Chesapeake Lowers Guidance

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

Chesapeake

(CSK)

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

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.