**UNITED STATES**


**SECURITIES AND EXCHANGE COMMISSION**


**WASHINGTON, D.C. 20549**


****








**FORM 10-Q**





**x**
**QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934****For the quarterly period ended August 31, 2004****o**
**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**





**WEIDER 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)





Registrants telephone number, including area code:


**(801) 975-5000**





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 x No





Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes  No x





The number of shares outstanding of the Registrants common stock is 26,079,641 (as of September 30, 2004).





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**Weider Nutrition International, Inc.**


****Index****





**PART I. FINANCIAL INFORMATION**





Item 1. Financial Statements


Weider Nutrition International Inc. and Subsidiaries - Condensed Consolidate Balance Sheets


Weider Nutrition International Inc. and Subsidiaries - Condensed Consolidated Statements of Income


Weider Nutrition International Inc. and Subsidiaries - Condensed Consolidates Statements of Cash Flows


Weider Nutrition International Inc. and Subsidiaries - Notes to Condensed Consolidated Financial Statements


|1. | Basis of Presentation and Other Matters
|-- | ---------------------------------------

|2. | Receivables, Net
|-- | ----------------

|3. | Inventories
|-- | -----------

|4. | Goodwill and Intangible Assets, Net
|-- | -----------------------------------

|5. | Operating Segments
|-- | ------------------

|6. | Sales to Major Customers
|-- | ------------------------

|7. | Commitments and Contingencies
|-- | -----------------------------

|8. | Recently Issued Accounting Standards
|-- | ------------------------------------

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations


General


Results of Operations (unaudited)


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 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 Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


Exhibit 31.2 - Certification of Chief Financial Officerpursuant to Section 302 of the Sarbanes-Oxley Act of 2002


Exhibit 32.1 - Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 902 of the Sarbanes-Oxley Act of 2002





Table of Contents





****PART I**.**    **FINANCIAL INFORMATION**





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





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


**CONDENSED CONSOLIDATED BALANCE SHEETS**


(in thousands, except share data)




**August 31,**
****
**May 31,**
********
****
**2004**
****
**2004****ASSETS**

(unaudited)Current assets:Cash and cash equivalents

$
14,528

$
7,449Receivables, net


33,910


35,620Inventories


32,252


28,431Prepaid expenses and other


2,566


5,021Deferred taxes


2,783


2,419Total current assets


86,039


78,940Property and equipment, net


24,218


24,618Other assets:Goodwill


4,346


4,346Intangible assets, net


4,903


5,146Deposits and other assets


1,654


1,874Total other assets


10,903


11,366Total assets

$
121,160

$
114,924**LIABILITIES AND STOCKHOLDERS EQUITY**Current liabilities:Accounts payable

$
17,897

$
16,116Accrued expenses


13,548


15,277Current portion of long-term debt


1,438


1,091Income taxes payable


1,006


--Total current liabilities


33,889


32,484Long-term debt


--


133Deferred taxes


7,811


6,494Commitments and contingencies (Note 7)Stockholders equity:Preferred stock, par value $.01 per share; sharesauthorized-10,000,000; no shares issued and outstanding


--


--Class A common stock, par value $.01 per share; sharesauthorized-50,000,000; shares issued and outstanding-11,105,997 and 11,127,166


111


111Class B common stock, par value $.01 per share; sharesauthorized-25,000,000; shares issued and outstanding-14,973,148


150


150Additional paid-in capital


83,809


83,902Deferred compensation costs


(586
)

(635
)Other accumulated comprehensive loss


(4,057
)

(4,060
)Retained earnings (accumulated deficit)


33


(3,655
)Total stockholders equity


79,460


75,813Total liabilities and stockholders equity

$
121,160

$
114,924










3





Table of Contents


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


**CONDENSED CONSOLIDATED STATEMENTS OF INCOME**


(in thousands, except share data)


(unaudited)





**Three Months Ended**
**August 31,**
********
****
**2004**
****
**2003**Net sales

$
69,766

$
63,641Cost of goods sold


41,847


39,348Gross profit


27,919


24,293Operating expenses:Selling and marketing


13,995


14,496General and administrative


6,294


5,383Research and development


1,174


1,214Amortization of intangible assets


267


142Total operating expenses


21,730


21,235Income from operations


6,189


3,058Other income (expense):Interest income


22


147Interest expense


(178
)

(333
)Other, net


(35
)

(155
)Total other expense, net


(191
)

(341
)Income from continuing operations before income taxes


5,998


2,717Income tax expense


2,310


1,088Net income from continuing operations


3,688


1,629Income from discontinued operations, net of income taxes


--


566Net income

$
3,688

$
2,195Weighted average shares outstanding:Basic


25,745,747


26,237,002Diluted


26,563,674


26,744,821Net income per share-basic and diluted:Net income from continuing operations

$
0.14

$
0.06Net income from discontinued operations


--


0.02Net income

$
0.14

$
0.08Comprehensive income

$
3,691

$
3,030

























4





Table of Contents


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


**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**


(in thousands)


(unaudited)





**Three Months Ended**
**August 31,**
********
****
**2004**
****
**2003**Cash flows from operating activities:Net income

$
3,688

$
2,195Adjustments to reconcile net income to net cash provided by (used in)operating activities:Provision for (recovery of) bad debts


19


(455
)Deferred taxes


953


1,226Depreciation and amortization


1,324


1,225Loss (gain) on sale of assets held for sale and property and equipment


1


(950
)Amortization of financing fees


99


102Amortization of deferred compensation costs


73


24Tax benefit from stock options exercised


3


--Changes in operating assets and liabilities:Receivables


1,691


(4,019
)Inventories


(3,821
)

(1,836
)Prepaid expenses and other


2,455


1,628Deposits and other assets


97


(54
)Accounts payable


1,781


2,414Other current liabilities


(731
)

(2,388
)Net cash provided by (used in) operating activities


7,632


(888
)Cash flows from investing activities:Purchase of property and equipment


(713
)

(330
)Purchase of intangibles


(7
)

--Proceeds from disposition of assets held for sale and property and equipment


--


6,510Collection of notes receivable


--


4Net cash provided by (used in) investing activities


(720
)

6,184Cash flows from financing activities:Issuance of common stock


12


--Acquisition and retirement of treasury stock


(108
)

--Net change in revolving line-of-credit


(2
)

50Proceeds from debt


380


109Payments on debt


(160
)

(4,256
)Net cash provided by (used in) financing activities


122


(4,097
)Effect of exchange rate changes on cash


45


102Increase in cash and cash equivalents


7,079


1,301Cash and cash equivalents, beginning of period


7,449


3,463Cash and cash equivalents, end of period

$
14,528

$
4,764





































5





Table of Contents


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


**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


(in thousands, except share data)


(unaudited)








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















®




















**2005**
****
**2004**Net income, as reported

$
3,688

$
2,195Net income, proforma


3,591


2,151Basic net income per share, as reported


0.14


0.08Diluted net income per share, as reported


0.14


0.08Basic net income per share, proforma


0.14


0.08Diluted net income per share, proforma


0.14


0.08





6





Table of Contents


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


**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)**


(in thousands, except share data)


(unaudited)





**2.****RECEIVABLES, NET**





Receivables


**August 31,**
****
**May 31,**
********
****
**2004**
****
**2004**Trade accounts

$
39,777

$
40,982Other, including income taxes


627


1,14240,404


42,124Less allowance for doubtful accounts, sales returns and discounts


(6,494
)

(6,504
)Total

$
33,910

$
35,620





**3.** **INVENTORIES**




Inventories consist of the following:


**August 31,**
****
**May 31,**
********
****
**2004**
****
**2004**Raw materials

$
10,945

$
7,814Work in process


2,966


1,385Finished goods


18,341


19,232Total

$
32,252

$
28,431


**4.****GOODWILL AND INTANGIBLE ASSETS, NET**










**August 31, 2004**
****
**May 31, 2004**
********
****
**Gross**
**Carrying**
**Amount**
****
**Accumul.**
**Amortiz.**
****
**Net Book Value**
****
**Gross**
**Carrying**
**Amount**
****
**Accumul.**
**Amortiz.**
****
**Net Book Value**Goodwill

$
4,346

$
--

$
4,346

$
4,346

$
--

$
4,346Intangible assets-patents
and trademarks

$
10,462

$
(5,559
)
$
4,903

$
10,365

$
(5,219
)
$
5,146















**5.**    **OPERATING SEGMENTS**





®





7





Table of Contents


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


**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)**


(in thousands, except share data)


(unaudited)

























**Net Sales**
****
**Income**
**(Loss) From Operations**
****
**Interest Expense**2005:Schiff Specialty

$
41,762

$
4,805

$
123Haleko


19,375


795


40Active Nutrition


10,327


572


15Eliminations


(1,698
)

17


--$
69,766

$
6,189

$
1782004:Schiff Specialty

$
40,045

$
3,552

$
201Haleko


16,519


160


130Active Nutrition


8,410


(678
)

20Eliminations


(1,333
)

24


(18
)$
63,641

$
3,058

$
333










**August 31,**
****
**May 31,**
********
****
**2004**
****
**2004**Total domestic assets

$
133,640

$
127,376Total international assets


46,952


46,689Eliminations


(59,432
)

(59,141
)Total

$
121,160

$
114,924













8





Table of Contents


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


**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)**


(in thousands, except share data)


(unaudited)





**6.**    **SALES TO MAJOR CUSTOMERS**





®





**7.**    **COMMITMENTS AND CONTINGENCIES**




















**8.**    **RECENTLY ISSUED ACCOUNTING STANDARDS**










9





Table of Contents


**ITEM 2.** MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS










**General**


Weider Nutrition International, Inc. develops, manufactures, markets, distributes and sells branded and private label vitamins, nutritional supplements and sports nutrition products in the United States and throughout the world. We offer a broad range of capsules and tablets, powdered drink mixes, ready-to-drink beverages and nutrition bars consisting of approximately 800 stock keeping units. Our portfolio of recognized brands, including Schiff, Multipower ® , Multaben, Weider ® and Tiger's Milk ® , are primarily marketed through mass market, health food store and health club and gym distribution channels. We market our branded nutritional supplement products, both domestically and internationally, in five principal categories: specialty supplements; vitamins and minerals; sports nutrition; weight management; and nutrition bars.
 
 In fiscal 2005, we may experience gross margin and operating margin volatility due to several factors, including a continuing strong competitive environment, product enhancement and new product introduction initiatives, and potentially significant raw material pricing pressures, particularly in the joint care category.
 
 For fiscal 2005, we expect to continue our efforts to defend our Schiff Move Free business against competition, including private label, and ultimately to increase our market share in the joint care product category. Accordingly, we are in the process of introducing product enhancements on Schiff Move Free and launching Schiff Lubriflex 3 , a new premium, proprietary joint care product.
 
 On August 18, 2004, we announced the agreement in principle to sell certain assets of our Active Nutrition Unit relating to its Weider branded business domestically and internationally to WHF, a privately held company headquartered in California and our majority stockholder. The terms of the potential sale provide for a purchase price of approximately $7.6 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, and the assumption of certain associated liabilities by WHF. The final purchase price is subject to upward or downward adjustment based upon the determination of the divested business final working capital balance.
 We have formed a Special Committee of our Board of Directors to negotiate, review and finalize the potential transaction. The potential transaction is subject to customary conditions, including among other matters, the negotiation and execution of a definitive purchase agreement, the receipt by us of a fairness opinion from an independent financial advisor, and the approval of the boards of directors of both our company and WHF. Under the direction of the Special Committee, investment bankers Houlihan Lokey Howard and Zurkin are currently performing a market valuation analysis for the Weider branded business. For the fiscal 2005 and 2004 first quarters, the Weider branded business generated net sales of approximately $8.4 million and $6.7 million, respectively, and incurred an operating income (loss) of approximately $0.8 million and $(0.6), respectively, excluding certain indirect costs primarily consisting of general and administrative expenses.












10





Table of Contents












**Results of Operations (unaudited)**


Three Months Ended August 31, 2004 Compared to Three Months


Ended August 31, 2003










*(in thousands)*

**Schiff Specialty**
****
**Haleko**
****
**Active Nutrition**
****
**Other**
**(1)**
****
**Total**2004:Net sales

$
41,762

$
19,375

$
10,327

$
(1,698
)
$
69,766Cost of goods sold


25,843


11,741


5,961


(1,698
)

41,847Gross profit


15,919


7,634


4,366


--


27,919Operating expenses:Selling and marketing


6,740


4,684


2,571


--


13,995General and administrative


3,505


1,770


1,019


--


6,294Research and development


868


176


130


--


1,174Amortization of intangible assets


1


209


74


(17
)

267Total operating expenses


11,114


6,839


3,794


(17
)

21,730Income from operations

$
4,805

$
795

$
572

$
17

$
6,1892003:Net sales

$
40,045

$
16,519

$
8,410

$
(1,333
)
$
63,641Cost of goods sold


25,686


10,037


4,958


(1,333
)

39,348Gross profit


14,359


6,482


3,452


--


24,293Operating expenses:Selling and marketing


6,978


4,542


2,976


--


14,496General and administrative


2,955


1,519


909


--


5,383Research and development


853


184


177


--


1,214Amortization of intangible assets


21


77


68


(24
)

142Total operating expenses


10,807


6,322


4,130


(24
)

21,235Income (loss) from operations

$
3,552

$
160

$
(678
)
$
24

$
3,058


(1) Amounts include inter-business unit sales and expense eliminations.





**Net Sales.** Net sales increased approximately 9.6% to $69.8 million for the fiscal 2005 first quarter, from $63.6 million for the fiscal 2004 first quarter. Overall, the increase in net sales was primarily attributable to an increase in Schiff Specialty joint product sales, improvement in our Haleko and Weider Europe branded businesses and favorable foreign currency exchange rates.


Schiff Specialty net sales increased approximately 4.3% to $41.8 million for the fiscal 2005 first quarter, from $40.0 million for the fiscal 2004 first quarter. The increase was primarily due to an increase in joint product sales. Move Free net sales were $19.2 million and $18.1 million, respectively, for the fiscal 2005 and 2004 first quarters. The joint product net sales results were partially offset by decreased sales of other Schiff branded and private label products and an increase in promotion costs classified as a reduction in net sales. We have retroactively reclassified and included our Schiff export business into our Schiff Specialty unit. Schiff export net sales of approximately $0.8 million and $1.0 million for the fiscal 2005 and 2004 first quarters, respectively, were previously included in our Active Nutrition business unit.





Haleko net sales, including the positive impact of foreign currency exchange rates, increased approximately 17.3% to $19.4 million for the fiscal 2005 first quarter, from $16.5 million for the fiscal 2004 first quarter.  Excluding approximately $1.0 million of favorable foreign currency exchange impact, net sales increased approximately 11.0%, primarily due to core brand relaunch efforts and private label growth.




11





Table of Contents










Gross Profit.




















Operating Expenses.




















Other Income/Expense.





Provision for Income Taxes.





12





Table of Contents


**Liquidity and Capital Resources**





3






























13





Table of Contents










*(in thousands)*
**Contractual**
**Cash Obligations**

**Total**
**Amounts**
**Committed**

**Less than**
**1 year**

**1-3**
**Years**

**3-5**
**Years**

**After**
**5 Years**Long-term debt

$
1,438

$
1,438

$
--

$
--

$
--Operating leases


22,932


3,240


5,683


5,728


8,281Purchase obligations


30,364


30,364


--


--


--Total obligations

$
54,734

$
35,042

$
5,683

$
5,728

$
8,281





**Critical Accounting Policies and Estimates**













·  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 and market conditions. 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, notes receivable, 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. We also consider collateral values and other factors in evaluating collectibility of notes receivable. Actual results may differ resulting in adjustment of the respective allowance(s).
 
 ·  We currently have deferred tax assets resulting from certain loss carry forwards 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 we are uncertain whether future operations will generate sufficient profit to utilize the loss carry forwards, valuation allowances are established.
 
 ·  We have significant intangible assets, including trademarks, patents and goodwill. The determination of related estimated useful lives and whether or not these assets are impaired involves significant judgments. Changes in strategy or market conditions could significantly impact these judgments and require adjustments to recorded asset balances.


**Impact of Inflation**










14





Table of Contents


**Seasonality**










**Forward Looking Statements**












the inability to reach a definitive agreement with WHF regarding the sale of certain Weider branded assets;the inability to successfully implement marketing and promotional programs behind our Schiff Move Free brand and other branded new products;the inability to successfully launch and gain distribution for our Schiff Lubriflex3 product and Schiff Move Free product enhancements;the inability to achieve cost savings and operational efficiencies;the inability to increase operating margins and increase revenues;dependence on individual products and customers;the inability to successfully relaunch brands in our Haleko business unit;the impact of competitive products and pricing, including private label;market and industry conditions, including pricing, demand for products, level of trade inventories and raw materials availability and pricing;the success of product development and the inability to obtain customer acceptance of new product introductions;changes in laws and regulations, including recently proposed FDA regulations regarding good manufacturing practices;litigation and government regulatory action;lack of available product liability insurance for products containing ephedra;adverse publicity regarding the consumption of nutritional supplements;changes in accounting standards; andother factors indicated from time to time in our SEC reports, copies of which are available upon request from our investor relations department or may be  obtained at the SEC's website (www.sec.gov).


**ITEM 3.** QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



















**ITEM 4.**    **CONTROLS AND PROCEDURES**




















15





Table of Contents





**PART II.**    **OTHER INFORMATION**





**ITEM 1.**    **LEGAL PROCEEDINGS**










**ITEM 2.**    **UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**










**Period**

**Total number of shares purchased**

**Average price paid per share**

**Total number of shares purchased as part of publicly announced plans or programs**

**Maximum number of shares that may yet be purchased under the plans or programs**June 1 - June 30

--

--

--

--July 1 - July 31

--

--

--

--August 1 - August 31

27,406(1)

$3.95

--

--Total

27,406

$3.95

--

--





(1)








**ITEM 3.**    **DEFAULTS UPON SENIOR SECURITIES**










**ITEM 4.**    **SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**










**ITEM 5.**    **OTHER INFORMATION**










**ITEM 6.**    **EXHIBITS**


31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


32.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002








16





Table of Contents


**SIGNATURES**
















WEIDER NUTRITION INTERNATIONAL, INC.











Date: October 14, 2004
By: /s/ Bruce J. WoodBruce J. WoodPresident, Chief ExecutiveOfficer and Director








Date: October 14, 2004
By: /s/ Joseph W. BatyJoseph W. BatyExecutive Vice President andChief Financial Officer












17