million during the quarter due
to strong sales. The average collection period decreased one day
during the second quarter and is three days higher than 1993's
average. Inventories decreased $9.5 million during the second
quarter of 1994 due in part to the decline in seasonally high
first quarter inventories of tissue products. Accounts payable
increased $6.2 million during the quarter. Accounts receivable,
14
inventories and accounts payable are higher than year end levels
due in part to the inclusion of the accounts of Lawless Holding
Corporation acquired in January 1994. The ratio of current
assets to current liabilities was 2.0 at the end of second
quarter 1994 compared to 2.1 at the end of the first quarter of
1994 and 1.9 at year end 1993.
"EBIT + D" (earnings before interest and income taxes plus
non-cash charges for depreciation, cost of timber harvested and
amortization) was $35.5 million for the second quarter of 1994,
or 24% higher than $28.7 million for the second quarter of 1993.
Improved income before taxes was primarily responsible for this
increase. EBIT + D for the second quarter of 1994 was 14% higher
than EBIT + D of $31.2 million for the first quarter of 1994.
Year-to-date EBIT + D was $66.7 million, 22% higher than $54.5
million in 1993. Net cash provided by operating activities for
the second quarter of 1994 was $28.1 million, or $5.7 million
less than in the second quarter of last year. For the year-to-
date, net cash provided by operating activities was $29.5
million, or $16.5 million less than in the prior year. Compared
to 1993, improved net income was more than offset by changes in
accounts receivable, inventories and accounts payable.
During the second quarter of 1994, long-term debt decreased
by approximately $17 million primarily as a result of seasonally
lower working capital requirements. Long-term debt has increased
$32.4 million since the beginning of the year primarily because
of the acquisition of Lawless Holding Corporation. During the
first quarter Chesapeake completed the public offering of $50
million of 25-year tax exempt bonds associated with projects at
its West Point, Virginia mill. The offering consisted of $31.25
million of 6.25% bonds, the proceeds of which were used to repay
9.0% to 10.125% tax exempt bonds issued in 1984, and $18.75
million of 6.375% bonds, the proceeds of which are being used to
finance new qualified projects. The call premium and write-off
of the remaining deferred debt costs for the 1984 bonds increased
first quarter interest expense by $.8 million. Out of a total of
$60 million committed and $100 million uncommitted credit lines
available at the end of second quarter, none were utilized. The
ratio of long-term debt to total capital was 44% at the end of
second quarter 1994 compared to 45% at the end of first quarter
1994 and 46% at the end of second quarter 1993. The ratio of
long-term debt to stockholders' equity was 100% at the end of
second quarter 1994 compared to 105% at the end of first quarter
1994 and 106% at the end of second quarter 1993.
Environmental Matters
See Note 6 of the Notes to Consolidated Financial
Statements included herein.
15
PART II
Item 1. Legal Proceedings
Reference is made to Note 4 of the Notes to
Consolidated Financial Statements included herein.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11.1 - Computation of Net Income Per Share
of Common Stock.
(b) Reports on Form 8-K
None
16
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.
CHESAPEAKE CORPORATION
(Registrant)
Date: August 9, 1994 BY: /s/Christopher R. Burgess
Christopher R. Burgess
Controller
Date: August 9, 1994 BY: /s/Andrew J. Kohut
Andrew J. Kohut
Vice President - Finance &
Chief Financial Officer
17
EXHIBIT INDEX
Page
Exhibit 11.1
Computation of Net Income per Share of
Common Stock 19
18
<TABLE>
EXHIBIT 11.1
CHESAPEAKE CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE OF COMMON STOCK
FOR THE SECOND QUARTER AND YEAR TO DATE
ENDED JUNE 30,1994 AND 1993
<CAPTION>
(Share amounts in thousands, dollar amounts in millions,
except for per share amounts)
Second Quarter Year to Date
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Primary:
Weighted average number of common
shares outstanding 23,455 23,330 23,453 23,330
Net additions to common shares
assuming exercise of dilutive
options, determined by treasury
stock method 154 13 147 27
Common shares and equivalents 23,609 23,343 23,600 23,357
Net Income $ 5.6 $ 1.3 $ 8.3 $ .5
Per share amount $ .24 $ .05 $ .35 $ .02
Fully diluted:
Common shares and equivalents 23,609 23,343 23,600 23,357
Net additional common shares
issuable upon exercise of
dilutive options, determined
by treasury stock method using
period end market price, if
higher than average price 17 - 20 -
Common shares, equivalents and
other potentially dilutive
securities 23,626 23,343 23,620 23,357
Net income for fully diluted
computation $ 5.6 $ 1.3 $ 8.3 $ .5
Per share amount $ .24 $ .05 $ .35 $ .02
</TABLE>
NOTE: (a) Dilution is less than 3%
19
17
18<PAGE>
