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Chesapeake Lowers Guidance

The company also uncovers some accounting errors.
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Paper and plastics company



lowered earnings guidance Friday and said it found accounting errors that resulted in overstated profits.

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For the current year, Chesapeake expects to earn 80 cents to $1 a share, down from previous guidance of 90 cents to $1.20 a share. Analysts were expecting 92 cents a share for the year.

The company said the revision followed an "assessment of current market conditions in certain underperforming operations and recent trends of a strengthening dollar."

Chesapeake expects to report a loss of 9 cents to 11 cents a share for the second quarter, including a 33-cent charge for a business divestiture. Excluding that, the company expects to earn 22 cents to 24 cents a share in the period.

The accounting errors relate to inventory costing and accrual accounting at the company's plastic packaging operations at Crewe, England, and corporate accruals for long-term incentive compensation.

On the basis of preliminary findings, Chesapeake believes the errors at Crewe resulted in a cumulative overstatement of net income in fiscal 2004 and the first quarter of 2005 of about $900,000 to $1.3 million. The adjustment for long-term incentive accruals resulted in an understatement of net income in fiscal 2004 and the first quarter of 2005 of about $400,000.