fourth quarters of fiscal 2009 compared to fiscal 2008. Sales in our consumer distribution channel increased by 7.8% in dollars and 5.5% in volume for fiscal 2009 compared to fiscal 2008 through the addition of a major private label customer and increased business at our existing customer base. The increase in sales volume has allowed us to utilize the extra production capacity generated by our new production facility located in Elgin, Illinois. However, further increases in sales volume will be required in the future for us to realize the full extent of the planned benefits of our new production facility located in Elgin, Illinois. Also, we recently lost the private label business of a significant customer, representing approximately 4% of our net sales for fiscal 2009.
Our fiscal 2009 results were negatively impacted by a pistachio recall. During the time period of March 31, 2009 through April 8, 2009, we voluntarily recalled roasted inshell pistachios, raw shelled pistachios and mixed nuts containing raw shelled pistachios. The recall was made as a precautionary measure because such products may have been contaminated with salmonella. Our recall was a follow-up to the industry-wide voluntary recall of pistachios announced by Setton Pistachio of Terra Bella, Inc. ("Setton"), one of our pistachio suppliers. We do not currently anticipate any further recalls related to purchases of pistachios from Setton. Our total costs associated with the recall are estimated to be approximately $2.5 million. This total may be broken down as follows: (i) $1.7 million reduction in sales for shipments to customers; (ii) $0.3 million increase in cost of sales for the destruction of inventory in our possession; and (iii) $0.5 million increase in administrative expenses for our customers' lost profits and other miscellaneous expenses. As of June 25, 2009, our remaining accrued liability for product recall is $435 thousand. We currently intend to aggressively pursue the recovery of our recall costs from Setton, Setton's insurance and our own insurance; however, we can provide no assurance as to the likelihood, extent or timing of any such recovery. Our total debt levels decreased by $38.6 million during fiscal 2009 due primarily to positive operating cash flow of $43.4 million and limited capital expenditures of $5.9 million. Our improved financial position will allow us to devote more resources to profitably grow and expand our business, especially our Fisher brand. We have developed a five-year strategic plan through which we intend to maximize the potential of our business. Results of Operations
The following table sets forth the percentage relationship of certain items to net sales for the periods indicated and the percentage increase or decrease of such items from fiscal 2008 to fiscal 2009 and from fiscal 2007 to fiscal 2008.

                                                                                                        Percentage Increase/Decrease
                                                      Percentage of Net Sales                         Fiscal 2009           Fiscal 2008
                                        Fiscal 2009         Fiscal 2008         Fiscal 2007            vs. 2008              vs. 2007
Net sales                                    100.0 %             100.0 %             100.0 %                  2.2 %                0.2 %
Gross profit                                  13.1                12.2                 7.6                    9.3                 60.4
Selling expenses                               6.6                 6.4                 7.2                    4.5                (10.5 )
Administrative expenses                        3.7                 3.5                 3.0                    9.5                 14.9
Restructuring expenses                        (0.1 )               0.3                   -                 (118.8 )                  -
Gain related to real estate sales                -                   -                (0.6 )                    -                    -


Fiscal 2009 Compared to Fiscal 2008
Net Sales.

The following table shows a comparison of sales by distribution channel, and as a percentage of total net sales (dollars in thousands):

            Distribution Channel        Fiscal 2009               Fiscal 2008
            Consumer               $ 317,097        57.3 %   $ 294,021        54.2 %
            Industrial                79,147        14.3        92,792        17.1
            Food Service              64,657        11.7        68,132        12.6
            Contract Packaging        55,753        10.0        47,441         8.8
            Export                    37,192         6.7        39,385         7.3

            Total                  $ 553,846       100.0 %   $ 541,771       100.0 %

The following table shows an annual comparison of sales by product type as a percentage of total gross sales. The table is based on gross sales, rather than net sales, because certain adjustments, such as promotional discounts, are not allocable to product type.

                  Product Type            Fiscal 2009     Fiscal 2008
                  Peanuts                       21.8 %          20.1 %
                  Pecans                        19.2            22.6
                  Cashews & Mixed Nuts          22.5            20.8
                  Walnuts                       13.3            14.7
                  Almonds                       11.3            11.9
                  Other                         11.9             9.9

                  Total                        100.0 %         100.0 %

Net sales in the consumer distribution channel increased by 7.8% in dollars and 5.5% in volume in fiscal 2009 compared to fiscal 2008. Private label consumer sales volume increased by 7.3% in fiscal 2009 compared to fiscal 2008 primarily due to: (i) a significant new customer for the last half of fiscal 2009;
(ii) expansion of business at an existing customer; and (iii) a general increase in sales of private label products due to current economic conditions. Fisher brand sales volume increased 3.2% for fiscal 2009 compared to fiscal 2008 primarily due to an increase in inshell peanut sales to a major customer partially offset by decreased sales to other customers. Net sales in the industrial distribution channel decreased by 14.7% in dollars and 23.3% in sales volume in fiscal 2009 compared to fiscal 2008. The sales volume decrease is primarily due to: (i) lower raw peanut sales to other peanut processors and oil processors resulting, in part, from a planned reduction in peanuts shelled at our Bainbridge, Georgia facility; (ii) increased price competition from processors who are directly aligned with nut growers; (iii) a decrease in the availability of our supply of tree nuts for the industrial distribution channel; and (iv) a decrease in demand in the industrial distribution channel for nuts, as fewer new products with nuts as ingredients are being developed. Net sales in the food service distribution channel decreased by 5.1% in dollars and 4.1% in volume in fiscal 2009 compared to fiscal 2008. This decrease is primarily due to the effects of current economic conditions as consumers are spending less money at restaurants. Net sales in the contract packaging distribution channel increased by 17.5% in dollars and 6.7% in volume in fiscal 2009 compared to fiscal 2008. The significant sales volume increase is primarily due to increased business with our major contract packaging customer. Net sales in the export distribution channel decreased by 5.6% in dollars and 3.0% in volume in fiscal 2009 compared to fiscal 2008. The decrease in volume is primarily due to lower sales to our industrial export customers. Gross Profit.
Gross profit increased 9.3% to $72.4 million for fiscal 2009 from $66.2 million for fiscal 2008. Gross margin increased to 13.1% of net sales for fiscal 2009 from 12.2% for fiscal 2008. The pistachio recall had a 0.3% percentage point effect on gross margin for fiscal 2009. The improvement was achieved largely due to: (i) a decrease in redundant costs, as all Chicago area operations are now consolidated at the New Site (as defined below); (ii) a decrease in external contractor charges related to moving equipment from the previous Chicago area facilities to the New Site; and (iii) improved efficiency variances. Gross profit

margins improved on sales of almonds and walnuts due to lower acquisition costs and decreased on peanuts and cashews. Temporary delays in supplier shipments of peanuts and cashews along with lower-priced purchase contracts resulted in limited opportunities for purchasing these commodities at low costs. In order to fulfill our obligations to our customers, we purchased these commodities in the high-priced spot market during the first half of fiscal 2009. Operating Expenses.
Selling expenses for fiscal 2009 were $36.5 million, an increase of $1.6 million, or 4.5%, from fiscal 2008. The increase is due primarily to a $2.8 million increase in advertising and promotion in our efforts to rejuvenate the Fisher brand and a $0.9 million increase in incentive compensation expense. These increases in selling expense were partially offset by a $1.2 million reduction in freight expense due to more customers picking up their orders at our facilities and lower fuel costs and savings resulting from our restructuring initiatives executed during fiscal 2008. Administrative expenses for fiscal 2009 were $20.7 million, an increase of $1.8 million, or 9.5%, from fiscal 2008. This increase is due primarily to a $0.6 million increase in incentive compensation expense and $0.5 million related to the pistachio recall. Operating expenses for fiscal 2008 included $1.8 million of restructuring expenses, primarily related to the estimated cost of withdrawal from a multiemployer pension plan. Operating expenses were reduced by $0.3 million during the first quarter of fiscal 2009 for the difference between our previously estimated cost of withdrawal from the multiemployer pension plan and the actual cost determined by the multiemployer pension plan.
Income from Operations.
Due to the factors discussed above, the income from operations was $15.6 million, or 2.8% of net sales, for fiscal 2009, compared to $10.7 million, or 2.0% of net sales, for fiscal 2008.
Interest Expense.
Interest expense decreased to $7.6 million for fiscal 2009 from $10.5 million for fiscal 2008. The decrease is primarily due to lower short-term interest rates on our Credit Facility compared to rates on our Prior Credit Facility (as defined below) which was in place during the majority of fiscal 2008 and also lower average debt levels.
Debt Extinguishment Costs.
Debt extinguishment costs of $6.7 million were recorded for fiscal 2008. As a result of our refinancing completed during the third quarter of fiscal 2008, we were required to pay a $1.0 million debt extinguishment charge to the lenders under the Prior Credit Facility, pay a $5.2 million debt extinguishment charge to the noteholders under the Prior Note Agreement and write off the $0.5 million in remaining unamortized balance of fees related to the Prior Credit Facility and Prior Note Agreement.
Rental and Miscellaneous (Expense) Income, Net.
Net rental and miscellaneous (expense) income was an expense of $1.3 million for fiscal 2009 compared to an expense of $0.3 million for fiscal 2008. The increase in net expense is due to lower rental income as a result of a higher vacancy rate at the office building located at the New Site. Income Tax Benefit.
Income tax benefit was $0.3 million, or (3.9)% of income before income taxes, for fiscal 2009 compared to $0.9 million, or 13.1% of income before income taxes, for fiscal 2008. The income tax benefit in 2009 varied from the federal statutory income tax rate primarily as we reversed a $3.0 million valuation allowance at the beginning of the year associated with deferred income tax assets, which included federal and state net operating loss ("NOL") carryforwards. Our operating results for fiscal 2009 and our currently expected future profitability led to the elimination of our $3.0 million valuation allowance as we currently believe it is more likely than not that the deferred income tax assets will be realized.
Net Income (Loss).
Net income was $6.9 million, or $0.65 basic and diluted per common share, for fiscal 2009, compared to a net loss of ($6.0) million, or ($0.56) basic and diluted per common share, for fiscal 2008, due to the factors discussed above.

Fiscal 2008 Compared to Fiscal 2007
Net Sales.
Net sales increased slightly to $541.8 million for fiscal 2008 from $540.9 million for fiscal 2007, an increase of $0.9 million, or 0.2%. Sales volume, measured as pounds shipped, decreased by 9.7% for the same time period. Net sales, measured in dollars and sales volume, increased in our food service distribution channel and decreased in our industrial and export distribution channels. Net sales in our consumer and contract packaging distribution channels increased in dollars but decreased in sales volume. The average net sales price per pound increased in all distribution channels.
Our costs to acquire raw peanuts increased over 30% in fiscal 2008. The cost increases were due to a combination of factors, including, (i) prices to peanut farmers were increased to provide incentives for growing peanuts, (ii) the failure of the federal government to extend the storage and handling subsidy for the last year under the 2002 Farm Bill, and (iii) drought conditions in the southeastern United States. Our peanut sales, including peanut butter, decreased by approximately 12% in terms of pounds shipped in fiscal 2008 compared to fiscal 2007, but increased slightly in terms of dollars. While our overall volume was negatively impacted by the increase in peanut prices, sufficient volume was maintained to improve our profitability.
The supply of cashews, which we procure primarily from India, Africa, Southeast Asia and Brazil, were negatively affected due to adverse weather conditions, increased domestic demand in India and other factors. Accordingly, the low supply, and the weak United States dollar, resulted in significantly higher market prices for cashews.
In January 2008, we terminated our store-door distribution system as a result of our determination that it was no longer profitable to ship products to customers through our store-door distribution system. In connection with the discontinuance of the store-door delivery system, we terminated nine employees. We maintained a majority of the $2.5 million in annual sales generated through the store-door distribution system, as business has migrated to our other distribution methods.
The following table shows a comparison of sales by distribution channel, and as a percentage of total net sales (dollars in thousands):

            Distribution Channel        Fiscal 2008               Fiscal 2007
            Consumer               $ 294,021        54.2 %   $ 276,890        51.2 %
            Industrial                92,792        17.1       111,998        20.7
            Food Service              68,132        12.6        61,763        11.4
            Contract Packaging        47,441         8.8        45,003         8.3
            Export                    39,385         7.3        45,204         8.4

            Total                  $ 541,771       100.0 %   $ 540,858       100.0 %

The following table shows an annual comparison of sales by product type as a percentage of total gross sales. The table is based on gross sales, rather than net sales, because certain adjustments, such as promotional discounts, are not allocable to product type.

                  Product Type            Fiscal 2008     Fiscal 2007
                  Peanuts                       20.1 %          20.0 %
                  Pecans                        22.6            22.3
                  Cashews & Mixed Nuts          20.8            21.1
                  Walnuts                       14.7            13.7
                  Almonds                       11.9            13.3
                  Other                          9.9             9.6

                  Total                        100.0 %         100.0 %

Net sales in the consumer distribution channel increased by 6.2% in dollars but decreased 3.4% in volume in fiscal 2008 compared to fiscal 2007. The dollar increase was due primarily to price increases and changes in sales mix. Private label consumer sales volume decreased by 1.6% in fiscal 2008 compared to fiscal 2007 due primarily to the loss of a portion of the business of a major customer who would not accept price increases, offset almost entirely by new business. Fisher brand sales volume decreased by 13.7% in

fiscal 2008 compared to fiscal 2007. The decrease is due primarily to lower snack nut sales and a $3.3 million reduction in walnut baking nut sales to a major customer.
Net sales in the industrial distribution channel decreased by 17.1% in dollars and 27.2% in sales volume in fiscal 2008 compared to fiscal 2007. The sales volume decrease was 21.0%, excluding raw peanut sales to other peanut processors. Other factors for the sales volume decrease included a decrease in almond sales due to our discontinuance of our almond handling operation and a decrease in walnut sales due to a decrease in the availability of our supply of walnuts for the industrial distribution channel.
Net sales in the food service distribution channel increased by 10.3% in dollars and 3.5% in volume in fiscal 2008 compared to fiscal 2007. Consistent sales volume increases were experienced at all major customers in the food service distribution channel.
Net sales in the contract packaging distribution channel increased by 5.4% in dollars, but decreased 7.5% in volume in fiscal 2008 compared to fiscal 2007. The increase in net sales dollars was due primarily to the introduction of new products for a major customer. The decrease in sales volume was due primarily to certain sales that occurred during the first twenty-six weeks of fiscal 2007 that were subsequently discontinued.
Net sales in the export distribution channel decreased by 12.9% in dollars and 13.3% in volume in fiscal 2008 compared to fiscal 2007. The decrease was due primarily to volume decreases in almond and pecan sales. Almond sales declined due to the discontinuance of our almond handling operation, which generated by-products, for which Europe is the principal market. Pecan sales in the export distribution channel declined primarily due to decreasing our sales efforts as higher profitability was available in our other distribution channels. Gross Profit.
Gross profit for fiscal 2008 increased 60.4% to $66.2 million from $41.3 million for fiscal 2007. Gross margin increased to 12.2% of net sales for fiscal 2008 from 7.6% for fiscal 2007. The gross profit improvement was achieved primarily through price increases, the elimination of unprofitable sales and shifts in sales mix. The gross profit increase was achieved despite the following unusual or infrequent expenses.
• $7.1 million increase in unfavorable labor and efficiency variances over fiscal 2007, which was primarily related to the shut down and start up costs for production lines that were moved from the previous Chicago area facilities and installed in the New Site;

• $2.6 million in estimated redundant manufacturing expenses as production activities occurred at the previous Chicago area facilities while the manufacturing spending in the New Site reflected increased production levels; and

• $2.6 million in external contractor charges that were related to the acceleration of the equipment move from the existing Chicago area facilities to the New Site.

Operating Expenses.
Selling expenses for fiscal 2008 were $34.9 million, a decrease of $4.1 million, or 10.5%, from fiscal 2007. The decrease was due primarily to a $1.7 million reduction in freight expense due to more customers picking up their orders at our facilities, a $1.5 million reduction in distribution expenses related primarily to the relocation of our Chicago area distribution center to the New Site, a $0.6 million reduction in broker commissions and a $0.4 million reduction in advertising and promotion related expenses. Administrative expenses for fiscal 2008 were $18.9 million, an increase of $2.4 million, or 14.9%, from fiscal 2007. This increase was due primarily to a $0.5 million increase in consulting fees related to our profitability enhancement initiative and the design and implementation of a new incentive compensation plan, a $0.4 million increase in salaries and a $1.7 million increase in incentive compensation related to such incentive compensation plan. Also included in operating expenses are restructuring costs of $1.8 million for fiscal 2008. These restructuring costs consisted of $1.2 million related to the discontinuance of our store-door distribution system, $0.3 million related to one-time severance expenses, $0.2 million related to the exit of a leased facility before termination date at a facility no longer utilized by us and $0.1 million of operating

lease termination costs. Also included in operating expenses for fiscal 2007 is a gain of $3.0 million related to real estate sales. Income (Loss) from Operations.
Due to the factors discussed above, the income from operations was $10.7 million, or 2.0% of net sales, for fiscal 2008, compared to a loss from operations of $11.1 million, or (2.1)% of net sales, for fiscal 2007. Interest Expense.
Interest expense increased to $10.5 million for fiscal 2008 from $9.3 million for fiscal 2007. This increase primarily resulted from the fact that we capitalized $0.9 million of interest in fiscal 2007 related to our facility consolidation project and capitalized no interest in fiscal 2008. In addition, we paid higher interest rates on our Prior Credit Facility and Prior Note Agreement during fiscal 2008 than fiscal 2007. Debt Extinguishment Cost.
Debt extinguishment costs of $6.7 million were recorded for fiscal 2008. As a result of our refinancing completed during the third quarter of fiscal 2008, we were required to pay a $1.0 million debt extinguishment charge to the lenders under the Prior Credit Facility, pay a $5.2 million debt extinguishment charge to the noteholders under the Prior Note Agreement and write off the $0.5 million in remaining unamortized balance of fees related to the Prior Credit Facility and Prior Note Agreement.
Rental and Miscellaneous (Expense) Income, Net.
Net rental and miscellaneous (expense) income was an expense of $0.3 million for fiscal 2008 compared to an expense of $0.6 million for fiscal 2007. Income Tax Benefit.
Income tax benefit was $0.9 million, or 13.1% of loss before income taxes, for fiscal 2008 compared to $7.5 million, or 35.6%, for fiscal 2007. We had no ability to carry back losses to prior years, since losses were experienced for . . .