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**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**








**FORM
      10-Q**





**ý**
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934****For
                the quarterly period ended November 30, 2006****q**
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934****For
                the transition period from ____ to ____.**Commission
                file number:**001-14608**








**SCHIFF
      NUTRITION INTERNATIONAL, INC.**


(Exact
      name of registrant as specified in its charter)





**Delaware**
            
            **87-0563574**(State
                or other jurisdiction
              of
                incorporation or organization)
            
            (I.R.S.
                Employer
              Identification
                No.)**2002
                South 5070 West**
              **Salt
                Lake City, Utah**
            
            **84104-4726**(Address
                of principal
              executive
                offices)
            
            (Zip
                Code)





**(801)
      975-5000**


(Registrant’s
      telephone number, including area code)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes ý No q





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange
      Act.





Large
      Accelerated Filer q   Accelerated
      Filer q   Non-Accelerated
      Filer ý





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes q No ý





As
      of January 8, 2007 the registrant had outstanding 11,658,016 shares of Class
      A
      common stock and 14,973,148 shares of Class B common stock.





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**PART
      I. FINANCIAL INFORMATION**





**ITEM
              1.**
            **FINANCIAL
                STATEMENTS**





**SCHIFF
      NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


***(in
      thousands, except share data)***


November
                30,
                2006
            
            May
                31,
                2006*(unaudited)***ASSETS**Current
                assets:Cash
                and cash
                equivalents
            
            $
            25,044
            
            $
            24,899Available-for-sale
                securities
            
            
            41,507
            
            
            40,120Receivables,
                net
            
            
            19,552
            
            
            20,431Inventories
            
            
            29,423
            
            
            23,515Prepaid
                expenses and other
            
            
            2,810
            
            
            2,444Deferred
                taxes, net
            
            
            2,156
            
            
            2,419Total
                current
                assets
            
            
            120,492
            
            
            113,828Property
                and
                equipment, net
            
            
            14,294
            
            
            13,287Other
                assets:Goodwill
            
            
            4,346
            
            
            4,346Deposits
                and
                other assets
            
            
            235
            
            
            154Total
                other
                assets
            
            
            4,581
            
            
            4,500Total
                assets
            
            $
            139,367
            
            $
            131,615**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                liabilities:Accounts
                payable
            
            $
            12,820
            
            $
            10,547Accrued
                expenses
            
            
            8,932
            
            
            11,472Short-term
                debt
            
            
            1,150
            
            
            —Income
                taxes
                payable
            
            
            1,095
            
            
            1,293Total
                current
                liabilities
            
            
            23,997
            
            
            23,312Deferred
                taxes, net
            
            
            13
            
            
            796Commitments
                and contingencies (Note 8)Stockholders'
                equity:Preferred
                stock, par value $.01 per share; shares authorized-10,000,000; no
                shares
                issued and outstanding
            
            
            —
            
            
            —Class
                A
                common stock, par value $.01 per share; shares authorized-50,000,000;
                shares issued and outstanding-11,654,816 and 11,606,193
            
            
            116
            
            
            116Class
                B
                common stock, par value $.01 per share; shares authorized-25,000,000;
                shares issued and outstanding-14,973,148
            
            
            150
            
            
            150Additional
                paid-in capital
            
            
            90,826
            
            
            88,488Retained
                earnings
            
            
            24,265
            
            
            18,753Total
                stockholders' equity
            
            
            115,357
            
            
            107,507Total
                liabilities and stockholders' equity
            
            $
            139,367
            
            $
            131,615




See
      notes to condensed consolidated financial statements.


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**SCHIFF
      NUTRITION INTERNATIONAL, INC. AND
      SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF INCOME**


***(in
      thousands, except share data)***


***(unaudited)***


Three
                Months EndedNovember
                30,2006
            
            2005Net
                sales
            
            $
            38,817
            
            $
            35,456Cost
                of goods sold
            
            
            22,640
            
            
            24,246Gross
                profit
            
            
            16,177
            
            
            11,210Operating
                expenses:Selling
                and marketing
            
            
            8,790
            
            
            6,060General
                and administrative
            
            
            4,155
            
            
            4,081Research
                and development
            
            
            864
            
            
            583Amortization
                of intangible assets
            
            
            —
            
            
            5Reimbursement
                of import costs
            
            
            (278
            )
            
            (908
            )Total
                operating expenses
            
            
            13,531
            
            
            9,821Income
                from operations
            
            
            2,646
            
            
            1,389Other
                income (expense):Interest
                income
            
            
            758
            
            
            400Interest
                expense
            
            
            (45
            )
            
            (38
            )Foreign
                currency translation gain (loss)
            
            
            2
            
            
            (36
            )Other,
                net
            
            
            13
            
            
            (21
            )Total
                other income, net
            
            
            728
            
            
            305Income
                from continuing operations before income taxes
            
            
            3,374
            
            
            1,694Income
                tax expense
            
            
            1,125
            
            
            89Income
                from continuing operations
            
            
            2,249
            
            
            1,605Loss
                from discontinued operations, net of income taxes
            
            
            —
            
            
            (70
            )Net
                income
            
            $
            2,249
            
            $
            1,535Weighted
                average shares outstanding:Basic
            
            
            26,541,764
            
            
            26,244,426Diluted
            
            
            27,330,278
            
            
            26,866,171Net
                income per share-basic and diluted:Income
                from continuing operations
            
            $
            0.08
            
            $
            0.06Loss
                from discontinued operations
            
            
            —
            
            
            —Net
                income
            
            $
            0.08
            
            $
            0.06Comprehensive
                income
            
            $
            2,249
            
            $
            1,535





See
      notes to condensed consolidated financial statements.


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**SCHIFF
      NUTRITION INTERNATIONAL, INC. AND
      SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF INCOME**


***(in
      thousands, except share data)***


***(unaudited)***


Six
                Months EndedNovember
                30,2006
            
            2005Net
                sales
            
            $
            84,469
            
            $
            83,473Cost
                of goods sold
            
            
            51,176
            
            
            59,554Gross
                profit
            
            
            33,293
            
            
            23,919Operating
                expenses:Selling
                and marketing
            
            
            17,079
            
            
            12,076General
                and administrative
            
            
            7,854
            
            
            7,643Research
                and development
            
            
            1,680
            
            
            1,311Amortization
                of intangible assets
            
            
            —
            
            
            11Reimbursement
                of import costs
            
            
            (298
            )
            
            (2,288
            )Total
                operating expenses
            
            
            26,315
            
            
            18,753Income
                from operations
            
            
            6,978
            
            
            5,166Other
                income (expense):Interest
                income
            
            
            1,501
            
            
            775Interest
                expense
            
            
            (103
            )
            
            (76
            )Foreign
                currency translation gain
            
            
            —
            
            
            1,577Other,
                net
            
            
            15
            
            
            (22
            )Total
                other income, net
            
            
            1,413
            
            
            2,254Income
                from continuing operations before income taxes
            
            
            8,391
            
            
            7,420Income
                tax expense
            
            
            2,879
            
            
            823Income
                from continuing operations
            
            
            5,512
            
            
            6,597Loss
                from discontinued operations, net of income taxes
            
            
            —
            
            
            (127
            )Net
                income
            
            $
            5,512
            
            $
            6,470Weighted
                average shares outstanding:Basic
            
            
            26,511,981
            
            
            26,176,524Diluted
            
            
            27,322,498
            
            
            26,820,312Net
                income per share-basic:Income
                from continuing operations
            
            $
            0.21
            
            $
            0.25Loss
                from discontinued operations
            
            
            —
            
            
            —Net
                income
            
            $
            0.21
            
            $
            0.25Net
                income per share-diluted:Income
                from continuing operations
            
            $
            0.20
            
            $
            0.25Loss
                from discontinued operations
            
            
            —
            
            
            (0.01
            )Net
                income
            
            $
            0.20
            
            $
            0.24Comprehensive
                income
            
            $
            5,512
            
            $
            6,303





See
      notes to condensed consolidated financial statements.


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**SCHIFF
      NUTRITION INTERNATIONAL, INC. AND
      SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


***(in
      thousands)***


***(unaudited)***


Six
                Months EndedNovember
                30,2006
            
            2005Cash
                flows from operating activities:Net
                income
            
            $
            5,512
            
            $
            6,470Adjustments
                to reconcile net income to net cash provided by operating
                activities:Deferred
                taxes
            
            
            (520
            )
            
            1,850Depreciation
                and amortization
            
            
            1,615
            
            
            1,483Foreign
                currency translation
            
            
            —
            
            
            (1,577
            )Amortization
                of financing fees
            
            
            28
            
            
            28Stock-based
                compensation
            
            
            2,108
            
            
            82Excess
                tax benefit from stock-based compensation
            
            
            (144
            )
            
            —Other
            
            
            (14
            )
            
            22Changes
                in operating assets and liabilities:Receivables
            
            
            579
            
            
            299Inventories
            
            
            (5,908
            )
            
            (309
            )Prepaid
                expenses and other
            
            
            (366
            )
            
            (305
            )Deposits
                and other assets
            
            
            (109
            )
            
            246Accounts
                payable
            
            
            2,522
            
            
            826Other
                current liabilities
            
            
            (2,594
            )
            
            (5,343
            )Net
                cash provided by operating activities
            
            
            2,565
            
            
            3,772Cash
                flows from investing activities:Purchase
                of property and equipment
            
            
            (2,857
            )
            
            (915
            )Proceeds
                from sale of Haleko Unit, net (Note 1)
            
            
            —
            
            
            13,683Purchase
                of available-for-sale securities
            
            
            (20,049
            )
            
            (26,577
            )Proceeds
                from sale of available-for-sale securities
            
            
            18,662
            
            
            21,714Collection
                of notes receivable
            
            
            300
            
            
            300Net
                cash provided by (used in) investing activities
            
            
            (3,944
            )
            
            8,205Cash
                flows from financing activities:Proceeds
                from stock options exercised
            
            
            256
            
            
            593Acquisition
                and retirement of common stock
            
            
            (170
            )
            
            (143
            )Excess
                tax benefit from stock-based compensation
            
            
            144
            
            
            —Proceeds
                from debt
            
            
            1,996
            
            
            1,693Payments
                on debt
            
            
            (846
            )
            
            (1,220
            )Net
                cash provided by financing activities
            
            
            1,380
            
            
            923Effect
                of exchange rate changes on cash
            
            
            —
            
            
            17Increase
                in cash and cash equivalents
            
            
            145
            
            
            12,917Cash
                and cash equivalents, beginning of period
            
            
            24,899
            
            
            11,358Cash
                and cash equivalents, end of period
            
            $
            25,044
            
            $
            24,275





See
      notes to condensed consolidated financial statements.


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  SCHIFF
                NUTRITION INTERNATIONAL, INC. AND
                SUBSIDIARIES
 **NOTES
                TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 ***(in
                thousands, except share data)***
 ***(unaudited)***




**1.**
            **BASIS
                OF PRESENTATION AND OTHER
                MATTERS**





The
      accompanying unaudited interim condensed consolidated financial statements
      (“interim financial statements”) do not include all disclosures provided in our
      annual consolidated financial statements. These interim financial statements
      should be read in conjunction with the consolidated financial statements and
      the
      footnotes thereto contained in our Annual Report on Form 10-K for the year
      ended
      May 31, 2006 as filed with the Securities and Exchange Commission. The May
      31,
      2006 condensed consolidated balance sheet, included herein, was derived from
      audited financial statements, but all disclosures required by generally accepted
      accounting principles are not provided in the accompanying footnotes. We are
      a
      majority-owned subsidiary of Weider Health and Fitness (“WHF”).





In
      our opinion, the accompanying interim financial statements contain all material
      adjustments necessary for a fair presentation of our financial position and
      results of operations. Results of operations and cash flows for any interim
      period are not necessarily indicative of the results of operations and cash
      flows that we may achieve for any other interim period or for the entire
      year.





On
      June 17, 2005, we announced the sale of our Haleko Unit to Atlantic Grupa of
      Zagreb, Croatia and certain of its subsidiaries for approximately $15,089 in
      cash. The transaction included the sale of the capital stock and partnership
      interests of the international subsidiaries that operate the Haleko Unit. In
      connection with the sale, we incurred transaction related costs of approximately
      $687 and relinquished cash of approximately $719. The transaction closed on
      June
      17, 2005, with an effective date of May 1, 2005 (the first day of Haleko's
      fiscal year 2006). The impact of the sale on the fiscal 2006 first quarter
      operating income was not significant.





On
      April 1, 2005, we announced the sale of certain assets of our Active Nutrition
      Unit relating to our Weider branded business domestically and internationally
      to
      Weider Global Nutrition, LLC (“WGN”), a wholly-owned subsidiary of WHF. The
      terms of the transaction provided for a cash payment of approximately $12,900
      and a note receivable of $1,100 in exchange for assets relating to the domestic
      Weider branded business, including inventory, receivables, and intangible and
      intellectual property, the capital stock of certain of our international
      subsidiaries related to the international Weider branded business (including
      the
      working capital of those subsidiaries), and the assumption of certain associated
      liabilities by WGN. The transaction closed on April 1, 2005, with an effective
      date of March 1, 2005.





In
      connection with the sale of the Weider branded business, we also entered into
      two separate agreements (domestic and European) whereby we agreed to provide
      certain general and administrative, research and development, and logistics
      services to WGN for an annual fee. The domestic service agreement provided
      for a
      one year term, with an option to either party for one additional year. The
      parties exercised this option for the second year and have further extended
      the
      term of the agreement through March 1, 2008. In connection with the sale of
      our
      Haleko Unit, the European service agreement was transferred to the purchaser
      of
      the Haleko Unit.





Historical
      operating results for the Haleko Unit are reflected as discontinued operations
      in our condensed consolidated financial statements, including the notes thereto.
      We believe our remaining business, which consists of the aggregation of several
      product-based operating segments, represents our only reportable
      segment.





On
      March 17, 2006, the Compensation Committee of our Board of Directors, pursuant
      to our 2004 Plan, approved the adoption of a long term incentive plan involving
      the grant of performance based restricted stock units (the “Units”). On March
      20, 2006, a total of 1,437,200 Units were issued to certain officers and
      employees. Each Unit represents the right to receive one share of the Company’s
      Class A common stock, subject to certain performance based vesting requirements.
      The Units will vest, if at all, based on the Company’s performance in relation
      to certain specified pre-established performance criteria targets over a
      performance period beginning on January 1, 2006 and expiring on May 31, 2008.
      The performance criteria upon which the Units may vest is based upon a “Business
      Value Created” formula, which is comprised of two performance criteria
      components: operating earnings and return on net capital. The grant date fair
      value of each Unit was $5.11. We recognize compensation expense over the
      performance period based on a periodic assessment of the probability that the
      performance criteria will be achieved. For the three and six month periods
      ended
      November 30, 2006, respectively, we recognized compensation expense of $1,149
      and $1,810, and the related tax benefit was approximately $383 and $621. At
      November 30, 2006, total unrecognized compensation expense, based on our
      assessment of the probability that the performance criteria will be achieved,
      was approximately $5,020, which is expected to be recognized over a weighted
      average period of 1.5 years.


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  **SCHIFF
                NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES**
 **NOTES
                TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -*****(continued)***
 ***(in
                thousands, except share data)***
 ***(unaudited)***




Effective
        August 16, 2002, we issued 640,000 restricted shares of Class A common stock
        to
        certain officers and employees. The aggregate value of these restricted shares
        was approximately $1,038, which we are expensing on straight-line basis over
        the
        accompanying five-year vesting (service) period. During the fiscal 2007 first
        quarter, 86,200 restricted shares vested. During the fiscal 2006 first quarter,
        98,200 restricted shares vested, and as a result of the voluntary termination
        of
        an employee, 12,000 restricted shares were cancelled. During the fiscal 2007
        and
        2006 first quarters, concurrent with the annual vesting, we reacquired (and
        ultimately retired) 23,443 and 27,201 shares, respectively, from certain
        employees in connection with the payment of individual income taxes. As of
        November 30, 2006, of the 640,000 restricted shares originally issued, 445,000
        shares have vested, of which 80,662 shares were reacquired (and retired),
        108,800 shares have been cancelled and 86,200 shares are subject to future
        vesting.





Effective
      March 1, 2006, we adopted Statement of Financial Accounting Standards (“SFAS”)
      No. 123R using the modified prospective method and began recognizing
      compensation expense for all awards granted after March 1, 2006, and for the
      unvested portion of previously granted awards that were outstanding at March
      1,
      2006. Compensation expense is recognized over the vesting period based on the
      computed fair value on the grant date of the award.





Prior
      to March 1, 2006, we disclosed the effect of SFAS No. 123, “Accounting for
      Stock-Based Compensation,” on a proforma basis and continued to follow
      Accounting Principles Board (“APB”) Opinion No. 25 (as permitted by SFAS No.
      123) as it relates to stock based compensation.





Proforma
      information regarding net income and net income per share is required by SFAS
      No. 123R and has been determined as if we had accounted for our employee stock
      options under the fair value method of SFAS No. 123R. For the purposes of
      proforma disclosure, the estimated fair value of the stock options is amortized
      to expense over the options’ vesting period. Our proforma net income and net
      income per share are as follows for the six months ended November 30,
      2005:


Net
                  income,
                  as reported
              
              $
              6,470Deduct
                  stock-based employee compensation expense determined under fair-value
                  based method, net of related tax effects
              
              
              (152
              )Net
                  income,
                  proforma
              
              $
              6,318Basic
                  net
                  income per share, as reported
              
              $
              0.25Diluted
                  net
                  income per share, as reported
              
              $
              0.24Basic
                  net
                  income per share, proforma
              
              $
              0.24Diluted
                  net
                  income per share, proforma
              
              $
              0.24




Net
      cash paid for income taxes was approximately $3,429 and $4,348, respectively,
      for the six months ended November 30, 2006 and 2005.




**2.**
            **AVAILABLE-FOR-SALE
                SECURITIES**





Available-for-sale
      securities consist primarily of auction rate securities, long-term variable
      rate
      bonds tied to short-term interest rates that are reset through a “dutch auction”
process which occurs every 7 to 35 days, and other variable rate debt and equity
      securities.





Available-for-sale
      securities at fair value, which approximates unamortized cost, consist of the
      following:


November
                30, 2006
            
            May
                31,2006Federal,
                state and municipal debt securities
            
            $
            30,600
            
            $
            29,114Corporate
                debt securities
            
            
            7,707
            
            
            7,306Corporate
                equity securities
            
            
            3,200
            
            
            3,700$
            41,507
            
            $
            40,120






7
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  **SCHIFF
                  NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES**
 **NOTES
                  TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -*****(continued)***
 ***(in
                  thousands, except share data)***
 ***(unaudited)***




Despite
      the long-term nature of these auction rate securities’ stated contractual
      maturities, there is a ready liquid market for these securities based on the
      interest reset mechanism. These securities are classified as current assets
      in
      the accompanying consolidated balance sheets because we have the ability and
      intent to sell these securities as necessary to meet our current liquidity
      needs. Contractual maturities of debt securities are as follows at November
      30,
      2006:





Less
                than one year
            
            $
            3,274One
                to five years
            
            
            850Over
                five years
            
            
            34,183$
            38,307





The
      amount of unrealized gains or losses for the first six months of fiscal 2007
      and
      2006 was not significant.





**3.**
            **RECEIVABLES,
                NET**





Receivables,
                net, consist of the following:November
                30, 2006
            
            May
                31, 2006Trade
                accounts
            
            $
            21,627
            
            $
            23,103Current
                portion of note receivable due from WGN
            
            
            100
            
            
            400Other
            
            
            678
            
            
            24822,405
            
            
            23,751Less
                allowances for doubtful accounts, sales returns and
                discounts
            
            
            (2,853
            )
            
            (3,320
            )Total
            
            $
            19,552
            
            $
            20,431





**4.**
            **INVENTORIES**





Inventories
                consist of the following:November
                30, 2006
            
            May
                31, 2006Raw
                materials
            
            $
            15,597
            
            $
            9,694Work
                in process
            
            
            1,235
            
            
            1,275Finished
                goods
            
            
            12,591
            
            
            12,546Total
            
            $
            29,423
            
            $
            23,515





**5.**
            **GOODWILLAND
                INTANGIBLE ASSETS,
                NET**





Goodwill
                and intangible assets, net, consist of the following:November
                30,
                2006
            
            May
                31,
                2006Gross
                Carrying Amount
            
            Accumul.
                Amortiz.
            
            Net
                Book
                Value
            
            Gross
                Carrying Amount
            
            Accumul.
                Amortiz.
            
            Net
                Book
                ValueGoodwill
            
            $
            4,346
            
            $
            —
            
            $
            4,346
            
            $
            4,346
            
            $
            —
            
            $
            4,346Intangible
                assets-patents and trademarks
            
            $
            2,090
            
            $
            (2,090
            )
            $
            —
            
            $
            2,090
            
            $
            (2,090
            )
            $
            —





Estimated
      amortization expense, assuming no change in the gross carrying amount of our
      intangible assets, is zero for all future fiscal years.







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  **SCHIFF
            NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -** ***(continued)***
 ***(in
            thousands, except share data)***
 ***(unaudited)***





The
      carrying amount of goodwill did not change during the first six months of fiscal
      2007 or during fiscal 2006.





**6.**
            **ACCRUEDEXPENSES**





Accrued
                expenses consist of the following:November
                30, 2006
            
            May
                31, 2006Accrued
                personnel related costs
            
            $
            2,019
            
            $
            3,477Accrued
                promotional costs
            
            
            4,497
            
            
            5,260Other
            
            
            2,416
            
            
            2,735Total
            
            $
            8,932
            
            $
            11,472





**7.**
            **CONCENTRATIONRISK**





The
      combined net sales to our two largest customers are significant. At November
      30,
      2006, and May 31, 2006, respectively, amounts due from Customer A represented
      approximately 36% and 30% and amounts due from Customer B represented
      approximately 26% and 27% of total trade accounts receivable. For the first
      six
      months of fiscal 2007 and 2006, respectively, Customer A accounted for
      approximately 36% and 35% and Customer B accounted for approximately 32% and
      36%
      of total net sales. Net sales of our Schiff® Move Free® brand accounted for
      approximately 49% and 47%, respectively, of total net sales for the first six
      months of fiscal 2007 and 2006.





**8.**
            **COMMITMENTSAND
                CONTINGENCIES**





We
      are currently named as a defendant in one lawsuit alleging that consumption
      of
      certain of our discontinued products containing ephedra caused or contributed
      to
      injuries and damages. We dispute the allegations, and are opposing the lawsuit.
      This case is not covered by insurance.





From
      time to time, we are involved in other claims, legal actions and governmental
      proceedings that arise from our business operations. Although ultimate liability
      cannot be determined at the present time, we believe that any liability
      resulting from these matters, if any, after taking into consideration our
      insurance coverage will not have a material adverse effect on our results of
      operations and financial condition.





**9.**
            **RECENTLYISSUED
                ACCOUNTING
                STANDARDS**





In
      November 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      151, “Inventory Costs,” which amends the guidance in Accounting Research
      Bulletin (“ARB”) No. 43, Chapter 4, “Inventory Pricing,” to clarify that
      abnormal amounts of idle facility expense, freight, handling costs, and wasted
      material (spoilage) should be recognized as a current-period expense. In
      addition, SFAS No. 151 requires that allocation of fixed production overheads
      to
      the costs of conversion be based on the normal capacity of the production
      facilities. The inventory costing provisions of SFAS No. 151 are effective
      for
      inventory costs incurred during fiscal years beginning after June 15, 2005.
      The
      adoption of SFAS No. 151 did not have a material impact on our results of
      operations and financial condition.







9
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  **SCHIFF
              NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -*****(continued)***
 ***(in
              thousands, except share data)***
 ***(unaudited)***




In
        December 2004, the FASB issued SFAS No. 123R, which replaces SFAS No. 123,
        supersedes APB Opinion No. 25 and amends SFAS No. 95, “Statement of Cash Flows.”
SFAS No. 123R eliminates the ability for public companies to measure share-based
        compensation transactions at the intrinsic value as allowed by APB Opinion
        No.
        25, and requires that such transactions be accounted for based on the grant
        date
        fair value of the award. SFAS No. 123R also amends SFAS No. 95, to require
        that
        excess tax benefits be reported as a financing cash inflow rather than as
        a
        reduction of taxes paid. Under the intrinsic value method allowed under APB
        Opinion No. 25, the difference between the quoted market price as of the
        date of
        the grant and the contractual purchase price of the share is charged to
        operations over the vesting period, and no compensation expense is recognized
        for fixed stock options with exercise prices equal to the market price of
        the
        stock on the dates of grant. Under the fair value based method as prescribed
        by
        SFAS No. 123R, we are required to charge the value of all newly granted
        stock-based compensation to expense over the vesting period based on the
        computed fair value on the grant date of the award. Effective March 1, 2006,
        we
        adopted SFAS No. 123R using the modified prospective method, recording
        compensation expense for all awards granted after the date of adoption and
        for
        the unvested portion of previously granted awards that remain outstanding
        at the
        date of adoption. The adoption of SFAS No. 123R resulted in incremental
        stock-based compensation expense of approximately $74 and $225, respectively,
        for the three and six month periods ended November 30, 2006. The incremental
        stock-based compensation expense caused income from continuing operations
        to
        decrease by $74 and $225, respectively, and net income to decrease by $49
        and
        $148, respectively, for the three and six month periods ended November 30,
        2006.
        The impact on basic and diluted earnings per share was less than $0.1 per
        share
        for the three and six months ended November 30, 2006. Cash provided by operating
        activities decreased and cash provided by financing activities increased
        by $144
        related to excess tax benefits from stock-based payment arrangements.




In
      May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
      Corrections," which replaces APB Opinion No. 20, "Accounting Changes," and
      SFAS
      No. 3, "Reporting Accounting Changes in Interim Financial Statements." SFAS
      No. 154 requires changing the accounting and reporting requirements of voluntary
      and mandatory (unless the pronouncement provides other transition requirements)
      changes in accounting principle by requiring retroactive application of the
      change in accounting principle to prior periods' financial statements, unless
      it
      is not practical to do so, rather than recording a cumulative catch-up
      adjustment in net income in the year of the change.  Reporting error
      corrections will be handled similarly to a change in accounting principle.
      The
      accounting and reporting requirements of SFAS No. 154 are effective for
      accounting changes and error corrections made in fiscal years beginning after
      December 15, 2005.




In
      November 2005, the FASB issued Staff Position No. 123R-3, “Transition Election
      Related to Accounting for Tax Effects of Share-Based Payment Awards,” that
      allows for a simplified method to establish the beginning balance of the
      additional paid-in capital pool (“APIC Pool”) related to the tax effects of
      employee stock-based compensation, and to determine the subsequent impact on
      the
      APIC Pool and Consolidated Statements of Cash Flows of the tax effects of
      employee stock-based compensation awards that are outstanding upon adoption
      of
      SFAS No. 123R. We are still in the process of calculating the APIC Pool and
      have
      not yet determined if we will elect to adopt the simplified method.





In
      July 2006, the FASB issued Interpretation No. 48, “Uncertainty in Income Taxes,”
(“FIN No. 48”), which establishes guidelines for recognizing, measuring and
      disclosing uncertainties relating to tax benefits reflected in an enterprise’s
      financial statements. FIN No. 48 establishes a “more-likely-than-not”
recognition threshold that must be met before a tax benefit, relative to a
      tax
      position in which the enterprise may be uncertain as to whether it will
      ultimately be sustained as filed in its tax return, can be recognized in the
      financial statements. The tax benefit recognizing, measuring and disclosing
      provisions of FIN No. 48 are effective at the beginning of the first fiscal
      year
      that begins after December 15, 2006. We have not yet determined the impact
      of
      adopting FIN No. 48 on our results of operations and financial
      condition.




In
      September 2006,
      the FASB issued SFAS No. 157, "Fair Value Measurements," that defines fair
      value, establishes a framework for measuring fair value, and expands disclosures
      about fair value measurements.  SFAS No. 157 retains the exchange price
      notion in defining fair value and clarifies that the exchange price is the
      price
      in an orderly transaction between market participants to sell the asset or
      transfer the liability in the market in which the reporting entity would
      transact for the asset or liability.  The definition focuses on the price
      that would be received to sell the asset or paid to transfer the
      liability (an exit price), not the price that would be paid to acquire the
      asset or received to assume the liability (an entry price).  SFAS No. 157
      expands disclosure about the use of fair value to measure assets and liabilities
      in interim and annual periods subsequent to initial recognition.  The
      additional disclosure focuses on the inputs used to measure fair value and
      the
      effect of the measurements on net income for the reporting period.  The
      fair value measurement and disclosure provisions of SFAS No. 157 are effective
      for financial statements issued for fiscal years beginning after November 15,
      2007.  We have not yet determined the impact of adopting SFAS No. 157 on
      our results of operations and financial condition.


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**ITEM2.**
            **MANAGEMENT'S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATIONS**





The
      following discussion and analysis should be read in conjunction with the
      condensed consolidated financial statements, including the notes thereto,
      appearing elsewhere in this Quarterly Report on Form 10-Q and other reports
      filed with the SEC. We disclaim any obligation to update any forward-looking
      statements whether as a result of new information, future events or
      otherwise.





**General**





Schiff
      Nutrition International, Inc. develops, manufactures, markets and distributes
      branded and private label vitamins, nutritional supplements and nutrition bars
      in the United States and throughout the world. We offer a broad range of
      capsules, tablets and nutrition bars. Our portfolio of recognized brands,
      including Schiff and Tiger’s Milk®, is marketed primarily through the mass
      market (including club) and, to a lesser extent, health food store distribution
      channels.





Prior
      to fiscal 2006, we were organized into three business units: the Schiff
      Specialty Unit, the Active Nutrition Unit and the Haleko Unit. The business
      units generally were managed independently, each with its own sales and
      marketing resources, and supported by common product research and development,
      operations and technical services and administrative functions. The Schiff
      Specialty Unit included the Schiff brand, as well as private label (contract
      manufacturing) business limited to customers that otherwise carry our products.
      The Active Nutrition Unit included our Weider branded global business and the
      Tiger's Milk brand. The Haleko Unit, our primary European operations, included
      the Multipower and Multaben nutritional supplement brands and private label
      businesses.





On
      June 17, 2005, we announced the sale of our Haleko Unit to Atlantic Grupa of
      Zagreb, Croatia and certain of its subsidiaries for approximately $15.1 million
      in cash. The transaction included the sale of the capital stock and partnership
      interests of the international subsidiaries that operate the Haleko Unit. The
      transaction closed on June 17, 2005, with an effective date of May 1, 2005
      (the
      first day of Haleko’s fiscal year 2006).





On
      April 1, 2005, we announced the sale of certain assets of our Active Nutrition
      Unit relating to our Weider branded business domestically and internationally
      to
      Weider Global Nutrition, LLC (“WGN”), a wholly-owned subsidiary of Weider Health
      and Fitness (“WHF”), a privately held company headquartered in California and
      our majority stockholder. The terms of the transaction provided for a cash
      payment of approximately $12.9 million and a note receivable of $1.1 million
      in
      exchange for assets relating to our domestic Weider branded business, including
      inventory, receivables, and intangible and intellectual property, the capital
      stock of certain of our international subsidiaries related to our international
      Weider branded business (including the working capital of those subsidiaries),
      and the assumption of certain associated liabilities by WGN. The transaction
      closed on April 1, 2005, with an effective date of March 1, 2005.





In
      connection with the sale of the Weider branded business, we also entered into
      two separate agreements (domestic and European) whereby we agreed to provide
      certain general and administrative, research and development, and logistics
      services to WGN for an annual fee. The domestic service agreement provided
      for a
      one year term, with an option to either party to extend the term for one
      additional year. The parties exercised this option for the second year and
      have
      further extended the term of the agreement through March 1, 2008. In connection
      with the sale of our Haleko Unit, the European service agreement was transferred
      to the purchaser of the Haleko Unit.





Historical
      operating results for the Haleko Unit are reflected as discontinued operations
      in our condensed consolidated financial statements, including the notes thereto.
      We believe our remaining business, which consists of the aggregation of several
      product-based operating segments, represents our only reportable
      segment.





During
      fiscal 2006 and the first half of fiscal 2007, we continued to provide selling
      and marketing support intended both to defend our Move Free business against
      competition, including private label, and ultimately to increase our market
      share in the joint care product category. Our primary initiative was the
      introduction of our Move Free Advanced product, which we believe is an improved,
      more effective version of our existing Move Free product. We began implementing
      the Move Free Advanced initiative during the latter part of the fiscal 2006
      second quarter. The introduction of Move Free Advanced into substantially all
      of
      our significant retail accounts continued during the second half of fiscal
      2006
      and was substantially completed in the fiscal 2007 first quarter. We provided
      incremental selling and marketing support during the second half of fiscal
      2006
      and continuing in the first half of fiscal 2007. Subject to the impact of Move
      Free Advanced marketing initiatives and competitive joint care category pricing
      pressures, including private label, we believe our fiscal 2007 net sales may
      be
      relatively constant, as compared to fiscal 2006 net sales.







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In
      addition to the ongoing impact of competitive pricing pressures, our operating
      results for the first half of fiscal 2006 were impacted by significant raw
      material pricing fluctuations, particularly in the joint care category. During
      fiscal 2006, joint care category raw material prices, which increased
      significantly during fiscal 2005, returned to pre-fiscal 2005 levels. However,
      our gross profit throughout fiscal 2006 was impacted by previous raw material
      purchase commitments. During fiscal 2005 and early fiscal 2006, as a result
      of
      the significant volatility in raw material costs and the inability to secure
      an
      acceptable price increase from customers, we discontinued certain private label
      (contract manufacturing) business.





Our
      operating results for the first half of fiscal 2006, as compared to the first
      half of fiscal 2007, were favorably impacted by the recognition of approximately
      $2.0 million (net difference) in reimbursement of import related costs, the
      recognition of approximately $1.6 million of non-taxable foreign currency
      related gain and an overall effective tax rate of approximately 11.1%.





Factors
      affecting our historical results, including the previous implementation of
      strategic initiatives as well as continuing refinement of our growth and
      business strategies, are ongoing considerations and processes. While the focus
      of these considerations is to improve future profitability, no assurance can
      be
      given that our decisions relating to these initiatives will not adversely impact
      our results of operations and financial condition.





Our
      principal executive offices are located at 2002 South 5070 West, Salt Lake
      City,
      Utah 84104, and our telephone number is (801) 975-5000.





**Resultsof
      Operations** ***(unaudited)***


*Three
      Months Ended November 30, 2006 Compared to Three Months*


*Ended
      November 30, 2005*





The
      following tables show comparative results for selected items as reported and
      as
      a percentage of net sales for the three months ended November 30, (dollars
      in
      thousands):





2006
            
            2005Net
                sales
            
            $
            38,817
            
            
            100.0
            %
            $
            35,456
            
            
            100.0
            %Cost
                of goods sold
            
            
            22,640
            
            
            58.3
            
            
            24,246
            
            
            68.4Gross
                profit
            
            
            16,177
            
            
            41.7
            
            
            11,210
            
            
            31.6Operating
                expenses:Selling
                and marketing
            
            
            8,790
            
            
            22.7
            
            
            6,060
            
            
            17.1General
                and administrative
            
            
            4,155
            
            
            10.7
            
            
            4,081
            
            
            11.5Research
                and development
            
            
            864
            
            
            2.2
            
            
            583
            
            
            1.7Amortization
                of intangible assets
            
            
            —
            
            
            —
            
            
            5
            
            
            —Reimbursement
                of import costs
            
            
            (278
            )
            
            (0.7
            )
            
            (908
            )
            
            (2.6
            )Total
                operating expenses
            
            
            13,531
            
            
            34.9
            
            
            9,821
            
            
            27.7Income
                from operations
            
            
            2,646
            
            
            6.8
            
            
            1,389
            
            
            3.9Other
                income, net
            
            
            728
            
            
            1.9
            
            
            305
            
            
            0.9Income
                tax expense
            
            
            (1,125
            )
            
            (2.9
            )
            
            (89
            )
            
            (0.3
            )Income
                from continuing operations
            
            $
            2,249
            
            
            5.8
            %
            $
            1,605
            
            
            4.5
            %





**Net
      Sales.** Net
      sales increased approximately 9.5% to $38.8 million for the fiscal 2007 second
      quarter, from $35.5 million for the fiscal 2006 second quarter. Overall, the
      increase in net sales was primarily attributable to a significant increase
      in
      private label sales and a modest increase in branded sales.





Aggregate
      branded net sales increased approximately 2.2% to $29.6 million for the fiscal
      2007 second quarter, from $29.0 million for the fiscal 2006 second quarter.
      Quarter-over-quarter branded joint care product net sales remained relatively
      constant at approximately $22.9 million, with a modest decrease in sales volume
      of approximately 1.8% substantially offset by a reduction in adjustments for
      product returns. Move Free net sales were $17.4 million and $15.7 million,
      respectively, for the fiscal 2007 and 2006 second quarters. Other branded net
      sales increased approximately 9.5% to $6.6 million for the fiscal 2007 second
      quarter, from $6.0 million for the fiscal 2006 second quarter. The increase
      primarily resulted from an increase in sales volume of approximately $0.4
      million, or 4.8%, coupled with a $0.4 million reduction in promotional
      incentives classified as sales price reductions. Classification of promotional
      costs as a sales reduction is required when the promotion effectively represents
      a price reduction. These increases were partially offset by an approximate
      $0.2
      million increase in adjustments for product returns.







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Private
      label net sales increased approximately 42.0% to $9.2 million for the fiscal
      2007 second quarter, from $6.5 million for the fiscal 2006 second quarter.
      The
      increase in private label sales was primarily due to the timing of customer
      orders and a modest volume increase from securing incremental private label
      business in the latter part of fiscal 2006 and the early part of fiscal
      2007.





**Gross
      Profit.** Gross
      profit increased approximately 44.3% to $16.2 million for the fiscal 2007 second
      quarter, from $11.2 million for the fiscal 2006 second quarter. Gross profit,
      as
      a percentage of net sales, was 41.7% for the fiscal 2007 second quarter,
      compared to 31.6% for the fiscal 2006 second quarter. The increase was primarily
      due to an approximate $4.5 million decrease in joint care raw material costs
      and
      an approximate $0.8 million decrease in adjustments for product returns,
      partially offset by a higher mix of lower margin private label
      sales.





**Operating
      Expenses.** Operating
      expenses increased approximately 37.8% to $13.5 million for the fiscal 2007
      second quarter, from $9.8 million for the fiscal 2006 second quarter. Operating
      expenses, as a percentage of net sales, were 34.9% and 27.7%, respectively,
      for
      the fiscal 2007 and 2006 second quarters. The increase resulted primarily from
      an increase in selling and marketing expenses primarily in support of our Move
      Free Advanced product, and a modest increase in research and development
      expenses. In addition, the fiscal 2006 second quarter includes approximately
      $0.9 million in reimbursement from certain suppliers of previously incurred
      costs associated with imported raw materials as compared to $0.3 million in
      similar reimbursement for the second quarter of fiscal 2007. These
      reimbursements, resulting primarily from the favorable outcome of litigation
      between one of our suppliers and the U.S. Government, represent refunds of
      previously paid tariffs on imported raw materials.





Selling
      and marketing expenses, including sales, marketing, advertising, freight and
      other costs, increased to approximately $8.8 million for the fiscal 2007 second
      quarter, from $6.1 million for the fiscal 2006 second quarter. The increase
      was
      primarily due to a $3.0 million increase in advertising costs, primarily in
      support of our Move Free Advanced product.





General
      and administrative expenses remained relatively constant at $4.2 million for
      the
      fiscal 2007 second quarter, compared to $4.1 million for the fiscal 2006 second
      quarter. An increase in personnel related costs due to the adoption of a
      long-term management incentive plan involving the grant of performance based
      restricted stock units (see Note 1 of Notes to Condensed Consolidated Financial
      Statements) was substantially offset by a reduction in management annual
      incentive program costs.





Research
      and development costs increased to approximately $0.9 million for the fiscal
      2007 second quarter, from $0.6 million for the fiscal 2006 second quarter,
      primarily resulting from an increase in personnel related costs and expenses
      associated with new product research.





**Other
      Income/Expense.** Other
      income/expense, net, was $0.7 million income for the fiscal 2007 second quarter,
      compared to $0.3 million income for the fiscal 2006 second quarter. During
      the
      fiscal 2007 second quarter, we recognized approximately $0.4 million of
      incremental interest income resulting from an increase in cash and
      available-for-sale securities.





**Provision
      for Income Taxes.** Provision
      for income taxes was $1.1 million for the fiscal 2007 second quarter, compared
      to $0.1 million for the fiscal 2006 second quarter. The increase primarily
      resulted from an increase in pre-tax income for the fiscal 2007 second quarter
      compared to the fiscal 2006 second quarter, and a lower effective tax rate
      for
      the fiscal 2006 second quarter. During the fiscal 2006 second quarter, we
      reduced certain estimated contingent tax liabilities by approximately $0.2
      million. In addition, a reduction in our overall projected fiscal 2006 tax
      rate
      at November 30, 2005, resulted in an approximate $0.4 million reduction in
      income tax expense for the fiscal 2006 second quarter. As a result, our
      effective tax rate was 5.3% for the fiscal 2006 second quarter, compared to
      33.3% for the fiscal 2007 second quarter.








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**Resultsof
      Operations (unaudited)**


*Six
      Months Ended November 30, 2006 Compared to Six Months*


*Ended
      November 30, 2005*





The
      following tables show comparative results for selected items as reported and
      as
      a percentage of net sales for the six months ended November 30, (dollars in
      thousands):





2006
            
            2005Net
                sales
            
            $
            84,469
            
            
            100.0
            %
            $
            83,473
            
            
            100.0
            %Cost
                of goods sold
            
            
            51,176
            
            
            60.6
            
            
            59,554
            
            
            71.3Gross
                profit
            
            
            33,293
            
            
            39.4
            
            
            23,919
            
            
            28.7Operating
                expenses:Selling
                and marketing
            
            
            17,079
            
            
            20.2
            
            
            12,076
            
            
            14.5General
                and administrative
            
            
            7,854
            
            
            9.3
            
            
            7,643
            
            
            9.2Research
                and development
            
            
            1,680
            
            
            2.0
            
            
            1,311
            
            
            1.5Amortization
                of intangible assets
            
            
            —
            
            
            —
            
            
            11
            
            
            —Reimbursement
                of import costs
            
            
            (298
            )
            
            (0.4
            )
            
            (2,288
            )
            
            (2.7
            )Total
                operating expenses
            
            
            26,315
            
            
            31.1
            
            
            18,753
            
            
            22.5Income
                from operations
            
            
            6,978
            
            
            8.3
            
            
            5,166
            
            
            6.2Other
                income, net
            
            
            1,413
            
            
            1.6
            
            
            2,254
            
            
            2.7Income
                tax expense
            
            
            (2,879
            )
            
            (3.4
            )
            
            (823
            )
            
            (1.0
            )Income
                from continuing operations
            
            $
            5,512
            
            
            6.5
            %
            $
            6,597
            
            
            7.9
            %





**Net
      Sales.** Net
      sales increased approximately 1.2% to $84.5 million for the six months ended
      November 30, 2006, from $83.5 million for the six months ended November 30,
      2005, primarily resulting from an increase in private label sales.





Aggregate
      branded net sales remained relatively constant at $66.7 million for the six
      months ended November 30, 2006, compared to $66.8 million for the six months
      ended November 30, 2005. Branded joint care product net sales increased by
      approximately $0.4 million resulting from a sales volume increase of
      approximately $2.7 million, or 3.8%, and an approximate $0.7 million reduction
      in adjustments for product returns. These increases were substantially offset
      by
      a $3.0 million increase in sales promotional incentives classified as sales
      price reductions. Classification of promotional costs as a sales reduction
      is
      required when the promotion effectively represents a price reduction. We
      utilized more price-discount like promotions due to increased competition,
      including from private label brands, and to support and ultimately increase
      our
      market share. Move Free net sales were $41.6 million and $39.6 million,
      respectively, for the six months ended November 30, 2006 and 2005. In addition,
      other branded net sales decreased by approximately $0.5 million primarily
      resulting from an approximate $0.2 million increase in promotional incentives
      classified as sales price reductions and an approximate $0.2 million increase
      in
      adjustments for product returns.





Private
      label sales increased approximately 6.6% to $17.7 million for the six months
      ended November 30, 2006, from $16.7 million for the six months ended November
      30, 2005. The increase in private label net sales primarily resulted from
      securing incremental private label business in the latter part of fiscal 2006
      and early part of fiscal 2007.





**Gross
      Profit.** Gross
      profit increased approximately 39.2% to $33.3 million for the six months ended
      November 30, 2006, from $23.9 million for the six months ended November 30,
      2005. Gross profit, as a percentage of net sales, was 39.4% for the six months
      ended November 30, 2006, compared to 28.7% for the six months ended November
      30,
      2005. The increase was primarily due to an approximate $11.3 million decrease
      in
      joint care raw material costs, partially offset by increases in promotional
      incentives classified as sales price reductions.





**Operating
      Expenses.**Operating expenses increased approximately 40.3% to $26.3
      million for the six months ended November 30, 2006, from $18.8 million for
      the
      six months ended November 30, 2005. Operating expenses, as a percentage of
      net
      sales, were 31.1% and 22.5%, respectively, for the six months ended November
      30,
      2006 and 2005. The increase resulted primarily from an increase in selling
      and
      marketing expenses, and modest increases in general and administrative and
      research and development costs. In addition, the first six months of fiscal
      2007
      includes approximately $2.3 million in reimbursement from certain suppliers
      of
      previously incurred costs associated with imported raw materials as compared
      to
      $0.3 million in similar reimbursement for the first six months of fiscal 2007.
      These reimbursements, resulting primarily from the favorable outcome of
      litigation between one of our suppliers and the U.S. Government, represent
      refunds of previously paid tariffs on imported raw materials.







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Selling
      and marketing expenses, including sales, marketing, advertising, freight and
      other costs, increased to approximately $17.1 million for the six months ended
      November 30, 2006, from $12.1 million for the six months ended November 30,
      2005. The increase was primarily due to a $4.5 million increase in advertising
      expense, primarily in support of our Move Free Advanced product, a $0.3 million
      increase in management incentive program costs due to the adoption of a
      long-term management incentive plan involving the grant of performance based
      restricted stock units (see Note 1 of Notes to Condensed Consolidated Financial
      Statements), and an increase in consulting fees in support of our export
      business.





General
      and administrative expenses remained relatively constant at $7.8 million for
      the
      six months ended November 30, 2006, compared to $7.6 million for the six months
      ended November 30, 2005. An increase in personnel related costs of approximately
      $0.7 million was substantially offset by a reduction in legal related costs.
      The
      first six months of fiscal 2007 includes approximately $1.1 million in
      incremental management incentive program costs consisting of an increase of
      approximately $1.8 million due
      to the adoption of a long-term management incentive plan involving the grant
      of
      performance based restricted stock units (see Note 1 of Notes to Condensed
      Consolidated Financial Statements), partially
      offset by a $0.6 million reduction in management annual incentive program costs.
      The first six months of fiscal 2006 includes approximately $0.4 million in
      severance expense.





Research
      and development costs increased to approximately $1.7 million for the six months
      ended November 30, 2006, from $1.3 million for the six months ended November
      30,
      2005, primarily resulting from an increase in personnel related costs and
      expenses associated with new product research.





**Other
      Income/Expense.** Other
      income/expense, net, was $1.4 million income for the six months ended November
      30, 2006, compared to $2.3 million income for the six months ended November
      30,
      2005. During the first six months of fiscal 2007, we recognized approximately
      $0.7 million of incremental interest income resulting from an increase in cash
      and available-for-sale securities. During the fiscal 2006 first quarter, as
      a
      result of the divestiture of our Haleko Unit, certain international operating
      entities were substantially liquidated. Accordingly, we recognized a non-taxable
      net foreign currency translation gain, previously reported as other accumulated
      comprehensive income in stockholders' equity, of approximately $1.6 million
      during the fiscal 2006 first quarter.





**Provision
      for Income Taxes.** Provision
      for income taxes was $2.9 million for the six months ended November 30, 2006,
      compared to $0.8 million for the six months ended November 30, 2005. In addition
      to an increase in pre-tax income and the fiscal 2006 non-taxable foreign
      currency translation gain noted in “Other Income/Expense” above, the fiscal 2006
      first quarter sale of the Haleko Unit resulted in the recognition of a gain
      under Internal Revenue Code Section 987 (“Section 987”). We reduced our
      estimated deferred tax liability for Section 987 obligations by approximately
      $0.8 million, which was reflected as a decrease in fiscal 2006 first quarter
      income tax expense. Also, during our fiscal 2006 second quarter, we reduced
      certain contingent tax liabilities by approximately $0.2 million. As a result
      of
      these items, our effective tax rate was 11.1% for the six months ended November
      30, 2005, compared to 34.3% for the six months ended November 30,
      2006.





**Liquidityand
      Capital Resources**





Working
      capital increased approximately $6.0 million to $96.5 million at November 30,
      2006, from $90.5 million at May 31, 2006, primarily due to an increase in
      inventories. Inventories increased approximately $5.9 million and accounts
      payable increased approximately $2.3 million, which reflected the impact of
      forward purchasing of certain raw materials and promotional timing
      considerations. Accrued expenses decreased by approximately $2.5 million
      primarily due to the payment of accrued management annual incentive program
      costs and a reduction in accrued promotional costs. The increase in short-term
      debt of approximately $1.2 million reflects the financing of annual premiums
      due
      on insurance policies which were renewed September 1, 2006.





On
      June 30, 2004, we entered into, through our wholly-owned direct operating
      subsidiary Schiff Nutrition Group, Inc. (“SNG”), a $25.0 million revolving
      credit facility (the “Credit Facility”) with KeyBank National Association, as
      Agent. In August 2006, we agreed to extend the maturity of the Credit Facility
      from June 30, 2007 to June 30, 2009. The Credit Facility contains customary
      terms and conditions, including, among others, financial covenants that may
      limit our ability to pay dividends on our common stock and certain other
      restrictions. Our obligations under the Credit Facility are secured by a first
      priority security interest on all of the capital stock of SNG. If our total
      coverage ratio exceeds a certain limit, our obligations will also be secured
      by
      a first priority security interest in all of our domestic assets. In the event
      we exceed certain other ratio limits, we will be subject to a borrowing base
      and
      will be able to borrow up to a lesser of $25.0 million or the sum of (i) 85%
      of
      eligible accounts receivable and (ii) 65% of eligible inventory. Borrowings
      under the Credit Facility bear interest at floating rates based on the KeyBank
      National Association prime rate or the Federal Funds effective rate. The Credit
      Facility can be used to fund our normal working capital and capital expenditure
      requirements, with availability to fund certain permitted strategic
      transactions. At November 30, 2006, there were no amounts outstanding and $25.0
      million was available for borrowing under the Credit Facility.







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We
      believe that our cash, cash flows from operations and the Credit Facility will
      be sufficient to meet our normal cash operating requirements during the next
      twelve months. However, we continue to review opportunities to acquire or invest
      in companies, product rights and other investments that are compatible with
      or
      complementary to our existing business. We could use cash and financing sources
      discussed herein, or financing sources that subsequently become available,
      to
      fund additional acquisitions or investments. In addition, we may consider
      issuing additional debt or equity securities in the future to fund potential
      acquisitions or growth, or to refinance existing debt. If a material
      acquisition, divestiture or investment is completed, our operating results
      and
      financial condition could change materially in future periods. However, no
      assurance can be given that additional funds will be available on satisfactory
      terms, or at all, to fund such activities.





Our
      Board of Directors will determine dividend policy in the future based upon,
      among other factors, results of operations, financial condition, contractual
      restrictions and other factors deemed relevant at the time. In addition, the
      Credit Facility contains certain customary financial covenants that may limit
      our ability to pay dividends on our common stock. We can give no assurance
      that
      we will pay dividends in the future.





A
      summary of our outstanding contractual obligations at November 30, 2006 is
      as
      follows (in thousands):





Contractual
              Cash
                Obligations
            
            Total
                Amounts Committed
            
            Less
                than 1
              Year
            
            1-3
              Years
            
            3-5
              Years
            
            After
                5 YearsOperating
                leases
            
            $
            15,029
            
            $
            2,460
            
            $
            4,846
            
            $
            4,642
            
            $
            3,081Purchase
                obligations
            
            
            7,091
            
            
            7,091
            
            
            —
            
            
            —
            
            
            —Total
                obligations
            
            $
            22,120
            
            $
            9,551
            
            $
            4,846
            
            $
            4,642
            
            $
            3,081





Purchase
      obligations consist primarily of open purchase orders for goods and services,
      including primarily raw materials, packaging and outsourced contract
      manufacturing commitments.





**CriticalAccounting
      Policies and
      Estimates**





In
      preparing our condensed consolidated financial statements, we make assumptions,
      estimates and judgments that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the dates
      of
      the condensed consolidated financial statements and the reported amounts of
      net
      sales and expenses during the reported periods. We periodically evaluate our
      estimates and judgments related to the valuation of inventories and intangible
      assets, allowances for doubtful accounts, notes receivable, sales returns and
      discounts, valuation of deferred tax assets, valuation of share-based payments
      and recoverability of long-lived assets. Note 1 of the consolidated financial
      statements contained in our Annual Report on Form 10-K for the year ended May
      31, 2006, filed with the SEC, describes the accounting policies governing each
      of these matters. Our estimates are based on historical experience and on our
      future expectations that are believed to be reasonable. The combination of
      these
      factors forms the basis for making judgments about the carrying values of assets
      and liabilities that are not readily apparent from other sources. Actual results
      may differ from our current estimates and those differences may be
      material.





We
      believe the following accounting policies affect some of our more significant
      estimates and judgments used in preparation of our condensed consolidated
      financial statements:





·
            We
                provide for inventory valuation adjustments for estimated obsolescence
                or
                unmarketable inventory equal to the difference between the cost of
                inventory and the estimated market value based upon assumptions about
                future demand, market conditions and/or liquidation value. For the
                six
                months ended November 30, 2006, inventory valuation adjustments resulted
                in a decrease in our gross profit and operating income of approximately
                $0.4 million. Inventory valuation adjustments did not materially
                impact
                our gross profit and operating income for the six months ended November
                30, 2005. If actual demand and/or market conditions are less
                favorable than those projected by management, additional inventory
                write-downs would be required.





·
            We
                maintain allowances for doubtful accounts, sales returns and discounts
                for
                estimated losses resulting from known customer exposures, including
                among
                others, product returns, inability to make payments and expected
                utilization of offered discounts. Changes in our allowances for doubtful
                accounts, sales returns and discounts resulted in an increase in
                our gross
                profit and operating income of approximately $0.5 million for the
                six
                months ended November 30, 2006, and a decrease in our gross profit
                and
                operating income of approximately $0.7 million for the six months
                ended
                November 30, 2005. At November 30, 2006 and May 31, 2006, our allowances
                for doubtful accounts, sales returns and discounts amounted to
                approximately $2.9 million and $3.3 million, respectively. Actual
                results
                may differ from our current estimates, resulting in adjustment of
                the
                respective allowance(s).





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·
            We
                currently have deferred tax assets resulting from certain tax credit
                carryforwards and other temporary differences between financial and
                income
                tax reporting. These deferred tax assets are subject to periodic
                recoverability assessments. The realization of these deferred tax
                assets
                is primarily dependent on future operating results. To the extent
                that it
                is more likely than not that future operations will not generate
                sufficient profit to utilize the tax credit carryforwards, valuation
                allowances are established. Changes in these valuation allowances
                did not
                significantly impact net income for the six months ended November
                30, 2006
                and 2005. At both November 30, 2006 and May 31, 2006, our deferred
                tax
                asset valuation allowances, primarily relating to foreign net operating
                loss and tax credit carryforwards, amounted to approximately $0.7
                million.





·
            We
                recognize compensation expense for certain performance based equity
                instrument awards (share-based payments) over the performance period
                based
                on a periodic assessment of the probability that the performance
                criteria
                will be achieved. For the six months ended November 30, 2006, we
                recognized compensation expense related to these awards of approximately
                $1.8 million. At November 30, 2006, total unrecognized compensation
                expense, based on our assessment of the probability that the performance
                criteria will be achieved, was approximately $5.0
                million.





·
            We
                have certain intangible assets, primarily consisting of goodwill.
                The
                determination of whether or not goodwill is impaired involves significant
                judgment. Changes in strategy or market conditions could significantly
                impact our judgment and require adjustment to the recorded goodwill
                balance.





**Impactof
      Inflation**





Inflation
      affects the cost of raw materials, goods and services we use. In recent years,
      inflation has been modest. We seek to mitigate the adverse effects of inflation
      primarily through improved productivity, strategic buying initiatives, and
      cost
      containment programs. However, the nutritional supplement industry competitive
      environment limits our ability to recover higher costs resulting from inflation
      by raising prices. During fiscal 2005 and early fiscal 2006, we were unable
      to
      pass on increases in raw material costs relating to our joint care products
      to
      our customers. See further discussion of raw material pricing matters in the
      “General” and “Results of Operations” sections above, and under “Forward-Looking
      Statements” below.





**Seasonality**





Our
      business can be seasonal, with fluctuations in sales resulting from timing
      of
      marketing and promotional activities, customer buying patterns and consumer
      spending patterns. In addition, as a result of changes in the amount of sales
      price reductions utilized for promotional incentives, product sales mix,
      competitive conditions, raw material pricing pressures and other factors
      discussed in our SEC reports, we experience fluctuations in gross profit and
      operating margins on a quarter-to-quarter basis.





**Forward-Looking
      Statements**





This
      Form 10-Q contains forward-looking statements within the meaning of Section
      27A
      of the Securities Act of 1933, as amended, and Section 21E of the Securities
      Exchange Act of 1934, as amended, that are based on management’s beliefs and
      assumptions, current expectations, estimates, and projections. These statements
      are subject to risks and uncertainties, certain of which are beyond the
      company’s ability to control or predict, and, therefore, actual results may
      differ materially. We disclaim any obligation to update any forward-looking
      statements whether as a result of new information, future events or
      otherwise.





Important
      factors that may cause these forward-looking statements to be false include,
      but
      are not limited to: the level of customer and consumer acceptance of Move Free
      Advanced, the inability to successfully implement marketing and spending
      programs behind our Move Free brand and other new branded products, the impact
      of raw material pricing, availability and quality (particularly relating to
      joint care products and ingredients from suppliers outside the United States),
      the mix between branded and private label products, the ability to grow and/or
      maintain branded and private label sales, the inability to achieve cost savings
      and operational efficiencies, the inability to increase operating margins and
      increase revenues, dependence on individual products, dependence on individual
      customers, the impact of competitive products and pricing (including private
      label), market and industry conditions (including pricing, demand for products
      and level of trade inventories), the impact of clinical studies regarding
      nutritional supplements, particularly relating to the joint care category,
      the
      success of product development, the inability to obtain customer acceptance
      of
      new product introductions, changes in laws and regulations, litigation and
      government regulatory action in the United States and internationally, the
      inability or increased cost to obtain product liability and general insurance,
      the uncertainty of market acceptance of new products, adverse publicity
      regarding the consumption of nutritional supplements, the inability to find
      strategic acquisitions or the inability to successfully consummate or integrate
      an acquisition, changes in accounting standards, and other factors indicated
      from time to time in the company’s SEC reports, copies of which are available
      upon request from the company’s investor relations department or may be obtained
      at the SEC's web site ( www.sec.gov ).
      These risks and uncertainties should be carefully considered before making
      an
      investment decision with respect to shares of our common stock.





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**ITEM3.**
            **QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET
                RISK**





The
      following discussion involves forward-looking statements of market risk which
      assume that certain adverse market conditions may occur. Actual future market
      conditions may differ materially from such assumptions. Accordingly, the
      forward-looking statements should not be considered our projections of future
      events or losses.





Our
      cash flows and net earnings may be subject to fluctuations resulting from
      changes in interest rates. Our current policy does not allow speculation in
      derivative instruments for profit or execution of derivative instrument
      contracts for which there is no underlying exposure. We do not use financial
      instruments for trading purposes. We measure market risk, related to our
      holdings of financial instruments, based on changes in interest rates utilizing
      a sensitivity analysis. We do not believe that a hypothetical 10% change in
      interest rates would have a material effect on our pretax earnings or cash
      flows.





Previously,
      our cash flows and net earnings were also subject to fluctuations resulting
      from
      changes in foreign currency exchange rates. However, as a result of the
      divestitures of our Weider branded business and Haleko Unit, we no longer have
      operating subsidiaries whose net sales and expenses are denominated in foreign
      currencies. Therefore, changes in foreign currency exchange rates are not
      expected to have a material impact on future cash flows and net earnings.





**ITEM4.**
            **CONTROLS
                AND PROCEDURES**





We
      maintain disclosure controls and procedures that are designed to ensure that
      information required to be disclosed in our Securities Exchange Act reports
      is
      recorded, processed, summarized and reported within the time periods specified
      in the SEC’s rules and forms and that such information is accumulated and
      communicated to our management, including our Chief Executive Officer and Chief
      Financial Officer, as appropriate, to allow for timely decisions regarding
      required disclosure. In designing and evaluating the disclosure controls and
      procedures, we recognize that any controls and procedures, no matter how well
      designed and operated, can provide only reasonable assurance of achieving the
      desired control objectives, and we are required to apply our judgment in
      evaluating the cost-benefit relationship of possible controls and
      procedures.





As
      required by SEC Rule 13a-15(b), we carried out an evaluation, under the
      supervision and with the participation of our management, including our Chief
      Executive Officer and Chief Financial Officer, of the effectiveness of the
      design and operation of our disclosure controls and procedures as of the end
      of
      the period covered by this report. Based on the foregoing, our Chief Executive
      Officer and Chief Financial Officer have concluded that our disclosure controls
      and procedures were effective.





There
      has been no change in our internal controls over financial reporting during
      our
      most recent fiscal quarter that has materially affected, or is reasonably likely
      to materially affect, our internal controls over financial
      reporting.


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**PART
      II. OTHER INFORMATION**





**ITEM1.**
            **LEGAL
                PROCEEDINGS**





The
      information set forth in Note 8 to the Notes to Condensed Consolidated Financial
      Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q is
      incorporated herein by reference.





**ITEM1A.**
            **RISK
                FACTORS**





We
      attempt to identify, manage and mitigate the risks and uncertainties that are
      associated with our business to the extent practical.  However, some level
      of risk and uncertainty will always be present.  Item 1A of our Annual
      Report on Form 10-K for the fiscal year ended May 31, 2006 describes some of
      the
      risks and uncertainties associated with our business.  These risks and
      uncertainties have the potential to materially affect our business, financial
      condition, results of operations, cash flows, projected results, and future
      prospects.  Other than as set forth in any subsequent Quarterly Report on
      Form 10-Q we have filed, there has been no material change from the risk factors
      previously disclosed in our Annual Report on Form 10-K for the year ended May
      31, 2006.





**ITEM2.**
            **UNREGISTERED
                SALES OF EQUITY SECURITIES AND USE OF
                PROCEEDS**





Not
      applicable





**ITEM3.**
            **DEFAULTS
                UPON SENIOR SECURITIES**





Not
      applicable





**ITEM4.**
            **SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY
                HOLDERS**





Our
      Annual Meeting of Stockholders was held on October 24, 2006 for the following
      purposes:





Proposal
      1: Election of our Board of Directors.


For
            
            Withheld
                AuthorityEric
                Weider
            
            157,639,655
            
            1,888,925George
                F. Lengvari
            
            157,645,855
            
            1,882,725Bruce
                J. Wood
            
            157,715,095
            
            1,813,485Ronald
                L. Corey
            
            158,589,745
            
            938,835Roger
                H. Kimmel
            
            157,714,212
            
            1,814,368Brian
                P. McDermott
            
            158,590,645
            
            937,935H.F.
                Powell
            
            158,481,575
            
            1,047,005





Proposal
      2: Approval of the Amendment to our 2004 Incentive Award Plan.





For
            
            Against
            
            Abstentions155,469,939
            
            1,087,224
            
            24,770





**ITEM5.**
            **OTHER
                INFORMATION**





Not
      applicable


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**ITEM6.**
            **EXHIBITS**





3.1.
            Amended
                and Restated Certificate of Incorporation of Schiff Nutrition
                International, Inc. (1)3.2.
            Amended
                and Restated Bylaws of Weider Nutrition International, Inc.
                (2)4.1.
            Revolving
                Credit Agreement dated as of June 30, 2004 between Weider Nutrition
                Group,
                Inc. and KeyBank National Association. (3)4.2.
            Form
                of specimen Class A common stock certificate. (4)10.1.
            Build-To-Suit
                Lease Agreement, dated March 20, 1996, between SCI Development Services
                Incorporated and Weider Nutrition Group, Inc. (2)10.2.
            Agreement
                by and between Joseph Weider and Weider Health and Fitness.
                (2)10.3.
            1997
                Equity Participation Plan of Weider Nutrition International, Inc.
                (2)*10.4.
            Form
                of Tax Sharing Agreement by and among Weider Nutrition International,
                Inc.
                and its subsidiaries and Weider Health and Fitness and its subsidiaries.
                (2)10.5.
            License
                Agreement between Mariz Gestao E Investmentos Limitada and Weider
                Nutrition Group, Limited. (2)10.6.
            Agreement
                between Schiff Nutrition Group, Inc. and Bruce J. Wood.
                (5)*10.7.
            Form
                Agreement between Schiff Nutrition Group, Inc. and certain of its
                executives. (5)*10.8.
            Amendments
                to 1997 Equity Participation Plan of Weider Nutrition International,
                Inc.
                (6)*10.9.
            Employment
                Agreement between Weider Nutrition Group, Inc. and Bruce J. Wood.
                (7)*10.10.
            Consulting
                Agreement between Weider Nutrition Group, Inc. and Gustin Foods,
                LLC dated
                as of February 1, 2004. (8)10.11.
            Schiff
                Nutrition International, Inc. 2004 Incentive Award Plan.
                (9)*10.12.
            Amendment
                effective as of March 1, 2005 to License Agreement between Mariz
                Gestao E
                Investmentos Limitada and Weider Nutrition Group, Inc.
                (10)10.13.
            Stock
                and Asset Purchase Agreement effective as of March 1, 2005 among
                Weider
                Nutrition International, Inc., Weider Nutrition Group, Inc. and Weider
                Global Nutrition, LLC. (10)10.14.
            Promissory
                Note of Weider Global Nutrition, LLC payable to Weider Nutrition
                Group,
                Inc. (10)10.15.
            Guarantee
                by Weider Health and Fitness in favor of Weider Nutrition International,
                Inc. and Weider Nutrition Group, Inc. (10)10.16.
            Share
                Sale and Transfer Agreement dated June 17, 2005 among Weider Nutrition
                GmbH, Haleko Management GmbH, Atlantic Grupa d.o.o., Hopen Investments
                BV
                and Svalbard Investments GmbH. (11)10.17.
            Form
                of Indemnification Agreement between Weider Nutrition Group, Inc.
                and
                certain of its executives and directors. (12)*10.18.
            Form
                of Restricted Stock Unit Award Grant Notice, Restricted Stock Unit
                Award
                Agreement and Deferral Election between Schiff Nutrition International,
                Inc. and certain of its executives. (13)*10.19.
            Amended
                and Restated License and Product Supply Agreement dated as of October
                13,
                2006 between Unigen Pharmaceuticals, Inc. and Schiff Nutrition Group,
                Inc.
                (14)10.20.
            Amendment
                No. 1 to the Schiff Nutrition International, Inc. 2004 Incentive
                Award
                Plan. (15)*10.21.
            Form
                of Director Restricted Stock Unit Agreement and Deferral Election.
                (16)*10.22.
            Form
                of Director Restricted Stock Agreement. (16)*21.1.
            Subsidiaries
                of Weider Nutrition International, Inc. (4)31.1.
            Certification
                of Chief Executive Officer
                pursuant to Section 302 of the Sarbanes-Oxley Act.
                (17)31.2.
            Certification
                of Chief Financial Officer
                pursuant to Section 302 of the Sarbanes-Oxley Act.
                (17)32.1.
            Certification
                of Chief Executive Officer
                and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
                Act. (17)





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(1)
            Previously
                filed in the Company’s Quarterly Report on Form 10-Q filed on January 17,
                2006 and incorporated herein by reference.(2)
            Previously
                filed in the Company's Registration Statement on Form S-1 (File No.
                333-12929) and incorporated herein by reference.(3)
            Previously
                filed in the Company's Current Report on Form 8-K filed on July 8,
                2004
                and incorporated herein by reference.(4)
            Previously
                filed in the Company’s Annual Report on Form 10-K filed on August 29, 2006
                and incorporated herein by reference.(5)
            Previously
                filed in the Company's Current Report on Form 8-K filed on February
                3,
                2006 and incorporated herein by reference.(6)
            Previously
                filed in the Company's Quarterly Report on Form 10-Q filed on January
                14,
                2002 and incorporated herein by reference.(7)
            Previously
                filed in the Company's Annual Report on Form 10-K filed on August
                29, 2002
                and incorporated herein by reference.(8)
            Previously
                filed in the Company's Quarterly Report on Form 10-Q filed on April
                14,
                2004 and incorporated herein by reference.(9)
            Previously
                filed in the Company's Definitive Proxy Statement on Form 14A filed
                on
                September 28, 2004 and incorporated herein by
                reference.(10)
            Previously
                filed in the Company's Current Report on Form 8-K filed on April
                4, 2005
                and incorporated herein by reference.(11)
            Previously
                filed in the Company's Current Report on Form 8-K filed on June 23,
                2005
                and incorporated herein by reference.(12)
            Previously
                filed in the Company's Current Report on Form 8-K filed on August
                10, 2005
                and incorporated herein by reference.(13)
            Previously
                filed in the Company’s Current Report on Form 8-K filed on March 23, 2006
                and incorporated herein by reference.(14)
            Previously
                filed in the Company’s Quarterly Report on Form 10-Q filed on October 16,
                2006 and incorporated herein by reference.(15)
            Previously
                filed in the Company’s Definitive Proxy Statement on Form 14A filed on
                September 27, 2006 and incorporated herein by
                reference.(16)
            Previously
                filed in the Company’s Current Report on Form 8-K filed on October 30,
                2006 and incorporated herein by reference.(17)
            Filed
                herewith.*
            Management
                contract.




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**SIGNATURES**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.








**SCHIFF
      NUTRITION INTERNATIONAL, INC.**








Date:
                January 12, 2007
            By:*/s/**Bruce
                J. Wood*Bruce
                J. WoodPresident,
                Chief Executive Officer and
                Director








Date:
                January 12, 2007
            By:*/s/**Joseph
                W. Baty*Joseph
                W. BatyExecutive
                Vice President and Chief Financial
                Officer





22


**Schiff
        Nutrition International, Inc.**
 **Index**




**PART
        I. FINANCIAL INFORMATION**
 
 ITEM
              1.
            FINANCIAL
                STATEMENTS 
 CONDENSED
        CONSOLIDATED BALANCE SHEETS
 CONDENSED
        CONSOLIDATED STATEMENTS OF INCOME *(3
        months)   (6
        months)*
 CONDENSED
        CONSOLIDATED STATEMENTS OF CASH
        FLOWS
 NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL
        STATEMENTS
 1.
            BASIS
                OF PRESENTATION AND OTHER
                MATTERS 2.
            AVAILABLE-FOR-SALE
                SECURITIES 3.
            RECEIVABLES,
                NET 4.
            INVENTORIES 5.
            GOODWILL
                AND INTANGIBLE ASSETS,
                NET 6.
            ACCRUED
                EXPENSES 7.
            CONCENTRATION
                RISK 8.
            COMMITMENTS
                AND
                CONTINGENCIES 9.
            RECENTLY
                ISSUED ACCOUNTING
                STANDARDS 
 ITEM
              2.
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                AND RESULTS OF OPERATIONS 
 -  General
 -  Results
        of Operations (unaudited) *(3
        months)   (6
        months)*
 -  Liquidity
        and Capital Resources
 -  Critical
        Accounting Policies and
        Estimates
 -  Impact
        of Inflation
 -  Seasonality
 -  Forward-Looking
        Statements
 
 ITEM
              3.
            QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET
                RISK ITEM
              4.
            CONTROLS
                AND PROCEDURES 
 **PART
        II. OTHER INFORMATION**
 
 ITEM
              1.
            LEGAL
                PROCEEDINGS ITEM
              1A.
            RISK
                FACTORS ITEM
              2.
            UNREGISTERED
                SALES OF EQUITY SECURITIES AND USE OF
                PROCEEDS ITEM
              3.
            DEFAULTS
                UPON SENIOR
                SECURITIES ITEM
              4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY
                HOLDERS ITEM
              5.
            OTHER
                INFORMATION ITEM
              6.
            EXHIBITS 
 **SIGNATURES**
 
 **Exhibit
        31.1** -
        Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of
        2002
 
 **Exhibit
        31.2** -
        Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of
        2002
 
 **Exhibit
        32.1** -
        CEO and CFO Certifications pursuant to Section 906 of the Sarbanes-Oxley
        Act of
        2002