**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C.  20549**

 

----

 

**FORM 10-Q**

** **

| **ý** |   | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|------------|--------|-----------------------------------------------------------------------------------------------|
|       |   |                                                                                          |
|       |   | **For  the quarterly period ended February 29, 2004**                                         |
|       |   |                                                                                          |
| **o**      |   | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**For the transitionperiod from            to            .**

 

**Commission filenumber:**

**001-14608**

 

**WEIDER NUTRITION INTERNATIONAL,INC.**

(Exact name of Registrant as specified in itscharter)

 

| **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 areacode:

**(801)975-5000**

 

Indicate by check mark whether the Registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theRegistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days. Yes   **ý**  No  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  **ý**

 

**Thenumber of shares outstanding of the Registrant’s common stock is 26,040,740 (asof March 31, 2004).**

 

 

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**PARTI.         FINANCIAL INFORMATION**

 

**ITEM1.         FINANCIAL STATEMENTS**

### ** **

### **WEIDER NUTRITION INTERNATIONAL, INC. ANDSUBSIDIARIES**

### **CONDENSED CONSOLIDATED BALANCE SHEETS**

**(inthousands, except share data)**

 
|                                                                                                                                    |   | **February  29,  2004** |    | **May 31,  2003** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|---------|-------------------|--------|
|                                                                                                                                    |   | **(unaudited)**         |    |              |   |
| **ASSETS**                                                                                                                              |   |                    |    |              |   |
| Current assets:                                                                                                                         |   |                    |    |              |   |
| Cash and cash equivalents                                                                                                               |   | $                       | 4,778   |              | $      | 3,463 |   |
| Receivables, net                                                                                                                        |   | 33,371                  |    | 27,592            |   |
| Inventories                                                                                                                             |   | 30,753                  |    | 27,543            |   |
| Prepaid expenses and other                                                                                                              |   | 4,418                   |    | 4,312             |   |
| Deferred taxes                                                                                                                          |   | 3,564                   |    | 2,908             |   |
| Assets held for sale                                                                                                                    |   | —                  |    | 5,077             |   |
|                                                                                                                                    |   |                    |    |              |   |
|   Total current assets                                                                                                        |   | 76,884                  |    | 70,895            |   |
|                                                                                                                                    |   |                    |    |              |   |
| Property and equipment, net                                                                                                             |   | 25,618                  |    | 26,676            |   |
|                                                                                                                                    |   |                    |    |              |   |
| Other assets:                                                                                                                           |   |                    |    |              |   |
| Intangible assets, net                                                                                                                  |   | 9,916                   |    | 9,738             |   |
| Deposits and other assets                                                                                                               |   | 3,902                   |    | 5,286             |   |
| Notes receivable, net (Note 5)                                                                                                          |   | 171                     |    | 2,178             |   |
| Assets held for sale                                                                                                                    |   | —                  |    | 469               |   |
|                                                                                                                                    |   |                    |    |              |   |
|   Total other assets                                                                                                          |   | 13,989                  |    | 17,671            |   |
|                                                                                                                                    |   |                    |    |              |   |
| Total assets                                                                                                                            |   | $                       | 116,491 |              | $      | 115,242 |   |
|                                                                                                                                    |   |                    |    |              |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                           |   |                    |    |              |   |
| Current liabilities:                                                                                                                    |   |                    |    |              |   |
| Accounts payable                                                                                                                        |   | $                       | 13,908  |              | $      | 20,096 |   |
| Accrued expenses                                                                                                                        |   | 16,304                  |    | 16,610            |   |
| Current portion of long-term debt                                                                                                       |   | 3,394                   |    | 8,057             |   |
| Income taxes payable                                                                                                                    |   | 793                     |    | 173               |   |
|                                                                                                                                    |   |                    |    |              |   |
|   Total current liabilities                                                                                                   |   | 34,399                  |    | 44,936            |   |
|                                                                                                                                    |   |                    |    |              |   |
| Long-term debt                                                                                                                          |   | 186                     |    | 659               |   |
|                                                                                                                                    |   |                    |    |              |   |
| Deferred taxes                                                                                                                          |   | 7,649                   |    | 801               |   |
|                                                                                                                                    |   |                    |    |              |   |
| Commitments and contingencies (Note 8)                                                                                                  |   |                    |    |              |   |
|                                                                                                                                    |   |                    |    |              |   |
| Stockholders’ equity:                                                                                                              |   |                    |    |              |   |
| Preferred stock, par value $.01 per share;  shares authorized-10,000,000; no shares issued and outstanding                              |   | —                  |    | —            |   |
| Class A common stock, par value $.01 per  share; shares authorized-50,000,000; shares issued and outstanding-11,051,676  and 11,916,288 |   | 110                     |    | 119               |   |
| Class B common stock, par value $.01 per  share; shares authorized-25,000,000; shares issued and outstanding-14,973,148                 |   | 150                     |    | 150               |   |
| Additional paid-in capital                                                                                                              |   | 83,634                  |    | 86,943            |   |
| Deferred compensation costs                                                                                                             |   | (698                    | )       | (873              | )      |
| Other accumulated comprehensive loss                                                                                                    |   | (3,824                  | )       | (4,951            | )      |
| Retained deficit                                                                                                                        |   | (5,115                  | )       | (12,542           | )      |
|                                                                                                                                    |   |                    |    |              |   |
|   Total stockholders’ equity                                                                                             |   | 74,257                  |    | 68,846            |   |
|                                                                                                                                    |   |                    |    |              |   |
| Total liabilities and stockholders’ equity                                                                                         |   | $                       | 116,491 |              | $      | 115,242 |   |

 

See notes to condensed consolidated financialstatements.

 

2

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##### **WEIDER NUTRITIONINTERNATIONAL, INC. AND SUBSIDIARIES**

##### **CONDENSED CONSOLIDATEDSTATEMENTS OF OPERATIONS**

##### **(in thousands, exceptshare data)**

##### **(unaudited)**

 
|                                                             |   | **Three  Months Ended** |   |
|------------------------------------------------------------------|--------|-------------------------|--------|
|                                                             |   | **February  29,  2004** |   | **February  28,  2003** |   |
|                                                             |   |                    |   |   |   |
| Net sales                                                        |   | $                       | 67,485 |   | $ | 57,728 |   |
|                                                             |   |                    |   |   |   |
| Cost of goods sold                                               |   | 41,895                  |   | 36,844 |   |
|                                                             |   |                    |   |   |   |
| Gross profit                                                     |   | 25,590                  |   | 20,884 |   |
|                                                             |   |                    |   |   |   |
| Operating expenses:                                              |   |                    |   |   |   |
| Selling and marketing                                            |   | 12,232                  |   | 11,410 |   |
| General and administrative                                       |   | 8,073                   |   | 6,645 |   |
| Research and development                                         |   | 868                     |   | 1,094 |   |
| Amortization of intangible assets                                |   | 146                     |   | 238 |   |
|                                                             |   |                    |   |   |   |
|   Total operating expenses                             |   | 21,319                  |   | 19,387 |   |
|                                                             |   |                    |   |   |   |
| Income from operations                                           |   | 4,271                   |   | 1,497 |   |
|                                                             |   |                    |   |   |   |
| Other income (expense):                                          |   |                    |   |   |   |
| Interest income                                                  |   | 124                     |   | 13 |   |
| Interest expense                                                 |   | (253                    | )      | (425 | ) |
| Other                                                            |   | 149                     |   | 163 |   |
|                                                             |   |                    |   |   |   |
|   Total other income (expense),  net                   |   | 20                      |   | (249 | ) |
|                                                             |   |                    |   |   |   |
| Income from continuing operations before  income taxes           |   | 4,291                   |   | 1,248 |   |
| Income tax expense                                               |   | 1,655                   |   | 491 |   |
|                                                             |   |                    |   |   |   |
| Net income from continuing operations                            |   | 2,636                   |   | 757 |   |
| Income (loss) from discontinued operations,  net of income taxes |   | (71                     | )      | 51 |   |
|                                                             |   |                    |   |   |   |
| Net income                                                       |   | $                       | 2,565  |   | $ | 808 |   |
|                                                             |   |                    |   |   |   |
| Weighted average shares outstanding:                             |   |                    |   |   |   |
|  Basic                                                      |   | 25,526,424              |   | 26,249,436 |   |
|  Diluted                                                    |   | 26,542,768              |   | 26,276,692 |   |
|                                                             |   |                    |   |   |   |
| Net income per share-basic and diluted:                          |   |                    |   |   |   |
|  Net income from continuing operations                      |   | $                       | 0.10   |   | $ | 0.03 |   |
|  Net income (loss) from discontinued  operations            |   | —                  |   | — |   |
|                                                             |   |                    |   |   |   |
|  Net income                                                 |   | $                       | 0.10   |   | $ | 0.03 |   |
|                                                             |   |                    |   |   |   |
| Comprehensive income                                             |   | $                       | 2,716  |   | $ | 1,078 |   |

 

See notes to condensed consolidated financialstatements.

 

3

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##### **WEIDER NUTRITIONINTERNATIONAL, INC. AND SUBSIDIARIES**

##### **CONDENSED CONSOLIDATEDSTATEMENTS OF OPERATIONS**

##### **(in thousands, exceptshare data)**

##### **(unaudited)**

 
|                                                                            |   | **Nine  Months Ended**  |    |
|---------------------------------------------------------------------------------|--------|-------------------------|---------|
|                                                                            |   | **February  29,  2004** |    | **February  28,  2003** |   |
|                                                                            |   |                    |    |   |   |
| Net sales                                                                       |   | $                       | 191,886 |   | $ | 185,073 |   |
|                                                                            |   |                    |    |   |   |
| Cost of goods sold                                                              |   | 118,915                 |    | 114,206 |   |
|                                                                            |   |                    |    |   |   |
| Gross profit                                                                    |   | 72,971                  |    | 70,867 |   |
|                                                                            |   |                    |    |   |   |
| Operating expenses:                                                             |   |                    |    |   |   |
| Selling and marketing                                                           |   | 40,391                  |    | 32,592 |   |
| General and administrative                                                      |   | 17,705                  |    | 17,833 |   |
| Research and development                                                        |   | 3,044                   |    | 2,934 |   |
| Amortization of intangible assets                                               |   | 429                     |    | 770 |   |
|                                                                            |   |                    |    |   |   |
|   Total operating expenses                                            |   | 61,569                  |    | 54,129 |   |
|                                                                            |   |                    |    |   |   |
| Income from operations                                                          |   | 11,402                  |    | 16,738 |   |
|                                                                            |   |                    |    |   |   |
| Other income (expense):                                                         |   |                    |    |   |   |
| Interest income (Note 5)                                                        |   | 852                     |    | 42 |   |
| Interest expense                                                                |   | (895                    | )       | (2,146 | ) |
| Write-off of financing fees, including OID  costs                               |   | —                  |    | (1,147 | ) |
| Other                                                                           |   | (222                    | )       | 438 |   |
|                                                                            |   |                    |    |   |   |
|   Total other expense, net                                            |   | (265                    | )       | (2,813 | ) |
|                                                                            |   |                    |    |   |   |
| Income from continuing operations before  income taxes                          |   | 11,137                  |    | 13,925 |   |
| Income tax expense                                                              |   | 4,288                   |    | 5,562 |   |
|                                                                            |   |                    |    |   |   |
| Net income from continuing operations                                           |   | 6,849                   |    | 8,363 |   |
| Income (loss) from discontinued operations,  net of income taxes                |   | 578                     |    | (786 | ) |
|                                                                            |   |                    |    |   |   |
| Net income before cumulative effect of  change in accounting principle          |   | 7,427                   |    | 7,577 |   |
|                                                                            |   |                    |    |   |   |
| Cumulative effect of change in accounting  principle, net of income tax benefit |   | —                  |    | (15,392 | ) |
|                                                                            |   |                    |    |   |   |
| Net income (loss)                                                               |   | $                       | 7,427   |   | $ | (7,815 | ) |
|                                                                            |   |                    |    |   |   |
| Weighted average shares outstanding:                                            |   |                    |    |   |   |
|  Basic                                                                     |   | 25,949,587              |    | 26,249,436 |   |
|  Diluted                                                                   |   | 26,821,183              |    | 26,249,436 |   |
|                                                                            |   |                    |    |   |   |
| Net income (loss) per share-basic and  diluted:                                 |   |                    |    |   |   |
| Net income from continuing operations                                           |   | $                       | 0.26    |   | $ | 0.32 |   |
| Net income (loss) from discontinued  operations                                 |   | 0.02                    |    | (0.03 | ) |
|                                                                            |   |                    |    |   |   |
| Net income before cumulative effect of  change in accounting principle          |   | 0.28                    |    | 0.29 |   |
| Cumulative effect of change in accounting  principle                            |   | —                  |    | (0.59 | ) |
|                                                                            |   |                    |    |   |   |
| Net income (loss)                                                               |   | $                       | 0.28    |   | $ | (0.30 | ) |
|                                                                            |   |                    |    |   |   |
| Comprehensive income (loss)                                                     |   | $                       | 8,554   |   | $ | (7,202 | ) |

 

See notes to condensed consolidated financialstatements.

 

4

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**WEIDER NUTRITIONINTERNATIONAL, INC. AND SUBSIDIARIES**

#### **CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

**(dollars inthousands)**

**(unaudited)**

** **
|                                                                                      |   | **Nine  Months Ended**  |   |
|-------------------------------------------------------------------------------------------|--------|-------------------------|--------|
|                                                                                      |   | **February  29,  2004** |   | **February  28,  2003** |   |
| Cash flows from operating activities:                                                     |   |                    |   |   |   |
| Net income (loss)                                                                         |   | $                       | 7,427  |   | $ | (7,815 | ) |
| Adjustments to reconcile net income (loss)  to net cash provided by operating activities: |   |                    |   |   |   |
| Provision for (recovery of) bad debts                                                     |   | (1,243                  | )      | 439 |   |
| Deferred taxes                                                                            |   | 6,192                   |   | (2,151 | ) |
| Depreciation and amortization                                                             |   | 3,764                   |   | 4,653 |   |
| Interest income on settlement of notes  receivable                                        |   | (609                    | )      | — |   |
| Asset impairment                                                                          |   | —                  |   | 23,321 |   |
| Gain on sale of assets held for sale and  property and equipment                          |   | (1,139                  | )      | — |   |
| Amortization/write-off of financing fees,  including original issue discount costs        |   | 251                     |   | 1,775 |   |
| Amortization of deferred compensation costs                                               |   | 226                     |   | 160 |   |
| Changes in operating assets and  liabilities:                                             |   |                    |   |   |   |
| Receivables                                                                               |   | (5,605                  | )      | 13,843 |   |
| Inventories                                                                               |   | (3,210                  | )      | (2,379 | ) |
| Prepaid expenses and other                                                                |   | (106                    | )      | (885 | ) |
| Deposits and other assets                                                                 |   | 1,047                   |   | (588 | ) |
| Accounts payable                                                                          |   | (6,188                  | )      | (4,111 | ) |
| Other current liabilities                                                                 |   | 786                     |   | (2,905 | ) |
|                                                                                      |   |                    |   |   |   |
| Net cash provided by operating activities                                                 |   | 1,593                   |   | 23,357 |   |
|                                                                                      |   |                    |   |   |   |
| Cash flows from investing activities:                                                     |   |                    |   |   |   |
| Purchase of property and equipment                                                        |   | (1,397                  | )      | (1,198 | ) |
| Purchase of intangibles                                                                   |   | —                  |   | (212 | ) |
| Proceeds from disposition of assets held  for sale and property and equipment             |   | 6,875                   |   | 5,400 |   |
| Proceeds from sale of  available-for-sale equity securities                               |   | —                  |   | 1,496 |   |
| Collection of notes receivable                                                            |   | 3                       |   | 140 |   |
| Increase in notes receivable                                                              |   | —                  |   | (701 | ) |
|                                                                                      |   |                    |   |   |   |
| Net cash provided by investing activities                                                 |   | 5,481                   |   | 4,925 |   |
|                                                                                      |   |                    |   |   |   |
| Cash flows from financing activities:                                                     |   |                    |   |   |   |
| Issuance of common stock                                                                  |   | 325                     |   | — |   |
| Tax benefit from stock options exercised                                                  |   | 73                      |   | — |   |
| Net change in revolving line-of-credit                                                    |   | —                  |   | (12,917 | ) |
| Proceeds from debt                                                                        |   | 2,704                   |   | 4,317 |   |
| Payments on debt                                                                          |   | (9,282                  | )      | (19,216 | ) |
|                                                                                      |   |                    |   |   |   |
| Net cash used in financing activities                                                     |   | (6,180                  | )      | (27,816 | ) |
|                                                                                      |   |                    |   |   |   |
| Effect of exchange rate changes on cash                                                   |   | 421                     |   | 339 |   |
|                                                                                      |   |                    |   |   |   |
| Increase in cash and cash equivalents                                                     |   | 1,315                   |   | 805 |   |
| Cash and cash equivalents, beginning of  period                                           |   | 3,463                   |   | 2,412 |   |
|                                                                                      |   |                    |   |   |   |
| Cash and cash equivalents, end of period                                                  |   | $                       | 4,778  |   | $ | 3,217 |   |

 

See notes to condensed consolidated financialstatements.

 

5

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**WEIDERNUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES**

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(inthousands, except share data)**

**(unaudited)**

 

 

**1.****                                      BASISOF PRESENTATION AND OTHER MATTERS**

 

The accompanying unaudited interim condensedconsolidated financial statements (“interim financial statements”) do notinclude all disclosures provided in our annual consolidated financial statements.  These interim financial statements should beread in conjunction with the consolidated financial statements and thefootnotes thereto contained in our Annual Report on Form 10-K for the yearended May 31, 2003 as filed with the Securities and Exchange Commission.  The May 31, 2003 consolidated balance sheetwas derived from audited financial statements, but all disclosures required bygenerally accepted accounting principles are not provided in the accompanyingfootnotes.  We are a majority-owned subsidiaryof Weider Health and Fitness (“WHF”).

 

In ouropinion, the accompanying interim financial statements contain all adjustments(which are of a normal recurring nature) necessary for a fair presentation ofour financial position and results of operations.  Certain prior period amounts have been reclassified to conformwith the current interim period presentation. The results of operations and cash flows for any interim period are notnecessarily indicative of the results of operations and cash flows that we mayachieve for any other interim period or for the entire year.

 

Effective inour fiscal 2004 first quarter, we sold substantially all of the assets of ourHaleko Venice Beach® sports apparel business to Hucke AG, a German apparelcompany, for cumulative net cash proceeds of approximately $6,754.  In accordance with Statement of FinancialAccounting Standards (“SFAS”) No. 144, the operating results for Venice Beach®are reflected as discontinued operations and the associated assets are includedin assets held for sale in the accompanying condensed consolidated financialstatements.  Accordingly, we recognizedafter-tax income from discontinued operations of approximately $578, includingan after-tax gain on disposal of approximately $743.  Fiscal 2004 results from discontinued operations may subsequentlybe impacted by certain lease related and/or other costs, as well as by finalsettlement of net assets sold in the transaction.

 

EffectiveAugust 16, 2002, we issued 640,000 restricted shares of Class A common stock tocertain officers and employees.  Theaggregate value of the restricted shares was approximately $1,038, which we areexpensing on a straight-line basis over the accompanying five-year vestingperiod.  In August 2003, 13,600 of theserestricted shares were cancelled as a result of the voluntary termination ofcertain employees.

 

Effective July26, 2002, we sold substantially all of the assets and certain associatedliabilities relating to our American Body Building® and Science Foods® brands.  The impact of the sale on the fiscal 2003first quarter operating results was not significant.

 

Effective June 1, 2002,we adopted SFAS No. 142, “Goodwill and Other Intangible Assets”, whichestablishes new accounting and reporting standards for goodwill and otherintangible assets.  (See Note 4 toCondensed Consolidated Financial Statements).

 

6

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We disclosethe effect of SFAS No. 123 “Accounting for Stock-Based Compensation”, on aproforma basis and continue to follow Accounting Principles Board (“APB”)Opinion No. 25 (as permitted by SFAS No. 123) as it relates to stock basedcompensation.

 

Proformainformation regarding net income (loss) and net income (loss) per share isrequired by SFAS No. 123, as amended by SFAS No. 148, and has been determinedas if we had accounted for our employee stock options and previously unvestedperformance units under the fair value method of SFAS No. 123.  For the purposes of proforma disclosure, theestimated fair value of the stock options is amortized to expense over theoptions vesting period.  Our proformanet income (loss) and net income (loss) per share were as follows:

 
|                                              |   | **Three  Months Ended** |   | **Nine  Months Ended** |   |
|---------------------------------------------------|--------|-------------------------|--------|------------------------|--------|
|                                              |   | **Feb. 29,  2004**      |   | **Feb. 28,  2003**     |   | **Feb. 29,  2004** |   | **Feb. 28,  2003** |   |
|                                              |   |                    |   |                   |   |   |   |   |   |
| Net income (loss), as reported                    |   | $                       | 2,565  |                   | $      | 808 |   | $ | 7,427 |   | $ | (7,815 | ) |
| Net income (loss), proforma                       |   | 2,482                   |   | 793                    |   | 7,183 |   | (7,862 | ) |
| Basic net income (loss) per share, as  reported   |   | 0.10                    |   | 0.03                   |   | 0.28 |   | (0.30 | ) |
| Diluted net income (loss) per share, as  reported |   | 0.10                    |   | 0.03                   |   | 0.28 |   | (0.30 | ) |
| Basic net income (loss) per share, proforma       |   | 0.10                    |   | 0.03                   |   | 0.28 |   | (0.30 | ) |
| Diluted net income (loss) per share,  proforma    |   | 0.09                    |   | 0.03                   |   | 0.27 |   | (0.30 | ) |
|                                                   |        |                         |        |                        |        |  |  |  |  |  |  |  |  |

 

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

 

Receivables, net, consist of the following:

 
|                                                    |   | **February  29,  2004** |   | **May 31,  2003** |   |
|---------------------------------------------------------|--------|-------------------------|--------|-------------------|--------|
|                                                    |   |                    |   |              |   |
| Trade accounts                                          |   | $                       | 39,045 |              | $      | 35,242 |   |
| Other                                                   |   | 795                     |   | 670               |   |
|                                                    |   |                    |   |              |   |
|                                                    |   | 39,840                  |   | 35,912            |   |
| Less allowance for doubtful accounts and  sales returns |   | (6,469                  | )      | (8,320            | )      |
|                                                    |   |                    |   |              |   |
|  Total                                             |   | $                       | 33,371 |              | $      | 27,592 |   |

 

**3.****                                      INVENTORIES**

** **

Inventories consist of thefollowing:

 
|            |   | **February  29,  2004** |   | **May 31,  2003** |   |
|-----------------|--------|-------------------------|--------|-------------------|--------|
|            |   |                    |   |              |   |
| Raw materials   |   | $                       | 10,114 |              | $      | 8,487 |   |
| Work in process |   | 3,632                   |   | 1,691             |   |
| Finished goods  |   | 17,007                  |   | 17,365            |   |
|            |   |                    |   |              |   |
|  Total     |   | $                       | 30,753 |              | $      | 27,543 |   |

 

7

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**4.****                                     ****INTANGIBLE ASSETS, NET**

 

Intangible assets, net, consist of thefollowing:

 
|                   |   | **February  29, 2004**      |   | **May 31,  2003**      |   |
|------------------------|--------|-----------------------------|--------|------------------------|--------|
|                   |   | **Gross  Carrying  Amount** |   | **Accumul.  Amortiz.** |   | **Net Book  Value** |   | **Gross  Carrying  Amount** |   | **Accumul.  Amortiz.** |   | **Net Book  Value** |   |
|                   |   |                        |   |                   |   |   |   |   |   |   |   |   |   |
| Patents and trademarks |   | $                           | 10,631 |                   | $      | (5,061 | ) | $ | 5,570 |   | $ | 9,743 |   | $ | (4,351 | ) | $ | 5,392 |   |
| Goodwill               |   | 4,346                       |   | —                 |   | 4,346 |   | 4,346 |   | — |   | 4,346 |   |
|                   |   |                        |   |                   |   |   |   |   |   |   |   |   |   |
|                   |   | $                           | 14,977 |                   | $      | (5,061 | ) | $ | 9,916 |   | $ | 14,089 |   | $ | (4,351 | ) | $ | 9,738 |   |

 

Estimatedamortization expense, assuming no changes in our intangible assets, for each ofthe five succeeding fiscal years, beginning with fiscal 2004, is $573 (2004),$427 (2005), $422 (2006), $388 (2007), and $383 (2008).

 

Upon the implementation of SFAS No. 142, wetested goodwill for impairment by comparing the carrying amount, includinggoodwill, for each of our reporting (business) units at June 1, 2002 to theestimated fair value for each of our reporting units.  We assessed the fair value of the reporting units by evaluatingtheir current and future cash flows in comparison to our overall marketcapitalization.  Based on thiscomparison, we concluded that the net book carrying value for two of ourreporting units, Active Nutrition and Haleko, exceeded their respective fairvalues.  For those two reporting units,we then compared the implied fair value of their respective goodwill to theirrespective net book carrying values to determine the asset impairmentamount.  Based on this comparison,effective June 1, 2002, we recognized an impairment loss of $23,321, or anafter-tax charge of $15,392, as a cumulative effect of a change in accountingprinciple.

 

The changes in the carrying amount of goodwill,broken down by business unit, for fiscal 2003 is as follows:

 
|                     |   | **Schiff®  Specialty** |   | **Active  Nutrition** |   | **Haleko** |   | **Total** |   |
|--------------------------|--------|-----------------------------|--------|-----------------------|--------|------------|--------|-----------|--------|
|                     |   |                        |   |                  |   |       |   |      |   |
| Balance at June 1, 2002  |   | $                           | 4,346  |                  | $      | 1,843      |   | $         | 21,478 |   | $ | 27,667 |   |
| Adoption of SFAS No. 142 |   | —                      |   | (1,843                | )      | (21,478    | )      | (23,321   | )      |
|                     |   |                        |   |                  |   |       |   |      |   |
| Balance at May 31, 2003  |   | $                           | 4,346  |                  | $      | —     |   | $         | — |   | $ | 4,346 |   |

 

The carrying amount of goodwill did notchange during the first nine months of fiscal 2004.

 

8

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**5.****                                     ****NOTES RECEIVABLE, NET**

 

Notesreceivable (including accrued interest), net, were $171 and $2,178,respectively, at February 29, 2004 and May 31, 2003.  The original notes receivable are recourse, collateralized bydebtors’ shares of our Class A common stock and repayable beginning in June2002 and ending December 2006.  Certainallowances for, or adjustments to, unrealizable amounts are recognized toadjust the outstanding balances to the underlying collateral value and/or toconsider other factors that may impact the valuation of the notesreceivable.  If shares of our Class Acommon stock are received in lieu of cash payment, a portion of, or the entireamount of outstanding notes receivable, including contractually due interestthereon, is reclassified as treasury stock and/or reflected as a directreduction of capital within stockholders’ equity.

 

In connectionwith collection efforts, we have been pursuing negotiations with the five noteholders who are no longer employed by the company. During our fiscal 2004 firstquarter, we received $68 in cash and acquired and retired 140,434 shares of ourClass A common stock valued at approximately $434 as full payment of principaland interest accrued on notes due from two note holders.  During our fiscal 2004 second quarter, wereceived $31 in cash and acquired and retired 826,175 shares of our Class Acommon stock valued at approximately $3,259 as full payment of principal andinterest accrued on notes due from two additional note holders.  We are continuing to pursue collection ofamounts due from the remaining note holder.

 

The fiscal2004 settlement of outstanding notes receivable resulted in the reduction ofpreviously recognized allowances for unrealizable amounts of $1,069, reflectedas a reduction of general and administrative expense, and recognition ofcontractually due interest income of $675, during the first two quarters offiscal 2004.  Notes receivable balancesare reflected net of aggregate allowances for unrealizable amounts of $78 and$1,304, respectively, at February 29, 2004 and May 31, 2003.

 

**6.****                                     ****OPERATING SEGMENTS**

 

Our operationsare organized into three business units. These business units are the Schiff® Specialty Unit, the ActiveNutrition Unit and the Haleko Unit (our primary European subsidiary).  The business units are managedindependently, each with its own sales and marketing resources, and supportedby product research and development, operations and technical services, andadministrative functions.

 

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We manufactureand market nutritional products, including a full line of specialtysupplements, vitamins and minerals through our Schiff® Specialty Unit.  Schiff® Specialty Unit products are marketedprimarily in the United States through mass-market distribution channels.  We manufacture and market a variety ofsports nutrition, nutritional bar and weight management products through ourActive Nutrition Unit.  The ActiveNutrition Unit also includes certain Schiff® branded products marketed outsidethe United States.  Active NutritionUnit products are marketed domestically and internationally primarily throughmass market and health club and gym distribution channels.  We also manufacture and market nutritionalproducts, including a full line of sports nutrition supplements, together withcertain other nutraceuticals within our Haleko Unit.  Haleko Unit products are marketed primarily in Europe throughmass market and health club and gym distribution channels.

 

Theaccounting policies of these business units are the same as those described inNote 1 to the consolidated financial statements in our Annual Report on Form10-K.  We evaluate the performance ofour business units based on actual and expected operating results of therespective business units.  Certaindomestic assets are not allocated to the Schiff® Specialty and Active NutritionUnits.  Accordingly, asset segmentinformation is provided on a total domestic and non-domestic basis consistentwith the manner in which management evaluates the business.

 

Effective in our fiscal 2004 first quarter, we reclassified the WeiderGermany branded business from our Haleko unit to our Active Nutritionunit.  Accordingly, Weider Germanybranded sales are included in Active’s operating results.  Haleko continues to provide manufacturingservices for the Weider Germany business and therefore also includes the sale(transfer) of these products in its stand-alone private label operatingresults.  These inter-business unitsales from Haleko to Active Nutrition are eliminated in the consolidatedfinancial statements.  We have notrestated the prior year business unit information to reflect this changebecause it was not practicable to do so.

** **

**Segment information for the three months ended February 29,2004 and February 28, 2003 is summarized as follows:**

** **
|                   |   | **Net Sales** |   | **Income  (Loss)  From  Operations** |   | **Interest  Expense** |   |
|------------------------|--------|---------------|--------|--------------------------------------|--------|-----------------------|--------|
| 2004:                  |   |          |   |                                 |   |                  |   |
| Schiff® Specialty |   | $             | 45,062 |                                 | $      | 4,001                 |   | $ | 193 |   |
| Active Nutrition       |   | 8,723         |   | (653                                 | )      | 17                    |   |
| Haleko                 |   | 14,929        |   | 897                                  |   | 73                    |   |
| Eliminations           |   | (1,229        | )      | 26                                   |   | (30                   | )      |
|                   |   | $             | 67,485 |                                 | $      | 4,271                 |   | $ | 253 |   |
|                   |   |          |   |                                 |   |                  |   |
| 2003:                  |   |          |   |                                 |   |                  |   |
| Schiff® Specialty |   | $             | 36,506 |                                 | $      | 2,416                 |   | $ | 253 |   |
| Active Nutrition       |   | 7,474         |   | (954                                 | )      | 24                    |   |
| Haleko                 |   | 14,307        |   | 35                                   |   | 148                   |   |
| Eliminations           |   | (559          | )      | —                               |   | —                |   |
|                   |   | $             | 57,728 |                                 | $      | 1,497                 |   | $ | 425 |   |

 

10

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**Segment information for the nine months ended February 29,2004 and February 28, 2003 is summarized as follows:**

** **
|                   |   | **Net Sales** |    | **Income  (Loss)  From  Operations** |   | **Interest  Expense** |   |
|------------------------|--------|---------------|---------|--------------------------------------|--------|-----------------------|--------|
| 2004:                  |   |          |    |                                 |   |                  |   |
| Schiff® Specialty |   | $             | 119,987 |                                 | $      | 10,236                |   | $ | 595 |   |
| Active Nutrition       |   | 27,901        |    | (876                                 | )      | 58                    |   |
| Haleko                 |   | 47,958        |    | 1,966                                |   | 329                   |   |
| Eliminations           |   | (3,960        | )       | 76                                   |   | (87                   | )      |
|                   |   | $             | 191,886 |                                 | $      | 11,402                |   | $ | 895 |   |
|                   |   |          |    |                                 |   |                  |   |
| 2003:                  |   |          |    |                                 |   |                  |   |
| Schiff® Specialty |   | $             | 112,284 |                                 | $      | 15,865                |   | $ | 1,520 |   |
| Active Nutrition       |   | 26,932        |    | 306                                  |   | 171                   |   |
| Haleko                 |   | 47,912        |    | 567                                  |   | 455                   |   |
| Eliminations           |   | (2,055        | )       | —                               |   | —                |   |
|                   |   | $             | 185,073 |                                 | $      | 16,738                |   | $ | 2,146 |   |

** **

Reconciliationof total assets for domestic and international operations is as follows:

 
|                       |   | **February  29,  2004** |    | **May 31,  2003** |   |
|----------------------------|--------|-------------------------|---------|-------------------|--------|
| Total domestic assets      |   | $                       | 129,284 |              | $      | 128,420 |   |
| Total international assets |   | 47,548                  |    | 49,101            |   |
| Eliminations               |   | (60,341                 | )       | (62,279           | )      |
| Total                      |   | $                       | 116,491 |              | $      | 115,242 |   |

 

Capitalexpenditures for domestic and international operations were $475 and $922,respectively, for the nine months ended February 29, 2004, and $769 and $429,respectively, for the nine months ended February 28, 2003.

 

**7.****                                     ****SALES TO MAJOR CUSTOMERS**

 

Our two largest customers combined accounted for approximately 52% and50%, respectively, of net sales for the nine months ended February 29, 2004 andFebruary 28, 2003.  At February 29,2004, and May 31, 2003, amounts due from these customers representedapproximately 41% and 39%, respectively, of total trade accounts receivable.

 

**8.****                                     ****COMMITMENTS ANDCONTINGENCIES**

 

In October2003, we were named as a defendant in *Rexall v. Weider Nutrition International, Inc. andLeiner Health Products, Inc.*filed in the United States DistrictCourt in the Western District of Wisconsin. The lawsuit alleges that certain of the defendant’s joint care productsinfringe upon a Rexall patent relating to the percentage of excipientscontained in a tablet.  We disputed theallegations and opposed the lawsuit.  InMarch 2004, the plaintiff dismissed their claims against us.  We have not yet resolved our counterclaimsin the matter.

 

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We arecurrently named as a defendant in four lawsuits alleging that consumption ofcertain products containing ephedra that we formerly manufactured and soldcaused injuries and damages to certain individuals.  We dispute the allegations and are opposing the lawsuits.  Our insurance carriers have assumed thedefense of three of the matters.

 

We arecurrently named as a defendant, along with numerous other dietary supplementcompanies, in purported class actions in certain state courts alleging that thedefendants sold androstenedione and other purportedly similar products inviolation of certain statutes and utilized false and misleading claims andadvertising.  We dispute the allegationsand are opposing the lawsuits.

 

From time totime, we are involved in other claims, legal actions and governmentalproceedings that arise from our business operations. Although ultimateliability cannot be determined at the present time, we believe that liabilityresulting from these matters, if any, after taking into consideration ourinsurance coverage, will not have a material adverse effect on our financialstatements.

 

**9.****                                     ****RECENTLY ISSUEDACCOUNTING STANDARDS**

 

InJune 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS No.146, “Accounting for Costs Associated With Exit or Disposal Activities”, whichrequires that costs associated with an exit or disposal activity be recognizedwhen the liability is incurred and nullifies EITF No. 94-3.  SFAS No. 146 is effective for any exit ordisposal activities occurring after December 31, 2002. The requirements of SFASNo. 146 were applied in the accounting treatment for the disposition of VeniceBeach® assets.

 

In November2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting andDisclosure Requirements for Guarantees, Including Indirect Guarantees ofIndebtedness to Others” (“FIN No. 45”), which addresses the disclosure to bemade by a guarantor in its interim and annual financial statements about itsobligations under guarantees.  FIN No.45 also requires the guarantor to recognize a liability for the non-contingentcomponent of the guarantee, which is the obligation to stand ready to performin the event that specified triggering events or conditions occur.  The recognition and measurement provisionsof FIN No. 45 are effective for all guarantees entered into or modified afterDecember 31, 2002.  We have not enteredinto any such guarantees and therefore the adoption of this standard did notimpact our consolidated financial statements.

 

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In December2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation –Transition and Disclosure – an amendment of SFAS No. 123”. SFAS No. 148 amendsSFAS No. 123, “Accounting for Stock-Based Compensation”, to require disclosurein the summary of significant accounting policies of the effects of an entity’saccounting policy with respect to stock-based employee compensation on reportednet income and earnings per share in annual and interim financialstatements.  We have adopted thedisclosure provisions of SFAS No. 148.

 

In January2003, the FASB issued Interpretation No. 46, “Consolidation of VariableInterest Entities”, (“FIN No. 46”) an interpretation of ARB No. 51.  FIN No. 46 addresses consolidation bybusiness enterprises of variable interest entities.  FIN No. 46 applies immediately to variable interest entitiescreated after January 31, 2003 and to variable interest entities in which anenterprise obtains an interest after that date.  FIN No. 46 applies in the first year or interim period endingafter December 15, 2003 to variable interest entities in which an enterpriseholds a variable interest that it acquired before February 1, 2003.  We do not have an interest in any variableinterest entity and therefore the adoption of FIN No. 46 did not impact ourconsolidated financial statements.

 

In April 2003,the FASB issued SFAS No. 149, “Amendment of Statement 133 on DerivativeInstruments and Hedging Activities”, which amends and clarifies accounting forderivative instruments, including certain derivative instruments embedded inother contracts, and for hedging activities under SFAS No. 133.  SFAS No. 149 is effective for contractsentered into or modified after June 30, 2003 and for hedging relationshipsdesignated after June 30, 2003.  Theadoption of SFAS No. 149 did not have an impact on our consolidated financialstatements.

 

In May 2003,the FASB issued SFAS No. 150, “Accounting for Certain Financial Instrumentswith Characteristics of both Liability and Equity”, which establishes standardsfor how an issuer classifies and measures certain financial instruments withcharacteristics of both liability and equity in its statement of financialposition.  SFAS No. 150 is effective fornew or modified financial instruments beginning June 1, 2003, and for existinginstruments beginning August 1, 2003. The adoption of SFAS No. 150 did not have an impact on our consolidatedfinancial statements.

 

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**ITEM2.          MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

The following discussion and analysis should beread in conjunction with the consolidated financial statements, including thenotes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q. Wedisclaim any obligation to update any forward-looking statements whether as aresult of new information, future events or otherwise.

 

**General**

 

Weider Nutrition International, Inc. develops, manufactures, markets,distributes and sells branded and private label vitamins, nutritionalsupplements and sports nutrition products in the United States and throughoutthe world. We offer a broad range of capsules and tablets, powdered drinkmixes, ready-to-drink beverages and nutrition bars consisting of approximately800 stock keeping units (“SKUs”).  Ourportfolio of brands, including Schiff®, Weider®, Tiger’s Milk®, Multipower® andMultaben, are primarily marketed through mass market, health food store andhealth club and gym distribution channels. We market our branded nutritional supplement products, both domesticallyand internationally, in five principal categories: specialty supplements;vitamins and minerals; sports nutrition; weight management; and nutrition bars.

 

Effective in our fiscal 2004 first quarter, we sold substantially allof the assets relating to Haleko’s Germany-based Venice Beach® sports apparelbrand.  The transaction included thesale of Venice Beach® receivables, inventories, intellectual property andcertain fixed assets and the assumption by the purchaser of approximately 47Venice Beach® employees.  The cumulativenet cash proceeds from the sale were approximately $6.8 million.  In accordance with SFAS No. 144, operatingresults for Venice Beach® are reflected as discontinued operations for allperiods presented.  Fiscal 2004 resultsfrom discontinued operations may subsequently be impacted by certain leaserelated and/or other costs, as well as by final settlement of net assets soldin the transaction.

 

Effective in our fiscal 2004 first quarter, we reclassified the WeiderGermany branded business from our Haleko unit to our Active Nutritionunit.  Accordingly, Weider Germanybranded sales are included in Active’s operating results.  Haleko continues to provide manufacturingservices for the Weider Germany business and therefore also includes the sale(transfer) of these products in its stand-alone private label operatingresults.  These inter-business unitsales from Haleko to Active Nutrition are eliminated in the consolidatedfinancial statements.  We have notrestated the prior year business unit information to reflect this changebecause it was not practicable to do so.

 

During the first nine months of fiscal 2004, we entered into settlementagreements with four former employees relating to certain outstanding notes dueto us, including interest accrued thereon. As a result of the respective settlement agreements, we received anaggregate of $99,000 in cash, acquired and retired a total of 966,609 shares ofour Class A common stock, reversed (recovered) approximately $1.1 million ofpreviously recognized allowances for unrealizable amounts and recognizedapproximately $0.7 million of contractually due interest income.

 

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For fiscal 2004, our priorities include initiatives to defend ourSchiff® Move Free® business against competition, including private label, andultimately to increase our market share in the joint care productcategory.  Accordingly, we expect tocontinue implementation of these initiatives for our Schiff® Move Free®business during the fiscal 2004 fourth quarter and into fiscal 2005.  While the focus of these considerations isto improve future profitability, no assurance can be given that our decisionsrelating to these initiatives will not adversely affect our results ofoperations or financial condition.

 

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

 

**Results of Operations(unaudited)**

*ThreeMonths Ended February 29, 2004 Compared to Three Months*

*EndedFebruary 28, 2003*

 

The following tables show comparative resultsfor continuing operations, by business unit, for the three months endedFebruary 29, 2004 and February 28, 2003. Certain indirect costs, including primarily general and administrativeand research and development expenses, are charged to the business units basedon various allocation methodologies (in thousands).

 
|                                 |   | **Schiff®  Specialty** |   | **Active  Nutrition** |   | **Haleko** |   | **Other  (1)** |   | **Total** |   |
|--------------------------------------|--------|-----------------------------|--------|-----------------------|--------|------------|--------|----------------|--------|-----------|--------|
| 2004:                                |   |                        |   |                  |   |       |   |           |   |      |   |
| Net sales                            |   | $                           | 45,062 |                  | $      | 8,723      |   | $              | 14,929 |      | $      | (1,229 | ) | $ | 67,485 |   |
| Cost of goods sold                   |   | 28,409                      |   | 5,673                 |   | 9,042      |   | (1,229         | )      | 41,895    |   |
| Gross profit                         |   | 16,653                      |   | 3,050                 |   | 5,887      |   | —         |   | 25,590    |   |
| Operating expenses:                  |   |                        |   |                  |   |       |   |           |   |      |   |
| Selling and marketing                |   | 5,811                       |   | 2,885                 |   | 3,536      |   | —         |   | 12,232    |   |
| General and administrative           |   | 6,273                       |   | 609                   |   | 1,191      |   | —         |   | 8,073     |   |
| Research and development             |   | 546                         |   | 140                   |   | 182        |   | —         |   | 868       |   |
| Amortization of intangible assets    |   | 22                          |   | 69                    |   | 81         |   | (26            | )      | 146       |   |
|   Total operating expenses |   | 12,652                      |   | 3,703                 |   | 4,990      |   | (26            | )      | 21,319    |   |
|                                 |   |                        |   |                  |   |       |   |           |   |      |   |
| Income (loss) from operations        |   | $                           | 4,001  |                  | $      | (653       | )      | $              | 897    |      | $      | 26 |   | $ | 4,271 |   |
|                                 |   |                        |   |                  |   |       |   |           |   |      |   |
| 2003:                                |   |                        |   |                  |   |       |   |           |   |      |   |
| Net sales                            |   | $                           | 36,506 |                  | $      | 7,474      |   | $              | 14,307 |      | $      | (559 | ) | $ | 57,728 |   |
| Cost of goods sold                   |   | 24,123                      |   | 4,745                 |   | 8,535      |   | (559           | )      | 36,844    |   |
| Gross profit                         |   | 12,383                      |   | 2,729                 |   | 5,772      |   | —         |   | 20,884    |   |
| Operating expenses:                  |   |                        |   |                  |   |       |   |           |   |      |   |
| Selling and marketing                |   | 5,162                       |   | 2,691                 |   | 3,557      |   | —         |   | 11,410    |   |
| General and administrative           |   | 3,906                       |   | 765                   |   | 1,974      |   | —         |   | 6,645     |   |
| Research and development             |   | 811                         |   | 148                   |   | 135        |   | —         |   | 1,094     |   |
| Amortization of intangible assets    |   | 88                          |   | 79                    |   | 71         |   | —         |   | 238       |   |
|   Total operating expenses |   | 9,697                       |   | 3,683                 |   | 5,737      |   | —         |   | 19,387    |   |
|                                 |   |                        |   |                  |   |       |   |           |   |      |   |
| Income (loss) from operations        |   | $                           | 2,416  |                  | $      | (954       | )      | $              | 35     |      | $      | — |   | $ | 1,497 |   |

 

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

 

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**NetSales.**  Net sales increasedapproximately 16.9% to $67.5 million for the fiscal 2004 third quarter, from$57.7 million for the fiscal 2003 third quarter.  Overall, the increase in net sales was primarily attributable toan increase in Schiff® Specialty sales and the positive impact of foreigncurrency exchange rates.

 

Schiff® Specialty net sales increasedapproximately 23.4% to $45.1 million for the fiscal 2004 third quarter, from$36.5 million for the fiscal 2003 third quarter. The increase was primarilyattributable to Schiff® Move Free® results, which were $19.2 million and $14.7million, respectively, for the fiscal 2004 and 2003 third quarters, anapproximate $2.8 million increase in quarter over quarter private label salesvolume, and an increase in other branded joint category sales.

 

We began implementing our Schiff® Grow MoveFree® initiative during the fiscal 2003 fourth quarter.  The initiative includes incremental sellingand marketing support intended to both defend our Move Free® business againstcompetition, including private label, and ultimately to increase our marketshare in the joint care product category. We believe our overall fiscal 2004 third quarter Move Free® and otherbranded joint category sales results benefited from the incremental investment,and are growing in certain domestic distribution channels.  We believe our fiscal 2004 fourth quarterMove Free® net sales will also reflect an increase as compared to the prioryear quarter, although at a lower growth rate than the fiscal 2004 thirdquarter.

 

Active Nutrition net sales increasedapproximately 16.7% to $8.7 million for the fiscal 2004 third quarter, from$7.5 million for the fiscal 2003 third quarter.  The increase was primarily attributable to an increase ininternational sales due to the reclassification/inclusion of $2.0 million inWeider Germany branded sales (a portion of which is also included in Halekoprivate label sales before inter-business unit eliminations) and the positive impactof foreign currency exchange rates. This increase was partially offset by a reduction in domestic Weiderbranded sales due to challenges in obtaining distribution for new products andmaintaining distribution for current products. Prior to fiscal 2004, Weider Germany branded sales were included only inHaleko’s operating results.

 

Haleko net sales,including the significant positive impact of foreign currency exchange rates,increased approximately 4.3% to $14.9 million for the fiscal 2004 third quarter,from $14.3 million for the fiscal 2003 third quarter.  Excluding foreign currency exchange rates, net sales decreased byapproximately 13.1%, primarily due to competitive pressures and economicconditions.  Economic conditions inGermany continue to decline and may negatively impact operating results in ourHaleko business unit for the foreseeable future.

 

**GrossProfit. **Gross profitincreased approximately 22.5% to $25.6 million for the fiscal 2004 thirdquarter, from $20.9 million for the fiscal 2003 third quarter.  The increase primarily resulted from highermargins in our Schiff® Specialty unit. Gross profit, as a percentage of net sales, was 37.9% for the fiscal2004 third quarter, compared to 36.2% for the fiscal 2003 third quarter.  Gross profit percentage increased in ourSchiff® Specialty unit and decreased moderately in our Active Nutrition andHaleko business units.

 

Schiff® Specialty gross profit increasedapproximately 34.5% to $16.7 million for the fiscal 2004 third quarter, from$12.4 million for the fiscal 2003 third quarter.  Gross profit, as a percentage of net sales, was 37.0% for thefiscal 2004 third quarter, compared to 33.9% for the fiscal 2003 thirdquarter.  The percentage increaseresulted primarily from an increase in higher margin Schiff® Move Free® andother joint product sales, which more than offset the impact of reduced marginson the increase in private label sales volumes.  Reductions in sales returns and

 

16

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inventoryrelated charges, partially offset by increased sales incentives due toincremental promotional spending, also contributed to the increase in grossprofit percentage.

 

Active Nutrition gross profit increasedapproximately 11.8% to $3.1 million for the fiscal 2004 third quarter, from$2.7 million for the fiscal 2003 third quarter, primarily resulting from theimpact of foreign currency exchange rates. Gross profit, as a percentage of net sales, was 35.0% for the fiscal 2004third quarter, compared to 36.5% for the fiscal 2003 third quarter.  The decrease was primarily attributable tothe inclusion of lower margin Weider Germany sales.

 

Haleko gross profit was relatively constant forthe fiscal 2004 third quarter, compared to the fiscal 2003 third quarter.  Gross profit, as a percentage of net sales,was 39.4% for the fiscal 2004 third quarter, compared to 40.3% for the fiscal2003 third quarter.  The modestpercentage decrease was primarily attributable to an increase in lower marginprivate label sales.

 

**OperatingExpenses. **Operatingexpenses increased approximately 10.0% to $21.3 million for the fiscal 2004third quarter, from $19.4 million for the fiscal 2003 third quarter.  The overall increase resulted primarily froman increase in general and administrative expenses and increases in selling andmarketing expenses due to higher sales volumes and continuing support for ourbrand building initiatives.

 

Selling and marketing expenses, including sales,marketing, advertising, freight and other costs, increased to approximately$12.2 million for the fiscal 2004 third quarter, from $11.4 million for thefiscal 2003 third quarter.  The increasein selling and marketing expenses resulted primarily from incremental marketingcosts associated with our long-term Move Free® strategy and related brandbuilding initiatives.

 

General and administrative expenses increased toapproximately $8.1 million for the fiscal 2004 third quarter, from $6.6 millionfor the fiscal 2003 third quarter, primarily resulting from the settlement of,and fees associated with, certain domestic legal matters.  Aggregate legal related costs increasedapproximately $2.5 million for the fiscal 2004 third quarter, as compared tothe fiscal 2003 third quarter.  Theincrease was partially offset by a decrease in software license fees andpersonnel costs in our Haleko business unit.

 

Research and development costs decreased toapproximately $0.9 million for the fiscal 2004 third quarter, from $1.1 millionfor the fiscal 2003 third quarter, primarily resulting from reductions incertain new product development costs and consulting fees.

 

**OtherIncome/Expense. **Otherincome/expense, net, was negligible for the fiscal 2004 third quarter, comparedto $0.2 million expense for the fiscal 2003 third quarter.  Interest income increased as a result ofcollection of amounts related to WHF’s guarantee of a certain ex-officer’sobligations to us.  Interest expensedecreased as a result of lower aggregate indebtedness.

 

**Provisionfor Income Taxes.**Provision for income taxes was $1.7million for the fiscal 2004 third quarter, compared to $0.5 million for thefiscal 2003 third quarter.  The changeresulted primarily from an increase in pre-tax income, partially offset by amodest reduction in our effective tax rate.

 

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**Results of Operations(unaudited)**

*NineMonths Ended February 29, 2004 Compared to Nine Months*

*EndedFebruary 28, 2003*

 

The following tables show comparative resultsfor continuing operations, by business unit, for the nine months ended February29, 2004 and February 28, 2003.  Certainindirect costs, including primarily general and administrative and research anddevelopment expenses, are charged to the business units based on variousallocation methodologies (in thousands).

 
|                              |   | **Schiff®  Specialty** |    | **Active  Nutrition** |   | **Haleko** |   | **Other  (1)** |   | **Total** |   |
|-----------------------------------|--------|-----------------------------|---------|-----------------------|--------|------------|--------|----------------|--------|-----------|--------|
| 2004:                             |   |                        |    |                  |   |       |   |           |   |      |   |
| Net sales                         |   | $                           | 119,987 |                  | $      | 27,901     |   | $              | 47,958 |      | $      | (3,960 | ) | $ | 191,886 |   |
| Cost of goods sold                |   | 76,875                      |    | 16,727                |   | 29,273     |   | (3,960         | )      | 118,915   |   |
| Gross profit                      |   | 43,112                      |    | 11,174                |   | 18,685     |   | —         |   | 72,971    |   |
| Operating expenses:               |   |                        |    |                  |   |       |   |           |   |      |   |
| Selling and marketing             |   | 19,178                      |    | 9,015                 |   | 12,198     |   | —         |   | 40,391    |   |
| General and administrative        |   | 11,605                      |    | 2,370                 |   | 3,730      |   | —         |   | 17,705    |   |
| Research and development          |   | 2,029                       |    | 458                   |   | 557        |   | —         |   | 3,044     |   |
| Amortization of intangible assets |   | 64                          |    | 207                   |   | 234        |   | (76            | )      | 429       |   |
| Total operating expenses          |   | 32,876                      |    | 12,050                |   | 16,719     |   | (76            | )      | 61,569    |   |
|                              |   |                        |    |                  |   |       |   |           |   |      |   |
| Income (loss) from operations     |   | $                           | 10,236  |                  | $      | (876       | )      | $              | 1,966  |      | $      | 76 |   | $ | 11,402 |   |
|                              |   |                        |    |                  |   |       |   |           |   |      |   |
| 2003:                             |   |                        |    |                  |   |       |   |           |   |      |   |
| Net sales                         |   | $                           | 112,284 |                  | $      | 26,932     |   | $              | 47,912 |      | $      | (2,055 | ) | $ | 185,073 |   |
| Cost of goods sold                |   | 70,448                      |    | 15,905                |   | 29,908     |   | (2,055         | )      | 114,206   |   |
| Gross profit                      |   | 41,836                      |    | 11,027                |   | 18,004     |   | —         |   | 70,867    |   |
| Operating expenses:               |   |                        |    |                  |   |       |   |           |   |      |   |
| Selling and marketing             |   | 13,834                      |    | 7,577                 |   | 11,181     |   | —         |   | 32,592    |   |
| General and administrative        |   | 9,784                       |    | 2,432                 |   | 5,617      |   | —         |   | 17,833    |   |
| Research and development          |   | 2,098                       |    | 400                   |   | 436        |   | —         |   | 2,934     |   |
| Amortization of intangible assets |   | 255                         |    | 312                   |   | 203        |   | —         |   | 770       |   |
| Total operating expenses          |   | 25,971                      |    | 10,721                |   | 17,437     |   | —         |   | 54,129    |   |
|                              |   |                        |    |                  |   |       |   |           |   |      |   |
| Income from operations            |   | $                           | 15,865  |                  | $      | 306        |   | $              | 567    |      | $      | — |   | $ | 16,738 |   |

 

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

 

**NetSales.**  Net sales increasedapproximately 3.7% to $191.9 million for the nine months ended February 29,2004, from $185.1 million for the nine months ended February 28, 2003.  Overall, the increase in net sales wasprimarily attributable to an increase in branded sales in our Schiff® Specialtybusiness unit and the positive impact of foreign currency exchange rates,partially offset by a reduction in sales volume in our Haleko unit and thefiscal 2003 first quarter sale of our American Body Building® and ScienceFoods® brands.  Fiscal 2003 net sales ofAmerican Body Building® and Science Foods® branded products, prior todivestiture, were $3.1 million.

 

Schiff® Specialty net sales increasedapproximately 6.9% to $120.0 million for the nine months ended February 29,2004, from $112.3 million for the nine months ended February 28, 2003. Theincrease primarily resulted from increases in Schiff® Move Free® and otherjoint product sales.  Net sales ofSchiff® Move Free® were $50.1 million for the nine months ended February 29,2004, compared to $44.9 million for the nine months ended February 28,2003.  We

 

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believeour fiscal 2004 Move Free® and other branded joint category sales resultsbenefited from our Schiff® Grow Move Free® initiative.

 

Active Nutrition net sales increasedapproximately 3.6% to $27.9 million for the nine months ended February 29,2004, from $26.9 million for nine months ended February 28, 2003.  The increase was primarily attributable tothe reclassification/inclusion of $5.6 million in Weider Germany branded sales(a portion of which is also included in Haleko private label sales beforeinter-business unit eliminations), partially offset by the sale of our AmericanBody Building® and Science Foods® brands and a decrease in domestic Weiderbranded sales.  Prior to fiscal 2004,Weider Germany branded sales were included only in Haleko’s operating results.

 

Haleko net sales remained relatively constant at approximately $47.9million for the nine months ended February 29, 2004 and February 28, 2003.  A decline in primarily branded Multabensales and private label sales volume was offset by the positive impact offoreign currency exchange rates.

 

**GrossProfit. **Gross profitincreased approximately 3.0% to $73.0 million for the nine months endedFebruary 29, 2004, from $70.9 million for the nine months ended February 28,2003.  The increase in gross profitprimarily resulted from an increase in branded Schiff® Specialty sales,partially offset by reduced margins on private label revenues.  Gross profit, as a percentage of net sales,was 38.0% for the nine months ended February 29, 2004, compared to 38.3% forthe nine months ended February 28, 2003.

 

Schiff® Specialty gross profit increasedapproximately 3.1% to $43.1 million for the nine months ended February 29,2004, from $41.8 million for the nine months ended February 28, 2003.  Gross profit, as a percentage of net sales,was 35.9% for the nine months ended February 29, 2004, compared to 37.3% forthe nine months ended February 28, 2003. The percentage decrease resulted primarily from reduced margins onprivate label sales volumes due to competitive pricing pressures and increasedsales incentives due to incremental promotional spending, partially offset byan increase in higher margin Move Free® and other joint product sales.

 

Active Nutrition gross profit remainedrelatively constant at $11.2 million for the nine months ended February 29,2004, compared to $11.0 million for the nine months ended February 28,2003.  Gross profit, as a percentage ofnet sales, remained relatively constant at 40.0% and 40.9%, respectively, forthe nine months ended February 29, 2004 and February 28, 2003.  The inclusion of lower margin Weider Germanysales primarily resulted in the modest percentage decrease.

 

Haleko gross profit increased approximately 3.8%to $18.7 million for the nine months ended February 29, 2004, from $18.0million for the nine months ended February 28, 2003.  Gross profit, as a percentage of net sales, was 39.0% for the ninemonths ended February 29, 2004, compared to 37.6% for the nine months endedFebruary 28, 2003.  The increase wasprimarily attributable to higher margins on our private label business, and adecrease in inventory related charges.

 

**OperatingExpenses.**  Operating expensesincreased approximately 13.7% to $61.6 million for the nine months endingFebruary 29, 2004, from $54.1 million for the nine months ending February 28,2003.  The overall increase wasprimarily attributable to increases in selling and marketing costs in supportof our brand building initiatives for all business units, particularly relatingto our Schiff® Move Free® joint product category.

 

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Selling and marketing expenses, including sales,marketing, advertising, freight and other costs, were $40.4 million for thenine months ended February 29, 2004, compared to $32.6 million for the ninemonths ended February 28, 2003.  Theincrease in selling and marketing expenses resulted primarily from incrementaltransition and marketing costs associated with our long-term Move Free®strategy, and increased selling and marketing in support of new products in ourSchiff® Specialty and Active Nutrition business units.  Incremental marketing costs for our MoveFree® business includes an increase in national advertising costs ofapproximately $3.3 million.

 

General and administrative expenses remainedrelatively constant at $17.7 million and $17.8 million, respectively, for thenine months ended February 29, 2004 and February 28, 2003. Increases inaggregate legal related costs of approximately $2.8 million were offset by thefiscal 2004 recovery of approximately $1.1 million of previously recognizednotes receivable valuation allowances and reduced Haleko systems and personnelrelated costs.

 

Research and development costs remainedrelatively constant at $3.0 million and $2.9 million, respectively, for thenine months ended February 29, 2004 and February 28, 2003.

 

**OtherExpense. **Otherexpense, net, was $0.3 million for the nine months ended February 29, 2004,compared to $2.8 million for the nine months ended February 28, 2003.  During the first nine months of fiscal 2004,we settled certain outstanding notes receivable primarily through reacquiring966,609 shares of our outstanding Class A common stock.  As a result of these settlementtransactions, we recognized approximately $.7 million in previouslyunrecognized interest income on the notes receivable.  Interest income also increased as a result of collection ofamounts related to WHF’s guarantee of a certain ex-officer’s obligations tous.  We recognized less interest expensedue to a reduction in total indebtedness for the nine months ended February 29,2004.  In November 2002, we paid off$5.0 million in remaining subordinated debt with borrowings available from oursenior bank credit facility, which resulted in an approximate $1.1 millionwrite-off of previously capitalized financing fees.  We recognized approximately $0.5 million in income on the sale ofcertain held-for-sale equity securities during the nine months ended February28, 2003.

 

**Provision for Income Taxes.**Provisionfor income taxes was $4.3 million for the nine months ended February 29, 2004,compared to $5.6 million for the nine months ended February 28, 2003.  The change resulted primarily from thedecrease in pre-tax earnings, and a modest reduction in our effective tax ratedue to a decrease in recognized valuation allowances.

 

**Liquidityand Capital Resources**

 

Workingcapital increased $16.5 million to approximately $42.5 million at February 29,2004, from $26.0 million at May 31, 2003. The increase in working capital resulted primarily from an increase inreceivables and inventories, partially offset by the sale of our Venice Beach®sports apparel business, coupled with decreases in accounts payable and currentportion of long-term debt.  The increasein receivables resulted primarily from higher sales in the fiscal 2004 thirdquarter, as compared to the fiscal 2003 fourth quarter.  The increase in inventories was primarilydue to increased promotional activity and an overall increase in joint categoryinventory items primarily in support of our Schiff® Grow Move Free® initiativeand recent increases in branded and private label joint product salesvolumes.  The decrease in accountspayable resulted primarily from certain adjustments in payment terms withcertain suppliers, including consideration of available terms discounts.

 

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We are party to a senior credit facility (the“Credit Facility”) with Bankers Trust Company, effective June 30, 2000, onbehalf of our domestic subsidiaries. The Credit Facility, as subsequently amended, is comprised of a $45.0million revolving loan.  Under therevolving loan, we may 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 or65% of the eligible inventory.  TheCredit Facility contains customary terms and conditions, including, amongothers, financial covenants regarding minimum cash flows and limitations onindebtedness and our ability to pay dividends under certain circumstances.  Our obligations under the Credit Facilityare secured by a first priority lien on all owned or acquired tangible andintangible assets of our domestic subsidiaries.  The Credit Facility, which expires in March 2005, is being usedto fund our normal working capital and capital expenditure requirements.  At February 29, 2004, available revolving loanfunds were approximately $25.2 million.

 

Our domestic operations were also supported by asubordinated loan (the “Subordinated Loan”) obtained in conjunction with theCredit Facility.  Effective May 31,2002, we used funds available under our revolving loan to pay down $5.0 millionof the Subordinated Loan.  EffectiveNovember 27, 2002, we used funds available under our revolving loan to pay-offthe remaining $5.0 million of the Subordinated Loan.

 

Our European working capital needs (primarilyour Haleko business unit) are supported by a Germany-based secured creditfacility (the “Haleko Facility”) that is subject to annual renewal inJune.  Our obligations under the HalekoFacility are secured by a first priority lien on substantially all Halekotangible and intangible assets.  DuringJune 2003, we renewed the Haleko Facility with Deutsche Bank AG in theapproximate amount of $12.4 million (at recent exchange rate).  Net proceeds from the sale of our VeniceBeach® sports apparel business were used to repay a portion of our outstandingindebtedness under the Haleko Facility. At

February29, 2004, amounts outstanding under the Haleko facility were approximately $1.0million and available revolving loan funds were approximately $11.2million.  We expect to renew the HalekoFacility again in June 2004.

 

We believe that our cash, cash flows fromoperations and the financing sources discussed above will be sufficient to meetour normal cash operating requirements during the next twelve months.  However, we continue to review opportunitiesto acquire or invest in companies, product rights and other investments thatare compatible with our existing business. We could use cash and financing sources discussed herein, or financingsources that subsequently become available, to fund additional acquisitions orinvestments.  In addition, we mayconsider issuing additional debt or equity securities in the future to fundpotential acquisitions or growth, or to refinance existing debt.  If a material acquisition or investment iscompleted, our operating results and financial condition could changematerially in future periods.  However,no assurance can be given that additional funds will be available onsatisfactory terms, or at all, to fund such activities.

 

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A summary of our outstanding long-term debt and operating leasecontractual obligations at February 29, 2004 is as follows (in thousands):

 
| **Contractual  Cash Obligations** |   | **Total  Amounts  Committed** |   | **Less than  1 Year** |   | **1-3 Years** |   | **4-5 Years** |   | **After  5 Years** |   |
|-----------------------------------|--------|-------------------------------|--------|-----------------------|--------|---------------|--------|---------------|--------|--------------------|--------|
|                              |   |                          |   |                  |   |          |   |          |   |               |   |
| Long-term debt                    |   | $                             | 3,580  |                  | $      | 3,394         |   | $             | 186    |               | $      | — |   | $ | — |   |
| Operating leases                  |   | 24,981                        |   | 3,708                 |   | 5,842         |   | 5,806         |   | 9,625              |   |
|                              |   |                          |   |                  |   |          |   |          |   |               |   |
| Total obligations                 |   | $                             | 28,561 |                  | $      | 7,102         |   | $             | 6,028  |               | $      | 5,806 |   | $ | 9,625 |   |

 

**CriticalAccounting Policies and Estimates**

 

Inpreparing our consolidated financial statements, we make assumptions, estimatesand judgments that affect the amounts reported.  We periodically evaluate our estimates and judgments related tovaluation of inventories, allowances for doubtful accounts, notes receivableand sales returns, valuation of deferred tax assets and recoverability oflong-lived assets.  Note 1 to theconsolidated financial statements contained in our Annual Report on Form 10-Kfor the year ended May 31, 2003, filed with the Securities Exchange Commission,describes the accounting policies governing each of these matters.  Our estimates are based on historicalexperience and on our future expectations that are believed to be reasonable.  The combination of these factors forms thebasis for making judgments about the carrying values of assets and liabilitiesthat are not readily apparent from other sources.  Actual results are likely to differ from our current estimatesand those differences may be material.

 

We believe the following critical accountingpolicies affect our more significant estimates and judgments used inpreparation of our consolidated financial statements:

 

•                  We providean inventory reserve for estimated obsolescence or unmarketable inventory equalto the difference between the cost of inventory and the estimated market valuebased upon assumptions about future demand and market conditions.  If actual market conditions are less favorablethan those projected by management, additional inventory write-downs would berequired.

 

•                  We maintainallowances for doubtful accounts, notes receivable and sales returns forestimated losses resulting from known customer exposures, including productreturns and inability to make payments. We also consider collateral values andother factors in evaluating collectibility of notes receivable.  Actual results may differ, resulting inadjustment of the respective allowance(s).

 

•                  We currentlyhave deferred tax assets resulting from certain loss carryforwards and othertemporary differences between financial and income tax reporting.  These deferred tax assets are subject toperiodic recoverability assessments. The realization of these deferred tax assets is primarily dependent onfuture operating results.  To the extentwe are uncertain whether future operations will generate sufficient profit toutilize the loss carry forwards, valuation allowances are established.

 

•                  We havesignificant intangible assets, including trademarks, patents and goodwill.  The determination of related estimateduseful lives and whether or not these assets are impaired involves significantjudgments.  Changes in strategy ormarket conditions could significantly impact these judgments and requireadjustments to recorded asset balances.

 

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**Impact of Inflation**

 

Historically, we have been able to pass inflationary increases for rawmaterials and other costs onto our customers through price increases and weanticipate that we will be able to continue to do so in the future.

 

**Seasonality**

 

Our business can be seasonal, with fluctuations in sales resulting fromtiming of marketing and promotional activities, customer buying patterns andconsumer spending patterns.  In addition,as a result of changes in product sales mix and other factors, as discussedabove, we experience fluctuations in gross profit and operating margins on aquarter-to-quarter basis.

 

**ForwardLooking Statements**

 

Investors are cautioned that, except for the historicalinformation contained herein, the matters discussed in this Quarterly Reportcontain forward-looking statements within the meaning of Section 27A of theSecurities Act of 1933, as amended, and Section 21E of the Securities ExchangeAct of 1934, as amended, that are based on management’s beliefs andassumptions, current expectations, estimates, and projections.  Statements that are not historical facts,including without limitation statements which are preceded by, followed by orinclude the words “believes,” “anticipates,” “plans,” “expects,” “estimates,”“may,” “should” or similar expressions are forward-looking statements. Thesestatements are subject to risks and uncertainties, certain of which are beyondour control, and, therefore, actual results may differ materially.

 

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

 

•                  theinability to successfully and cost effectively implement initiatives to defendour Schiff® Move Free® business against the competition;

•                  theinability to achieve cost savings and operational efficiencies;

•                  theinability to increase operating margins and increase revenues;

•                  dependenceon individual products and customers;

•                  theinability to successfully restructure our Active Nutrition and Haleko businessunits and make them profitable;

•                  the impactof competitive products and pricing (including private label);

•                  market andindustry conditions, including pricing, demand for products, level of tradeinventories and raw materials availability and pricing;

•                  the successof product development and new product introductions into the marketplace;

•                  changes inlaws and regulations, including recently proposed FDA regulations regardinggood manufacturing practices;

•                  litigationand government regulatory action;

•                  lack ofavailable product liability insurance for products containing ephedra;

•                  adversepublicity regarding the consumption of nutritional supplements;

•                  changes inaccounting standards; and

•                  otherfactors indicated from time to time in our SEC reports, copies of which areavailable upon request from our investor relations department or may beobtained at the SEC’s website (www.sec.gov).

 

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**ITEM3.          QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

The followingdiscussion involves forward-looking statements of market risk which assume foranalytical purposes that certain adverse market conditions may occur.  Actual future market conditions may differmaterially from such assumptions. Accordingly, the forward-looking statements should not be considered ourprojections of future events or losses.

 

Our cash flowsand net earnings (losses) are subject to fluctuations resulting from changes ininterest rates and foreign exchange rates. We currently are party to one modest derivative instrument relating toour Haleko business unit.  Our currentpolicy does not allow speculation in derivative instruments for profit orexecution of derivative instrument contracts for which there are no underlyingexposure.  We do not use financialinstruments for trading purposes.

 

We measuremarket risk, related to our holdings of financial instruments, based on changesin interest rates utilizing a sensitivity analysis.  We do not believe that a hypothetical 10% change in interestrates would have a material effect on our pretax earnings or cash flows.

 

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

 

We maintain disclosure controls and procedures that are designed toensure that information required to be disclosed in our Exchange Act reports isrecorded, processed, summarized and reported within the time periods specifiedin the Securities and Exchange Commission’s rules and forms and that suchinformation is accumulated and communicated to our management, including ourChief Executive Officer and Chief Financial Officer, as appropriate, to allowfor timely decisions regarding required disclosure.  In designing and evaluating the disclosure controls andprocedures, we recognize that any controls and procedures, no matter how welldesigned and operated, can provide only reasonable assurance of achieving thedesired control objectives, and we are required to apply our judgment inevaluating the cost-benefit relationship of possible controls and procedures.

 

As required by SEC Rule 13a-15(b), we carried out an evaluation, underthe supervision and with the participation of management, including our ChiefExecutive Officer and Chief Financial Officer, of the effectiveness of the designand operation of the Company’s disclosure controls and procedures as of the endof the quarter covered by this report. Based on the foregoing, the Chief Executive Officer and Chief FinancialOfficer have concluded that the Company’s disclosure controls and procedureswere effective at the reasonable assurance level.

 

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

 

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**PARTII.          OTHERINFORMATION**

 

**Item1.  Legal Proceedings.**

 

Theinformation set forth in Note 8 to Condensed Consolidated Financial Statementsin Item 1 of this Quarterly Report on Form 10-Q is incorporated herein byreference.

 

**Item 2.****          ****Changes in Securities.**

 

Notapplicable.

 

**Item 3.****          ****Defaults Upon SeniorSecurities.**

 

Notapplicable.

 

**Item 4.****          ****Submission of Mattersto a Vote of Security Holders.**

 

Not applicable.

 

**Item 5.****          ****Other Information.**

 

Not applicable.

## ** **

## **Item 6.**            Exhibitsand Reports on Form 8-K

 

(a)                                  Exhibits

 

10.1                           ConsultingAgreement between the Company and Gustin Foods, LLC.

31.1                           Certification of ChiefExecutive Officer pursuant to Section 302 of the Sarbanes-Oxley Act

31.2                           Certification of ChiefFinancial Officer pursuant to Section 302 of the Sarbanes-Oxley Act

32.1                           Certification of ChiefExecutive Officer and Chief Financial Officer pursuant to Section 906 of theSarbanes-Oxley Act

 

(b)                                 Reports on Form 8-K

 

On December 18, 2003, we filed a report on Form 8-K with the commissionregarding our fiscal 2004 second quarter press release.

 

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**SIGNATURES**

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the Registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

 
|   |           | **WEIDER NUTRITION  INTERNATIONAL, INC.** |
|--------|----------------|-------------------------------------------|
|   |           |                                      |
|   |           |                                      |
| Date:  | April 14, 2004 | By: /s/                                   | Bruce J. Wood |   |
|   |           |                                      | Bruce J. Wood |
|   |           |                                      |   | President, Chief Executive |
|   |           |                                      |   | Officer and Director |
|   |           |                                      |   |   |
|   |           |                                      |   |   |
| Date:  | April 14, 2004 | By: /s/                                   | Joseph W. Baty |   |
|   |           |                                      |   | Joseph W. Baty |
|   |           |                                      |   | Executive Vice President and |
|   |           |                                      |   | Chief Financial Officer |
|        |                |                                           |  |  |  |

 

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