John B Sanfilippo & Son Inc (JBSS) 2007 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the John B. Sanfilippo & Son Inc., fourth quarter and fiscal 2007 year-end earnings conference call. My name is Eric. I'll be your coordinator for today. At this time, all participants are in a listen only mode. We will facilitate the question-and-answer session towards the end of the conference. (OPERATOR INSTRUCTIONS) I'd like to turn your presentation over to your host for today's call, Mr. Michael Valentine, Chief Financial Officer, please proceed, sir.

Okay, thank you, Eric. First we want to thank everyone for participating in our quarterly conference call for the fourth quarter of fiscal 2007 and also for the fiscal year ended 2007 Before we start, we want to remind everyone that we may make forward-looking statements today. These statements are based under current expectations and involve risks and uncertainties.

The factors that could negatively impact results are explained in our various SEC filings that we've made and we encourage you to refer to these filings to learn more about these risk factors. Starting with the income statement and sales, fourth quarter net sales declined by 6% to $122.9 million from $130.8 million. This decrease is attributable to a 6.5% decline in the weighted average selling price of our products. This price decline primarily was attributable to a shift in the product mix from higher priced items such as mixed nuts, cashews, and processed peanut products, to raw shell peanuts that were primarily shipped to other peanut shellers.

Unit sales declined in all distribution channels except the industrial channel led by a considerable volume decline in the export channel as the discontinuance of our almond handling operation in the third quarter led to a reduction in the amount of almonds that were available for sale into this channel. The discontinuance of the almond operation also had a similar impact on sales volume in the industrial channel, however, its impact was more than offset by increased sales of raw peanuts.

A reduction in promotional activity on the part of our retail customers on items such as mixed nuts, cashews, and peanuts also led to the decline in unit volume for the consumer channel. A reduction in promotional activity also led to a decrease in unit volume sold and our contract packaging channel.

Sales for the current fiscal year decreased by 6.6% to $541.4 million, from $579.6 million for fiscal 2006. This decrease is attributable to a 5.7% decline in the weighted average selling price. As was the case in the quarterly comparison, this price decline primarily was attributable to a shift in product mix from higher priced items such as mixed nuts, cashews, and processed peanuts to raw shelled peanuts that again were shipped to other peanut shellers.

The lack of promotional activity that led to the volume decline in the consumer channel and contract packaging channels in the fourth quarter also led to the volume decline in those channels in year-over-year comparison in addition to other factors. The loss of a significant private label customer in July of 2006 also contributed to the volume decline in the consumer channel when compared to unit volumes sold in that channel in fiscal 2006. This will be the last quarter where we will have that unfavorable comparable. Despite the decline in net sales, the fourth quarter gross profit increased by $7.1 million from gross profit reported in the fourth quarter fiscal 2006.

As a percentage of net sales gross profit margin increased to 8.4% from 2.4% from last years fourth quarter. The improvement of gross profit chiefly was attributed to considerable increases in the profitability of sales of almonds, cashews, mixed nuts, macadamia nuts, and walnuts mainly as a result of lower acquisition costs for these commodities. The improvement in gross profit on almond sales is mainly attributable to the discontinuance of our almond handling operation as we could not fully cover costs, fully could not cover our manufacturing and material costs in the prior year when most of our almonds came from the handling operation.

Gross profit improved in all distribution channels. Although gross profit and gross profit margin improved in the quarterly comparison the current quarters gross profit was impacted negatively by the following significant items: first, a $3 million reduction in absorption of manufacturing costs due to a 16.9% decline in production volume and all plants combined. This decline in volume occurred because of the shift in sales mix to items that require fewer production sets such as raw shelled peanuts. The discontinuance of the almond handling operation also led to the decline in production volume as the processing of almonds purchased from growers as opposed to from other handlers requires significantly more production steps.

A $2.2 million increase in manufacturing expenses as a result of our operating in the new Elgin facility at a relatively high level while operating our existing Chicago facilities at levels that were similar to those levels in the prior years fourth quarter. And then finally a $1.0 million incremental expense associated with the acceleration of the equipment move from the existing Chicago area facilities to the new facility in Elgin. We anticipate that future costs related to the acceleration of the equipment move will be approximately $2 million which will be incurred in the first and second quarters of fiscal 2008.

Fiscal 2007 gross profit margin improved to 7.6% from 6.4 % from a year ago as a percentage of net sales. Gross profit margins improved on the sales of macadamia nuts , almonds, cashews, mixed nuts, and pecans especially in the second half of the fiscal year.

The lower average purchase cost of almonds contributed greatly to the improvement in the gross profit margin in the current fiscal year. Gross profit margins improved in the industrial, contract packaging, and export channels. As was the case in the quarterly comparison, lower production volume, redundant manufacturing costs and the acceleration of the equipment move combined to partially offset the benefits derived from lower tree nut costs.

Fourth quarter selling and administrative expenses as a percentage of net sales and in total increased from 10.7% in 2006 to 10.9% in the current year. Quarterly selling expenses and administrative expenses as a percentage of net sales increased primarily because we spent $500,000 in the current quarter on consulting fees related to our material weakness remediation efforts and $200,000 for fees to secure waivers from our lenders for non-compliance of certain financial covenants in our loan agreements.

Total selling and administrative expenses as a percentage of net sales for the fiscal year comparison increased from 9.5% for fiscal 2006 to 10.2% for the current fiscal year. In addition to the increases in consulting fees and bank fees that led to the increase in the quarterly comparison, higher distribution costs at the new facility related to the move of our distribution center and results in start up costs earlier in the year and higher audit and legal fees incurred earlier in the year contributed to the increase in total selling and administrative expenses as a percentage of net sales.

For the fourth quarter fiscal 2007, interest expense increased to $3 million from $2 million for the fourth quarter of fiscal 2006. For fiscal 2007, for the full year, interest expense increased to $9.3 million from $6.5 million in the previous year. Higher short-term debt and increased interest rates on both our short-term and long term facilities generated the increase in interest expense in both the quarterly and fiscal year comparisons. Primarily as a result of the improvement in gross profit and the non-recurrence of the goodwill impairment charge taken in last years fourth quarter, the net loss and the current fourth quarter declined from $9.6 million to $3.9 million and primarily as a result of the increase in the gain on real estate sales that occurred earlier in the current year and the favorable factors mentioned in the quarterly comparison, the net loss in the current year declined from $ 16.7 million to $13.7 million.

Turning to the Balance Sheet, total inventories declined by $30.2 million or 18.4% in fiscal 2007. Pounds of raw input stocks fell by 38.1% or 29.6 million pounds during the year. Declines in the quantity of raw input stocks of Walnuts, pecans, peanuts, and almonds contributed for the most part to the decline in the overall input stocks of raw tree nuts and peanuts. Higher acquisition costs for pecans and walnuts and the shift in the product mix in our inventory to shell pecans primarily led to a 9.5% increase in the weighted average cost per pound of our total input stocks.

The value of finished goods inventories increased by 11.8% in fiscal 2007 primarily because of an increase in the quantity of finished goods pecans. Mainly as a result of higher short-term debt, which in large part was caused by capital expenditures made to complete the facility consolidation project, total debt increased by $10.4 million during the current fiscal year. We have remediated three of the four material weaknesses in our internal controls that we disclose in our restated annual report for fiscal 2006 and made significant progress in remediating the remaining material weakness over the last six months, especially in respect to disclosure between our accounting department and all other departments.

The remaining weakness relates to our forecasting capabilities and we have already implemented steps to improve these capabilities by engaging consultants to review our '08 forecast and to provide us with forecasting tools in addition to hiring a senior level accountant to direct our financial planning and analysis efforts. The steps we have taken will be tested during the first and second quarters of 2008 to determine their effectiveness and whether this remaining weakness has been successfully remediated.

We have received waivers from both of our banks and note holders for all covenant violations that occurred in the fourth quarter and in the first and second periods of fiscal 2008. Additionally we have received waivers from both lenders for covenant violations that are anticipated to occur for September and for the first quarter of fiscal 2008. There were no fees paid or increases in interest rates as a consequence of obtaining these waivers. Despite receiving these waivers our lenders have not reached agreement on ending the sharing period which commenced on August 6th which has been explained in detail in a form 8-K that we filed on August 15th.

During the fourth quarter we engaged an advisor to assist us in assessing our refinancing options. Proposals from asset based lenders concludes some of our existing lenders. As a result of these efforts we believe that we now have reasonable financing options in respect to pricing with minimal financial covenants. It is our intention to continue to solicit proposals for the refinancing of our bank credit facility and notes, however, it should be noted that the prepayment penalties with the existing facilities are expected to range between $3 and $3.5 million in addition to other fees if we refinance both facilities.

In the long run, if we elect to refinance, this up front cost could be largely offset by fees saved by not having to request waivers in the future, a longer term on long term debt and lower fees and rates on short-term debt. I do want to caution though that there can be no assurance that we will actually carry out our refinancing plans. At this time I would like to turn the call over to Jeff Sanfilippo, our Chief Executive Officer to make further

Thank you, Mike. Good morning, everyone. Though the operating results for the fourth quarter were disappointing, we've made considerable progress in eliminating the losses incurred over the past two years and for remediating the material weaknesses reported this past fiscal year.

The financial results for this quarter are a 59% improvement over the fourth quarter in fiscal 2006. Key drivers of this improvement included the following: Changes in how we procure raw materials. As you know we've made significant changes in the way we buy tree nuts that we shell. The decision to no longer purchase field run almonds from growers was the right one for our company.

Cost reductions were realized in the fourth quarter and the company expects additional savings in fiscal 2008 as a result of this decision. There was a layoff of over 100 employees in our Gustine California facility as a result of this decision, and the actions that occurred in the almond industry this year with price declines mitigated the decision we made mitigated the risk we would have faced even in this current crop condition.

Second key driver reductions in manufacturing spending in our Chicago area facilities is a result of the consolidation, and a third driver is profit enhancement initiatives and SKU optimization. The Sales and Marketing departments throughout our organization have assessed the profitability of over 200 items and have taken appropriate steps to either initiate price changes or discontinue products. The company will continue to execute plans to manage procurement, reduce manufacturing costs, and improve the profitability of our product portfolio but we will balance these initiatives with one focus and that is to provide consistent quality and value for our customers.

The company just celebrated the grand opening of our new Elgin corporate headquarters last Thursday. We had over 300 guests attend including customers, financial partners, vendors, brokers, and dignitaries from the City of Elgin including the mayor. For the first time in the company's history, we have a dedicated research and development center on site to improve current product offerings and create new mixes, coatings, flavors, and seasonings for nuts. The company also plans on having consumer focus groups in our R&D center in the future. We will become a better resource for our customers and accelerate the speed to market for new nut products.

As I mentioned in the third quarter, we decided to accelerate the move of the equipment at our existing Chicago area facilities into Elgin by the end of 2007, one year ahead of our original plan. The acceleration of the move is estimated to cost an additional $2 million in the first and second quarters of fiscal 2008 while eliminating approximately $1 million per month on average that we would have incurred if we continue to operate out of the three remaining facilities over the next six quarters.

Additionally, the acceleration of the move will allow us to realize the anticipated savings to be derived from the consolidation sooner than we initially planned. There are currently 600 employees working in our Elgin facility. Upon completion of our consolidation, there will be over 900 people working at our headquarters.

Now let's turn to revenues. Turning to consumption trends, in the snack category for food drug mass, unit volume in the snack category increased 1.6% versus a year ago and dollars increased 3.5%. Almonds, pistachios, and mixes all experienced double digit growth in the category, however, we continue to see declines in peanut consumption with a 7% reduction in retail unit sales during fiscal 2007. In the baking category, unit volume is up 1.7% with dollars up 3.1%. The dollar increase can be attributed to both higher average selling prices and a product mix shift to higher priced nuts such as almonds and pine nuts.

As far as the companies revenues in the quarter, as Mike mentioned, the 6% decline in net sales can be attributed to a 6.5% decline in average weighted selling price. Although we did see a slight increase in pounds shipped to customers, this was mainly attributed to raw peanuts sold through our industrial channel to other shellers. The company is focused on growing sales revenues across all our channels, especially consumer and food service.

New private label business the company secured at several consumer accounts began shipping at the end of the fourth quarter. We anticipate that sales in fiscal 2008 generated by this new business will offset the declines incurred in the consumer channel in fiscal 2007. We see increased promotional activity by the brands and a renewed committment by many of our private label customers to focus on building their nut programs. For example, one of our premium customers, an innovative and aggressive convenience store retailer in the northeast has consistently expanded its private label program with impressive results of over 40% growth this past year.

In response to the strong promotional activity from the brands the company is dedicating additional resources to marketing and promotional efforts to support the Fisher Brand. The company recently completed a research study to reposition the brand and we will execute plans throughout fiscal 2008 to grow Fisher Brand awareness and gain new distribution.

In closing, although the results for the quarter and year-end were disappointing, we have action plans in place and executed strategies to improve our performance. There is a great deal of work to be done but the improvement s in the quarter and the overall year-end improvement are results that demonstrate the changes we have made and will continue to make will improve our performance going into fiscal 2008. Thank you.

Okay, at this point, we've completed the speaking part of our call. At this time, we will entertain questions from our listeners. Operator? Would you please queue up the first question?

(OPERATOR INSTRUCTIONS). Your first question comes from the line of Ron Strauss with Pekin Singer Strauss. Please proceed.

Good morning, gentlemen.

Good morning, Ron.

In looking over your press release, you indicate that there was three items that impacted your gross margin in the fourth quarter, and it looks to me like two of the three items were non-recurring. Is that in fact the case?

Yes.

I was thinking of the redundant manufacturing expenses an the outsider contract charges.

Right. We do anticipate that when the move is completed, the last items in the list will not recur.

So absent that, you were pretty close to breakeven in the fourth quarter?

Yes, I think if you also add the waiver fees and the consulting fees for the remediation effort, it gets us relatively close to breakeven.

And could you tell us what the current years nut crop looks like from your perspective?

Okay, I'll start with peanuts and we'll bounce around a little bit here, Ron.

Yes.

As you may know, we've had a drought in the southeast in addition to that, we saw a substantial decline in planted acreage. As quite a bit of peanut acres moved to corn.

Yes.

As a result of that, we're looking at a crop that's probably going to be down about somewhere in the neighborhood of about 10% to 20% depending on yield, and as a result of that, we're anticipating a minimum cost increase of approximately 25%. On cashews, cash to market was actually below historical averages for a large portion of the last six months or so. It's come up a bit. The crop looks very good in Vietnam and relatively normal in some of the other growing areas I'm told, but it has come up a bit to normal, what I would characterize as normal levels and that's mainly being driven by increased domestic consumption in India. Jeff? You want to take some?

Turning to pecans, the national pecan sellers association just had their convention this past week and the shellers estimate for the new pecan crop is 365 million pounds. That is a sizeable crop. Pecans are a fluctuating crop. One year it's big and the next year is small. This is coming on to the bigger crop cycle and the 365 million pound crop plus an additional 100 million pounds estimated to come out of Mexico has a substantial size, so we anticipate lower procurement costs for pecans coming this year.

So what implications does this have for your gross margin s over the next 12 to 18 months?

Well, I think, Ron, most of the crops are favorable especially almonds and pecans. I think the big question mark is whether we'll be able to pass along our peanut cost increases into our customers and not knowing that, it would be difficult to predict what will happen to our gross margins.

But on balance do you think gross margins will continue to improve as a result of this crop or would it stagnate?

Well, I think that if you look at say the first two quarters of fiscal '08 and you compare them to the first two quarters of fiscal '07, just discontinuing our almond handling operation alone and ignoring everything else, should allow us to improve our gross margins.

Pretty significantly?

Well that was a very significant loss last year and we don't expect that to recur, so I guess I would say you're right in that respect.

And one thing additional is the lower commodity costs on some of the items will allow us to promote the category more which has been a struggle over the last couple years.

It wasn't so long ago that management was targeting a mid to high teen gross margins for the company as a whole. Do you still feel that's an achievable goal and if so, how long will it take for you to get there?

Ron, it's difficult to say. Of course we've got to complete the move, get people trained here. As you know, we're ahead of schedule, so that's going to take some time, probably the balance of the fiscal year to really get into a situation where we can start to realize the full benefits of this operation.

But you still feel it's an achievable goal?

Well I think in the long run it is depending on commodity costs, but we still have quite a bit of work here as Jeff mentioned that we have to do this fiscal year.

Well I was interested in Jeff's comments, talking about perhaps getting more marketing oriented and more consumer oriented with the Fisher Nut Brand. This is an area that the company really has never focused on in the past, being principally a private label and industrial food service producer of nuts or processor of nuts. I find that very encouraging. How big is the Fisher Nut Brand now?

Well, total brand is over $100 million if you combine the snack and the baking portions of the brand. We have relatively small market share if you look at Planters and Blue Diamond, Diamond, Emerald in the category. So, we definitely do not spend as much as our competitors on both advertising, marketing and promotional activity, and we will, you'll see a committment from us to do that going forward.

To what extent is your tight financial situation preventing you from doing more marketing?

It isn't, Ron.

It is not?

No.

Excellent. What would you say your overall market share is today versus a year ago or three years ago?

For the Fisher Brand?

No.

Or total company?

Total company.

Well, I think as you know, we've reported some sizeable reductions in pounds shipped and certainly that indicates that our share overall in all channels with all nut products is probably declined.

Okay, that's it for now. Thank you, gentlemen.

Okay.

Your next question comes from the line of Greg Hillman with First Wilshire Securities. Please proceed.

Good morning.

Good morning, Greg.

A couple questions. You know Jeff, you were talking about the convenience store in the northeast that was using a private label, the brand with your nuts. Were they using the Fisher label or did they have some other label on that?

No. It was private brands. There was no Fisher distribution there.

Okay.

What we're seeing is a recommitment or a bigger committment from a lot of our private brands, not just ours but our competitors as well to grow their brand and grow the equity in their store brands.

Okay, I guess it would make sense, so could a convenience store earn a higher margin by having their private label brand of nuts versus like going with Frito nuts?

They can earn a higher brand but what it allows them to do is be more innovative and they control the destiny of the brand, they control the type of products they put in there, so it gives them a little more flexibility and Fritos does a great job. They are the convenience store king as far as snacks, but the company that wants to do a private brand just gives them some more flexibility on the type of products they can have on shelf.

And just kind of a big question about strategy. I notice you lost a big order to Raw Corporation in I guess July of '06 due to bundling. Is there anyway you can do an alliance with other like baker or serial companies to bid on those accounts to counter act that bundling effect?

That's a challenge to do that. You're looking at the logistics and trying to combine cookies and crackers and syrups and nuts all together, and not to say it's not a strategy that we wouldn't consider, but it's not something that we're pursuing at this time.

Okay. In terms of this year versus I think your record profitability year was your fiscal year ending June '04 and what was, I guess what was different than now and could that set of circumstances be recreated in the future in terms of sales, your cost level, and pricing for the raw nuts?

Well, I think from a cost of raw nut standpoint, the cost of raw nuts today and the cost of raw nuts back in the latter part of 2003 and early part of 2004 were pretty much in line. I think the big difference was the sizeable increase in demand that we saw back in that year, mainly because of low carb diets and it really did create a very considerable spike in consumption and we all benefited from that the whole industry. To get that kind of spike in consumption is something that the whole industry will have to work towards because it isn't something that's going to come to us externally.

Okay. And then in terms of the move to Elgin, what would be the payback period you think for the money that you've incurred in moving to Elgin?

We haven't disclosed that, Greg.

Okay. And the earlier questioner asked about gross margin and you mentioned not processing, I think, almonds yourself would help on your gross margin but also apparently, you wouldn't have made the move to the Elgin facility unless it was going to improve your gross margin, right?

Right. That's correct.

Okay. And in terms of just I think there's an ebb and flow in terms of the private label accounts, in terms of when they come up to bid and I think in your last press release, not this one but the prior quarter one you mentioned that you got a customer that was going to bring $25 million in revenue on an annualized basis, I think it was starting in May of this year. Is that correct?

That's right.

And when Jeff was talking about gaining additional customers in the private label area, was that just referring to that or to new customers come in addition to that from the last press release?

It's really a combination of both new customers and new product lines within our existing customer base.

Okay, and then so is the total now greater than $25 million now, based on the product, the additional products and new customers?

Some of those new products and existing customers, Greg, are new, and it's just difficult to predict how successful they will be, so at this time, we would keep it at $25 million.

Okay. I'll get back in queue. Thank you.

Okay, thanks, Greg.

Your next question comes from the line of Larry Callahan with Huntleigh Securities.

Good morning. I was just wondering if you've told people what your total investment in the new Elgin facility is. I see about over the last three years over $110 million in facility expansion costs. Would most of that be applicable to the Elgin facility?

It's actually $105 million not counting our investment in the original Elgin site.

Not counting, you mean the original $490 thousand or so that you purchased? Or just the property?

Just the property. We have an investment in there of roughly about $7 million.

Oh, okay. And are those facility expansion costs in the current fiscal year going to be under $10 million or even less than that?

You mean as far as you're talking about move costs or are you talking about further capital expenditures?

Further capital expenditures.

Almost all of our capital expenditures related to the project have been completed as of the end of fiscal '07, and any capital expenditures that we do here in the new facility or in the outside facilities are essentially going to be what we would characterize as maintenance CapEx.

Okay. And then when you talked about your credit agreements you mentioned an asset based agreement possibly. Is there any reason why that new facility, would that new facility be far more easily borrowed against now that it's complete and occupied?

Yes. We believe that's the case.

Okay. Thank you very much.

Okay, thank you.

Your next question comes from the line of Thomas Sullivan with Merrill Lynch. Please proceed.

Hi, thank you. I'd just like to know if you've, have your items made their way into major retailers? Sam's Club, Cosco, BJ's and how do these items do if they are there?

Are you talking about private label or Fisher Brand?

Private label.

Private label we supply some of the customers that you mentioned around the United States. I mean, some that are still opportunities there are several major retailers that we do not supply at this time, so there are great opportunities.

Okay. Number two, just real estate, anymore transactions where you might be consolidating or selling anymore real estate?

Yes. The original Elgin site that I mentioned before is up for sale. We do have an agreement with a buyer on that piece of property and we anticipate that will close early in the third quarter.

Okay, all right, thank you very much.

Okay.

(OPERATOR INSTRUCTIONS). Your next question comes from the line of Greg Hillman as a follow-up with First Wilshire Securities. Please proceed.

Jeff, earlier in the conference call, you mentioned some overall trends in nut consumption.

Sure.

In the United States, but what were they? Could you talk about Mike was talking about the spike up in '04 in consumption due to some health trends but what's going on currently?

Well what we're seeing is a shift as I mentioned from peanuts, focusing on the snack category first a shift from peanuts to almonds continue to grow double digit consumption. We're seeing growth in pistachios this past fiscal year and we also saw additional growth in mixes, trail mix, fruit and nut mixes, we're also seeing as I'm sure most of you have heard growth in natural and organics, the company is going to be certified organic in this facility in the spring of 2008 so we will pursue opportunities to expand our supply both our private brands and Fisher with organic products going forward. In the baking category, consumption relatively stable, the typical walnuts continue to expand, pecans were down a little bit in unit volume although we're seeing continued growth in almonds in the baking channel, pine nuts continue to grow and then substantial growth out of know where from brazil nuts which we're really not sure why that's the case, but it's there.

That's interesting. And then overall, I mean, in terms of nuts, I guess what's the elasticity, price elasticity for nut buying or consumption, let's say for just peanuts? Has anybody calculated that? In other words when the price goes up how does consumption go down or whatever?

Well overall if you look at long term for almost all commodities it's very elastic. Peanuts would be the most elastic because you can, depending on what the demand is they can replant or increase the plantings of peanuts every year, but something like an almond or a walnut where the tree takes four to seven years to bear fruit, that supply is extremely inelastic and that was what drove some of the huge spikes in prices in 2004-2005 because it took a while for supply to catch up with the increase in demand.

Okay, and you benefited from that?

We benefited from, well the price increase, sure.

Okay. And just in terms of, I take it you make trail mix too? You put fruit and make trail mixes?

Yes, we launched a whole program eight different SKUs of Fisher what we call Fisher Fusions, eight different snack mixes, dried fruit and nuts, and there were some snack mixes as well, an that continues to be a growing category and a growing trend. Snack mixes and also bold flavors. Consumers are really looking at unique product flavors as they look to the category for additional product offerings.

Are nuts, are they gaining share relative to like potato chips in snack food category?

You know, I really don't know exactly what the gain is against the total snack category, whether chips are growing at the same pace. I do know that we continue to see growth in the snack category for nuts.

Okay. And then in terms of just repositioning the Fisher Brand, are you trying to get it to be the second brand, like say in Safeway right now, is there a second brand in Safeway or is there just Planters?

Well Planters is the brand leader over 20% of the category, you've got strong presence with Blue Diamond in the category. You've got several other brands as well in the category. Fisher has some distribution there, but it's still, it's relatively fragmented category if you looked at all of the different brands as well as private brands. And so the rebranding of Fisher is to, the research we did was to understand the Fisher consumer, the general consumer perception, what type of products are relevant in the category that may be missing and that's what we're focused on with the brand is repositioning it against Planters, against Blue Diamond, the others in the category.

I have to admit, I think you do the stuff for Whole Foods and I really like the mixed nuts that you do for Whole Foods, the 365 ones. I was just wondering about mixed nuts in general, do you think that is the category that has legs if you go further?

If you look at the mixed nut category, it's relatively flat right now, actually unit consumption was up, it's relatively flat, unit consumption was 0.9% growth but we continue to see strong mixed nut consumption, it's still a large piece of the total category.

Okay. And then just one final question for Mike. In terms of getting into the out of the red ink for earnings , you mentioned you're near breakeven now and I, because normally, you do a strong second quarter going into the Christmas season and I was wondering if any of, whether that could get torpedoed by bank costs refinancing or some other non-recurring charge where you end up having a breakeven in the second

Well we've provided you with the potential costs of the refinancing and also what we anticipate our future moving costs are. You combined those two and you're looking at a very significant number, somewhere in the neighborhood of at least $6 million. I would imagine if you put that all into one quarter, it would put some significant pressure on our ability to make a profit and that would especially be the case if that occurred in the first quarter.

In the First Quarter, okay. And but then if you got it, so it seems like your move and stuff like that would be complete so it's possible you could clean everything up by the first quarter and let's say you could have a relatively clean second quarter?

That's possible but I think it's more likely just because of the current mortgage market, it's probably more likely that we would refinance in the second quarter.

Okay. So you might have to wait until the following fiscal year to get a clean second quarter?

That's correct.

Okay. That's fine. Thanks very much, Mike.

Okay, thanks, Greg.

Your next question comes from the line of Bruce Baughman with Franklin Templeton. Please proceed.

Good morning.

Good morning.

The going concern issue here, is there something that can be mitigated before the report is issued?

Well, no. The report was issued this morning.

Okay, so that's not subject to change, okay.

Right.

Thank you.

Okay, thank you.

It appears we have no more audio questions in queue. I would like to turn the call over to Mr. Michael Valentine for closing remarks.

Again, we would like to thank all listeners for their interest in JBSS. At this time, we will end our earnings call for the fourth quarter of fiscal '07 and fiscal year 2007. Thank you.

Thank you for your participation in today's conference. This concludes our presentation. You may now disconnect, and have a good day.