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 June 30, 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: 1-3203
_______________________
CHESAPEAKE CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 54-0166880
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1021 East Cary Street
Richmond, Virginia 23218-2350
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: 804-697-1000
Not Applicable
(Former name, former address, and former fiscal year,
if changed since last report)
_______________________
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 / /.
Number of shares of $1.00 par value common stock outstanding as
of July 23, 1999: 21,263,438 shares.
CHESAPEAKE CORPORATION
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
INDEX
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Earnings-
Quarter and Six months ended June 30, 1999
and June 30, 1998 3
Consolidated Balance Sheets
at June 30, 1999 and December 31, 1998 5
Consolidated Statements of Cash Flows-
Six months ended June 30, 1999
and June 30, 1998 7
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 21
Item 3. Qualitative and Quantitative Disclosures
About Market Risk 29
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 29
Item 6. Exhibits and Reports on Form 8-K 29
Signature 30
-2-
PART I
CHESAPEAKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In millions, except per share data)
(Unaudited)
Quarter Ended Six Months Ended
June 30, June 30,
-------------- ----------------
1999 1998 1999 1998
------ ------ ------ ------
Net sales $327.5 $237.0 $566.6 $453.8
Costs and expenses:
Cost of products sold 237.9 170.9 408.8 325.3
Depreciation, amortization
and cost of timber
harvested 24.4 15.9 42.4 31.3
Selling, general and
administrative expenses 42.6 32.2 77.5 65.2
------ ------ ------ ------
Income from operations 22.6 18.0 37.9 32.0
Other income and expenses, net 1.6 3.9 5.4 7.2
Interest expense, net (11.4) (4.7) (17.4) (9.3)
------ ------ ------ ------
Income before taxes and
cumulative effect of
accounting change 12.8 17.2 25.9 29.9
Income taxes 4.4 6.6 9.0 11.3
------ ------ ------ ------
Income before cumulative
effect of accounting
change 8.4 10.6 16.9 18.6
Cumulative effect of accounting
change, net of income
taxes of $8.4 - - - 13.3
------ ------ ------ ------
Net income $ 8.4 $ 10.6 $ 16.9 $ 31.9
====== ====== ====== ======
-3-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS, Continued
(In millions, except per share data)
(Unaudited)
Quarter Ended Six Months Ended
June 30, June 30,
--------------------------------
1999 1998 1999 1998
------ ------ ------ ------
Basic earnings per share:
Earnings before cumulative
effect of accounting
change $ .39 $ .50 $ .79 $ .88
Cumulative effect of
accounting change, net
of income taxes - - - .62
------ ------ ------ ------
Basic earnings per share $ .39 $ .50 $ .79 $ 1.50
====== ====== ====== ======
Weighted average number of
common shares 21.3 21.1 21.3 21.2
====== ====== ====== ======
Diluted earnings per share
Earnings before cumulative
effect of accounting
change $ .39 $ .49 $ .78 $ .87
Cumulative effect of
accounting change, net
of income taxes - - - .62
------ ------ ------ ------
Diluted earnings per share $ .39 $ .49 $ .78 $ 1.49
====== ====== ====== ======
Weighted average number of
common shares and equivalents
outstanding, assuming dilution 21.6 21.5 21.6 21.5
====== ====== ====== ======
Cash dividends declared per
share of common stock $ .22 $ .20 $ .44 $ .40
====== ====== ====== ======
See accompanying notes to consolidated financial statements.
-4-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Millions of dollars)
(Unaudited)
June 30, Dec. 31,
1999 1998
---------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 18.2 $ 62.4
Accounts receivable, less allowances for
doubtful accounts (1999-$3.8; 1998-$4.1) 202.9 127.6
Inventories:
Finished goods 53.0 34.5
Work in process 45.4 27.0
Materials and supplies 53.5 41.2
------- ------
Total inventories 151.9 102.7
Deferred income taxes 12.4 12.4
Other 5.8 8.3
------- ------
Total current assets 391.2 313.4
------- ------
Property, plant and equipment, at cost 1,094.5 872.4
Less accumulated depreciation 399.9 385.9
------- ------
694.6 486.5
Timber and timberlands, net 56.4 56.7
------- ------
Net property, plant and equipment 751.0 543.2
------- ------
Goodwill and intangibles, net 263.9 52.7
Other assets 95.9 70.1
------- ------
Total assets $1,502.0 $979.4
======= ======
-5-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, Continued
(Millions of dollars, except share data)
(Unaudited)
June 30, Dec. 31,
1999 1998
---------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 95.6 $ 57.4
Accrued expenses 111.4 89.7
Current maturities of long-term debt 5.2 5.8
Dividends payable 4.7 4.7
Income taxes payable 6.3 -
------- ------
Total current liabilities 223.2 157.6
------- ------
Long-term debt 696.8 270.4
Other long-term liabilities 26.3 16.3
Postretirement benefits other than pensions 19.8 19.5
Deferred income taxes 100.8 74.3
------- ------
Total liabilities 1,066.9 538.1
------- ------
Shareholders' 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 21,261,845
in 1999 and 21,439,385 shares in 1998,
respectively 21.3 21.4
Additional paid-in capital 11.9 20.0
Accumulated other comprehensive loss (14.1) (8.7)
Retained earnings 416.0 408.6
------- ------
Total shareholders' equity 435.1 441.3
------- ------
Total liabilities and shareholders'
equity $1,502.0 $979.4
======= ======
See accompanying notes to consolidated financial statements.
-6-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of dollars)
(Unaudited)
Six Months Ended
June 30,
1999 1998
------ -------
Operating activities:
Net earnings $ 16.9 $ 31.9
Adjustments to reconcile net income to
net cash provided by operating activities:
Cumulative effect of accounting change - (21.7)
Depreciation, cost of timber harvested and
amortization of intangibles 42.4 31.3
Deferred income taxes 1.0 8.8
Gain on sale of property, plant and equipment (0.2) (1.6)
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable, net (10.5) (15.0)
Inventories (10.6) (3.3)
Other assets 2.4 (1.0)
Accounts payable (11.9) 1.7
Accrued expenses (5.6) 1.9
Income taxes payable 2.9 .5
------ ------
Net cash provided by operating activities 26.8 33.5
------ ------
Investing activities:
Purchases of property, plant and equipment (41.8) (36.6)
Acquisitions (374.2) (6.0)
Proceeds from sale of
property, plant and equipment 1.1 3.2
Other, net (2.8) (0.1)
------ ------
Net cash used in investing activities (417.7) (39.5)
------ ------
-7-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
(Millions of dollars)
(Unaudited)
Six Months Ended
June 30,
1999 1998
----- -----
Financing activities:
Net borrowings on lines of credit 36.6 4.6
Payments on long-term debt (21.8) (1.6)
Proceeds from long-term debt 360.7 .5
Purchases of outstanding common stock (13.8) (6.9)
Dividends paid (9.4) (8.5)
Debt issue costs (2.7) -
Other 1.0 4.3
------ ------
Net cash provided by (used in) financing
activities 350.6 (7.6)
------ ------
Effect of exchange rates on cash (3.9) (1.1)
Decrease in cash and cash equivalents (44.2) (14.7)
Cash and cash equivalents at beginning of
period 62.4 73.3
------ ------
Cash and cash equivalents at end of period $ 18.2 $ 58.6
====== ======
See accompanying notes to consolidated financial statements.
-8-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Unaudited)
Note 1. Summary of Significant Accounting Policies
The consolidated financial statements of Chesapeake
Corporation and subsidiaries (the "Company") included herein are
unaudited, except for the December 31, 1998, consolidated balance
sheet, and have been prepared by the Company pursuant to the
rules and regulations of the Securities and Exchange Commission.
In the opinion of management, the consolidated financial
statements reflect all adjustments, all of a normal recurring
nature, necessary to present fairly the Company's consolidated
financial position and results of operations for the interim
periods presented herein. These consolidated financial
statements should 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 1999 interim
period should not be regarded as necessarily indicative of the
results that may be expected for the entire year.
Certain prior-year data have been reclassified to conform to
the 1999 presentation.
Note 2. Adoption of Accounting Pronouncements
The Financial Accounting Standards Board has issued
Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" ("SFAS 133").
SFAS 133, which is effective for fiscal years beginning after
June 15, 2000, requires companies to record derivatives on the
balance sheet as assets or liabilities, measured at fair market
value. This standard is not expected to have a material impact
on the Company's financial statements.
Note 3. Comprehensive Income
Comprehensive income for the quarters and the six months
ended June 30, 1999 and 1998 was $2.6 million and $11.5 million
and $10.2 million and $31.1 million, respectively. The
difference between net income and comprehensive income is due to
foreign currency translation.
Note 4. Acquisitions and Dispositions
In June 1999, the Company announced that it had signed a
letter of intent with Georgia-Pacific Corporation to combine the
two companies' away-from-home tissue businesses in a new
partnership. Chesapeake will contribute the assets and certain
-9-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited),continued
Note 4. Acquisitions and Dispositions, continued
liabilities of its Tissue business to the partnership, for which
it will receive a 10 percent interest in the partnership and an
initial cash distribution of approximately $730 million. The
partnership is expected to be formed late in the third quarter or
early in the fourth quarter of 1999.
In April 1999, the Company announced that it had signed
letters of intent to sell 278,000 acres of timberlands in
Virginia, Maryland and Delaware and its building products
business (two sawmills, a lumber processing plant and a wood-chip
mill) for combined proceeds of $186 million. On July 30, 1999,
the Company completed the sale of its building products business.
that provided for a close date of July 30, 1999. The sale of
timberlands is anticipated to close in the third quarter of 1999.
On March 18, 1999, Chesapeake completed its acquisition of
substantially all of the outstanding capital shares of Field
Group plc ("Field Group"), a European specialty packaging company
headquartered in the United Kingdom. The acquisition was
effected through a tender offer by Chesapeake UK Acquisitions
plc, a wholly-owned subsidiary of Chesapeake, for all of the
outstanding capital shares of Field Group at a purchase price of
(pound) 3.60 per share. As of April 30, 1999, Chesapeake
acquired compulsorily all remaining outstanding shares of Field
Group. The final purchase price of approximately US $373.3
million was funded through a combination of approximately $316.1
million in borrowings under a new credit facility (the "Credit
Facility"), $22.2 million in unsecured loan notes ("Loan Notes")
issued to certain Field Group shareholders, and $35.0 million in
cash.
The Credit Facility consists of a $200 million 364-day
revolving credit facility (which, at Chesapeake's option, may be
converted into a two-year term loan) and a $250 million five-year
revolving credit facility. Borrowings under the Credit Facility
bear interest and incur facility fees at a variable rate per
annum, which are initially equal to an all-in cost of LIBOR plus
1.0%. The Credit Facility contains customary representations,
warranties and covenants, including covenants that require
Chesapeake to maintain certain financial ratios. In addition,
the Credit Facility includes a provision that requires Chesapeake
to apply no less than 50% of the net proceeds of any sale of its
timberlands to permanently extinguish borrowings under the 364-
day revolving credit facility. The Loan Notes bear interest at a
variable rate per
-10-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Unaudited),continued
Note 4. Acquisitions and Dispositions, continued
annum equal to the LIBOR rate for six-month sterling deposits,
and are redeemable in whole or in part at the option of the
holder on each biannual interest payment date commencing March
31, 2000. If not earlier redeemed, the Loan Notes mature on
September 30, 2006.
On May 5, 1999, the Company acquired Berry's (Holding)
Limited of Ireland ("Berry's") through Field Group. Berry's is
one of Ireland's largest suppliers of printed pharmaceutical
leaflets and self-adhesive labels and has annual net sales of
approximately $9.2 million.
The acquisitions of Field Group and Berry's have been
accounted for using the purchase method. The results of
operations of Field Group and Berry's have been included in the
consolidated statement of earnings since March 18, 1999 and May
5, 1999, respectively. The purchase price amounts for these
acquisitions have been allocated to the acquired net assets as
summarized below (in millions):
Fair value of assets acquired $553.4
Liabilities assumed or created (167.5)
Cash acquired (11.7)
------
Cash paid for acquisitions, net $374.2
======
-11-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Unaudited),continued
Note 4. Acquisitions and Dispositions, continued
Pro forma financial information reflecting the combined
results of the Company and Field Group is as follows (in
millions, except per share amounts):
Quarter Ended Six Months Ended
June 30, June 30,
---------------- ---------------
1999 1998 1999 1998
------ ------ ------ ------
Net sales $327.5 $335.1 $646.0 $657.9
Income before cumulative
effect of accounting change $8.4 $10.6 $12.0 $20.1
Net income $8.4 $10.6 $12.0 $33.4
Earnings per share before
cumulative effect of
accounting change:
Basic $0.39 $0.50 $0.56 $0.95
Diluted $0.39 $0.49 $0.56 $0.93
Net income per share:
Basic $0.39 $0.50 $0.56 $1.57
Diluted $0.39 $0.49 $0.56 $1.55
On November 20, 1998, Chesapeake Corporation acquired all of
the outstanding capital stock of Capitol Packaging Corporation, a
specialty packaging company located in Denver, Co. On February
2, 1998, Chesapeake Packaging Co. purchased substantially all of
the assets, and assumed certain liabilities, of Rock City Box
Co., Inc., located in Utica, NY. This operation manufactures
corrugated containers, trays, and pallets, as well as wood and
foam packaging products.
Note 5. Restructuring
In the fourth quarter of 1998, the Company formulated a
restructuring program which included early retirement and
voluntary severance programs (70 positions) in the Tissue
segment, and a severance program (60 positions) and 2 facility
closures in the Merchandising and Specialty Packaging segment.
At June 30, 1999, payments totaling $3.2 million have been made
primarily for the early retirement and severance programs for
approximately 85 persons, reducing the $11.8 million
restructuring accrual to $8.6 million.
-12-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Unaudited),continued
Note 6. Litigation
Wisconsin Tissue ("WT"), a wholly-owned subsidiary of the
Company, has been identified by the federal government and the
State of Wisconsin as a potentially responsible party with
respect to possible natural resource damages and Superfund
liability in the Fox River and Green Bay System. See Note 8 for
further information regarding this matter.
On May 13, 1997, the Attorney General of Florida filed a
civil complaint against WT alleging violations of antitrust laws.
The complaint also names nine other commercial and industrial
tissue manufacturers and seeks compensatory monetary damages,
civil penalties, and injunctive relief. Other private and state
civil antitrust class actions have also been filed against WT (or
against the Company, identifying WT as a "division" of the
Company) and against the other defendants. WT and the Company
believe that WT has valid defenses to the plaintiffs' claims and
are defending the actions vigorously.
The Company is a party to various other legal actions that
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, results of
operations, or cash flows.
Note 7. Income Taxes
The Company's effective income tax rate was 35% for the six
months ended June 30, 1999 and 37.5% for the six months ended
June 30, 1998. The decrease in the Company's effective income
tax rate is primarily due to the acquisition of businesses in
countries which have a lower effective tax rate.
Note 8. Environmental Matters
Chesapeake has a strong commitment to protecting the
environment. The Company has an environmental audit program to
monitor compliance with environmental laws and regulations. The
Company is committed to abiding by the environmental, health and
safety principles of the American Forest & Paper Association.
Each expansion project has been planned to comply with applicable
environmental regulations and to enhance environmental protection
at existing facilities. The Company
-13-
CHESAPEAKE CORPORATION AND SUBSIDIARIES
Notes To Consolidated Financial Statements (Unaudited),continued
Note 8. Environmental Matters, continued
faces increasing capital expenditures and operating costs to
comply with expanding and more stringent environmental
regulations, although compliance with existing environmental
regulations is not expected to have a materially adverse effect
on the Company's earnings, financial position, or competitive
position.
The Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") and similar state "Superfund" laws
impose liability, without regard to fault or to the legality of
the original action, on certain classes of persons (referred to
as potentially responsible parties or "PRPs") associated with a
release or threat of a release of hazardous substances into the
environment. Financial responsibility for the clean-up or other
remediation of contaminated property or for natural resource
damages can extend to previously owned or used properties,
waterways, and properties owned by third parties, as well as to
properties currently owned and used by a company even if
contamination is attributable entirely to prior owners. As
discussed below, the U.S. Environmental Protection Agency ("EPA")
has given notice of its intent to list the lower Fox River in
Wisconsin on the National Priorities List under CERCLA and has
identified WT as a PRP.
Except for the Fox River matter, the Company has not been
identified as a PRP at any CERCLA-related sites. However, there
can be no assurance that the Company will not be named as a PRP
at any other sites in the future, or that the costs associated
with additional sites would not be material to the Company's
financial position, liquidity or results of operations.
In June 1994, the United States Department of Interior, Fish
and Wildlife Service ("FWS"), a federal natural resources
trustee, notified WT that it had identified WT and four other
companies located along the lower Fox River in northeast
Wisconsin as PRPs for purposes of natural resources liability
under CERCLA arising from alleged releases of polychlorinated
biphenyls ("PCBs") in the Fox River and Green Bay System. Two
other companies subsequently received similar notices from the
FWS. The FWS and other governmental and tribal entities,
including the State of Wisconsin, allege that natural resources,
including endangered species, fish, birds, tribal lands, or lands
held by the United States in trust for various Indian tribes,
have been exposed to PCBs that were released from facilities
located along the lower Fox River. The FWS is
-14-
CHESAPEAKE CORPORATION AND ITS SUBSIDIARIES
Notes To Consolidated Financial Statements (Unaudited),continued
Note 8. Environmental Matters, continued
proceeding with a natural resource damage assessment with respect
to the alleged discharges. On January 31, 1997, the FWS notified
WT of its intent to file suit, subject to final approval by the
Department of Justice, against WT to recover alleged natural
resource damages. WT and other PRPs are engaged in discussions
with the parties asserting trusteeship of the natural resources
concerning the damage assessment and the basis for resolution of
the natural resource damage claims.
WT and other PRPs are also engaged in discussions with the
State of Wisconsin with respect to resolving possible state
claims concerning remediation, restoration and natural resource
damages related to the alleged discharge of PCBs into the Fox
River and Green Bay System. Under an interim agreement with the
State of Wisconsin, the PRPs are providing funds for an interim
phase of resource damage assessment and restoration work. WT's
obligation under the agreement is not material to the Company's
financial position, liquidity or results of operations.
On June 18, 1997, the EPA announced that it was initiating
the process of listing the lower Fox River on the CERCLA National
Priorities List of hazardous waste sites. The EPA identified
several PRPs, including WT.
On February 26, 1999, the Wisconsin Department of Natural
Resources ("DNR") released for public comment a draft remedial
investigation/feasibility study ("RI/FS") for the lower Fox River
site. In the draft RI/FS, the DNR reviewed and summarized
several categories of possible remedial alternatives for the
site, estimated to cost in the range of $143 million to $721
million, but did not identify a preferred remedy. (As required
by applicable regulations, the draft RI/FS also includes a "no
action" alternative that does not entail remediation costs, but
the Company does not believe that the "no action" alternative
will be selected). There can be no assurance that many of the
cost estimates in the draft RI/FS will not differ significantly
from actual costs. The Company submitted timely comments on the
draft RI/FS both individually and in conjunction with other PRPs.
After finalizing the RI/FS, the DNR and the EPA are expected to
announce a preferred remedial alternative in a Proposed Remedial
Action Plan. The Proposed Remedial Action Plan will be subject to
a public comment period, and enforcement of any definitive
Remedial Action Plan may be subject to judicial review.
-15-
CHESAPEAKE CORPORATION AND ITS SUBSIDIARIES
Notes To Consolidated Financial Statements (Unaudited),continued
Note 8. Environmental Matters, continued
The largest components of the costs of the more expensive
clean-up alternatives presented in the draft RI/FS are
attributable to large-scale sediment removal, treatment and
disposal. Based on current information and advice from its
environmental consultants, WT believes that an aggressive effort
to remove substantial amounts of PCB-contaminated sediments (most
of which are buried under cleaner material or are otherwise
unlikely to move), as contemplated by certain alternatives
presented in the draft RI/FS, would be environmentally
detrimental and therefore inappropriate. Instead, WT believes
that less intrusive alternatives are more environmentally
appropriate, cost effective and responsible methods of managing
risks attributable to sediment contamination.
The ultimate cost to WT associated with this matter cannot
be predicted with certainty at this time, due to uncertainties
with respect to: which, if any, of the remedial alternatives
presented in the draft RI/FS will be implemented, and
uncertainties associated with the actual costs of each of the
potential alternatives; the outcome of the federal and state
natural resource damage assessments; WT's share of any multi-
party clean-up/restoration expenses; the timing of any clean-
up/restoration; the evolving nature of clean-up/restoration
technologies and governmental regulations; controlling legal
precedent; the extent to which contribution will be available
from other parties; and the scope of potential recoveries from
insurance carriers and prior owners of WT. While such costs
cannot be predicted with certainty at this time, the Company
believes that the ultimate clean-up/restoration costs associated
with the lower Fox River site may exceed $100 million for all
PRPs in the aggregate. Under CERCLA, each PRP generally will be
jointly and severally liable for the full amount of the clean-up
costs, subject to a right of contribution from the other PRPs.
In practice, PRPs generally negotiate among themselves to
determine their respective contributions to any multi-party
cleanup/restoration, based upon factors including their
respective contributions to the alleged contamination and their
ability to pay. Based on presently available information, the
Company believes that several of the named PRPs will be able to
pay substantial shares toward remediation and restoration, and
that there are additional parties, some of which have substantial
resources, that may also be jointly and severally liable.
-16-
CHESAPEAKE CORPORATION AND ITS SUBSIDIARIES
Notes To Consolidated Financial Statements (Unaudited),continued
Note 8. Environmental Matters, continued
The Company also believes that it is entitled to substantial
indemnification from a prior owner of WT, pursuant to a stock
purchase agreement between the parties, with respect to
liabilities related to this matter. The Company believes that
the prior owner intends to, and has the financial ability to,
honor its indemnification obligation under the stock purchase
agreement.
Based on presently available information, the Company
believes that if any remediation/restoration is done in an
environmentally appropriate, cost effective and responsible
manner, the matter is unlikely to have a material adverse effect
on the Company's financial position, liquidity or results of
operations. However, because of the uncertainties described
above, there can be no assurance that WT's ultimate liability
with respect to the lower Fox River site will not have a material
adverse effect on the Company's financial position, liquidity or
results of operations. The Company's letter of intent with
Georgia-Pacific concerning the proposed tissue partnership
contemplates that the Company will retain the liability related
to the lower Fox River site and the related third party indemnity
rights.
The EPA has stated its intent to develop additional 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 eventual capital cost impact on
the Company of compliance with the additional 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.
In March 1998, WT's Chicago, IL tissue mill received a
Notice of Violation ("NOV") from EPA alleging violation of the
Illinois State Implementation Plan as adopted pursuant to the
Clean Air Act ("CAA"). The alleged violation involves the
emission of volatile organic material. WT is in the process of
negotiating a possible resolution of the alleged violation with
EPA. The ultimate cost to WT, if any, associated with the
alleged violation cannot be determined with certainty at this
time due to the absence of a determination that there has been a
violation, and, if a violation is found to have occurred, a
determination of the appropriate capture and control techniques
-17-
CHESAPEAKE CORPORATION AND ITS SUBSIDIARIES
Notes To Consolidated Financial Statements (Unaudited),continued
Note 8. Environmental Matters, continued
or other corrective action and the cost thereof, and the amount
of any penalties imposed by EPA. WT believes that it is entitled
to significant indemnification for costs or expenses incurred
with regard to this matter from the prior owner of the Chicago
mill and that the prior owner has the financial ability to honor
its indemnification obligation.
On April 19, 1999, the EPA and the Virginia Department of
Environmental Quality ("DEQ") each issued NOVs under the CAA
against St. Laurent Paper Products Corp. ("St. Laurent") (and, in
the case of EPA's NOV, Chesapeake Corporation) relating to St.
Laurent's kraft products mill located in West Point, Virginia
(the "Mill"). St. Laurent is the successor to Chesapeake Paper
Products, L.L.C. which, as owner of the Mill, was sold by
Chesapeake Corporation to St. Laurent Paperboard (U.S.) Inc.
("St. Laurent (U.S.)") in May 1997 pursuant to a Purchase
Agreement dated as of April 30, 1997 by and among Chesapeake
Corporation, St. Laurent Paperboard Inc. and St. Laurent (U.S.)
(the "Purchase Agreement"). In general, the NOVs
allege that from 1984 to the present the Mill installed certain
equipment and modified certain production processes without
obtaining required permits. Under applicable law, the EPA and
DEQ may commence a court action with respect to the matters
alleged in the NOVs seeking injunctive relief to compel
compliance with the CAA, and a court may impose civil penalties
of up to $25,000 per day of violation ($27,500 per day for
violations after January 30, 1997) for violations of the CAA
(provided that a court, in determining the amount of any penalty
to be assessed, shall take into consideration, among other
things, the size of the business, the economic impact of the
penalty on the business, the business' compliance history and
good faith efforts to comply, the economic benefit to the
business of noncompliance and the seriousness of the violation).
The Purchase Agreement provides that Chesapeake Corporation will
indemnify St. Laurent against any violations of applicable
environmental laws (including the CAA) that existed at the Mill
as of the date of the Purchase Agreement and as of the May 1997
closing date (and any other such violations that existed prior to
such dates as to which Chesapeake had "knowledge," as defined in
the Purchase Agreement). Chesapeake's indemnification obligation
to St. Laurent with respect to such matters is capped at $50
million and, in certain circumstances, is subject to a $2.0
million deductible. The Company is cooperating with St. Laurent
to analyze, respond to, and defend against the matters alleged in
the NOVs. Based upon an initial review of the NOVs,
-18-
CHESAPEAKE CORPORATION AND ITS SUBSIDIARIES
Notes To Consolidated Financial Statements (Unaudited),continued
Note 8. Environmental Matters, continued
the Company believes that both it and St. Laurent have
substantial defenses against the alleged violations. The Company
and St. Laurent intend to work with EPA and DEQ to address the
matters that are the subject of the NOVs and, if necessary,
to defend vigorously against the allegations. The ultimate cost,
if any, to the Company relating to matters alleged in the NOVs
cannot be determined with certainty at this time due to the
absence of a determination that any violations of the CAA
occurred and, if any violations are ultimately found to have
occurred, a determination of (i) any required remediation costs
and penalties and (ii) whether St. Laurent would be entitled to
indemnification from the Company under the Purchase Agreement.
Note 9. Segment Disclosure
Second Quarter Year-to-Date
-------------- -------------
1999 1998 1999 1998
Net sales: ---- ---- ---- ----
Merchandising and Specialty
Packaging $114.3 $111.5 $227.4 $215.8
European Specialty Packaging 89.6 - 105.0 -
Tissue 108.2 113.4 207.0 215.1
Forest Products/Land Development 15.4 12.1 27.2 22.9
------ ------ ------ ------
$327.5 $237.0 $566.6 $453.8
====== ====== ====== ======
Earnings before interest and
taxes (EBIT):
Merchandising and Specialty
Packaging $ 1.9 $ 1.7 $ 3.9 $ 2.5
European Specialty Packaging 5.8 - 6.4 -
Tissue 17.8 18.4 33.3 33.8
Forest Products/Land Development 3.4 5.6 8.1 8.9
Corporate (4.7) (3.8) (8.4) (6.0)
------ ------ ------ ------
$ 24.2 $ 21.9 $ 43.3 $ 39.2
====== ====== ====== ======
-19-
CHESAPEAKE CORPORATION AND ITS SUBSIDIARIES
Notes To Consolidated Financial Statements (Unaudited),continued
Note 9. Segment Disclosure, continued
June 30, June 30,
1999 1998
Identifiable assets: -------- ------
Merchandising and Specialty Packaging $ 338.4 $298.6
European Specialty Packaging 534.0 -
Tissue 458.1 453.1
Forest Products/Land Development 119.8 120.1
Corporate 51.7 77.2
-------- ------
$1,502.0 $949.0
======== ======
Chesapeake conducts its business in four segments. The
Company's Merchandising and Specialty Packaging segment produces
and sells point-of-sale displays, graphic packaging and
corrugated shipping containers. The European Specialty Packaging
segment is comprised of the Field Group operations which produces
folding cartons for food and consumer and pharmaceutical and
healthcare companies. The results of operations of Field Group
are included in the consolidated segment results since
March 18, 1999, the acquisition date (See Note 4). The Company's
Tissue segment is composed of commercial and industrial tissue
operations of Wisconsin Tissue and Wisconsin Tissue de Mexico.
The Forest Products/Land Development segment manages the Company's
timberlands and real estate holdings. There were no intersegment
sales for the six months ended June 30, 1999 and June 30, 1998.
-20-
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
Net sales for the quarter ended June 30, 1999, were $327.5
million, up $90.5 million compared with second quarter net sales
of $237.0 million in 1998. Net sales for the six months ended
June 30, 1999, of $566.6 million compared to net sales of $453.8
million for the comparable 1998 period. Excluding the sales of
Field Group, net sales for the 1999 periods, compared to the
prior year, were flat on a quarterly basis and up approximately
2% on a year-to-date basis.
Net income for the quarter ended June 30, 1999, was $8.4
million, or $.39 per diluted share, compared with 1998 second
quarter net income of $10.6 million or $.49 pr diluted share.
Net income for the six months ended June 30, 1999, was $16.9
million, or $.78 per diluted share, compared with 1998 second
quarter reported net income, before the cumulative effect of an
accounting change, of $18.6 million, or $.87 per diluted share.
The decrease in net income was primarily the result of higher raw
material costs in the Merchandising and Specialty Packaging
segment, lower gains on bulk land sales and increased interest
costs on outstanding debt. Interest expense has increased due to
additional borrowings in 1999, primarily to finance the Field
Group acquisition.
Net income for the six months ended June 30, 1998, including
the cumulative effect of an accounting change of $13.3 million,
net of taxes, was $31.9 million, or $1.49 per diluted share. The
change in accounting consisted of the capitalization of certain
timber reforestation costs that were previously expensed in
order to achieve better matching of those costs with the
revenues realized from the eventual harvesting of the timber.
Other income and expenses, net decreased $2.3 million and
$1.8 million for the quarter and six months ended June 30, 1999,
respectively, compared to the same periods in 1998, primarily as
a result of reduced bulk land sales and a gain on the sale of a
corporate aircraft of $1.5 million ($.04 per diluted share after
taxes) in the first quarter of 1998.
Restructuring
In the fourth quarter of 1998, the Company formulated a
restructuring program which included early retirement and
voluntary severance programs (70 positions) in the Tissue
segment, and a severance program (60 positions) and 2 facility
-21-
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
closures in the Merchandising and Specialty Packaging segment.
During the six months ended June 30, 1999, payments totaling $3.2
million have been made primarily for the early retirement and
severance programs for approximately 85 persons. The Company
expects to utilize the remaining $8.6 million restructuring
reserve consistent with the restructuring plan set forth in
December of 1998.
Segment Information
Merchandising and Specialty Packaging
Increase/(Decrease)
(dollars in millions) 1999 1998 $ %
- ----------------------------------------------------------------
Second quarter:
Net sales $114.3 $111.5 $2.8 2.5%
EBIT 1.9 1.7 0.2 11.8%
Operating margin 1.7% 1.5% 13.3%
Six months:
Net sales 227.4 215.8 11.6 5.4%
EBIT 3.9 2.5 1.4 56.0%
Operating margin 1.7% 1.2% 41.7%
================================================================
Net sales for the second quarter and first half of 1999
increased primarily due to higher point-of-purchase display and
graphic packaging volume, partially offset by modestly lower
average selling prices. The increase in EBIT and operating margin
for the quarter and six months reflected sales volume growth,
ongoing cost reductions, and improved operating efficiencies,
partially offset by lower corrugated container margins driven by
higher raw material costs.
European Specialty Packaging
The European Specialty Packaging segment includes the
results of Field Group, which has been consolidated since the
date of acquisition, March 18, 1999. Sales and EBIT for this
segment were $89.6 million and $5.8 million, respectively, for
the second quarter of 1999. On a pro forma basis Field Group's
second quarter sales were down approximately 8.7% year over year
due to lower volume and selling prices, particularly in Field
Group's Asian markets. Field's operating margin in the second
quarter of 6.5% was up slightly from the pro forma margin for the
second quarter of 1998.
-22-
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
Tissue
Increase/(Decrease)
(dollars in millions) 1999 1998 $ %
- ----------------------------------------------------------------
Second quarter:
Net sales $108.2 $113.4 $(5.2) (4.6%)
EBIT 17.8 18.4 (0.6) (3.3%)
Operating margin 16.5% 16.2% 1.9%
Six months:
Net sales 207.0 215.1 (8.1) (3.8%)
EBIT 33.3 33.8 (0.5) (1.5%)
Operating margin 16.1% 15.7% 2.5%
================================================================
The decrease in sales for the quarter and six months ended
June 30, 1999, compared to the prior year periods reflected a one
percent decline in average tissue selling prices and lower parent
roll volume, offset slightly by higher converted tissue volume.
The EBIT impact of lower sales was somewhat offset by the
combination of favorable raw materials yield and improved
converting efficiencies. Operating margin improvements reflected
improved converting efficiencies and changes in product mix. See
Note 4 regarding the planned contribution of the Tissue business
to a partnership with Georgia-Pacific Corporation.
Forest Products/Land Development
Increase/(Decrease)
(dollars in millions) 1999 1998 $ %
- ----------------------------------------------------------------
Second quarter:
Net sales $15.4 $12.1 $3.3 27.3%
EBIT 3.4 5.6 (2.2) (39.3%)
Operating margin 22.1% 46.3% (52.3%)
Six months:
Net sales 27.2 22.9 4.3 18.8%
EBIT 8.1 8.9 (0.8) (9.0%)
Operating margin 29.8% 38.9% (23.4%)
================================================================
Net sales increases in 1999 for the quarter and six months
compared to the prior year periods were primarily due to higher
lumber sales volume, offset in part by lower lumber pricing.
EBIT and operating margin decreases in the second quarter of 1999
resulted from a reduction in bulk land sales. See Note 4
regarding the planned sale of 278,000 acres of timberlands and
the July 30, 1999, sale of the segment's building products
business.
-23-
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
Liquidity and Financial Position
Net cash provided by operating activities decreased in the
six months ended June 30, 1999, compared to the six months ended
June 30, 1998, primarily due to increases in working capital
caused by the timing of accounts payable cutoff. The working
capital increases were partially offset by improvements in
EBITDA, a measure of internal cash flow combining EBIT plus
depreciation, amortization and cost of timber harvested. EBITDA
of $85.7 million for the six months ended June 30, 1999, was 22%
higher than EBITDA of $70.5 million for the six months ended June
30, 1998. The ratio of current assets to current liabilities of
1.75 at June 30, 1999, decreased from 2.29 at June 30, 1998. The
changes in EBITDA and the current ratio are primarily due to the
purchase of Field Group.
Net cash used in investing activities for the first six
months of 1999 was $417.7 million compared to $39.5 million in
the first six months of 1998, which primarily reflects the cash
utilized to acquire Field Group. Capital spending increased
primarily due to the continued implementation of improved
information systems throughout the Company.
Cash provided by financing activities in 1999 was $350.6
million compared to a $7.6 million use of cash in 1998, due to
the funding of the Field Group acquisition and the open market
repurchase of the Company's common stock. In January 1999, the
Company entered into a new $450 million bank credit facility
which included a 364-day $200 million revolving line of credit,
which is convertible at the Company's option to a two-year term
loan, and a five-year $250 million revolving line of credit. This
credit facility was used primarily to fund the acquisition of
Field Group. With this increase in debt, Chesapeake's net debt-
to-capital ratio was 56 percent as of June 30, 1999, compared to
29 percent as of June 30, 1998.
In June 1999, the Company announced that it had signed a
letter of intent with Georgia-Pacific Corporation to combine the
two companies' away-from-home tissue businesses in a new
partnership. Chesapeake will contribute the assets of its
Wisconsin Tissue business to the partnership, for which it will
receive a 10 percent interest in the partnership and an initial
cash distribution of approximately $730 million. The partnership
is expected to be formed late in the third quarter or early in
the fourth quarter of 1999.
In April 1999, the Company announced it had signed letters
-24-
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
of intent to sell 278,000 acres of timberlands and its building
products business (two sawmills, a lumber processing plant and a
wood-chip mill) for combined proceeds of $186 million. On July
30, 1999, the Company completed the sale of it building products
business. The sale of timberlands is anticipated to close in the
third quarter of 1999.
The Company expects to use the cash received from its sale
of its building products business, its pending sale of
timberlands, and its pending partnership with Georgia-Pacific to
repurchase outstanding shares, significantly reduce its debt, and
continue the growth of its specialty packaging business through
strategic acquisitions and alliances.
Management believes that its existing cash position and
other available sources of liquidity are sufficient to meet
current and anticipated requirements for the foreseeable future.
Outlook
The following statements reflect management's outlook for
the Company as of July 20, 1999. These statements do not reflect
the potential impact of any mergers, acquisitions, divestitures,
or other structural changes in the Company's business, and are
subject to certain risks and uncertainties, including those
listed under the caption "Forward-Looking Statements" on page 27
of this report. The outlook includes the expected 1999 impact of
the Field Group acquisition.
- -The Company expects revenue for 1999 to be in the $1.2 billion
to $1.3 billion range, up compared to 1998 primarily as a result
of the acquisition of Field Group.
- -The Company's effective income tax rate in 1999 is expected to
be 35 percent, down slightly from the previous outlook, due to a
lower effective tax rate in Europe.
- -Capital spending, excluding acquisitions, for 1999 is expected
to be approximately $90 million, compared to $73 million in 1998,
due primarily to expected capital spending by Field Group.
- -Depreciation, depletion, and amortization is expected to be
approximately $90 million in 1999, up from $62 million in 1998,
due primarily to the acquisition of Field Group.
- -Earnings per share expectations for 1999 are expected to be in
the range of $2.15 to $2.35 per diluted share. However, if the
partnership with Georgia-Pacific is formed late in the third
quarter, the Company expects a negative impact on earnings per
diluted share of $.20 to $.25
-25-
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS,
CONTINUED
Year 2000
In 1997, Chesapeake established a plan intended to address
the impact of the Year 2000 problem on its internal systems and
facilities, as well as its key suppliers and customers. The
project consists of the following four phases:
- -Phase 1 - inventory and analysis of key business systems and
infrastructure for Year 2000 problems. Phase 1 was completed in
July 1997.
- -Phase 2 - remediation of non-compliant systems. As discussed
below, the remediation of systems which are mission critical and
which affect production was completed in July 1999; the
remediation of non-critical ancillary systems is scheduled to be
completed by October 1, 1999.
- -Phase 3 - testing of mission critical systems. This phase is in
process and is scheduled to be completed by October 1, 1999.
- -Phase 4 - development of contingency plans. This phase has also
begun. As discussed below, the Company expects that its
contingency plans will be fully developed by October 1, 1999.
The Company's Year 2000 team consists of location and
business unit Year 2000 coordinators and project managers who,
for the purpose of this project, report and are accountable to
the Company's Chief Financial Officer.
State of Readiness
Most of the Company's mission critical business systems
utilize packaged applications, which are purchased from third
party software vendors. As part of its overall business
strategy, the Company is installing new integrated Enterprise
Resource Planning ("ERP") software that is expected to provide
enhanced reporting and operational benefits. The installation of
Year 2000 compliant ERP software is also the principal element
of the Company's Year 2000 remediation plan. The Company's
Tissue segment implemented Year 2000 compliant ERP software in
April 1999. Chesapeake's other business segments and corporate
headquarters have completed or are finalizing the installation
of Year 2000 compliant ERP software. Those installations are
approximately 95% complete as of July 1999, and are scheduled to
be completed at all locations by September 1, 1999. The Company
is in the process of integrated validation and testing of all
mission critical systems. The testing is anticipated to be
completed by October 1, 1999.
-26-
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
In addition to the installation of Year 2000 compliant ERP
software, the Company's remediation efforts include the upgrading
or replacement of proprietary computer software systems
(primarily in the Tissue segment), and the upgrading or
replacement of computer hardware, machinery, and equipment;
process control systems; security systems; and telecommunications
equipment. The Company has completed the process of upgrading or
replacing these systems and equipment, as necessary for Year 2000
compliance.
Cost to Address Year 2000 Readiness
The cost of installing the new ERP software, no material
portion of which relates specifically to achieving Year 2000
compliance, is expected to be approximately $20 million. Of this
amount, approximately $16 million is expected to be capitalized,
with approximately $8.6 million capitalized during the Company's
fiscal year ending December 31, 1998. To date, the Company has
incurred approximately $19.6 million of the expected ERP
implementation cost. Other specifically identifiable costs
related to Year 2000 compliance are in the range of $2-3 million,
approximately $2.5 million of which has been incurred to date.
Field Group has incurred costs of $0.4 million out of anticipated
total costs of $0.5 million. The Company expects to fund the
remaining costs associated with its Year 2000 compliance program
with cash generated from operations. Management does not believe
that any of Chesapeake's material information technology projects
have been deferred due to the Company's Year 2000 compliance
efforts.
Because of the interdependence of information systems today,
Year 2000 compliant companies may be affected by the Year 2000
readiness of their material suppliers, customers, and other third
parties. As part of Chesapeake's evaluation of the Year 2000
readiness of its suppliers, customers, and other third parties,
the Company has contacted substantially all of its critical
suppliers to request written assurance that they have
Year 2000 readiness programs in place as well as an affirmation
that they will be compliant when necessary. Responses to these
inquiries continue to be gathered and reviewed. To date, no such
parties have informed the Company that they do not expect to be
Year 2000 compliant in a timeframe that would expose Chesapeake
to material business risks. Further analysis and follow-up is
being conducted as necessary. Although management has not yet
determined the risk associated with the failure of any such party
to become Year 2000 compliant, the Company can provide no
assurance that such failure would not have a material adverse
-27-
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
effect on the Company's results of operations, financial position
or cash flows. However, in an effort to minimize such risks, in
most cases (with utilities and banking institutions as notable
exceptions), the Company utilizes multiple suppliers of goods and
services and is prepared to substitute suppliers if one or more
have Year 2000 related difficulties.
Business Continuity and Contingency Planning
The ultimate effects on the Company or its suppliers or
customers of not being fully Year 2000 compliant cannot be
reasonably estimated. While Chesapeake believes its efforts are
adequate to address its Year 2000 concerns, the Company could
experience a material adverse effect on its results of
operations, financial position, or cash flows if its Year 2000
compliance schedule is not met, if the remaining costs to
remediate the Company's Year 2000 issues materially exceed
current estimates, or if material suppliers, customers, or other
businesses encounter serious problems in their Year 2000
remediation efforts. Therefore, the Company is in the process of
developing plans to address such contingencies, with a focus on
mission critical applications and material suppliers. Such
contingency plans may include the development of back-up
procedures, the purchase of additional inventory, and the
utilization of alternate suppliers. The Company expects to
complete its contingency plans by October 1, 1999.
Accounting Pronouncements
See Note 2 to Consolidated Financial Statements.
Forward-Looking Statements
Forward-looking statements in the foregoing Management's
Discussion and Analysis of Financial Condition and Results of
Operations include statements that are identified by the use of
words or phrases including, but not limited to, the following:
"will likely result", "expected to", "will continue", "is
anticipated", "estimated", "project", "believe" and words or
phrases of similar import. Changes in the following important
factors, among others, could cause Chesapeake's actual results to
differ materially from those expressed in any such forward-
looking statements: competitive products and pricing; production
costs, particularly for raw materials such as waste paper and
corrugated box and display materials; fluctuations in demand;
governmental policies and regulations affecting the environment;
-28-
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
interest rates; currency translation movements; Year 2000
compliance issues; and other risks that are detailed from time to
time in reports filed by the Company with the Securities and
Exchange Commission.
Item 3. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET
RISK
None.
PART II
Item 1. Legal Proceedings
Reference is made to Note 7 of the Notes to
Consolidated Financial Statements included herein.
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibits:
27.1 - Financial Data Schedule - 1999
27.2 - Restated Financial Data Schedule - 1998
(b)Reports on Form 8-K:
(i)Current Report dated March 18, 1999, filed May 28, 1999,
reporting, under Item 7, financial statements and unaudited
pro forma financial information related to the
acquisition of Field Group plc.
-29-
SIGNATURE
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 3, 1999 BY: /s/ William T. Tolley
William T. Tolley
Senior Vice President -
Finance & Chief
Financial Officer
-30-
EXHIBIT INDEX
EXHIBIT
- -------
27.1 Financial Data Schedule - 1999 *
27.2 Restated Financial Data Schedule - 1998 *
* Filed herewith
-31-
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<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 18,200,000
<SECURITIES> 0
<RECEIVABLES> 202,900,000
<ALLOWANCES> 3,800,000
<INVENTORY> 151,900,000
<CURRENT-ASSETS> 391,200,000
<PP&E> 1,094,500,000
<DEPRECIATION> 399,900,000
<TOTAL-ASSETS> 1,502,000,000
<CURRENT-LIABILITIES> 223,200,000
<BONDS> 696,800,000
0
0
<COMMON> 21,300,000
<OTHER-SE> 413,800,000
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<TOTAL-COSTS> 528,700,000
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<INCOME-TAX> 9,000,000
<INCOME-CONTINUING> 16,900,000
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,900,000
<EPS-BASIC> .79
<EPS-DILUTED> .78
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 58,600,000
<SECURITIES> 0
<RECEIVABLES> 127,800,000
<ALLOWANCES> 5,900,000
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0
0
<COMMON> 21,200,000
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<TOTAL-LIABILITY-AND-EQUITY> 949,000,000
<SALES> 453,800,000
<TOTAL-REVENUES> 453,800,000
<CGS> 325,300,000
<TOTAL-COSTS> 421,800,000
<OTHER-EXPENSES> 7,200,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,300,000
<INCOME-PRETAX> 29,900,000
<INCOME-TAX> 11,300,000
<INCOME-CONTINUING> 18,600,000
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<CHANGES> 13,300,000
<NET-INCOME> 31,900,000
<EPS-BASIC> 1.50
<EPS-DILUTED> 1.49
</TABLE>
