Click hereto rapidly navigate through this document

---

---






**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 November 30, 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.  YesxNo o





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





The number of shares outstanding of the Registrants common stock is 26,087,641 (as of January 12, 2005).














|
|
|
|

|
|

****PART I.** **FINANCIAL INFORMATION****
 ****ITEM 1.****  **FINANCIAL STATEMENTS**





****WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES**
**CONDENSED CONSOLIDATED BALANCE SHEETS****


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





November 30, 2004

May 31,
2004(unaudited)**ASSETS**Current assets:Cash and cash equivalents

$
20,113

$
7,449Receivables, net


32,093


35,620Inventories


36,860


28,431Prepaid expenses and other


4,876


5,021Deferred taxes


2,240


2,419Total current assets


96,182


78,940Property and equipment, net


24,074


24,618Other assets:Goodwill


4,346


4,346Intangible assets, net


4,878


5,146Deposits and other assets


795


1,874Total other assets


10,019


11,366Total assets

$
130,275

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

$
19,449

$
16,116Accrued expenses


13,178


15,277Current portion of long-term debt


2,673


1,091Income taxes payable


1,581


--Total current liabilities


36,881


32,484Long-term debt


--


133Deferred taxes


10,119


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-11,106,993 and 11,127,166


111


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


150


150Additional paid-in capital


83,816


83,902Deferred compensation costs


(536
)

(635
)Other accumulated comprehensive loss


(3,763
)

(4,060
)Retained earnings (accumulated deficit)


3,497


(3,655
)Total stockholders equity


83,275


75,813Total liabilities and stockholders equity

$
130,275

$
114,924





See notes to condensed consolidated financial statements.


|
|
|
|

|
|

****


****WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES**
**CONDENSED CONSOLIDATED STATEMENTS OF INCOME****


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


**(unaudited)**





Three Months Ended
November 30,2004

2003Net sales

$
66,959

$
60,760Cost of goods sold


41,927


37,672Gross profit


25,032


23,088Operating expenses:Selling and marketing


11,845


13,663General and administrative


6,034


4,248Research and development


1,180


962Amortization of intangible assets


266


141Total operating expenses


19,325


19,014Income from operations


5,707


4,074Other income (expense):Interest income


95


581Interest expense


(93
)

(309
)Other, net


(76
)

(216
)Total other income (expense), net


(74
)

56Income from continuing operations before income taxes


5,633


4,130Income tax expense


2,169


1,547Net income from continuing operations


3,464


2,583Income from discontinued operations, net of income taxes


--


83Net income

$
3,464

$
2,666Weighted average shares outstanding:Basic


25,719,341


26,085,336Diluted


26,486,673


27,175,959Net income per share-basic and diluted:Net income from continuing operations

$
0.13

$
0.10Net income from discontinued operations


--


--Net income

$
0.13

$
0.10Comprehensive income

$
3,758

$
2,807











See notes to condensed consolidated financial statements.


|
|
|
|

|
|

****


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


**CONDENSED CONSOLIDATED STATEMENTS OF INCOME**


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


**(unaudited)**


****


Six Months Ended
November 30,2004

2003Net sales

$
136,725

$
124,401Cost of goods sold


83,774


77,020Gross profit


52,951


47,381Operating expenses:Selling and marketing


25,840


28,159General and administrative


12,328


9,632Research and development


2,354


2,176Amortization of intangible assets


533


283Total operating expenses


41,055


40,250Income from operations


11,896


7,131Other income (expense):Interest income


117


728Interest expense


(271
)

(642
)Other


(111
)

(371
)Total other expense, net


(265
)

(285
)Income from continuing operations before income taxes


11,631


6,846Income tax expense


4,479


2,633Net income from continuing operations


7,152


4,213Income from discontinued operations, net of income taxes


--


649Net income

$
7,152

$
4,862Weighted average shares outstanding:Basic


25,732,544


26,161,169Diluted


26,525,174


26,960,390Net income per share-basic:Net income from continuing operations

$
0.28

$
0.16Net income from discontinued operations


--


0.02Net income

$
0.28

$
0.18Net income per share-diluted:Net income from continuing operations

$
0.27

$
0.16Net income from discontinued operations


--


0.02Net income

$
0.27

$
0.18Comprehensive income

$
7,449

$
5,838





See notes to condensed consolidated financial statements.


|
|
|
|

|
|

****WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES**
**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS****


**(in thousands)**


**(unaudited)**





Six Months Ended
November 30,2004

2003Cash flows from operating activities:Net income

$
7,152

$
4,862Adjustments to reconcile net income to net cash provided by (used in)operating activities:Recovery of bad debts


(87
)

(1,122
)Deferred taxes


3,804


3,408Depreciation and amortization


2,662


2,498Interest income on settlement of notes receivable


--


(609
)Gain on disposition of net assets held for sale and property and equipment


(27
)

(1,301
)Amortization of financing fees


113


168Amortization of deferred compensation costs


139


93Tax benefit from stock options exercised


4


--Changes in operating assets and liabilities:Receivables


3,614


(5,384
)Inventories


(8,429
)

(4,224
)Prepaid expenses and other


145


617Deposits and other assets


25


(111
)Accounts payable


3,333


2,189Other current liabilities


(550
)

(2,360
)Net cash provided by (used in) operating activities


11,898


(1,276
)Cash flows from investing activities:Purchase of property and equipment


(1,082
)

(773
)Purchase of intangibles


(7
)

(224
)Proceeds from disposition of assets held for sale and property and equipment


928


6,898Collection of notes receivable


--


4Net cash provided by (used in) investing activities


(161
)

5,905Cash flows from financing activities:Issuance of common stock


18


40Acquisition and retirement of treasury stock


(108
)

--Net change in revolving line-of-credit


(2
)

1,793Proceeds from debt


2,374


2,738Payments on debt


(1,633
)

(7,949
)Net cash provided by (used in) financing activities


649


(3,378
)Effect of exchange rate changes on cash


278


287Increase in cash and cash equivalents


12,664


1,538Cash and cash equivalents, beginning of period


7,449


3,463Cash and cash equivalents, end of period

$
20,113

$
5,001










See notes to condensed consolidated financial statements.


|
|
|
|

|
|

****


****


****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**





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, 2004 as filed with the Securities and Exchange Commission. The May 31, 2004 consolidated balance sheet 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 adjustments (which are of a normal recurring nature) necessary for a fair presentation of our financial position and results of operations. Certain prior period amounts have been reclassified to conform with the current interim period presentation. 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.





Effective in our fiscal 2004 first quarter, we sold substantially all of the assets relating to Halekos Venice Beach ® sports apparel business to Hucke AG, a German apparel company, for initial cumulative net cash proceeds of approximately $6,898. In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, the operating results for Venice Beach are reflected as discontinued operations for the three and six months ended November 30, 2003. Accordingly, we recognized after-tax income from discontinued operations of approximately $649, including an after-tax gain on disposal of approximately $831, for the six months ended November 30, 2003. Results from discontinued operations for the six months ended November 30, 2003 were subsequently impacted by certain lease related and other costs, as well as by final settlement of net assets sold in the transaction. Ultimately, cumulative net cash proceeds amounted to approximately $7,134 and income from discontinued operations, net of income taxes, amounted to approximately $812 for fiscal 2004.





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 a straight-line basis over the accompanying five-year vesting period. During the fiscal 2005 second quarter, 124,600 of these restricted shares vested. Concurrent with vesting, we reacquired (and ultimately retired) 27,406 shares from certain employees in connection with the payment of individual income taxes. During the fiscal 2004 second quarter, 128,000 of these restricted shares vested and 13,600 were cancelled as a result of the voluntary termination of certain employees.





We disclose the effect of SFAS No. 123, Accounting for Stock-Based Compensation, on a proforma basis and continue 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. 123, as amended by SFAS No. 148, and has been determined as if we had accounted for our employee stock options and unvested restricted stock under the fair value method of SFAS No. 123. 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:





Three Months Ended
November 30,

Six Months Ended
November 30,2004

2003

2004

2003Net income, as reported

$
3,464

$
2,666

$
7,152

$
4,862Net income, proforma


3,348


2,570


6,939


4,722Basic net income per share, as reported


0.13


0.10


0.28


0.18Diluted net income per share, as reported


0.13


0.10


0.27


0.18Basic net income per share, proforma


0.13


0.10


0.27


0.18Diluted net income per share, proforma


0.13


0.09


0.26


0.18





|
|
|
|

|
|

****


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


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


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


**(unaudited)**





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





Receivables, net, consist of the following:November 30,
2004

May 31,
2004Trade accounts

$
38,002

$
40,982Other, including income taxes


724


1,14238,726


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


(6,633
)

(6,504
)Total

$
32,093

$
35,620








**3.**   **INVENTORIES**





Inventories consist of the following:November 30,2004

May 31,2004Raw materials

$
12,672

$
7,814Work in process


2,792


1,385Finished goods


21,396


19,232Total

$
36,860

$
28,431








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





Goodwill and intangible assets, net, consist of the following:





November 30, 2004

May 31, 2004Gross
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

$
10,946

$
(6,068
)
$
4,878

$
10,365

$
(5,219
)
$
5,146





Estimated amortization expense, assuming no changes in our intangible assets, for each of the five succeeding fiscal years, beginning with fiscal 2005, is $1,066 (2005), $1,063 (2006), $1,037 (2007), $1,015 (2008), and $942 (2009).





The carrying amount of goodwill did not change during the first six months of fiscal 2005 or during fiscal 2004.


|
|
|
|

|
|

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


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


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


**(unaudited)**





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





We are organized into three business units: the Schiff ® Specialty unit, the Haleko unit (our primary European subsidiary) and the Active Nutrition unit. These business units are managed independently, each with its own sales and marketing resources, and supported by product research and development, operations and technical services and administrative functions.





We manufacture and market nutritional products, including a full line of specialty supplements, vitamins and minerals through our Schiff Specialty unit. Schiff Specialty products are marketed primarily in the United States through mass market distribution channels. We manufacture and market nutritional products, including a full line of sports nutrition supplements, together with certain other nutraceuticals within our Haleko unit. Haleko products are marketed primarily in Europe through mass market and health club and gym distribution channels. We also manufacture and market a variety of sports nutrition, nutritional bar and weight management products through our Active Nutrition unit. Active Nutrition products are marketed domestically and internationally primarily through mass market and health club and gym distribution channels.





The accounting policies of these business units are the same as those described in Note 1 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended May 31, 2004. We evaluate the performance of our business units based on actual and expected operating results of the respective business units. Certain domestic assets are not allocated to the Schiff Specialty and Active Nutrition units. Accordingly, asset segment information is provided on a total domestic and non-domestic basis consistent with the manner in which management evaluates the business.





Effective in our fiscal 2005 first quarter, we retroactively reclassified Schiff export net sales and operating results from our Active Nutrition unit to our Schiff Specialty unit. Schiff export net sales and operating income previously included in Active Nutrition operating results were $560 and $256, respectively, for the fiscal 2004 second quarter, and $1,573 and $796, respectively, for the six months ended November 30, 2003.





Segment information for the three months ended November 30, 2004 and 2003 is summarized as follows:





Net Sales

Income (Loss) From Operations

Interest
Expense2004:Schiff Specialty

$
42,310

$
5,157

$
42Haleko


16,232


346


38Active Nutrition


9,364


279


13Eliminations


(947
)

(75
)

--$
66,959

$
5,707

$
932003:Schiff Specialty

$
36,453

$
3,479

$
201Haleko


16,510


909


126Active Nutrition


9,195


(340
)

21Eliminations


(1,398
)

26


(39
)$
60,760

$
4,074

$
309





|
|
|
|

|
|

****


****


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


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


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


**(unaudited)**





Segment information for the six months ended November 30, 2004 and 2003 is summarized as follows:





Net Sales

Income (Loss) From Operations

Interest
Expense2004:Schiff Specialty

$
84,072

$
9,962

$
165Haleko


35,607


1,141


78Active Nutrition


19,691


851


28Eliminations


(2,645
)

(58
)

--$
136,725

$
11,896

$
2712003:Schiff Specialty

$
76,498

$
7,031

$
402Haleko


33,029


1,068


256Active Nutrition


17,605


(1,017
)

41Eliminations


(2,731
)

49


(57
)$
124,401

$
7,131

$
642





Reconciliation of total assets for domestic and international operations is as follows:





November 30,
2004

May 31,
2004Total domestic assets

$
141,733

$
127,376Total international assets


48,049


46,689Eliminations


(59,507
)

(59,141
)Total

$
130,275

$
114,924





Capital expenditures for domestic and international operations were $829 and $253, respectively, for the six months ended November 30, 2004, and $325 and $448, respectively, for the six months ended November 30, 2003.





**6.**  **CONCENTRATION RISK**





Our two largest customers combined accounted for approximately 47% and 50%, respectively, of net sales for the six months ended November 30, 2004 and 2003. At November 30, 2004, and May 31, 2004, amounts due from these customers represented approximately 37% and 38%, respectively, of total trade accounts receivable. Net sales of our Schiff Move Free ® brand accounted for approximately 25% of total net sales for the six months ended November 30, 2004 and 2003.





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





In November 2004, we were named as a defendant in *Willis v. American Body Building Products, Optimum Nutrition, Weider Nutrition et. al.* filed in Illinois state court. The lawsuit alleges that consumption of an American Body Building brand product containing ephedra caused injuries and damages to the plaintiff. We sold the American Body Building brand to Optimum Nutrition (Optimum) in July 2002, and have tendered the matter to Optimum under the indemnification provisions of the related Asset Purchase Agreement. Optimum initially denied the tender for indemnification; however, we are contesting the denial of the indemnification coverage by Optimum. This matter is not covered by insurance. We dispute the allegations and are defending the matter.


|
|
|
|

|
|

****


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


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


(in thousands, except share data)


(unaudited**)**





We are currently named as a defendant in two other lawsuits alleging that consumption of certain of our discontinued products containing ephedra caused or contributed to injuries and damages. We dispute the allegations and our insurance carriers have assumed defense of one of the matters. The second matter is not covered by insurance. We believe that, after taking into consideration our insurance coverage, these lawsuits, if successful, generally would not have a material adverse effect on our results of operations and financial condition. However, one or more large punitive damage awards, which are generally not covered by insurance (and are not covered by the indemnification provisions in the Willis matter), or a large adverse award in a lawsuit not covered by insurance or indemnification, could have a material adverse effect on our results of operations and financial condition. In connection with the sale of the American Body Building and Science Foods brands in July 2002, we discontinued the sale of products that contain ephedra. However, we cannot assure you that we will not be subject to further litigation with respect to ephedra products we previously sold.





We were named as a defendant along with numerous other supplement and nutrition companies in purported class actions in Florida, Illinois and New Jersey state courts, alleging that androstenedione and other purportedly similar products were sold by defendants in violation of certain statutes and utilizing false and misleading claims and advertising. We disputed the allegations and contested the matter. In November 2004, we reached an agreement in principal with the plaintiffs to settle the matter on a nationwide basis. In agreeing to settle this matter, we have not admitted any wrongdoing. The terms of the settlement include the establishment of a fund by the Company to be used towards settlements with a nationwide class of plaintiffs. The fund will be distributed to potential claimants in cash or coupon dependent upon the type of proof of purchase or product use tendered by the potential claimant. If cash claims exceed $50,000, we may opt out (in our discretion) of the settlement agreement, and the litigation may proceed or be subject to further settlement negotiations. The settlement agreement also provides for the payment of plaintiffs attorneys fees and costs. In late December 2004, the court granted preliminary approval to the settlement agreement. In accounting for the settlement of this matter, we have taken into consideration the cash claim opt out provisions, cash and coupon redemption rates in similar settlement arrangements and typical redemption rates for coupons toward the purchase of our products.





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.





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





In March 2004, the Financial Accounting Standards Board (FASB) reached a consensus on Emerging Issues Task Force (EITF) Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, which provides guidance to determine the meaning of other-than-temporary impairment and its application to investments classified as either available-for-sale or held-to-maturity (including individual securities and investments in mutual funds), and investments accounted for under the cost method or the equity method. The guidance for evaluating whether an investment is other-than-temporarily impaired should be applied in other-than-temporary impairment evaluations made in reporting periods beginning after June 15, 2004. The adoption of EITF Issue No. 03-1 did not have a material impact on our results of operations and financial condition.





In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment, which replaces SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for stock Issued to Employees. SFAS No. 123 (revised 2004) requires that costs resulting from all share-based payment transactions, a transaction in which an entity exchanges its equity instruments for goods or services, be recognized in the financial statements. Costs resulting from all share-based payment transactions will be determined by applying a fair-value-based measurement method at the date of the grant, with limited exceptions. Costs will be recognized over the period in which the goods or services are received. The recognition and measurement provisions of SFAS No. 123 (revised 2004) are effective for all share-based payment transactions entered into after August 31, 2005. We have not determined the impact, if any, SFAS No. 123 (revised 2004) will have on our results of operations and financial condition.


|
|
|
|

|
|

****


****


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





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





**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.





We are continuing 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 have introduced product enhancements to Schiff Move Free and launched Schiff Lubriflex 3 , a new premium, proprietary joint care product. However, in the second half of fiscal 2005 and continuing into fiscal 2006, we anticipate escalating raw material costs (particularly in the joint care category), significant marketing support of the Libruflex 3 launch, and continuing difficult economic conditions in Germany may negatively impact operating margins.





In August 2004, we announced an agreement in principle to potentially sell certain assets of our Active Nutrition business unit relating to our Weider branded business domestically and internationally. As of the date hereof, we have not entered into a definitive sale agreement. Under the direction of the Special Committee formed to oversee the transaction, the investment banking firm of Houlihan Lokey Howard and Zurkin has performed a market valuation analysis for the Weider branded business and solicited acquisition offers in addition to the previously announced offer made by Weider Health and Fitness. Discussions regarding the asset sale and our consideration of the offers submitted to the company are ongoing.





If the potential sale of the Weider branded business is consummated, we anticipate that we would change our corporate name and that the remaining portion of the Active Nutrition business unit would be incorporated into our Schiff Specialty business unit. For the six months ended November 30, 2004 and 2003, the Weider branded business generated net sales of approximately $15.8 million and $13.6 million, respectively, and incurred an operating income (loss) of approximately $1.0 million and $(1.1) million, respectively, excluding certain indirect costs primarily consisting of general and administrative expenses.





Effective in our fiscal 2004 first quarter, we sold substantially all of the assets relating to Halekos Venice Beach sports apparel business for initial cumulative net cash proceeds of approximately $6.9 million. In accordance with SFAS No. 144, the operating results for Venice Beach are reflected as discontinued operations for the three and six months ended November 30, 2003. Results from discontinued operations for the six months ended November 30, 2003 were subsequently impacted by certain lease related and other costs, as well as by final settlement of net assets sold in the transaction. Ultimately, cumulative net cash proceeds amounted to approximately $7.1 million and income from discontinued operations, net of income taxes, amounted to approximately $0.8 million for fiscal 2004.





During fiscal 2004, we entered into settlement agreements with five former employees relating to certain outstanding notes due to us, including interest accrued thereon. As a result of the respective settlement agreements, we received an aggregate of $99,000 in cash and acquired and retired a total of 966,609 shares of our Class A common stock valued at approximately $3.8 million as full payment of principal and interest accrued on the notes. Settlement agreements entered into during the six months ended November 30, 2003, resulted in recoveries of previously recognized notes receivable valuation allowances of approximately $1.1 million, reflected as a reduction of general and administrative expense, and recognition of contractually due interest income of approximately $0.7 million.


|
|
|
|

|
|




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





**Results of Operations (unaudited)**


*Three Months Ended November 30, 2004 Compared to Three Months*


*Ended November 30, 2003*





The following tables show comparative results for continuing operations, by business unit, for the three months ended November 30, 2004 and 2003. Certain indirect costs, primarily including general and administrative and research and development expenses, are charged to the business units based on various allocation methodologies.





*(in thousands)*

Schiff
Specialty

Haleko

Active
Nutrition

Other
(1)

Total2004:Net sales

$
42,310

$
16,232

$
9,364

$
(947
)
$
66,959Cost of goods sold


27,134


10,017


5,631


(855
)

41,927Gross profit


15,176


6,215


3,733


(92
)

25,032Operating expenses:Selling and marketing


5,651


4,056


2,138


--


11,845General and administrative


3,495


1,432


1,107


--


6,034Research and development


872


170


138


--


1,180Amortization of intangible assets


1


211


71


(17
)

266Total operating expenses


10,019


5,869


3,454


(17
)

19,325Income (loss) from operations

$
5,157

$
346

$
279

$
(75
)
$
5,7072003:Net sales

$
36,453

$
16,510

$
9,195

$
(1,398
)
$
60,760Cost of goods sold


23,321


10,195


5,554


(1,398
)

37,672Gross profit


13,132


6,315


3,641


--


23,088Operating expenses:Selling and marketing


6,593


4,117


2,953


--


13,663General and administrative


2,409


1,020


819


--


4,248Research and development


630


190


142


--


962Amortization of intangible assets


21


79


67


(26
)

141Total operating expenses


9,653


5,406


3,981


(26
)

19,014Income (loss) from operations

$
3,479

$
909

$
(340
)
$
26

$
4,074





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





**Net Sales.** Net sales increased approximately 10.2% to $67.0 million for the fiscal 2005 second quarter, from $60.8 million for the fiscal 2004 second quarter. Overall, the increase in net sales was primarily attributable to an increase in Schiff Specialty branded and private label joint product sales and favorable foreign currency exchange rates.





Schiff Specialty net sales increased approximately 16.1% to $42.3 million for the fiscal 2005 second quarter, from $36.5 million for the fiscal 2004 second quarter. The increase was primarily due to an increase in Move Free sales, the launch of Lubriflex 3 into several retail accounts and increases in export and private label sales. These positive sales results were partially offset by decreased sales of other Schiff branded products. Move Free net sales were $15.0 million and $12.7 million, respectively, for the fiscal 2005 and 2004 second quarters. As a result of significant volatility in raw material costing and the inability to secure an acceptable price increase from the customer, we recently discontinued certain private label or contract manufacturing services. Net sales for the discontinued private label business amounted to approximately $6.8 million and $5.0 million, respectively, for the fiscal 2005 and 2004 second quarters.





We have retroactively reclassified and included our Schiff export business into our Schiff Specialty unit. Schiff export net sales of approximately $1.9 million and $0.6 million, respectively, for the fiscal 2005 and 2004 second quarters, were previously included in our Active Nutrition business unit.





Haleko net sales, including the positive impact of foreign currency exchange rates, decreased approximately 1.7% to $16.2 million for the fiscal 2005 second quarter, from $16.5 million for the fiscal 2004 second quarter. Excluding the favorable foreign currency exchange impact, net sales decreased approximately 9.4%, primarily due to a reduction in Multipower sales in Germany. The sales decrease is due primarily to a reduction in health gym customers resulting from heightened competitive pressures and continuing difficult economic conditions in Germany.





Active Nutrition net sales increased approximately 1.8% to $9.4 million for the fiscal 2005 second quarter, from $9.2 million for the fiscal 2004 second quarter. The increase was primarily attributable to incremental distribution in our Weider branded European business and the impact of foreign currency exchange rates, partially offset by a modest reduction in U.S. branded sales.





- 12 -*Go to Index*


****


****


**Gross Profit.** Gross profit increased approximately 8.4% to $25.0 million for the fiscal 2005 second quarter, from $23.1 million for the fiscal 2004 second quarter. Gross profit increased in our Schiff Specialty unit and remained relatively constant in our Haleko and Active Nutrition units. Gross profit, as a percentage of net sales, was 37.4% for the fiscal 2005 second quarter, compared to 38.0% for the fiscal 2004 second quarter. Gross profit percentage remained relatively constant in each of our business units.





Schiff Specialty gross profit increased approximately 15.6% to $15.2 million for the fiscal 2005 second quarter, from $13.1 million for the fiscal 2004 second quarter, primarily resulting from the increase in net sales. Gross profit, as a percentage of net sales, remained relatively constant at 35.9% and 36.0%, respectively, for the fiscal 2005 and 2004 second quarters. Percentage increases from higher margin Move Free and other branded joint product sales were offset by an increase in lower margin private label sales, higher raw material costs and some redirection of marketing support to price discount-like promotions, which are accounted for as a direct reduction of sales. The redirection of marketing support was in response to competitive pricing conditions.





Haleko gross profit remained relatively constant at $6.2 million and $6.3 million, respectively, for the fiscal 2005 and 2004 second quarters. Gross profit, as a percentage of net sales, also remained relatively constant at 38.3% for the fiscal 2005 and 2004 second quarters.





Active Nutrition gross profit remained relatively constant at $3.7 million and $3.6 million, respectively, for the fiscal 2005 and 2004 second quarters. Gross profit, as a percentage of net sales, also remained relatively constant at 39.9% and 39.6%, respectively, for the fiscal 2005 and 2004 second quarters.





**Operating Expenses.** Operating expenses increased approximately 1.6% to $19.3 million for the fiscal 2005 second quarter, from $19.0 million for the fiscal 2004 second quarter. An increase in general and administrative expense was substantially offset by a decrease in selling and marketing expenses.





Selling and marketing expenses, including sales, marketing, advertising, freight and other costs, decreased to approximately $11.8 million for the fiscal 2005 second quarter, from $13.7 million for the fiscal 2004 second quarter. The decrease in selling and marketing expenses resulted primarily from an increase in price discount-like promotional costs, which are accounted for as a direct reduction of sales. Furthermore, selling and marketing expenses were impacted by reduced media advertising, primarily in our Schiff Specialty unit.





General and administrative expenses increased to approximately $6.0 million for the fiscal 2005 second quarter, from $4.2 million for the fiscal 2004 second quarter. The increase in general and administrative expenses resulted primarily from expenses associated with the potential sale of the Weider branded business, corporate governance costs and incremental personnel related costs. In addition, the fiscal 2004 second quarter amount includes approximately $0.5 million in recoveries of previously recognized notes receivable valuation allowances, which are reflected as a reduction in general and administrative expenses.





Research and development costs increased to approximately $1.2 million for the fiscal 2005 second quarter, from $1.0 million for the fiscal 2004 second quarter, primarily resulting from an increase in contracted research relating to potential new product initiatives. Amortization of intangibles increased due to a reduction in the estimated remaining useful lives of certain Haleko trademarks.





**Other Income/Expense.** Other income/expense, net, was $0.1 million expense for the fiscal 2005 second quarter, compared to $0.1 million income for the fiscal 2004 second quarter. Interest expense decreased as a result of reduced aggregate indebtedness and a reduction of financing fees under the current credit facility. Fiscal 2004 second quarter interest income includes approximately $0.5 million recognized in connection with the settlement of certain notes receivable.


|
|
|
|

|
|

****


****


**Provision for Income Taxes.** Provision for income taxes was $2.2 million for the fiscal 2005 second quarter, compared to $1.5 million for the fiscal 2004 second quarter. The change resulted primarily from an increase in pre-tax income and a modest increase in our effective tax rate.





**Results of Operations (unaudited)**


*Six Months Ended November 30, 2004 Compared to Six Months*


*Ended November 30, 2003*





The following tables show comparative results for continuing operations, by business unit, for the six months ended November 30, 2004 and 2003. Certain indirect costs, primarily including general and administrative and research and development expenses, are charged to the business units based on various allocation methodologies.





*(in thousands)*

Schiff
Specialty

Haleko

Active
Nutrition

Other
(1)

Total2004:Net sales

$
84,072

$
35,607

$
19,691

$
(2,645
)
$
136,725Cost of goods sold


52,977


21,758


11,592


(2,553
)

83,774Gross profit


31,095


13,849


8,099


(92
)

52,951Operating expenses:Selling and marketing


12,391


8,740


4,709


--


25,840General and administrative


7,000


3,202


2,126


--


12,328Research and development


1,740


346


268


--


2,354Amortization of intangible assets


2


420


145


(34
)

533Total operating expenses


21,133


12,708


7,248


(34
)

41,055Income (loss) from operations

$
9,962

$
1,141

$
851

$
(58
)
$
11,8962003:Net sales

$
76,498

$
33,029

$
17,605

$
(2,731
)
$
124,401Cost of goods sold


49,007


20,232


10,512


(2,731
)

77,020Gross profit


27,491


12,797


7,093


--


47,381Operating expenses:Selling and marketing


13,571


8,661


5,927


--


28,159General and administrative


5,364


2,539


1,729


--


9,632Research and development


1,483


374


319


--


2,176Amortization of intangible assets


42


155


135


(49
)

283Total operating expenses


20,460


11,729


8,110


(49
)

40,250Income (loss) from operations

$
7,031

$
1,068

$
(1,017
)
$
49

$
7,131





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





**Net Sales.** Net sales increased approximately 9.9% to $136.7 million for the six months ended November 30, 2004, from $124.4 million for the six months ended November 30, 2003. Overall, the increase in net sales was primarily attributable to an increase in Schiff Specialty branded and private label joint product sales, improvement in our Weider Europe branded business and favorable foreign currency exchange rates.





Schiff Specialty net sales increased approximately 9.9% to $84.1 million for the six months ended November 30, 2004, from $76.5 million for the six months ended November 30, 2003. The increase was primarily due to an increase in Move Free sales, and increases in export and private label joint product sales. The increase was partially offset by decreased sales of other Schiff branded products. Move Free net sales were $34.2 million and $30.8 million, respectively, for the six months ended November 30, 2004 and 2003. As a result of significant volatility in raw material costing and the inability to secure an acceptable price increase from the customer, we recently discontinued certain private label or contract manufacturing services. Net sales for the discontinued private label business amounted to approximately $10.6 million and $9.3 million, respectively, for the six months ended November 30, 2004 and 2003.





We have retroactively reclassified and included our Schiff export business into our Schiff Specialty unit. Schiff export net sales of approximately $2.6 million and $1.6 million for the six months ended November 30, 2004 and 2003, respectively, were previously included in our Active Nutrition business unit.


|
|
|
|

|
|







Haleko net sales, including the positive impact of foreign currency exchange rates, increased approximately 7.8% to $35.6 million for the six months ended November 30, 2004, from $33.0 million for the six months ended November 30, 2003. Excluding the favorable foreign currency exchange impact, net sales remained relatively constant for the six months ended November 30, 2004 and 2003. An increase in private label sales was substantially offset by a reduction in branded sales (primarily Multipower) resulting from continuing difficult economic conditions in Germany.





Active Nutrition net sales increased approximately 11.8% to $19.7 million for the six months ended November 30, 2004, from $17.6 million for the six months ended November 30, 2003. The increase was primarily attributable to incremental distribution in our Weider branded European business and the impact of foreign currency exchange rates, partially offset by a reduction in U.S. branded sales.





**Gross Profit.** Gross profit increased approximately 11.8% to $53.0 million for the six months ended November 30, 2004, from $47.4 million for the six months ended November 30, 2003. Gross profit increased in all of our business units due primarily to increased sales and favorable foreign currency exchange rates. Gross profit, as a percentage of net sales, was 38.7% for the six months ended November 30, 2004, compared to 38.1% for the six months ended November 30, 2003. Gross profit percentage increased modestly in our Schiff Specialty and Active Nutrition units and remained relatively constant in our Haleko unit.





Schiff Specialty gross profit increased approximately 13.1% to $31.1 million for the six months ended November 30, 2004, from $27.5 million for the six months ended November 30, 2003, primarily resulting from the increase in net sales. Gross profit, as a percentage of net sales, increased to 37.0% for the six months ended November 30, 2004, from 35.9% for the six months ended November 30, 2003. The percentage increase resulted primarily from an increase in higher margin Move Free and other branded joint product sales, partially offset by an increase in lower margin private label sales, higher raw material costs and some redirection of marketing support to price discount-like promotions, which are accounted for as a direct reduction of sales.  The redirection of marketing support was in response to competitive pricing conditions.





Haleko gross profit increased approximately 8.2% to $13.8 million for the six months ended November 30, 2004, from $12.8 million for the six months ended November 30, 2003, resulting primarily from favorable foreign currency exchange rates. Gross profit, as a percentage of net sales, remained relatively constant at 38.9% and 38.7%, respectively, for the six months ended November 30, 2004 and 2003.





Active Nutrition gross profit increased approximately 14.2% to $8.1 million for the six months ended November 30, 2004, from $7.1 million for the six months ended November 30, 2003, primarily resulting from an increase in sales and favorable foreign currency exchange rates. Gross profit, as a percentage of net sales, increased to 41.1% for the six months ended November 30, 2004, from 40.3% for the six months ended November 30, 2003. The percentage increase was primarily attributable to a reduction in inventory valuation charges and product returns.





**Operating Expenses.** Operating expenses increased approximately 2.0% to $41.1 million for the six months ended November 30, 2004, from $40.3 million for the six months ended November 30, 2003. An increase in general and administrative expense was substantially offset by a decrease in selling and marketing expenses.





Selling and marketing expenses, including sales, marketing, advertising, freight and other costs, decreased to approximately $25.8 million for the six months ended November 30, 2004, from $28.2 million for the six months ended November 30, 2003. The decrease in selling and marketing expenses resulted primarily from an increase in price discount-like promotional costs, which are accounted for as a direct reduction of sales. Furthermore, selling and marketing expenses were impacted by reduced media advertising, primarily in our Schiff Specialty unit.





General and administrative expenses increased to approximately $12.3 million for the six months ended November 30, 2004, from $9.6 million for the six months ended November 30, 2003. The increase in general and administrative expenses resulted primarily from expenses associated with the potential sale of the Weider branded business, corporate governance costs and incremental personnel related costs. In addition, the prior comparable period amount includes approximately $1.1 million in recoveries of previously recognized notes receivable valuation allowances, which are reflected as a reduction in general and administrative expenses.





Research and development costs increased to approximately $2.4 million for the six months ended November 30, 2004, from $2.2 million for the six months ended November 30, 2003, primarily resulting from an increase in contracted research relating to potential new product initiatives. Amortization of intangibles increased due to a reduction in the estimated remaining useful lives of certain Haleko unit trademarks.


|
|
|
|

|
|

****


****


**Other Income/Expense.** Other income/expense, net, was approximately $0.3 million expense for the six months ended November 30, 2004 and 2003. Interest expense for the six months ended November 30, 2004, decreased as a result of reduced aggregate indebtedness and a reduction of financing fees under our current credit facility. Interest income for the six months ended November 30, 2003, includes approximately $0.7 million recognized in connection with the settlement of certain notes receivable.





**Provision for Income Taxes.** Provision for income taxes was $4.5 million for the six months ended November 30, 2004, compared to $2.6 million for the six months ended November 30, 2003. The change resulted primarily from an increase in pre-tax income.





**Liquidity and Capital Resources**





Working capital increased approximately $12.8 million to $59.3 million at November 30, 2004, from $46.5 million at May 31, 2004, primarily represented by increases in cash and inventories. The increase in inventories is due primarily to joint product sales growth and our proactive decision to increase raw materials on-hand relating to this category, planned fiscal third quarter promotions in key accounts, our Lubriflex 3 product launch and foreign currency exchange impact.





Effective June 30, 2000, we were party to a senior credit facility (the Credit Facility) with Bankers Trust Company, on behalf of our domestic subsidiaries. The Credit Facility, as subsequently amended, was comprised of a $45.0 million revolving loan, under which we were able to borrow up to the lesser of $45.0 million or the sum of (i) 85% of eligible accounts receivable and (ii) the lesser of $22.5 million or 65% of the eligible inventory. The Credit Facility, which was being used to fund normal working capital and capital expenditure requirements, was terminated on June 30, 2004 in favor of a new credit facility discussed below.





On June 30, 2004, we entered into, through our wholly-owned direct operating subsidiary Weider Nutrition Group, Inc. (WNG), a new $25.0 million revolving credit facility (the New Credit Facility) with KeyBank National Association, as Agent. The New Credit Facility contains customary terms and conditions, including, among others, financial covenants and certain restrictions. Our obligations under the New Credit Facility are secured by a second priority security interest on all of the capital stock of WNG. If our total coverage ratio exceeds a certain limit, our obligations will also be secured by a second 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 the lesser of $25.0 million or the sum of (i) 85% of eligible accounts receivable and (ii) 65% of eligible inventory. Borrowings under the New Credit Facility bear interest at floating rates based on the KeyBank National Association prime rate or the Federal Funds effective rate, and the New Credit Facility matures on June 30, 2007, with options for one-year extensions under certain circumstances. The New 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, 2004, there were no amounts outstanding and $25.0 million was available under the New Credit Facility.





Our European working capital needs (primarily our Haleko business unit) are supported by a Germany-based secured credit facility (the Haleko Facility) that is subject to annual renewal in July. Our obligations under the Haleko Facility are secured by a second priority lien on substantially all Haleko tangible and intangible assets. In July 2004, we renewed the Haleko Facility with Deutsche Bank AG in the approximate amount of $10.2 million (at recent exchange rates) on terms substantially similar to the previous facility. At November 30, 2004, there was approximately $0.5 million outstanding and $9.2 million was available under the Haleko Facility.





We believe that our cash, cash flows from operations and the financing sources discussed above 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 our existing business. We may 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 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, our credit facilities contain certain customary financial covenants that may limit our ability to pay common stock dividends. We can give no assurance that we will pay dividends in the future.


|
|
|
|

|
|







A summary of our outstanding contractual obligations at November 30, 2004 is as follows:





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

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

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

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

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

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

$
2,673

$
2,673

$
--

$
--

$
--Operating leases


22,119


3,196


5,632


5,588


7,703Purchase obligations


17,178


17,178


--


--


--Total obligations

$
41,970

$
23,047

$
5,632

$
5,588

$
7,703





**Critical Accounting 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 and recoverability of long-lived assets. Note 1 to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended May 31, 2004, filed with the Securities and Exchange Commission, 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 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 that it is more likely than not that future operations will not 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**





Historically, we generally have been able to pass inflationary increases for raw materials and other costs on to our customers through price increases. While we will continue efforts to do so in the future, we cannot assure you that we will be successful. See further discussion of raw material pricing matters in the General and Results of Operations sections above.


|
|
|
|

|
|

****


****


**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 product sales mix, competitive conditions, raw material pricing pressures and other factors, as discussed above, we experience fluctuations in gross profit and operating margins on a quarter-to-quarter basis.





**Forward Looking Statements**





Investors are cautioned that, except for the historical information contained herein, the matters discussed in this Quarterly Report contain 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. Statements that are not historical facts, including without limitation statements which are preceded by, followed by or include the words believes, anticipates, plans, expects, estimates, may, should or similar expressions are forward-looking statements. These statements are subject to risks and uncertainties, certain of which are beyond our control, and, therefore, actual results may differ materially.





Important factors that may cause these forward looking statements to be false include, but are not limited to:





|· | the inability to reach a definitive agreement regarding the potential sale of the Weider branded business;
|- | ----------------------------------------------------------------------------------------------------------

|· | the inability to successfully implement marketing and spending programs behind our Schiff Move Free brand and other branded new products;
|- | -----------------------------------------------------------------------------------------------------------------------------------------

|· | the inability to successfully launch and gain distribution for our Schiff Lubriflex3product and Schiff Move Free product enhancements;
|- | --------------------------------------------------------------------------------------------------------------------------------------

|· | raw material pricing and availability, particularly in the joint care category, and the inability to pass on raw material price increases to customers;
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------

|· | the inability to achieve cost savings and operational efficiencies;
|- | -------------------------------------------------------------------

|· | the inability to increase operating margins and increase revenues;
|- | ------------------------------------------------------------------

|· | dependence on individual products;
|- | ----------------------------------

|· | the inability to successfully relaunch brands in our Haleko business unit;
|- | --------------------------------------------------------------------------

|· | the impact of competitive products and pricing (including private label);
|- | -------------------------------------------------------------------------

|· | dependence on individual customers;
|- | -----------------------------------

|· | market and industry conditions, including pricing, demand for products and, level of trade inventories;
|- | -------------------------------------------------------------------------------------------------------

|· | 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; and
|- | ------------------------------------

|· | other 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**





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 are subject to fluctuations resulting from changes in interest rates and foreign exchange rates. We currently are party to one modest interest rate derivative relating to our Haleko business unit. Our current policy does not allow speculation in derivative instruments for profit or execution of derivative instrument contracts for which there are 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.





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





We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission'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 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 quarter covered by this report. Based on the foregoing, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level.





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.


|
|
|
|

|
|

****


****


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





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





The information set forth in Note 7 to Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q is incorporated herein by reference.





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





None





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





Not applicable





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





Our Annual Meeting of Shareholders was held on October 26, 2004 for the following purpose:








Proposal 1: Election of our Board of Directors.


For

Withheld
AuthorityEric Weider
155,083,767

4,089,354George F. Lengvari
155,095,707

4,077,414Bruce J. Wood
155,066,201

4,106,920Ronald L. Corey
155,493,652

3,679,469Roger H. Kimmel
155,523,339

3,649,782Brian P. McDermott
155,493,652

3,679,469H.F. Powell
155,493,612

3,679,509Cynthia G. Watts
155,548,278

3,624,843


Proposal 2: Approval of our 2004 Incentive Award Plan.





For

Against

Abstentions

Broker Non-Votes152,224,541

4,011,866

41,777

2,894,937





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





On October 26, 2004, our stockholders approved our 2004 Incentive Award Plan (the Plan). Our Board of Directors had approved the Plan on September 24, 2004, subject to stockholder approval. A description of the terms and conditions of the Plan has been previously reported in our Proxy Statement on Schedule 14A dated September 28, 2004.





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





10.1  Weider Nutrition International, Inc. 2004 Incentive Award Plan*


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





*Previously filed in the Registrants Proxy Statement on Schedule 14A dated September 28, 2004 and incorporated herein by reference.


|
|
|
|

|
|

****


****


****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.





**WEIDER NUTRITION INTERNATIONAL, INC.**








Date: January 14, 2005
By: /s/   Bruce J. WoodBruce J. WoodPresident, Chief ExecutiveOfficer and Director








Date: January 14, 2005
By: /s/   Joseph W. BatyJoseph W. BatyExecutive Vice President andChief Financial Officer





|
|
|
|

|
|

**WEIDER NUTRITION INTERNATIONAL, INC.**
 ****INDEX****
 
 **PART I.** **FINANCIAL INFORMATION**
 
 ITEM 1. FINANCIAL STATEMENTS
 CONDENSED CONSOLIDATED BALANCE SHEETS
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 ITEM 4. CONTROLS AND PROCEDURES
 
 **PART II.** **OTHER INFORMATION**
 
 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 902 OF THE SARBANES-OXLEY ACT OF 2002