2.Product Recall

On April 23, 2015, we announced a voluntary product recall of certain varieties of the Company’s Fresh FrozenTM brand of frozen vegetables, as well as select varieties of our Jamba® “At Home” line of smoothie kits because our Jefferson, Georgia facility tested positive for Listeria monocytogenes. The impacts recorded in our consolidated statement of operations attributable to the recall for the quarter and six months ended June 27, 2015 are summarized as follows (in thousands):


	Quarter Ended		Six Months Ended
	June 27, 2015		June 27, 2015
Net revenues	$	—	$	—
Cost of revenues (1)		1,127		16,387
Gross profit		(1,127)		(16,387)
Operating expenses:
Selling, general and administrative expenses (2)		1,267		1,500
Impairment of intangible asset (3)		—		9,277
Operating loss		(2,394)		(27,164)
Interest expense, net		—		—
Loss before income taxes		(2,394)		(27,164)
Income tax benefit		897		9,812
Net loss	$	(1,497)	$	(17,352)

(1)

Additional cost of revenues represents the provision for the write-down of inventory on hand and for additional costs estimated to be incurred related to the recall, including product expected to be returned from customers and consumers. During the quarter and six months ended June 27, 2015, the Company incurred approximately $1.1 million of incremental production costs as a result of utilizing co-packers inventory.

(2)

Additional selling, general and administrative costs consists of approximately $1.5 million of professional fees associated with the recall and $0.2 million to record additional accounts receivable reserves which was recorded in the first quarter of fiscal 2015 but reversed in the second quarter of fiscal 2015.

(3)

Amount reflects a $9.3 million impairment charge recorded to write-off the carrying value of the Fresh Frozen customer relationships intangible asset.