In a press release last night, Annie's (BNNY) announced that it has initiated a voluntary recall of certain certified organic and made with organic pizza products, due to the possible presence of fragments of flexible metal mesh from a faulty sifter at a third-party flour mill. In a regulatory filing following the press release, the company stated, "Prior to recording costs associated with the recall, the Company expected to report net sales of approximately $37M for the third quarter ended December 31, 2012, representing an approximate increase of 22% as compared to the third quarter of the prior year. In addition, retail consumption trends for the Company were in the high teens in the aggregate across its business in the third quarter." Annie's also stated it expects to record costs associated with the recall in Q3, primarily as a reduction to net sales to account for customer and consumer returns and an increase in cost of sales to account for the destruction of finished goods and raw materials inventory and to a lesser extent, increased selling, general and administrative expenses. The company will also incur some additional costs in future quarters, but expects to reverse the charges for such costs that are recovered from its existing recall insurance and from the third-party supplier. Any such recovery will be recorded in the period in which such recovery is determined to be probable. Annie's added that while it is too soon to predict the impact of this recall on its net sales, the company expects that pizza sales for Q4 will be reduced. While production plans for certified organic and made with organic pizza products are still in the process of being finalized, management expects to begin shipping replacement product into distributors and retailers in February in order to replenish retail shelves and inventories. In pre-market trading the day after the announcement, Annie's shares are down about 10.6% to $34.38.
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