Chesapeake Corporation Announces Restructuring Plan

(Richmond, Va.)--Chesapeake Corporation (NYSE:CSK) today announced a restructuring program consistent with the Company's intention to reduce corporate overhead and rationalize its manufacturing network after undertaking a series of acquisitions in Europe over the past two years.

Chesapeake's Chairman, President and Chief Executive Officer Thomas H. Johnson explained, "These actions are consistent with our intention to reduce costs while we continue to optimize our manufacturing network. The savings from our planned restructuring will significantly enhance the competitiveness and productivity of Chesapeake's operations."

The restructuring actions will result in a non-recurring, after-tax charge of approximately $4.8 million (approximately $.32 per diluted share) in the third quarter of 2001 and an additional, not yet determined, charge in the fourth quarter of 2001.

The restructuring program is comprised of the following:

In the third quarter, 2001, an after-tax charge of approximately $3.4 million will be recognized for costs associated with a salaried staff reduction of approximately 50 positions at corporate headquarters in Richmond, Virginia, achieved primarily through a voluntary separation program. The voluntary separation program benefits will be funded by surplus assets of the Company's U.S. defined benefit salaried pension plan. Approximately 80 percent of the staff reductions are expected to be complete by the end of 2001, with the remainder to be completed during the first quarter of 2002. Costs of approximately $1.4 million after taxes will also be recognized in the third quarter, 2001, for the consolidation of corporate office sites in Richmond and the reduction of the carrying value of a corporate aircraft that is expected be sold in the fourth quarter of 2001. The salaried staff reduction is expected to generate annualized pretax savings of $5-6 million (approximately $.20-.25 per diluted share).
In the fourth quarter, 2001, Chesapeake expects to record additional restructuring charges. The Company is considering proposals to reduce the manufacturing capacity of two carton factories in Scotland and is consulting with employee representatives in relation to these proposals.

Additional capacity reductions in the Company's plants are also under consideration. The Company will record restructuring provision during the fourth quarter for costs associated with workforce and capacity reductions after employee representatives have been consulted. Savings related to these actions will be announced in the fourth quarter of this year.

The Company also expects to complete the sale of its Thatcham, England factory in the fourth quarter. The Thatcham factory was closed at the end of 2000 as part of a restructuring provision recorded in the fourth quarter, 2000.

Johnson said, "It is essential for us to find the best way to balance capacity and make the most efficient use of available assets, while ensuring customer service is maintained at the highest levels. These actions are important steps towards these objectives."

Chesapeake Corporation, headquartered in Richmond, Va., is a global leader in specialty packaging. Chesapeake is a leading European folding carton, leaflet and label supplier and a leader in plastics packaging for niche markets. Chesapeake has over 50 locations in North America, Europe, Africa and Asia. Chesapeake's website is www.cskcorp.com.

This news release, including comments by Thomas H. Johnson, contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The accuracy of such statements is subject to a number of risks, uncertainties and assumptions that may cause Chesapeake's actual results to differ materially from those expressed in the forward-looking statements including, but not limited to: competitive products and pricing; production costs, particularly for raw materials such as folding carton and plastic materials; fluctuations in demand; government policies and regulations affecting the environment; interest rates; fluctuations in foreign exchange rates; the ability of the Company to remain in compliance with its debt covenants; and other risks that are detailed from time to time in reports filed by the Company with the Securities and Exchange Commission. Chesapeake does not undertake any duty to update any forward-looking statements in this news release and encourages users of this release to review public disclosure by Chesapeake subsequent to the date of this release.

# # #