US snack manufacturer Poore Brothers has announced that a review of internal controls has uncovered accounting errors.


A review performed by the company, with the assistance of an independent consultant identified accounting errors related to product promotion obligations that were incurred in the second quarter of 2005 but not recorded in the company’s financial statements until the third quarter of 2005.


In addition, subsequent to the issuance of the company’s third quarter earnings press release the company became aware of a potential sales return related to product shipped in the third quarter of 2005. Also in the second and third quarters of 2005, the company incorrectly accrued for employee sick pay benefits that had not been earned by employees.


The company believes that the estimated impact of the accounting errors mentioned above on the second quarter ended 25 June 2005 is a decrease of approximately $100,000 in net income, and the accounting errors and the adjustment discussed above on the third quarter ended 1 October 2005 is a decrease of approximately $100,000 in the net loss.


For the nine months ended October 1, 2005 the aggregate impact of these items substantially offset and thus has no significant impact on net income or earnings per diluted share. The company plans to restate its previously issued financial statements for the quarter ended June 25, 2005 to more accurately reflect the results for that period.


The review also identified a material weakness in the company’s internal controls over trade spending as of 25 June 2005 that continued into the third quarter ended 1 October 2005. The company took steps during the third quarter and additional steps since then to improve its internal control structure to remediate this material weakness.