Paper and plastics company
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.