8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: May 7, 2008
(Date of Earliest Event Reported)
Commission file number: 1-3203
CHESAPEAKE CORPORATION
(Exact name of registrant as specified in its charter)
Virginia	54-0166880
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1021 East Cary Street
Richmond, Virginia	23219
(Address of principal executive offices)	(Zip Code)
Registrant's telephone number, including area code: 804-697-1000
Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ]Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ]Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ]Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ]Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02  RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On May 7, 2008, Chesapeake Corporation (the "Company" or "Chesapeake") issued a press release announcing first quarter 2008 results.  The information contained in the press release, which is attached as Exhibit 99.1 to this report, is incorporated herein by reference.  On May 7, 2008 Chesapeake held a conference call with investors to discuss the first quarter 2008 results.  The manuscript of this conference call, which is attached as Exhibit 99.2 to this report, is incorporated herein by reference. The information in this Form 8-K and the exhibits attached shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing made by Chesapeake under the Securities Act of 1933, as amended.
ITEM 9.01  FINANCIAL STATEMENTS AND EXHIBITS
(c)	Exhibits
	99.1	Press release, issued on May 7, 2008, announcing first quarter 2008 results
	99.2	Manuscript for conference call held on May 7, 2008, discussing first quarter 2008 results

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:  May 7, 2008	BY:	/s/ Joel K. Mostrom
		Joel K. Mostrom
		Executive Vice President & Chief Financial Officer

EXHIBIT INDEX
Exhibit No.	Description of Exhibit
99.1	Press release, issued on May 7, 2008, announcing first quarter 2008 results
99.2	Manuscript for conference call held on May 7, 2008, discussing first quarter 2008 results

EX-99.1

Exhibit 99.1

NEWS RELEASE

For Immediate Release

May 7, 2008

Chesapeake Reports First-Quarter 2008 Results

RICHMOND, Va. – Chesapeake Corporation (NYSE: CSK) today reported financial results for the first quarter of 2008.

First-Quarter 2008 Consolidated Results

·   Net sales of $252.9 million declined 7 percent when compared to the first quarter of 2007, and declined 13 percent excluding the effect of changes in foreign currency exchange rates.

·   Operating income exclusive of goodwill impairments, gains or losses on divestitures and restructuring expenses, asset impairments and other exit costs (collectively “special items”) was $0.1 million, down $15.9 million when compared to the first quarter of 2007, and was down $16.8 million compared to the first quarter of 2007 excluding the effect of changes in foreign currency exchange rates.

·   Loss from continuing operations was $8.4 million, or $0.43 per share, compared to income from continuing operations of $0.9 million, or $0.05 per share, for the first quarter of 2007.  Excluding special items, loss from continuing operations was $8.0 million, or $0.41 per share, compared to income from continuing operations of $1.6 million, or $0.08 per share, for the first quarter of 2007.

“We expected financial results for the first half of the year to be below those in 2007, and the first quarter was worse than expected,” said Andrew J. Kohut, Chesapeake’s president & chief executive officer.  “The second quarter should be better than the first, and we expect the second half of the year to build on this momentum because of a robust business pipeline and benefits from process improvement initiatives.

“We have made good progress on refinancing our senior revolving credit facility and have a commitment letter to have a new $250-million senior secured credit facility by the end of June,” added Kohut.  “We are also actively exploring options for non-core or underperforming assets.”

Segment Results

The following discussion compares the results of the business segments for the first quarter of 2008 with the first quarter of 2007 and excludes the effect of changes in foreign currency exchange rates and special items.

Paperboard Packaging

Net sales for the first quarter of 2008 decreased 16 percent, or $36.9 million, compared to the same period in 2007.  The decline in net sales was due to lower sales of both branded products and pharmaceutical and healthcare packaging.  The sales decline in branded products packaging was approximately 21 percent and was primarily due to decreased sales in the U.K., slightly offset by increased sales of German confectionery packaging.  The decline in pharmaceutical and healthcare packaging sales was approximately 11 percent and was primarily a result of price declines, competitive market conditions and the timing of new product launches by customers.

Operating loss for the first quarter of 2008 was unfavorable compared to operating income in the same period in 2007 by $13.9 million.  The decrease in operating results was largely due to decreased sales volumes throughout the segment, pricing pressures and start-up costs associated with new products, facility relocations and process improvement initiatives.

Plastic Packaging

Net sales for the first quarter of 2008 increased 4 percent, or $1.8 million, over the comparable quarter in 2007.  The increase in net sales during the first quarter was primarily due to the partial pass through of higher raw material costs.

Operating income for the first quarter of 2008 declined 39 percent, or $2.7 million, compared to the same period in 2007. The decrease in operating income for the first quarter was primarily due to weakness in the South African beverage operation, which resulted primarily from price declines due to competitive market conditions and from increased raw material costs.

Liquidity

Net cash used in operating activities was $5.0 million for the first quarter of 2008, compared to net cash provided by operating activities of $14.2 million for the first quarter of 2007.  The decrease in net cash provided by operating activities was primarily due to the decrease in operating results and increased working capital requirements compared to the same period in 2007.  Exclusive of restructuring spending, net cash used in operating activities was $3.4 million for the first quarter of 2008 compared to net cash provided by operating activities of $16.3 million for the first quarter of 2007.

Total debt at March 30, 2008 was $543.2 million, of which $190.4 million was designated as current, compared to total debt of $515.3 million at December 30, 2007, of which $6.9 million was designated as current. The increase in the current portion of long-term debt resulted from the reclassification of the company’s 2004 senior revolving credit facility, which matures in February 2009.  Changes in foreign currency exchange rates increased total debt approximately $11.1 million at the end of the first quarter of 2008 compared to the end of 2007.

On March 5, 2008, the company obtained agreement from a majority of the lenders under the senior revolving credit facility to amend the facility.  The amendment affects financial maintenance covenants in all four quarters of fiscal 2008, providing an increase in the total leverage ratios and a decrease in the interest coverage ratios.  In addition, interest rates were increased to 450 basis points over LIBOR and basket limitations were imposed for acquisitions, dispositions and other indebtedness, among other changes.  The amendment also stipulated that in the event that the senior revolving credit facility was not fully refinanced prior to March 31, 2008, the company would provide a security interest in substantially all tangible assets of its European subsidiaries.  Activities are currently underway by the lenders under the senior revolving credit facility to obtain security interests in certain of the company’s assets, primarily in the U.K. and Ireland.

The company was in compliance with all of its debt covenants as of the end of the first quarter of fiscal 2008.  However, based on current projections the company may not be in compliance with the financial covenants under the senior revolving credit facility at the end of the second quarter of fiscal 2008.  The company expects to avoid compliance issues with these financial covenants by improving cash flows, reducing outstanding indebtedness, replacing or amending the senior revolving credit facility or obtaining waivers from the lenders, but there can be no assurance that these alternatives will be successfully implemented.  Failure to comply with the financial covenants would be an event of default under the senior revolving credit facility.  If such an event of default were to occur, the lenders under the senior revolving credit facility could require immediate payment of all amounts outstanding under the facility and terminate their commitments to lend under the facility.  Pursuant to cross-default provisions in many of the instruments that govern the company’s other outstanding indebtedness, immediate payment of much of the other outstanding indebtedness could be required, all of which would have a material adverse effect on the business, results of operations and financial condition.

On May 2, 2008, the company entered into a commitment letter with GE Commercial Finance Limited and General Electric Capital Corporation to act as the lead arranger and underwriter to provide a $250-million senior secured credit facility to refinance outstanding borrowings under the company’s 2004 senior revolving credit facility that matures in February 2009. The new facility is expected to include revolving credit and term loans secured by substantially all of the assets of the company’s operations in the U.S. and Europe. The commitment letter is subject to a number of conditions that must be satisfied before the GE facility is funded. While the company anticipates it will close on the refinancing before the end of June 2008, there can be no assurance that such closing will occur.  If the company is unable to refinance the senior revolving credit facility by February 2009, all amounts outstanding under the facility will become payable and, pursuant to cross-default provisions in many of the instruments that govern the company’s other outstanding indebtedness, immediate payment of much of the other outstanding indebtedness could be required, all of which would have a material adverse effect on the business, results of operations and financial condition.

U.K. Pension Recovery Plan

As previously disclosed, one of the company’s U.K. subsidiaries is party to a recovery plan for its U.K. pension plan that requires the subsidiary to make annual cash contributions to the pension plan in July each year of at least £6 million above otherwise required levels in order to achieve a funding level of 100 percent by July 2014.  In addition, if an interim funding level for the U.K. pension plan of 90 percent was not achieved by April 5, 2008, the recovery plan requires that an additional supplementary contribution to achieve an interim funding level of 90 percent be paid on or before July 15, 2008.  The funding level of the U.K. pension plan is dependent upon certain actuarial assumptions, including assumptions related to inflation, investment returns and market interest rates, changes in the numbers of plan participants and changes in the benefit obligations and related laws and regulations.  Changes to these assumptions in the past six months have had a significant impact on the calculation of the funding level of the U.K. pension plan.

The company has received the April 2008 valuation of the pension plan's assets and liabilities which indicates that the required supplementary contribution to the pension plan would be £35.6 million to achieve 90 percent funding as of that date under the terms of the current recovery plan. The company’s U.K. subsidiary would be unable to make this supplementary contribution without breaching certain financial covenants of the existing senior revolving credit facility or covenants that are likely to be included in any refinancing thereof.  Any such breach would trigger cross-defaults under substantially all of the company’s other debt, which would have a material adverse effect on our business, results of operations and financial condition.

The company has reached agreement with the U.K. pension plan trustee on the principles of amendments to the recovery plan that will reduce the supplemental payment due on or before July 15, 2008 to ₤6 million and provide additional assurance of, and security for, the company’s future funding of the plan. The company believes the amounts payable under the proposed amended recovery plan can be paid without the company breaching relevant financial covenants. The company and the U.K. pension plan trustee are in the process of finalizing the terms of the amended recovery plan and will seek any appropriate approvals required for the amended recovery plan. While there can be no assurance that the recovery plan will be amended, the company expects to finalize the amended recovery plan prior to the July 15, 2008 payment date.

Income Taxes

The company’s effective income tax rate is heavily influenced by the relationship of U.S. to non-U.S. pre-tax income (losses), as well as by management’s expectations as to the recovery of its U.S. and certain foreign jurisdiction deferred income tax assets and any settlements of income tax contingencies with income tax authorities.

Other Items

Special items for the first quarter of 2008 and the first quarter of 2007 included restructuring expenses, asset impairments and other exit costs of $0.6 million and $0.8 million, respectively.  These charges were primarily associated with workforce reductions.

First-quarter 2008 results included adjustments relating to prior periods, the net impact of which increased net loss from continuing operations before taxes by $0.6 million, decreased loss from continuing operations by $0.3 million and decreased net loss by $0.3 million.  These adjustments, which were deemed immaterial to the current and prior periods, included (1) an overstatement of revenue due to invoicing errors for a particular customer; (2) incorrect capitalization of expenses associated with an inter-company fixed asset transfer; and (3) an understatement of deferred tax assets associated with the sale of one of the company’s U.K. manufacturing facilities.

Conference Call

Chesapeake will hold a conference call today at 11 a.m. Eastern Daylight Time to discuss its first-quarter 2008 results.  The conference call may be accessed via the Investor Relations section of Chesapeake Corporation's website at http://www.chesapeakecorp.com.  Simply click on the "Investor Relations" button in the left column, then on "Conference Calls."  A replay of the webcast will be available later today in that same section of Chesapeake's website.

About Chesapeake Corporation

Chesapeake Corporation protects and promotes the world’s great brands as a leading international supplier of value-added specialty paperboard and plastic packaging. Headquartered in Richmond, Va., the company is one of Europe’s premier suppliers of folding cartons, leaflets and labels, as well as plastic packaging for niche markets.  Chesapeake has 45 locations in Europe, North America, Africa and Asia and employs approximately 5,400 people worldwide.

Forward-looking Statements

This news release, including the comments by Andrew J. Kohut, 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: the company’s inability to realize the full extent of the expected savings or benefits from restructuring or cost savings initiatives, and to complete such activities in accordance with their planned timetables and within their expected cost ranges; the effects of competitive products and pricing; changes in production costs, particularly for raw materials such as folding carton and plastics materials, and the ability to pass through increases in raw material costs to customers; fluctuations in demand; possible recessionary trends in U.S. and global economies; changes in governmental policies and regulations; changes in interest rates and credit availability; changes in actuarial assumptions related to pension and postretirement benefits plans and the ability to amend the existing U.K. pension recovery plan; changes in liabilities and cash funding obligations associated with the company’s defined benefit pension plans; the ability to remain in compliance with current debt covenants and to refinance the senior revolving credit facility; fluctuations in foreign currency exchange rates; and other risks that are detailed from time to time in reports filed by Chesapeake with the Securities and Exchange Commission.

Chesapeake Corporation
Consolidated Statements of Operations (Unaudited)
(in millions, except per share data)
	First Quarter
	2008			2007
Net sales	$	252.9		$	272.0
Costs and expenses:
Cost of products sold		218.1			222.4
Selling, general and administrative expenses		36.7			34.2
Restructuring expenses, asset impairments and other exit costs (a)		0.6			0.8
Other income, net		2.0			0.6
Operating (loss) income		(0.5	)		15.2
Interest expense, net		11.5			10.7
(Loss) income from continuing operations before taxes		(12.0	)		4.5
Income tax (benefit) expense		(3.6	)		3.6
(Loss) income from continuing operations		(8.4	)		0.9
Discontinued operations, net of taxes (b)		(0.4	)		(0.2	)
Net (loss) income	$	(8.8	)	$	0.7
Diluted earnings per share:
(Loss) income from continuing operations	$	(0.43	)	$	0.05
Discontinued operations, net of taxes		(0.02	)		(0.01	)
Net (loss) income	$	(0.45	)	$	0.04
Weighted average shares and equivalents outstanding - diluted		19.4			19.4
(a)  Restructuring expenses, asset impairments and other exit costs in 2008 and 2007 primarily relate to
workforce reductions.
(b)  Discontinued operations in 2008 and 2007 is primarily related to the tax treatment of the disposition of
assets of Wisconsin Tissue Mills Inc. in 1999.

Chesapeake Corporation
Condensed Consolidated Balance Sheets (Unaudited)
($ in millions)
	March 30,		December 30,
	2008		2007
Assets
Current assets:
Cash and cash equivalents	$	23.1	$	10.0
Accounts receivable, net		156.9		163.6
Inventories, net		119.5		121.4
Other current assets		58.2		36.2
Total current assets		357.7		331.2
Property, plant and equipment, net		357.5		358.7
Goodwill		387.4		387.4
Other assets		122.5		136.4
Total assets	$	1,225.1	$	1,213.7
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses	$	237.9	$	228.6
Current portion of long-term debt		190.4		6.9
Income taxes payable		0.1		1.8
Total current liabilities		428.4		237.3
Long-term debt		352.8		508.4
Pension and postretirement benefits		39.3		38.5
Deferred income taxes		42.4		43.8
Long-term income taxes payable		29.0		28.5
Other long-term liabilities		56.2		76.0
Stockholders' equity		277.0		281.2
Total liabilities and stockholders' equity	$	1,225.1	$	1,213.7

Chesapeake Corporation
Business Segment Highlights (Unaudited)
($ in millions)
	First
	Quarter
Net sales:
2008
Paperboard Packaging	$	200.3
Plastic Packaging		52.6
	$	252.9
2007
Paperboard Packaging	$	225.3
Plastic Packaging		46.7
	$	272.0
Operating (loss) income:
2008
Paperboard Packaging	$	(0.9	)
Plastic Packaging		5.0
Corporate		(4.0	)
Restructuring expenses, asset impairments and
other exit costs		(0.6	)
	$	(0.5	)
2007
Paperboard Packaging	$	12.8
Plastic Packaging		7.0
Corporate		(3.8	)
Restructuring expenses, asset impairments and
other exit costs		(0.8	)
	$	15.2
Depreciation and amortization:
2008
Paperboard Packaging	$	10.8
Plastic Packaging		2.0
Corporate		-
	$	12.8
2007
Paperboard Packaging	$	11.4
Plastic Packaging		1.7
Corporate		0.1
	$	13.2

Chesapeake Corporation
Non-GAAP Financial Measures (Unaudited)
($ in millions, except per share data)
Non-GAAP Financial Measures
The company presents the following non-GAAP measures of results: operating income (loss); income (loss) from continuing operations; earnings (loss) per share from continuing operations; and cash flows from operating activities. Each is adjusted to exclude special items which include goodwill impairment charges, gains (losses) on the extinguishment of debt, gains (losses) on divestitures, restructuring expenses, asset impairments and other exit costs, and cash spending for restructuring activities.
The company’s management believes these non-GAAP measures provide investors, potential investors, securities analysts and others with useful information to evaluate the performance of the business, because they exclude gains and losses that management believes are not indicative of the ongoing operating results of the business. In addition, these non-GAAP measures are used by management to evaluate the operating performance of the company. The presentation of this additional information is not meant to be considered in isolation or as a substitute for operating income, income from continuing operations, earnings per share from continuing operations or cash flows from operating activities as determined in accordance with GAAP.
	First Quarter
							Excluding
	GAAP Basis						Special Items
CONSOLIDATED RESULTS	2008			2007			2008			2007
Operating (loss) income	$	(0.5	)	$	15.2		$	0.1		$	16.0
(Loss) income from continuing operations		(8.4	)		0.9			(8.0	)		1.6
(Loss) earnings per share from continuing operations		(0.43	)		0.05			(0.41	)		0.08
Net cash (used in) provided by operating activities		(5.0	)		14.2			(3.4	)		16.3
Capital expenditures		15.7			12.5			15.7			12.5
	First Quarter						Percent Change
							GAAP			Local
SEGMENT RESULTS	2008			2007			Basis			Currency
Net sales:
Paperboard Packaging	$	200.3		$	225.3			(11.1	)%		(16.4	)%
Plastic Packaging		52.6			46.7			12.6	%		3.9	%
	$	252.9		$	272.0			(7.0	)%		(12.9	)%
Operating (loss) income:
Paperboard Packaging	$	(0.9	)	$	12.8			(107.0	)%		(108.6	)%
Plastic Packaging		5.0			7.0			(28.6	)%		(38.6	)%
Corporate		(4.0	)		(3.8	)		5.3	%		5.3	%
Restructuring expenses, asset impairments and
other exit costs		(0.6	)		(0.8	)		(25.0	)%		(25.0	)%
	$	(0.5	)	$	15.2			(103.3	)%		(109.2	)%

Chesapeake Corporation
Non-GAAP Financial Measures (Unaudited)
($ in millions, except per share data)
	First Quarter
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES	2008			2007
Operating (loss) income	$	(0.5	)	$	15.2
Add: restructuring expenses, asset impairments and other exit costs		0.6			0.8
Operating income exclusive of special items	$	0.1		$	16.0
(Loss) income from continuing operations	$	(8.4	)	$	0.9
Add: restructuring expenses, asset impairments and other exit
costs after taxes		0.4			0.7
(Loss) income from continuing operations exclusive of special
items	$	(8.0	)	$	1.6
(Loss) earnings per share from continuing operations	$	(0.43	)	$	0.05
Add: restructuring expenses, asset impairments and other exit
costs after taxes		0.02			0.03
(Loss) earnings per share from continuing operations exclusive of
special items	$	(0.41	)	$	0.08
Cash flows from operating activities	$	(5.0	)	$	14.2
Add: cash spending for restructuring activities		1.6			2.1
Cash flows from operating activities exclusive of special items	$	(3.4	)	$	16.3

 

#        #        #

Media Relations Contact:

Joseph C. Vagi

Manager - Corporate Communications

(804) 697-1110

joe.vagi@chesapeakecorp.com

www.chesapeakecorp.com

Investor Relations Contact:

Joel K. Mostrom

Executive Vice President & Chief Financial Officer

(804) 697-1147

joel.mostrom@chesapeakecorp.com

www.chesapeakecorp.com

EX-99.2

Exhibit 99.2

1Q CONFERENCE CALL SCRIPT

MAY 7, 2008

JKM Opening Comments

Good morning and welcome to Chesapeake Corporation's first-quarter conference call.  I'm Joel Mostrom, executive vice president and chief financial officer, and joining me today is Andy Kohut, our president and chief executive officer.

Andy will begin with some overall comments on our business.  I will then provide a financial review of the results for the first quarter.  After that we will be available for questions.

Before we get started, I want to advise all participants that this call is being recorded by Chesapeake Corporation and is copyrighted material.  It cannot be recorded or rebroadcast without Chesapeake's express permission.  Furthermore, the comments on this call may include "forward-looking statements" as defined in the Private Securities Litigation Reform Act.   The accuracy of such forward-looking 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.  Certain of those risks, uncertainties and assumptions are set forth in the summary of this conference call, which will be posted on the Company's web site at the conclusion of this call.  Additionally, during this call there may be references to certain non-GAAP financial information.  This information has been reconciled to GAAP in the Company's earnings release which will also be posted on the Company's website.

Now I will turn the call over to Andy.

AJK Comments

Thanks Joel.  Good morning – Our results for the first quarter of 2008 were disappointing.  We anticipated the first half of the year to be below 2007, but the first quarter was worse than expected.  Our results reflected the full impact of the loss of our tobacco business with BAT.   In addition, sales were down across most paperboard markets when compared to a fairly strong first quarter 2007.  While we have not lost any significant business, the timing of product launches and de-stocking by some of our customers has adversely impacted our overall sales.  We also continued to experience the residual impact of our prior service issues.  However, as I reported during last quarter’s conference call, the service issues are behind us and we have a robust business pipeline that we expect will begin to benefit us during the second half of the year.

We incurred startup expenses for the consolidation of our supply chain offering for the alcoholic drinks market in Scotland and the relocation our Long Island, New York facility serving the pharmaceutical and healthcare market.  Additionally, process improvement consulting expenses peaked during the quarter.  All told, the startups, relocation and consulting expenses negatively impacted our financial results in excess of $3 million.

Economic conditions are uncertain.  We do have select markets that are showing certain weakness and pricing remains competitive.  We are currently pushing forward with recovery of raw material cost increases for both paperboard and resin.  Although a significant amount of our business is index-linked to raw material costs, the timing of implementing our price increases tends to lag between 30 and 60 days.

We’ve had a good start to the year in our German confectionery business and specialty chemical plastics business.  Additionally, our key pharma market in the UK and Ireland has started to realize the benefits from improved service and some early benefits from the process improvement initiatives.  Overall, despite a slow start to the year, we continue to believe that the second half will show improvement and that our overall operating results for the year will be ahead of 2007 levels.

Before I turn the call over to Joel, I want to highlight our near-term objectives.  Our number one priority is to secure refinancing of our revolving credit facility.  We have made good progress in this effort.   We have a signed commitment letter with GE and expect to have the new credit facility in place by the end of June.  This has been a challenging task in today’s credit environment but we feel this is very good progress.  We also had to renegotiate a new recovery plan with the Trustee of our largest pension plan in the UK.  I am pleased to report that we have reached agreement with the Trustee on the principles of a new recovery plan.

The second area of focus is to deliver improved financial results in the second half of 2008.  We have clear milestones in place to help insure the success of our initiatives.  Our operating teams are dedicated to improving performance in the second half of the year; the combination of a strong business pipeline and the benefits from the process improvement initiatives are key elements of the recovery.

Our third priority is to sell or close non-core assets or assets which are under-performing and do not have a plan to achieve our growth and profitability expectations.  We have a number of initiatives under way at this time, and will make definitive announcements at appropriate times in the future.

So, in summary, we are focused on finalizing our refinancing, delivering improved financial results in the second half of 2008 and consummating the sale or closure of non-core or under-performing assets.

I’ll now turn the call over to Joel.

JKM COMMENTS

Thanks Andy.

This morning we reported a first quarter net loss from continuing operations of $8.4 million, or $0.43 per share, compared to net income from continuing operations of $900,000, or $0.05 per share, for the first quarter of 2007.  We incurred charges for special items in both these periods.

Special items include goodwill impairments, restructuring expenses, asset impairments and gains or losses related to divestitures.

Our operating income, exclusive of special items, for the first quarter of 2008 was $100,000, compared to $16.0 million for the first quarter of 2007.

Operating income for the first quarter of 2008 was favorably impacted by changes in foreign currency exchange rates and decreased pension expense.  Changes in foreign currency exchange rates increased operating income, exclusive of special items, approximately $900,000 for the first quarter of 2008 when compared to the first quarter of 2007 and decreased pension expense increased operating income approximately $1.8 million.

I'll now review our operating results starting with the Paperboard Packaging segment.  My discussion of segment operating income excludes the effects of special items.

First quarter net sales of $200 million for the Paperboard Packaging segment were down 11% compared to net sales for the first quarter of 2007.  Excluding changes in foreign currency exchange rates, net sales were down 16% for the quarter.  Sales in both branded products and pharmaceutical and healthcare packaging were down in the first quarter of 2008.  Sales of branded products packaging were down about 21% for the first quarter excluding changes in foreign currency exchange rates.  The decline was largely due to decreased sales of tobacco packaging.  In addition, sales of UK drinks, confectionery and food and household packaging were down about 16% for the quarter, primarily due to weaker demand.  Sales of German confectionery packaging remained strong through the first quarter of 2008 and increased slightly over the prior year quarter.  Sales of pharmaceutical and healthcare packaging were down about 11% for the first quarter excluding changes in foreign currency exchange rates.  The decline in sales was primarily the result of price declines due to competitive market conditions and, as Andy mentioned, the residual impact of prior customer service issues.  We expect our sales volumes to improve in the second half of 2008 now that our service levels are back on track and we have secured new business in this area.

The Paperboard Packaging segment's operating income for the first quarter of 2008 was a loss of $900,000, which was a decrease of $13.7 million, compared to the first quarter of 2007.  Changes in foreign currency exchange rates increased segment operating income by $200,000 for the quarter.  The decrease in operating income for the first quarter was partially due to the decreased sales of tobacco packaging.  Lower tobacco packaging sales accounted for about 20% of the operating income decline for the quarter.  The start-up expenses related to the multi-shaped tubes production for alcoholic drinks packaging, the relocation of our Long Island facility and the costs associated with recent process improvement initiatives together accounted for about 20% of the operating income decline as well.  The remaining decline in operating income was primarily due to the decreased sales of both branded products and pharmaceutical and healthcare packaging as well as increased energy and transport costs.

The Plastic Packaging segment had sales of $53 million in the first quarter of 2008, up 13% from the first quarter of 2007.  Excluding changes in foreign currency exchange rates, net sales were up 4% for the quarter.  The increase in net sales for the first quarter was primarily due to the partial pass-through of higher raw material costs.  Sales volumes were relatively flat year-over-year, with increased volume of specialty chemical packaging offset by decreased volume of food and beverage packaging.

The Plastic Packaging segment’s operating income was $5.0 million for the first quarter of 2008, a decrease of $2.0 million from the strong first quarter of 2007.  Changes in foreign currency exchange rates increased segment operating income $700,000 for the quarter.  The decrease in operating income for the first quarter was primarily due to weakness in the beverage packaging operation in South Africa, which resulted primarily from price declines due to competitive market conditions and from under-recovery of increased raw material costs.

Turning back now to our consolidated results, net cash used in operating activities was $5.0 million for the first quarter of 2008, a decrease of $19.2 million compared to the first quarter of 2007.  The decrease in operating cash flow was primarily due to the decrease in operating income in 2008 and increased working capital requirements.

Total debt at the end of the first quarter of 2008 was $543.2 million compared to $515.3 million at the end of 2007.  Changes in foreign currency exchange rates increased total debt at the end of the first quarter by approximately $11 million.  Likewise, foreign exchange rates increased interest expense approximately $400,000 for the first quarter of 2008 when compared to 2007.

Before I open the call up for questions, I would like to expand on a few points that Andy mentioned in his opening remarks.  With respect to our refinancing initiatives,on May 2, 2008, we entered into a commitment letter with GE Commercial Finance Limited and General Electric Capital Corporation to act as the lead arranger and underwriter to provide a $250 million senior secured credit facility to refinance outstanding borrowings under our Credit Agreement with Wachovia Bank and other lenders which matures in February 2009. The new facility is expected to include revolving credit as well as amortizing 5 and 7 year term loans.  It is expected to be secured by security interests in substantially all of the assets of the company’s operations in the US and Europe. The commitment letter is subject to a number of conditions that must be satisfied before the new GE facility is funded.  We anticipate closing on the refinancing before the end of June 2008.

The second point involves our negotiations with the Trustee of our primary UK pension plan, and we are pleased to report we have reached agreement with the Trustee of the pension plan on the principles of amendments to the recovery plan which will reduce the supplemental payment due on or before July 15, 2008 to ₤6 million, and provide additional assurance of, and security for, on-going funding of the plan. We believe the amounts payable under the proposed amended recovery plan can be paid without the company breaching relevant financial covenants.  The company and the Trustee are in the process of finalizing the provisions of the proposed amended recovery plan and will seek any appropriate approvals required for the amended recovery plan.  We believe it is highly likely that the amended recovery plan will be finalized.

Now at this time we would be happy to take your questions.

JKM Close

I'd like to remind everyone today's call will be available for replay on our website, www.chesapeakecorp.com or can be accessed by calling 888-203-1112 or 719-457-0820 code 7488892.

This concludes today's call.  Thank you for participating.