GO***TO INDEX***








**UNITED
STATES**


**SECURITIES
AND EXCHANGE COMMISSION**


**WASHINGTON,
D.C. 20549**





****





**FORM
10-Q**





**x**
    **QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
      1934****For
      the quarterly period ended February 28, 2005**** ̈**
    **TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934****For
      the transition period from ____ to ____.**Commission
      file number:**001-14608**








**WEDIER
NUTRITION INTERNATIONAL, INC.**


(Exact name of
Registrant as specified in its charter)








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








Registrant’s
telephone number, including area code:


**(801)
975-5000**








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





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





The number of
shares outstanding of the Registrant’s common stock is 26,112,058 (as of April
1, 2005).








******


**WEIDER
NUTRITION INTERNATIONAL, INC.**
 **INDEX**
 
 ****
 **PART
I.****FINANCIAL
INFORMATION**
 
 ITEM 1.FINANCIAL
STATEMENTS
 CONDENSED CONSOLIDATED BALANCE SHEETS
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
 
 ITEM 2.MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 ITEM 3.QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 ITEM 4.CONTROLS AND
PROCEDURES
 
 
 **PART
II.****OTHER
INFORMATION**
 
 SIGNATURES
 
 EXHIBIT 31.1 - CERTIFICATION OF CEO
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 EXHIBIT 31.2 - CERTIFICATION OF CFO
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 EXHIBIT 32.1 - CEO AND CFO CERTIFICATIONS
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002





******






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





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





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


**CONDENSED
CONSOLIDATED BALANCE SHEETS**


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





February 28,
      2005
    
    May
      31,
      2004(unaudited)**ASSETS**Current
      assets:Cash and cash
      equivalents
    
    $
    24,919
    
    $
    7,449Receivables,
      net
    
    
    32,111
    
    
    35,620Inventories
    
    
    31,760
    
    
    28,431Prepaid
      expenses and other
    
    
    5,226
    
    
    5,021Deferred
      taxes
    
    
    1,982
    
    
    2,419Total current
      assets
    
    
    95,998
    
    
    78,940Property and
      equipment, net
    
    
    23,717
    
    
    24,618Other
      assets:Goodwill
    
    
    4,346
    
    
    4,346Intangible
      assets, net
    
    
    4,661
    
    
    5,146Deposits and
      other assets
    
    
    583
    
    
    1,874Total other
      assets
    
    
    9,590
    
    
    11,366Total
      assets
    
    $
    129,305
    
    $
    114,924**LIABILITIES
      AND STOCKHOLDERS’ EQUITY**Current
      liabilities:Accounts
      payable
    
    $
    18,786
    
    $
    16,116Accrued
      expenses
    
    
    13,155
    
    
    15,277Current
      portion of long-term debt
    
    
    1,855
    
    
    1,091Income taxes
      payable
    
    
    167
    
    
    --Total current
      liabilities
    
    
    33,963
    
    
    32,484Long-term
      debt
    
    
    --
    
    
    133Deferred
      taxes
    
    
    10,705
    
    
    6,494Commitments
      and contingencies (Note 7)Stockholders’
      equity:Preferred
      stock, par value $.01 per share; sharesauthorized-10,000,000;
      no shares issued and outstanding
    
    
    --
    
    
    --Class A
      common stock, par value $.01 per share; sharesauthorized-50,000,000;
      shares issued and outstanding 11,124,912
      and 11,127,166
    
    
    111
    
    
    111Class B
      common stock, par value $.01 per share; sharesauthorized-25,000,000;
      shares issued and outstanding-14,973,148
    
    
    150
    
    
    150Additional
      paid-in capital
    
    
    83,874
    
    
    83,902Deferred
      compensation costs
    
    
    (487
    )
    
    (635
    )Other
      accumulated comprehensive loss
    
    
    (3,727
    )
    
    (4,060
    )Retained
      earnings (accumulated deficit)
    
    
    4,716
    
    
    (3,655
    )Total
      stockholders’ equity
    
    
    84,637
    
    
    75,813Total
      liabilities and stockholders’ equity
    
    $
    129,305
    
    $
    114,924





See notes to
condensed consolidated financial statements.





- 2 -
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****


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


**CONDENSED
CONSOLIDATED STATEMENTS OF INCOME**


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


**(unaudited)**





Three Months
      EndedFebruary
      28,
    
    February
      29,2005
    
    2004Net
      sales
    
    $
    65,557
    
    $
    67,485Cost of goods
      sold
    
    
    42,871
    
    
    41,895Gross
      profit
    
    
    22,686
    
    
    25,590Operating
      expenses:Selling and
      marketing
    
    
    14,321
    
    
    12,232General and
      administrative
    
    
    5,079
    
    
    8,073Research and
      development
    
    
    986
    
    
    868Amortization
      of intangible assets
    
    
    272
    
    
    146Total
      operating expenses
    
    
    20,658
    
    
    21,319Income from
      operations
    
    
    2,028
    
    
    4,271Other income
      (expense):Interest
      income
    
    
    123
    
    
    124Interest
      expense
    
    
    (82
    )
    
    (253
    )Other,
      net
    
    
    (90
    )
    
    149Total other
      income (expense), net
    
    
    (49
    )
    
    20Income from
      continuing operations before income taxes
    
    
    1,979
    
    
    4,291Income tax
      expense
    
    
    760
    
    
    1,655Net income
      from continuing operations
    
    
    1,219
    
    
    2,636Loss from
      discontinued operations, net of income taxes
    
    
    --
    
    
    (71
    )Net income
    
    $
    1,219
    
    $
    2,565Weighted
      average shares outstanding:Basic
    
    
    25,764,664
    
    
    25,526,424Diluted
    
    
    26,583,336
    
    
    26,542,768Net income
      per share-basic and diluted:Net income
      from continuing operations
    
    $
    0.05
    
    $
    0.10Net loss from
      discontinued operations
    
    
    --
    
    
    --Net income
    
    $
    0.05
    
    $
    0.10Comprehensive
      income
    
    $
    1,255
    
    $
    2,716





See notes to
condensed consolidated financial statements.





- 3 -
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****


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


**CONDENSED
CONSOLIDATED STATEMENTS OF INCOME**


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


**(unaudited)**





Nine Months
      EndedFebruary
      28,
    
    February
      29,2005
    
    2004Net
      sales
    
    $
    202,282
    
    $
    191,886Cost of goods
      sold
    
    
    126,645
    
    
    118,915Gross
      profit
    
    
    75,637
    
    
    72,971Operating
      expenses:Selling and
      marketing
    
    
    40,161
    
    
    40,391General and
      administrative
    
    
    17,407
    
    
    17,705Research and
      development
    
    
    3,340
    
    
    3,044Amortization
      of intangible assets
    
    
    805
    
    
    429Total
      operating expenses
    
    
    61,713
    
    
    61,569Income from
      operations
    
    
    13,924
    
    
    11,402Other income
      (expense):Interest
      income
    
    
    240
    
    
    852Interest
      expense
    
    
    (353
    )
    
    (895
    )Other
    
    
    (201
    )
    
    (222
    )Total other
      expense, net
    
    
    (314
    )
    
    (265
    )Income from
      continuing operations before income taxes
    
    
    13,610
    
    
    11,137Income tax
      expense
    
    
    5,239
    
    
    4,288Net income
      from continuing operations
    
    
    8,371
    
    
    6,849Income from
      discontinued operations, net of income taxes
    
    
    --
    
    
    578Net income
    
    $
    8,371
    
    $
    7,427Weighted
      average shares outstanding:Basic
    
    
    25,743,251
    
    
    25,949,587Diluted
    
    
    26,544,561
    
    
    26,821,183Net income
      per share-basic:Net income
      from continuing operations
    
    $
    0.33
    
    $
    0.26Net income
      from discontinued operations
    
    
    --
    
    
    0.02Net
      income
    
    $
    0.33
    
    $
    0.28Net income
      per share-diluted:Net income
      from continuing operations
    
    $
    0.32
    
    $
    0.26Net income
      from discontinued operations
    
    
    --
    
    
    0.02Net
      income
    
    $
    0.32
    
    $
    0.28Comprehensive
      income
    
    $
    8,704
    
    $
    8,554





See notes to
condensed consolidated financial statements.





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


**CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(in
thousands)**


**(unaudited)**





Nine Months
      EndedFebruary
      28,
    
    February
      29,2005
    
    2004Cash flows
      from operating activities:Net
      income
    
    $
    8,371
    
    $
    7,427Adjustments
      to reconcile net income to net cash provided byoperating
      activities:Recovery of
      bad debts
    
    
    (69
    )
    
    (1,243
    )Deferred
      taxes
    
    
    4,648
    
    
    6,192Depreciation
      and amortization
    
    
    4,057
    
    
    3,764Interest
      income on settlement of notes receivable
    
    
    --
    
    
    (609
    )Gain on
      disposition of net assets held for sale and property and
      equipment
    
    
    (39
    )
    
    (1,139
    )Amortization
      of financing fees
    
    
    128
    
    
    251Amortization
      of deferred compensation costs
    
    
    148
    
    
    226Tax benefit
      from stock options exercised
    
    
    14
    
    
    73Changes in
      operating assets and liabilities:Receivables
    
    
    3,578
    
    
    (5,605
    )Inventories
    
    
    (3,329
    )
    
    (3,210
    )Prepaid
      expenses and other
    
    
    (205
    )
    
    (106
    )Deposits and
      other assets
    
    
    276
    
    
    1,047Accounts
      payable
    
    
    2,670
    
    
    (6,188
    )Other current
      liabilities
    
    
    (2,702
    )
    
    786Net cash
      provided by operating activities
    
    
    17,546
    
    
    1,666Cash flows
      from investing activities:Purchase of
      property and equipment
    
    
    (1,677
    )
    
    (1,397
    )Purchase of
      intangibles
    
    
    (7
    )
    
    --Proceeds from
      disposition of assets held for sale and property and
    equipment
    
    
    926
    
    
    6,875Collection of
      notes receivable
    
    
    --
    
    
    3Net cash
      provided by (used in) investing activities
    
    
    (758
    )
    
    5,481Cash flows
      from financing activities:Issuance of
      common stock
    
    
    66
    
    
    325Acquisition
      and retirement of common stock
    
    
    (108
    )
    
    --Net change in
      revolving line-of-credit
    
    
    (2
    )
    
    --Proceeds from
      debt
    
    
    2,561
    
    
    2,704Payments on
      debt
    
    
    (2,098
    )
    
    (9,282
    )Net cash
      provided by (used in) financing activities
    
    
    419
    
    
    (6,253
    )Effect of
      exchange rate changes on cash
    
    
    263
    
    
    421Increase in
      cash and cash equivalents
    
    
    17,470
    
    
    1,315Cash and cash
      equivalents, beginning of period
    
    
    7,449
    
    
    3,463Cash and cash
      equivalents, end of period
    
    $
    24,919
    
    $
    4,778





See notes to
condensed consolidated financial statements.





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


**NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS**


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


**(unaudited)**





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





The accompanying
unaudited interim condensed consolidated financial statements (“interim
financial statements”) do not include all disclosures provided in our annual
consolidated financial statements. These interim financial statements should be
read in conjunction with the consolidated financial statements and the footnotes
thereto contained in our Annual Report on Form 10-K for the year ended May 31,
2004 as filed with the Securities and Exchange Commission. The May 31, 2004
consolidated balance sheet was derived from audited financial statements, but
all disclosures required by generally accepted accounting principles are not
provided in the accompanying footnotes. We are a majority-owned subsidiary of
Weider Health and Fitness (“WHF”).





In
our opinion, the accompanying interim financial statements contain all
adjustments (which are of a normal recurring nature) necessary for a fair
presentation of our financial position and results of operations. Certain prior
period amounts have been reclassified to conform with the current interim period
presentation. Results of operations and cash flows for any interim period are
not necessarily indicative of the results of operations and cash flows that we
may achieve for any other interim period or for the entire year.





On
April 1, 2005, we announced the sale of certain assets of our Active Nutrition
unit relating to our Weider branded business domestically and internationally to
Weider Global Nutrition, LLC, a wholly-owned subsidiary of WHF. The terms of the
transaction provide that we will receive approximately $14,000 in exchange for
assets relating to our domestic Weider branded business, including inventory,
receivables, and intangible and intellectual property, the capital stock of
certain of our international subsidiaries related to the international Weider
branded business (including the working capital of those subsidiaries), and the
assumption of certain associated liabilities by Weider Global Nutrition. The
transaction closed on April 1, 2005, with an effective date of March 1, 2005.





For the nine months
ended February 28, 2005, the Weider branded business generated net sales of
approximately $23,133 and pre-tax income of approximately $1,691(excluding
certain indirect costs primarily consisting of general and administrative
expenses). We anticipate that we will recognize a transaction related
pre-tax gain of approximately $3,500 in our fiscal 2005 fourth quarter, subject
to final determination of directly associated costs. At February 28, 2005, net
book value of the assets and liabilities subsequently disposed of was
approximately $9,476, including approximately $7,867 in working capital and
approximately $1,609 in intangible and other assets.





In
connection with the transaction, the parties also entered into separate
agreements whereby we will provide certain general and administrative, research
and development, and logistics services to Weider Global Nutrition for an annual
fee. The terms of the service agreements are for a one year period, with options
by either party for one additional year. We also received a license to use the
Weider name for corporate purposes for a limited period of time (up to twelve
months) prior to transitioning to a new name for our company.





Effective in our
fiscal 2004 first quarter, we sold substantially all of the assets relating to
Haleko’s Venice Beach ® sports apparel
business to Hucke AG, a German apparel company, for initial cumulative net cash
proceeds of approximately $6,898. In accordance with Statement of Financial
Accounting Standards (“SFAS”) No. 144, the operating results for Venice Beach
are reflected as discontinued operations for the three and nine months ended
February 29, 2004. Accordingly, we recognized after-tax income from discontinued
operations of approximately $578, including an after-tax gain on disposal of
approximately $743, for the nine months ended February 29, 2004. Results from
discontinued operations for the nine months ended February 29, 2004 were
subsequently impacted by certain lease related and other costs, as well as by
final settlement of net assets sold in the transaction. Ultimately, cumulative
net cash proceeds amounted to approximately $7,134, and income from discontinued
operations, net of income taxes, amounted to approximately $812, including an
after-tax gain on disposal of approximately $977 for fiscal 2004.





Effective August
16, 2002, we issued 640,000 restricted shares of Class A common stock to certain
officers and employees. The aggregate value of these restricted shares was
approximately $1,038, which we are expensing on a straight-line basis over the
accompanying five-year vesting period. During the fiscal 2005 second quarter,
124,600 of these restricted shares vested. Concurrent with vesting, we
reacquired (and ultimately retired) 27,406 shares from certain employees in
connection with the payment of individual income taxes. During the fiscal 2004
second quarter, 128,000 of these restricted shares vested and 13,600 were
cancelled as a result of the voluntary termination of certain
employees.





- 6 -
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**WEIDER
NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES**


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


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


**(unaudited)**





At
February 28, 2005 and May 31, 2004 other accumulated comprehensive loss
consisted only of foreign currency translation adjustments.





We
disclose the effect of SFAS No. 123, “Accounting for Stock-Based Compensation”,
on a proforma basis and continue to follow Accounting Principles Board (“APB”)
Opinion No. 25 (as permitted by SFAS No. 123) as it relates to stock based
compensation.





Proforma
information regarding net income and net income per share is required by SFAS
No. 123, as amended by SFAS No. 148, and has been determined as if we had
accounted for our employee stock options and unvested restricted stock under the
fair value method of SFAS No. 123. For the purposes of proforma disclosure, the
estimated fair value of the stock options is amortized to expense over the
options’ vesting period. Our proforma net income and net income per share are as
follows:





Three Months
      Ended
    
    Nine Months
      EndedFebruary
      28,
    
    February
      29,
    
    February
      28,
    
    February
      29,2005
    
    2004
    
    2005
    
    2004Net income,
      as reported
    
    $
    1,219
    
    $
    2,565
    
    $
    8,371
    
    $
    7,427Net income,
      proforma
    
    
    1,133
    
    
    2,482
    
    
    8,072
    
    
    7,183Basic net
      income per share, as reported
    
    
    0.05
    
    
    0.10
    
    
    0.33
    
    
    0.28Diluted net
      income per share, as reported
    
    
    0.05
    
    
    0.10
    
    
    0.32
    
    
    0.28Basic net
      income per share, proforma
    
    
    0.04
    
    
    0.10
    
    
    0.31
    
    
    0.28Diluted net
      income per share, proforma
    
    
    0.04
    
    
    0.09
    
    
    0.30
    
    
    0.27





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





Receivables,
      net, consist of the following:February
      28,
    
    May
      31,2005
    
    2004Trade
      accounts
    
    $
    37,763
    
    $
    40,982Other,
      including income taxes
    
    
    533
    
    
    1,14238,296
    
    
    42,124Less
      allowance for doubtful accounts, sales returns and
    discounts
    
    
    (6,185
    )
    
    (6,504
    )Total
    
    $
    32,111
    
    $
    35,620





**3.** **INVENTORIES**





Inventories
      consist of the following:February
      28,
    
    May
      31,2005
    
    2004Raw
      materials
    
    $
    12,277
    
    $
    7,814Work in
      process
    
    
    1,541
    
    
    1,385Finished
      goods
    
    
    17,942
    
    
    19,232Total
    
    $
    31,760
    
    $
    28,431








- 7 -
 ***RETURN TO INDEX***





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


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


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


**(unaudited)**





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





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





February 28,
      2005
    
    May 31,
      2004Gross
      Carrying
      Amount
    
    Accumul.
      Amortiz.
    
    Net Book
      Value
    
    Gross
      Carrying
      Amount
    
    Accumul.
      Amortiz.
    
    Net Book
      ValueGoodwill
    
    $
    4,346
    
    $
    --
    
    $
    4,346
    
    $
    4,346
    
    $
    --
    
    $
    4,346Intangible
      assets-patents and trademarks
    
    $
    10,946
    
    $
    (6,285
    )
    $
    4,661
    
    $
    10,365
    
    $
    (5,219
    )
    $
    5,146





Estimated
amortization expense, assuming no changes in our intangible assets, for each of
the five succeeding fiscal years, beginning with fiscal 2005, is $1,080 (2005),
$1,085 (2006), $1,059 (2007), $1,037 (2008), and $741 (2009).





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





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





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





We
manufacture and market nutritional products, including a full line of specialty
supplements, vitamins and minerals through our Schiff Specialty unit. Schiff
Specialty products are marketed primarily in the United States through mass
market distribution channels. We manufacture and market nutritional products,
including a full line of sports nutrition supplements, together with certain
other nutraceuticals within our Haleko unit. Haleko products are marketed
primarily in Europe (approximately 78% in Germany) through mass market and
health club and gym distribution channels. We also manufacture and market a
variety of sports nutrition, nutritional bar and weight management products
through our Active Nutrition unit. Active Nutrition products are marketed
domestically and internationally primarily through mass market and health club
and gym distribution channels.





The accounting
policies of these business units are the same as those described in Note 1 to
the consolidated financial statements in our Annual Report on Form 10-K for the
fiscal year ended May 31, 2004. We evaluate the performance of our business
units based on actual and expected operating results of the respective business
units. Certain domestic assets are not allocated to the Schiff Specialty and
Active Nutrition units.





Effective in our
fiscal 2005 first quarter, we retroactively reclassified Schiff export net sales
and operating results from our Active Nutrition unit to our Schiff Specialty
unit. Schiff export net sales and operating income previously included in Active
Nutrition operating results were $555 and $201, respectively, for the fiscal
2004 third quarter, and $2,128 and $997, respectively, for the nine months ended
February 29, 2004.





Effective March 1,
2005, we sold certain assets of our Active Nutrition unit (see Note 1 to the
condensed consolidated financial statements). As a result of the sale, the
remaining assets and related operations for the Active Nutrition unit will be
consolidated into our Schiff Specialty unit. Beginning with our fiscal 2005
fourth quarter we will report segment information for the two remaining business
units.





- 8 -
 ***RETURN TO INDEX***





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


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


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


**(unaudited)**




Segment information
for the three months ended February 28, 2005 and February 29, 2004 is summarized
as follows:





Net
      Sales
    
    Income (Loss)
      From Operations
    
    Interest
      Expense
    
    Depreciation
      & Amortization Expense2005:Schiff
      Specialty
    
    $
    43,601
    
    $
    2,938
    
    $
    41
    
    $
    697Haleko
    
    
    14,131
    
    
    (2,082
    )
    
    10
    
    
    541Active
      Nutrition
    
    
    8,991
    
    
    1,203
    
    
    31
    
    
    176Eliminations
    
    
    (1,166
    )
    
    (31
    )
    
    --
    
    
    (19
    )$
    65,557
    
    $
    2,028
    
    $
    82
    
    $
    1,3952004:Schiff
      Specialty
    
    $
    45,617
    
    $
    4,202
    
    $
    193
    
    $
    742Haleko
    
    
    14,929
    
    
    897
    
    
    73
    
    
    364Active
      Nutrition
    
    
    8,168
    
    
    (854
    )
    
    17
    
    
    187Eliminations
    
    
    (1,229
    )
    
    26
    
    
    (30
    )
    
    (27
    )$
    67,485
    
    $
    4,271
    
    $
    253
    
    $
    1,266





Segment information
for the nine months ended February 28, 2005 and February 29, 2004 is summarized
as follows:





Net
      Sales
    
    Income (Loss)
      From Operations
    
    Interest
      Expense
    
    Depreciation
      & Amortization Expense2005:Schiff
      Specialty
    
    $
    127,673
    
    $
    12,900
    
    $
    206
    
    $
    2,080Haleko
    
    
    49,738
    
    
    (941
    )
    
    88
    
    
    1,498Active
      Nutrition
    
    
    28,682
    
    
    2,054
    
    
    59
    
    
    532Eliminations
    
    
    (3,811
    )
    
    (89
    )
    
    --
    
    
    (53
    )$
    202,282
    
    $
    13,924
    
    $
    353
    
    $
    4,0572004:Schiff
      Specialty
    
    $
    122,115
    
    $
    11,233
    
    $
    595
    
    $
    2,288Haleko
    
    
    47,958
    
    
    1,966
    
    
    329
    
    
    1,001Active
      Nutrition
    
    
    25,773
    
    
    (1,873
    )
    
    58
    
    
    549Eliminations
    
    
    (3,960
    )
    
    76
    
    
    (87
    )
    
    (74
    )$
    191,886
    
    $
    11,402
    
    $
    895
    
    $
    3,764








- 9 -
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**WEIDER
NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES**


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


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


**(unaudited)**





Reconciliation of
total assets for our business units is as follows:


February 28,
      2005
    
    May
      31,
      2004Schiff
      Specialty - domestic
    
    $
    --
    
    $
    --Active
      Nutrition - international
    
    
    13,679
    
    
    11,827Haleko -
      international
    
    
    33,888
    
    
    37,173Unallocated -
      domestic Schiff Specialty and Active
      Nutrition
    
    
    143,036
    
    
    127,376Eliminations
    
    
    (61,298
    )
    
    (61,452
    )Total
    
    $
    129,305
    
    $
    114,924


Total domestic and
international net sales amounted to $134,292 and $67,990, respectively, for the
nine months ended February 28, 2005, and $130,840 and $61,046, respectively, the
nine months ended February 29, 2004. Capital
expenditures for domestic and international operations were $1,195 and $482,
respectively, for the nine months ended February 28, 2005, and $475 and $922,
respectively, for the nine months ended February 29, 2004.





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





Net sales to our
two largest customers combined, which are primarily included in our Schiff
Specialty unit, are significant. Customer A accounted for approximately 27% and
29%, respectively, and Customer B accounted for approximately 22% and 23%,
respectively, of net sales for the nine months ended February 28, 2005 and
February 29, 2004. At February 28, 2005, and May 31, 2004, amounts due from
Customer A represented approximately 18% and 23%, respectively, and amounts due
from Customer B represented approximately 22% and 15%, respectively, of total
trade accounts receivable. Net sales of our Schiff Move Free ® brand accounted
for approximately 26% and 29%, respectively, of total net sales for the nine
months ended February 28, 2005 and February 29, 2004.





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





We
are currently named as a defendant in three lawsuits alleging that consumption
of certain of our discontinued products containing ephedra caused or contributed
to injuries and damages. We dispute the allegations and our insurance carriers
have assumed defense of one of the matters. The other two matters are not
covered by insurance. However, we are pursuing indemnification from a third
party for one of the matters. We believe that, after taking into consideration
our insurance coverage, these lawsuits, if successful, generally would not have
a material adverse effect on our results of operations and financial condition.
However, one or more large punitive damage awards, which are generally not
covered by insurance (and are not covered by the indemnification provisions in
the one matter), or a large adverse award in a lawsuit not covered by insurance
or indemnification, could have a material adverse effect on our results of
operations and financial condition. Given the preliminary stages of these
proceedings, we are unable to determine the likelihood of an unfavorable outcome
or estimate an amount or range of possible loss at this time. In connection with
the sale of the American Body Building and Science Foods brands in July 2002, we
discontinued the sale of products that contain ephedra. However, we cannot
assure you that we will not be subject to further litigation with respect to
ephedra products we previously sold.





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





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





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





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


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


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


**(unaudited)**








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





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





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





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





**General**





Weider Nutrition
International, Inc. develops, manufactures, markets, distributes and sells
branded and private label vitamins, nutritional supplements and sports nutrition
products in the United States and throughout the world. We offer a broad range
of capsules and tablets, powdered drink mixes, ready-to-drink beverages and
nutrition bars. Our portfolio of recognized brands, including Schiff,
Multipower ® , Multaben and
Tiger's Milk ® , are primarily
marketed through mass market, health food store and health club and gym
distribution channels. We market our branded nutritional supplement products,
both domestically and internationally, in five principal categories: specialty
supplements; vitamins and minerals; sports nutrition; weight management; and
nutrition bars.





We
are continuing our efforts to defend our Schiff Move Free business against
competition, including private label, and ultimately to increase our market
share in the branded joint care product category. Accordingly, we have
introduced product enhancements to Schiff Move Free and launched Schiff
Lubriflex 3TM , a new premium,
proprietary joint care product. However, in the fourth quarter of fiscal 2005
and continuing into fiscal 2006, we anticipate that escalating raw material
costs (particularly in the joint care category), significant marketing support
of the Lubriflex 3 launch and
continuing difficult economic conditions in Germany may negatively impact
operating margins.





On
April 1, 2005, we announced the sale of certain assets of our Active Nutrition
unit relating to our Weider branded business domestically and internationally to
Weider Global Nutrition, LLC, a wholly-owned subsidiary of WHF. The terms of the
transaction provide that we will receive approximately $14.0 million in exchange
for assets relating to our domestic Weider branded business, including
inventory, receivables, and intangible and intellectual property, the capital
stock of certain of our international subsidiaries related to our international
Weider branded business (including the working capital of those subsidiaries),
and the assumption of certain associated liabilities by Weider Global Nutrition.
The transaction closed on April 1, 2005, with an effective date of March 1,
2005.





In
connection with the transaction, the parties also entered into separate
agreements whereby we will provide certain general and administrative, research
and development, and logistics services to Weider Global Nutrition for
an annual fee. The terms of the service agreements are for a one year
period, with options by either party for one additional year. We also received a
license to use the Weider name for corporate purposes for a limited period of
time (up to twelve months) prior to transitioning to a new name for our
company.





Due to the sale of
the Weider branded business, we anticipate incorporating the remaining portion
of the Active Nutrition unit into our Schiff Specialty unit. For the nine months
ended February 28, 2005 and February 29, 2004, the Weider branded business
generated net sales of approximately $23.1 million and $19.7 million,
respectively, and recognized pre-tax income (loss) of approximately $1.7 million
and $(1.9) million, respectively, excluding certain indirect costs primarily
consisting of general and administrative expenses.





Effective in our
fiscal 2004 first quarter, we sold substantially all of the assets relating to
Haleko’s Venice Beach sports apparel business for initial cumulative net cash
proceeds of approximately $6.9 million. In accordance with SFAS No. 144, the
operating results for Venice Beach are reflected as discontinued operations for
the three and nine months ended February 29, 2004. Results from discontinued
operations for the nine months ended February 29, 2004 were subsequently
impacted by certain lease related and other costs, as well as by final
settlement of net assets sold in the transaction. Ultimately, cumulative net
cash proceeds amounted to approximately $7.1 million, and income from
discontinued operations, net of income taxes, amounted to approximately $0.8
million, including an after-tax gain on disposal of approximately $1.0 million
for fiscal 2004.





During fiscal 2004,
we entered into settlement agreements with five former employees relating to
certain outstanding notes due to us, including interest accrued thereon. As a
result of the respective settlement agreements, we received an aggregate of
$99,000 in cash and acquired and retired a total of 966,609 shares of our Class
A common stock valued at approximately $3.8 million as full payment of principal
and interest accrued on the notes. Settlement agreements entered into during the
nine months ended February 29, 2004, resulted in recoveries of previously
recognized notes receivable valuation allowances of approximately $1.1 million,
reflected as a reduction of general and administrative expense, and recognition
of contractually due interest income of approximately $0.7 million.





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





**Results of
Operations (unaudited)**


*Three Months
Ended February 28, 2005 Compared to Three Months*


*Ended February
29, 2004*





The following
tables show comparative results for continuing operations, by business unit, for
the three months ended February 28, 2005 and February 29, 2004. Certain indirect
costs, primarily including general and administrative and research and
development expenses, are charged to the business units based on various
allocation methodologies.





*(in
      thousands)*
    
    Schiff
      Specialty
    
    Haleko
    
    Active
      Nutrition
    
    Other
      (1)
    
    Total2005:Net
      sales
    
    $
    43,601
    
    $
    14,131
    
    $
    8,991
    
    $
    (1,166
    )
    $
    65,557Cost of goods
      sold
    
    
    29,939
    
    
    9,015
    
    
    5,033
    
    
    (1,116
    )
    
    42,871Gross
      profit
    
    
    13,662
    
    
    5,116
    
    
    3,958
    
    
    (50
    )
    
    22,686Operating
      expenses:Selling and
      marketing
    
    
    7,575
    
    
    4,963
    
    
    1,783
    
    
    --
    
    
    14,321General and
      administrative
    
    
    2,498
    
    
    1,800
    
    
    781
    
    
    --
    
    
    5,079Research and
      development
    
    
    650
    
    
    206
    
    
    130
    
    
    --
    
    
    986Amortization
      of intangible assets
    
    
    1
    
    
    229
    
    
    61
    
    
    (19
    )
    
    272Total
      operating expenses
    
    
    10,724
    
    
    7,198
    
    
    2,755
    
    
    (19
    )
    
    20,658Income (loss)
      from operations
    
    $
    2,938
    
    $
    (2,082
    )
    $
    1,203
    
    $
    (31
    )
    $
    2,0282004:Net
      sales
    
    $
    45,617
    
    $
    14,929
    
    $
    8,168
    
    $
    (1,229
    )
    $
    67,485Cost of goods
      sold
    
    
    28,660
    
    
    9,042
    
    
    5,422
    
    
    (1,229
    )
    
    41,895Gross profit
    
    
    16,957
    
    
    5,887
    
    
    2,746
    
    
    --
    
    
    25,590Operating
      expenses:Selling and
      marketing
    
    
    5,898
    
    
    3,536
    
    
    2,798
    
    
    --
    
    
    12,232General and
      administrative
    
    
    6,289
    
    
    1,191
    
    
    593
    
    
    --
    
    
    8,073Research and
      development
    
    
    546
    
    
    182
    
    
    140
    
    
    --
    
    
    868Amortization
      of intangible assets
    
    
    22
    
    
    81
    
    
    69
    
    
    (26
    )
    
    146Total
      operating expenses
    
    
    12,755
    
    
    4,990
    
    
    3,600
    
    
    (26
    )
    
    21,319Income (loss)
      from operations
    
    $
    4,202
    
    $
    897
    
    $
    (854
    )
    $
    26
    
    $
    4,271





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





**Net
Sales.** Net sales
decreased approximately 2.9% to $65.6 million for the fiscal 2005 third quarter,
from $67.5 million for the fiscal 2004 third quarter. Overall, the decrease in
net sales was primarily attributable to a decrease in Schiff Specialty private
label sales and a decrease in Haleko branded sales.





Schiff Specialty
net sales decreased approximately 4.4% to $43.6 million for the fiscal 2005
third quarter, from $45.6 million for the fiscal 2004 third quarter. Aggregate
branded sales increased approximately 2.4% to $31.1 million for the fiscal 2005
third quarter, from $30.3 million for the fiscal 2004 third quarter. Branded
joint product sales volume, including Lubriflex 3 results, increased
approximately $2.3 million, and export sales volume increased approximately $0.3
million. These increases were more than offset by a $1.9 million decrease in
other Schiff branded sales volume and a $2.7 million reduction in private label
sales volume. Move Free net sales were $16.9 million and $19.2 million,
respectively, for the fiscal 2005 and 2004 third quarters. As a result of
significant volatility in raw material costing and the inability to secure an
acceptable price increase from the customer, we recently discontinued certain
private label or contract manufacturing services. Net sales for the discontinued
private label business amounted to approximately $5.1 million and $6.8 million,
respectively, for the fiscal 2005 and 2004 third quarters.





- 13 -
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We
have retroactively reclassified and included our Schiff export business into our
Schiff Specialty unit. Schiff export net sales of approximately $0.6 million for
the fiscal 2004 third quarter, were previously included in our Active Nutrition
unit.





Haleko net sales,
including the positive impact of foreign currency exchange rates, decreased
approximately 5.3% to $14.1 million for the fiscal 2005 third quarter, from
$14.9 million for the fiscal 2004 third quarter. Excluding the favorable foreign
currency exchange impact of approximately $1.1 million, net sales decreased
approximately 12.8%, quarter over quarter. A $2.3 million reduction in branded
sales volume resulting from continuing difficult economic conditions in Germany
and heightened competitive pressures resulting in reduced pricing to mass market
and health club customers, was partially offset by a $0.4 million increase in
private label sales volume.





Active Nutrition
net sales increased approximately 10.1% to $9.0 million for the fiscal 2005
third quarter, from $8.2 million for the fiscal 2004 third quarter. Excluding
the favorable foreign currency impact of approximately $0.4 million, net sales
increased approximately 5.6% primarily due to $0.4 million of incremental
distribution in our Weider branded European business .





**Gross
Profit.** Gross profit
decreased approximately 11.3% to $22.7 million for the fiscal 2005 third
quarter, from $25.6 million for the fiscal 2004 third quarter. Gross profit, as
a percentage of net sales, was 34.6% for the fiscal 2005 third quarter, compared
to 37.9% for the fiscal 2004 third quarter. Gross profit, and the gross profit
percentage, decreased in our Schiff Specialty and Haleko units and increased in
our Active Nutrition unit.





Schiff Specialty
gross profit decreased approximately 19.4% to $13.7 million for the fiscal 2005
third quarter from $17.0 million for the fiscal 2004 third quarter. Gross
profit, as a percentage of net sales, was 31.3% and 37.2%, respectively, for the
fiscal 2005 and 2004 third quarters. The decrease was primarily due to a $2.2
million increase in joint product raw material costs and a $3.0 million increase
in price discount-like promotions, which are accounted for as a direct reduction
of sales, partially offset by an approximate $1.6 million increase resulting
from a change in sales mix. The increase in price discount-like promotions was
in response to competitive pricing conditions.





Haleko gross profit
decreased approximately 13.1% to $5.1 million for the fiscal 2005 third quarter,
from $5.9 million for the fiscal 2004 third quarter. Gross profit, as a
percentage of net sales, was 36.2% and 39.4%, respectively, for the fiscal 2005
and 2004 third quarters. The decrease primarily resulted from a reduction in
sales volume due to economic conditions and a reduction in pricing to mass
market and health club customers due to heightened competitive
conditions.





Active Nutrition
gross profit increased approximately 44.1% to $4.0 million for the fiscal 2005
third quarter, from $2.7 million for the fiscal 2004 third quarter. Gross
profit, as a percentage of net sales, was 44.0% and 33.6%, respectively, for the
fiscal 2005 and 2004 third quarters. In addition to approximately $0.3 million
in gross profit resulting from incremental sales volume, the increase in gross
profit and the gross profit percentage was primarily due to a $0.3 million
reduction in product returns and a $0.6 million decrease in inventory related
charges.





**Operating
Expenses.** Operating expenses
decreased approximately 3.1% to $20.7 million for the fiscal 2005 third quarter,
from $21.3 million for the fiscal 2004 third quarter. An increase in selling and
marketing expenses was more than offset by a decrease in general and
administrative expenses.





Selling and
marketing expenses, including sales, marketing, advertising, freight and other
costs, increased to approximately $14.3 million for the fiscal 2005 third
quarter, from $12.2 million for the fiscal 2004 third quarter. Selling and
marketing expenses increased approximately $1.7 million in our Schiff Specialty
unit and approximately $1.4 million in our Haleko unit, and decreased
approximately $1.0 million in our Active Nutrition unit. The Schiff Specialty
increase resulted primarily from $3.0 million in marketing costs in support of
our fiscal 2005 launch of Lubriflex 3 , partially offset
by a $0.6 million decrease in personnel related costs. In addition,
reclassification of approximately $0.7 million in promotional spending to price
discount-like promotions, which are accounted for as a direct reduction of
sales, also offset the incremental Lubriflex 3 marketing expense.
The increase in Haleko’s selling and marketing expenses primarily resulted from
increased marketing activity in response to heightened competitive conditions
and in support of the introduction of new products. In addition, Haleko’s
selling and marketing expenses increased approximately $0.4 million due to the
impact of foreign currency exchange rates. Active Nutrition's decrease
in selling and marketing expenses resulted primarily from a $0.4 million
decrease in promotional spending resulting from a reduction in new product
activity and a $0.6 million decrease resulting from the favorable impact of
previously implemented cost reduction initiatives.





General and
administrative expenses decreased to approximately $5.1 million for the fiscal
2005 third quarter, from $8.1 million for the fiscal 2004 third quarter. The
decrease in general and administrative expenses resulted primarily from a $2.5
million reduction in legal related costs and a $0.9 million decrease in
personnel related costs primarily in our
Schiff Specialty unit, partially offset by an approximate $0.6 million increase
due to foreign currency impact and incremental personnel and consulting costs in
our Haleko unit.





- 14 -
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Research and
development costs remained relatively constant at $1.0 million and $0.9 million,
respectively, for the fiscal 2005 and 2004 third quarters. Amortization of
intangibles increased due to a reduction in the estimated remaining useful lives
of certain Haleko trademarks.





**Other
Income/Expense.** Other
income/expense, net, was negligible for the fiscal 2005 and 2004 third quarters.
Interest expense decreased as a result of reduced aggregate indebtedness and a
reduction of financing fees under the current credit facility. Fiscal 2004 third
quarter other, net, includes a $0.2 million gain on sale of
securities.





**Provision
for Income Taxes.** Provision for
income taxes was $0.8 million for the fiscal 2005 third quarter, compared to
$1.7 million for the fiscal 2004 third quarter. The change resulted primarily
from a decrease in pre-tax income and a slight decrease in our effective tax
rate.





**Results of
Operations (unaudited)**


*Nine Months
Ended February 28, 2005 Compared to Nine Months*


*Ended February
29, 2004*





The following
tables show comparative results for continuing operations, by business unit, for
the nine months ended February 28, 2005 and February 29, 2004. Certain indirect
costs, primarily including general and administrative and research and
development expenses, are charged to the business units based on various
allocation methodologies.





*(in
      thousands)*
    
    Schiff
      Specialty
    
    Haleko
    
    Active
      Nutrition
    
    Other
      (1)
    
    Total2005:Net
      sales
    
    $
    127,673
    
    $
    49,738
    
    $
    28,682
    
    $
    (3,811
    )
    $
    202,282Cost of goods
      sold
    
    
    82,916
    
    
    30,773
    
    
    16,625
    
    
    (3,669
    )
    
    126,645Gross
      profit
    
    
    44,757
    
    
    18,965
    
    
    12,057
    
    
    (142
    )
    
    75,637Operating
      expenses:Selling and
      marketing
    
    
    19,966
    
    
    13,703
    
    
    6,492
    
    
    --
    
    
    40,161General and
      administrative
    
    
    9,498
    
    
    5,002
    
    
    2,907
    
    
    --
    
    
    17,407Research and
      development
    
    
    2,390
    
    
    552
    
    
    398
    
    
    --
    
    
    3,340Amortization
      of intangible assets
    
    
    3
    
    
    649
    
    
    206
    
    
    (53
    )
    
    805Total
      operating expenses
    
    
    31,857
    
    
    19,906
    
    
    10,003
    
    
    (53
    )
    
    61,713Income (loss)
      from operations
    
    $
    12,900
    
    $
    (941
    )
    $
    2,054
    
    $
    (89
    )
    $
    13,9242004:Net
      sales
    
    $
    122,115
    
    $
    47,958
    
    $
    25,773
    
    $
    (3,960
    )
    $
    191,886Cost of goods
      sold
    
    
    77,667
    
    
    29,273
    
    
    15,935
    
    
    (3,960
    )
    
    118,915Gross profit
    
    
    44,448
    
    
    18,685
    
    
    9,838
    
    
    --
    
    
    72,971Operating
      expenses:Selling and
      marketing
    
    
    19,469
    
    
    12,198
    
    
    8,724
    
    
    --
    
    
    40,391General and
      administrative
    
    
    11,653
    
    
    3,730
    
    
    2,322
    
    
    --
    
    
    17,705Research and
      development
    
    
    2,029
    
    
    557
    
    
    458
    
    
    --
    
    
    3,044Amortization
      of intangible assets
    
    
    64
    
    
    234
    
    
    207
    
    
    (76
    )
    
    429Total
      operating expenses
    
    
    33,215
    
    
    16,719
    
    
    11,711
    
    
    (76
    )
    
    61,569Income (loss)
      from operations
    
    $
    11,233
    
    $
    1,966
    
    $
    (1,873
    )
    $
    76
    
    $
    11,402





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





**Net
Sales.** Net sales
increased approximately 5.4% to $202.3 million for the nine months ended
February 28, 2005, from $191.9 million for the nine months ended February 29,
2004. Overall, the increase in net sales was primarily attributable to an
increase in Schiff Specialty branded joint product sales, improvement in our
Weider branded European business and favorable foreign currency exchange
rates.





Schiff Specialty
net sales increased approximately 4.6% to $127.7 million for the nine months
ended February 28, 2005, from $122.1 million for the nine months ended February
29, 2004. The increase was primarily due to a $9.0 million increase in branded
joint product sales volume, including Lubriflex 3 , and a $1.4
million increase in export sales volume. Aggregate branded sales increased
approximately 8.8% to $89.1 million for the nine months ended





- 15 -
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February 28, 2005,
from $81.9 million for the nine months ended February 29, 2004. Move Free net
sales were approximately $51.1 million and $50.1 million, respectively, for the
nine months ended February 28, 2005 and February 29, 2004. The increase in
branded sales was partially offset by a $1.6 million reduction in private label
sales volume. As a result of significant volatility in raw material costing and
the inability to secure an acceptable price increase from the customer, we
recently discontinued certain private label or contract manufacturing services.
Net sales for the discontinued private label business amounted to approximately
$15.8 million and $16.1 million, respectively, for the nine months ended
February 28, 2005 and February 29, 2004.





We
have retroactively reclassified and included our Schiff export business into our
Schiff Specialty unit. Schiff export net sales of approximately $2.1
million for the nine months ended February 29, 2004 were previously
included in our Active Nutrition unit.





Haleko net sales,
including the positive impact of foreign currency exchange rates, increased
approximately 3.7% to $49.7 million for the nine months ended February 28, 2005,
from $48.0 million for the nine months ended February 29, 2004. Excluding the
favorable foreign currency exchange impact of approximately $3.5 million, net
sales decreased approximately 3.5% for the nine months ended February 28, 2005,
compared to the nine months ended February 29, 2004. A $3.3 million decrease in
branded sales volume resulting from continuing difficult economic conditions in
Germany and reduced pricing to mass market and health club customers due to
heightened competitive pressures, was partially offset by a $1.5 million
increase in private label sales volume.





Active Nutrition
net sales increased approximately 11.3% to $28.7 million for the nine months
ended February 28, 2005, from $25.8 million for the nine months ended February
29, 2004. Excluding the favorable foreign currency exchange impact of
approximately $1.1 million, net sales increased approximately 6.9% primarily due
to $2.5 million of incremental distribution in our Weider branded European
business, partially offset by a $0.7 million reduction in U.S. branded sales
volume.





**Gross
Profit.** Gross profit
increased approximately 3.7% to $75.6 million for the nine months ended February
28, 2005, from $73.0 million for the nine months ended February 29, 2004. Gross
profit, as a percentage of net sales, was 37.4% for the nine months ended
February 28, 2005, compared to 38.0% for the nine months ended February 29,
2004. Gross profit percentage decreased in our Schiff Specialty and Haleko units
and increased in our Active Nutrition unit.





Schiff Specialty
gross profit remained relatively constant at $44.8 million for the nine months
ended February 28, 2005, compared to $44.4 million for the nine months ended
February 29, 2004. Gross profit, as a percentage of net sales, decreased to
35.1% for the nine months ended February 28, 2005, from 36.4% for the nine
months ended February 29, 2004. The decrease was primarily due to a $2.6 million
increase in joint product raw material costs and a $2.8 million increase in
price discount-like promotions, which are accounted for as a direct reduction of
sales, substantially offset by an incremental $5.1 million resulting from a
change in sales mix, including an increase in branded sales volume. The increase
in price discount-like promotions was primarily in response to competitive
pricing conditions.





Haleko gross profit
increased approximately 1.5% to $19.0 million for the nine months ended February
28, 2005, from $18.7 million for the nine months ended February 29, 2004,
resulting primarily from favorable foreign currency exchange rates. Excluding
the favorable foreign currency exchange impact of approximately $1.3 million,
gross profit decreased 5.6% for the nine months ended February 28, 2005,
compared to the nine months ended February 29, 2004. Gross profit, as a
percentage of net sales, decreased to 38.1% for the nine months ended February
28, 2005, from 39.0% for the nine months ended February 29, 2004. The decrease
primarily resulted from a reduction in sales volume due to economic conditions
in Germany and competitive pressure resulting in reduced pricing to mass market
and health club customers.





Active Nutrition
gross profit increased approximately 22.6% to $12.1 million for the nine months
ended February 28, 2005, from $9.8 million for the nine months ended February
29, 2004. Gross profit, as a percentage of net sales, increased to 42.0% for the
nine months ended February 28, 2005, from 38.2% for the nine months ended
February 29, 2004. In addition to an incremental $0.4 million in gross profit
resulting from increases in sales volume and $0.4 million due to foreign
currency exchange rates, the increase in gross profit and gross profit
percentage was primarily attributable to a $1.1 million reduction in inventory
related charges and a $0.5 million reduction in product returns.





**Operating
Expenses.** Operating expenses
remained relatively constant at $61.7 million for the nine months ended February
28, 2005, compared to $61.6 million for the nine months ended February 29, 2004.
Modest decreases in selling and marketing and general and administrative
expenses were more than offset by increases in research and development costs
and amortization of intangible assets.





- 16 -
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Selling and
marketing expenses, including sales, marketing, advertising, freight and other
costs, remained relatively constant for the nine months ended February 28, 2005,
compared to the nine months ended February 29, 2004. The Schiff Specialty
increase resulted primarily from $4.2 million in marketing costs in support of
our fiscal 2005 launch of Lubriflex 3 , substantially
offset by reclassification of approximately $3.7 million in promotional spending
to price discount-like promotions, which are accounted for as a direct reduction
of sales. The increase in Haleko’s selling and marketing expenses were primarily
due to $1.0 million in foreign currency impact and $0.5 million in additional
spending in response to competitive conditions and support of new product
introductions. The decrease in Active Nutrition primarily resulted from a $0.7
million decrease in promotional expense due to a reduction of new product
activity and a $1.4 million decrease resulting from the favorable impact of
previously implemented cost reduction and other initiatives.





General and
administrative expenses remained relatively constant for the nine months ended
February 28, 2005, compared to the nine months ended February 29, 2004.
Decreases in general and administrative expenses resulting primarily from a $2.5
million reduction in legal related costs and a $0.8 million decrease in
personnel related costs were partially offset by $0.6 million in expenses
associated with the sale of the Weider branded business and $0.5 million in
incremental consulting fees, including corporate governance costs. In addition,
the prior comparable period amount includes approximately $1.1 million in
recoveries of previously recognized notes receivable valuation allowances, which
are reflected as a reduction in general and administrative
expenses.





Research and
development costs increased to approximately $3.3 million for the nine months
ended February 28, 2005, from $3.0 million for the nine months ended February
29, 2004 primarily resulting from an increase in contracted research relating to
potential new product initiatives. Amortization of intangibles increased due to
a reduction in the estimated remaining useful lives of certain Haleko unit
trademarks.





**Other
Income/Expense.** Other expense, net,
was approximately $0.3 million expense for the nine months ended February 28,
2005 and February 29, 2004. Interest expense for the nine months ended February
28, 2005, decreased as a result of reduced aggregate indebtedness and a
reduction of financing fees under our current credit facility. Interest income
for the nine months ended February 29, 2004, includes approximately $0.7 million
recognized in connection with the settlement of certain notes
receivable.





**Provision
for Income Taxes.** Provision for
income taxes was $5.2 million for the nine months ended February 28, 2005,
compared to $4.3 million for the nine months ended February 29, 2004. The change
resulted from an increase in pre-tax income.





**Liquidity
and Capital Resources**





Working capital
increased approximately $15.5 million to $62.0 million at February 28, 2005,
from $46.5 million at May 31, 2004, primarily represented by an increase in cash
and cash equivalents partially offset by a modest increase in current
liabilities. The increase in inventories is due primarily to joint product sales
growth and our proactive decision to increase raw materials on-hand relating to
this category, our Lubriflex 3 product launch and
foreign currency exchange impact.





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





On
June 30, 2004, we entered into, through our wholly-owned direct operating
subsidiary Weider Nutrition Group, Inc. (“WNG”), a new $25.0 million revolving
credit facility (the “New Credit Facility”) with KeyBank National Association,
as Agent. The New Credit Facility contains customary terms and conditions,
including, among others, financial covenants and certain restrictions. Our
obligations under the New Credit Facility are secured by a first priority
security interest on all of the capital stock of WNG. If our total coverage
ratio exceeds a certain limit, our obligations will also be secured by a first
priority security interest in all of our domestic assets. In the event we exceed
certain other ratio limits, we will be subject to a borrowing base and will be
able to borrow up to the lesser of $25.0 million or the sum of (i) 85% of
eligible accounts receivable and (ii) 65% of eligible inventory. Borrowings
under the New Credit Facility bear interest at floating rates based on the
KeyBank National Association prime rate or the Federal Funds effective rate, and
the New Credit Facility matures on June 30, 2007, with options for one-year
extensions under certain circumstances. The New Credit Facility can be used to
fund our normal working capital and capital expenditure requirements, with
availability to fund certain permitted strategic transactions. At February 28,
2005, there were no amounts outstanding and $25.0 million was available under
the New Credit Facility.





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Our European
working capital needs (primarily our Haleko unit) are supported by a
Germany-based secured credit facility (the “Haleko Facility”) that is subject to
annual renewal in or around July. Our obligations under the Haleko Facility are
secured by a first priority lien on substantially all Haleko tangible and
intangible assets. In July 2004, we renewed the Haleko Facility with Deutsche
Bank AG in the approximate amount of $10.4 million (at recent exchange rates) on
terms substantially similar to the previous facility. At February 28, 2005,
there was approximately $0.1 million outstanding and $9.1 million was available
under the Haleko Facility.





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





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





A
summary of our outstanding contractual obligations at February 28, 2005 is as
follows (in thousands):





**Contractual**
      **Cash
      Obligations**
    
    **Total**
      **Amounts**
      **Committed**
    
    **Less
      than**
      **1
      year**
    
    **1-3**
      **Years**
    
    **3-5**
      **Years**
    
    **After**
      **5
      Years**Long-term
      debt
    
    $
    1,855
    
    $
    1,855
    
    $
    --
    
    $
    --
    
    $
    --Operating
      leases
    
    
    21,561
    
    
    3,254
    
    
    5,718
    
    
    5,464
    
    
    7,125Purchase
      obligations
    
    
    24,839
    
    
    24,839
    
    
    --
    
    
    --
    
    
    --Total
      obligations
    
    $
    48,255
    
    $
    29,948
    
    $
    5,718
    
    $
    5,464
    
    $
    7,125





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


****


**Critical
Accounting Policies and Estimates**





In
preparing our condensed consolidated
financial statements, we make assumptions, estimates and judgments that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the dates of the condensed consolidated financial
statements and the reported amounts of net sales and expenses during the
reported periods. We periodically evaluate our estimates and judgments related
to the valuation of inventories and intangible assets, allowances for doubtful
accounts, notes receivable, sales returns and discounts, valuation of deferred
tax assets and recoverability of long-lived assets. Note 1 to the consolidated
financial statements contained in our Annual Report on Form 10-K for the year
ended May 31, 2004, filed with the Securities and Exchange Commission, describes
the accounting policies governing each of these matters. Our estimates are based
on historical experience and on our future expectations that are believed to be
reasonable. The combination of these factors forms the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from our current
estimates and those differences may be material.





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





●  We provide for
inventory valuation adjustments for estimated obsolescence or unmarketable
inventory equal to the difference between the cost of inventory and the
estimated market value based upon assumptions about future demand and market
conditions. Inventory valuation adjustments resulted in an increase to gross
profit of approximately $0.6 million for each of the fiscal 2005 and 2004 third
quarters, and an increase (decrease) to gross profit of approximately $0.3
million and $(0.6) million, respectively, for the nine months ended February 28,
2005 and February 29, 2004.  At February 28, 2005 and May 31, 2004, our
inventory valuation allowance amounted to approximately $2.7 million and $3.7
million, respectively.  If actual demand and/or market conditions are less
favorable than those projected by management, additional inventory write-downs
would be required.








- 18 -
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●  We maintain
allowances for doubtful accounts, sales returns and discounts for estimated
losses resulting from known customer exposures, including among others, product
returns, inability to make payments and expected utilization of offered
discounts. Changes in our
allowances for doubtful accounts, notes receivable, sales returns and discounts
did not materially impact our earnings for the fiscal 2005 and 2004 third
quarters or for the nine months ended February 28, 2005 and February 29,
2004.  Increases in Schiff Specialty allowances for sales returns primarily
resulting from the risks associated with the launch of new products, were
substantially offset by decreases in allowances for sales returns in our Active
Nutrition unit.  At February 28, 2005 and May 31, 2004, our allowance
for doubtful accounts, sales returns and discounts amounted to approximately
$6.2 million and $6.5 million, respectively.  Actual results may
differ resulting in adjustment of the respective
allowance(s).




●We currently have deferred tax assets
resulting from certain loss carry forwards and other temporary differences
between financial and income tax reporting. These deferred tax assets are
subject to periodic recoverability assessments. The realization of these
deferred tax assets is primarily dependent on future operating results. To the
extent that it is more likely than not that future operations will not generate
sufficient profit to utilize the loss carry forwards, valuation allowances are
established.  At February 28, 2005 and May 31, 2004 our deferred tax asset
valuation allowances amounted to approximately $4.6 million.





●  We have significant
intangible assets, including trademarks, patents and goodwill. The determination
of related estimated useful lives and whether or not these assets are impaired
involves significant judgments. Changes in strategy or market conditions could
significantly impact these judgments and require adjustments to recorded asset
balances.





**Impact of
Inflation**





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





**Seasonality**





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





**Forward
Looking Statements**





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





Important factors
that may affect our future performance or cause these forward looking statements
to be false include, but are not limited to the following.





***Dependence
on Significant Customers*** **.** Our largest customers are Costco and Wal-Mart. Combined, these two customers
accounted for approximately 49% and 52%, respectively, of our total net sales
for the nine months ended February 28, 2005 and February 28, 2004. The loss of
either Costco or Wal-Mart as a customer, or a significant reduction in purchase
volume by Costco or Wal-Mart, could have a material adverse effect on our
results of operations and financial condition. We cannot assure you that Costco
and/or Wal-Mart will continue to be significant customers.





***Availability
of Raw Materials.*** We
obtain all of our raw materials for the manufacture of our products from third
parties. We cannot assure you that suppliers will provide the raw materials we
need in the quantities requested, at a price we are willing to pay, or that meet
our quality standards and labeling requirements. Any significant delay in or
disruption of the supply of raw materials could, among other things,
substantially increase the cost of such materials, require reformulation or
repackaging of products, require the qualification of new suppliers, or result
in our inability to meet customer demands for certain products. In addition, we
also acquire a significant amount of ingredients for a number of our products
(particularly joint care products) from suppliers outside of the United States,
particularly in China. Accordingly, the acquisition of these ingredients is
subject to the risks generally associated with importing raw materials,
including, among other factors, delays in shipments, changes in economic and
political conditions, quality assurance, tariffs, trade disputes and foreign
currency fluctuations. The discovery of Bovine Spongiform Encephalopathy,
commonly referred to as “mad cow disease”, in a country from which we obtain a
significant amount of our raw materials derived from bovine sources could
prevent us from purchasing such raw materials in the required quantities at an
acceptable price, or at all. The occurrence of any of the foregoing,
particularly with respect to raw materials needed for our joint care products,
could have a material adverse effect on our results of operations and financial
condition.





- 19 -
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***Dependence
on Individual Products*** **.** Certain products and product lines account for a significant amount of our total
net sales. Net sales for our Schiff Move Free brand were approximately 26% and
29%, respectively, of our total net sales for the nine months ended February 28,
2005 and February 29, 2004. We cannot assure you that Schiff Move Free or other
of our products currently experiencing strong popularity and growth will
maintain sales levels over time. The inability to successfully
implement marketing and spending programs behind our Schiff Move Free brand and
other branded products could have a material adverse effect on our results of
operations and financial condition.





***Dependence
on New Products*** **.** We believe our
ability to grow in existing markets is partially dependent upon our ability to
introduce new and innovative products. Although we seek to introduce additional
products each year, the success of new products is subject to a number of
variables, including developing products that will appeal to customers and
comply with applicable regulations. For example, if we are unable to
successfully launch and gain distribution for our Schiff Lubriflex 3 product and Schiff
Move Free product enhancements, our results of operations could suffer. In
addition, the inability to successfully relaunch brands and new products in our
Haleko unit would adversely affect our results of operations. We cannot assure
you that our efforts to develop and introduce innovative new products will be
successful or that customers will accept new products.





***Acquisitions
and Investments.*** An
element of our strategy going forward includes expanding our product offerings,
enhancing business development and gaining access to new skills and other
resources through strategic acquisitions and investments when attractive
opportunities arise. There can be no assurance that attractive acquisition
opportunities will be available to us, that we will be able to obtain financing
for or otherwise consummate any acquisitions or that any acquisitions which are
consummated will prove to be successful.





***Risks
of Competition*** **.** The market for the sale of nutritional supplements is highly competitive.
Certain of our principal competitors have greater financial and other resources
available to them and possess extensive manufacturing, distribution and
marketing capabilities. Private label products of our customers, which have been
significantly increasing in certain nutrition categories, also represent
significant competition to our products.  Pricing
pressure could adversely affect our ability topass on raw
material price increases to customers and negatively impact our financial
performance.Increased competition from competitors and from
private label pressures could have a material adverse effect on our results of
operations and financial condition.





***Effect
of Unfavorable Publicity*** **.** We
believe our sales depend on consumer perceptions of the safety, quality and
efficacy of our products as well as products distributed and sold by other
companies. Consumer perceptions are influenced by national media attention
regarding our products and other nutritional supplements. We expect that there
will be some unfavorable future publicity or scientific research. Future
unfavorable reports or publicity could have a material adverse effect on our
results of operations and financial condition.





Ephedra
has been the subject of certain adverse publicity relating to alleged harmful or
adverse effects. The Food and Drug Administration ("FDA") has recently
prohibited the sale of dietary supplements containing ephedra. A number of state
and local governments also have proposed or passed legislation regulating or
prohibiting the sale of ephedra products. We are not able to predict whether
ephedra products will be subject to further federal, state, local, or foreign
laws or regulations or whether adverse publicity regarding ephedra will continue
or increase. We are currently a party to certain lawsuits regarding the sale of
ephedra products. In connection with
the sale of the American Body Building and Science Foods brands in July 2002, we
discontinued the sale of products that contain ephedra .





***Product
Liability and Availability of Related Insurance*** **.** As
a manufacturer and distributor of products designed to be ingested, we face an
inherent risk of exposure to product liability claims. Certain damages in
litigation, such as punitive damages, are generally not covered by insurance. In
the event that we do not have adequate insurance or other indemnification
coverage, product liability claims could have a material adverse effect on our
results of operations and financial condition.


We
have been and are currently named as a defendant in product liability lawsuits
regarding certain of our ephedra products. Prior to September 1, 2001, we
maintained, on an occurrence basis, both primary and excess insurance coverage
regarding our ephedra products. Subsequent to September 1, 2001, we maintained,
on a claims made basis, primary but not excess coverage regarding our ephedra
products, with very limited coverage on only certain ephedra products for the
policy period which ended on September 1, 2003. Subsequent to September 1, 2003,
we have not maintained any insurance coverage regarding ephedra products. Only
one of our lawsuits regarding ephedra products is covered by insurance. In
connection with the sale of the American Body Building and Science Foods brands
in July 2002, we discontinued the sale of products that contain ephedra.
However, we cannot assure you that we will not be subject to further litigation
with respect to ephedra products we have already sold.


******


***Impact
of Government Regulation on Our Operations*** **.** Our operations, properties and products are subject to regulation by various
foreign, federal, state and local government entities and agencies, particularly
the FDA and the Federal
Trade Commission .
Among other matters, government regulation covers statements and claims made in
connection with the packaging, labeling, marketing and advertising of our
products. Governmental agencies have a variety of processes and remedies
available to them, including initiating investigations, issuing warning letters
and cease and desist orders, requiring corrective labeling or advertising,
requiring consumer redress, seeking injunctive relief or product seizure,
imposing civil penalties or commencing criminal prosecution. As a result of our
efforts to comply with applicable statutes and regulations, from time to time we
have reformulated, eliminated or relabeled certain of our products and revised
certain aspects of our sales, marketing and advertising programs.





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The FDA has
proposed extensive good manufacturing practice regulations for dietary
supplements. In addition, we may be subject to additional laws or regulations
administered by federal, state, or foreign regulatory authorities, the repeal or
amendment of laws or regulations which we consider favorable, such as the
Dietary Supplement Health and Education Act of 1994, as amended, or more
stringent interpretations of current laws or regulations. We are unable to
predict the nature of such future laws, regulations, interpretations or
applications, nor can we predict what effect additional governmental regulations
or administrative orders, when and if promulgated, would have on our business in
the future. Any or all of these requirements and the related costs to comply
with such requirements could have a material adverse effect on our results of
operations and financial condition.





***Restrictions
Imposed by Terms of Our Indebtedness*** **.** Our borrowing arrangements impose certain financial and operating covenants,
including, among others, requirements that we maintain, under certain
circumstances, certain financial ratios and satisfy certain financial tests,
limitations on capital expenditures and restrictions, or limitations on our
ability to incur debt, pay dividends, or take certain other corporate actions,
all of which may restrict our ability to expand or pursue our business
strategies. Changes in economic or business conditions, results of operations or
other factors could cause a violation of one or more covenants in our debt
instruments.





***Risks
Associated with International Markets*** **.** We
have significant international operations, with approximately 33% and 32%,
respectively, of our net sales for the nine months ended February 28, 2005 and
February 29, 2004 generated outside the United States. Operating in
international markets exposes us to certain risks, including, among others,
changes in or interpretations of foreign regulations that may limit our ability
to sell certain products or repatriate products to the United States, foreign
currency fluctuations, the potential imposition of trade or foreign exchange
restrictions or increased tariffs and political instability. The occurrence of
any of the foregoing could have a material adverse effect on our results of
operations and financial condition.





***Control
by Principal Stockholder*** **.** WHF owns all of our outstanding shares of Class B common stock, representing
over 90% of the aggregate voting power of all outstanding shares of our common
stock. WHF is in a position to exercise control over us and to determine the
outcome of all matters required to be submitted to stockholders for approval
(except as otherwise provided by law or by our amended and restated certificate
of incorporation or amended and restated bylaws) and otherwise to direct and
control our operations. Accordingly, we cannot engage in any strategic
transactions without the approval of WHF.







***Third-Party
Intellectual Property Rights and Proprietary Techniques.*** Although
the nutritional supplement industry has historically been characterized by
products with naturally occurring ingredients in pill or tablet form, recently
it is becoming more common for suppliers and competitors to apply for patents or
develop proprietary technologies and processes. Although we seek to ensure that
we do not infringe the intellectual property rights of others, there can be no
assurance that third parties will not assert intellectual property infringement
claims against us. To the extent that these developments prevent us from
offering or supplying competitive products or ingredients in the marketplace, or
result in litigation or threatened litigation against us related to alleged or
actual infringement of third-party rights, these developments could have a
material adverse effect on our results of operations and financial
condition.







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





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





Our cash flows and
net earnings are subject to fluctuations resulting from changes in interest
rates and foreign exchange rates. We currently are party to one modest interest
rate derivative relating to our Haleko business unit. Our current policy does
not allow speculation in derivative instruments for profit or execution of
derivative instrument contracts for which there is no underlying exposure. We do
not use financial instruments for trading purposes.





Since we have
subsidiaries whose net sales and expenses are denominated in foreign currencies
(primarily the Euro), changes in the value of these foreign currencies relative
to the value of the U.S. dollar may impact our reported net earnings. The U.S.
dollar volume of these foreign currency denominated net sales was approximately
$62.3 million, or 30.8% of total net sales, for the nine months ended February
28, 2005. The impact of fluctuations in foreign currency exchange rates resulted
in an approximate $4.3 million increase in net sales for the nine months ended
February 28, 2005. The impact of fluctuations in foreign currency exchange rates
on operating income was negligible for the same time period.





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





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





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





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





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





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





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





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





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





None





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





Not
applicable





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





None





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





Not
applicable





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





3.1
    Amended and
      Restated Certificate of Incorporation of Weider Nutrition International,
      Inc. (1)


3.2
    Amended and
      Restated Bylaws of Weider Nutrition International, Inc.
(1)


31.1
    Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002 (2)


31.2
    Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002 (2)


32.1
    Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to Section
      906 of the Sarbanes-Oxley Act of 2002 (2)





(1)
    Filed as an
      Exhibit to the Company’s Registration Statement on Form S-1 (File No.
      333-12929) and incorporated herein by
reference.


(2)
    Filed
      herewith.








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**SIGNATURES**











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


****


****


**WEIDER NUTRITION
INTERNATIONAL, INC.**








Date: April
      8, 2005
    By: /s/ Bruce
      J. WoodBruce J. WoodPresident,
      Chief ExecutiveOfficer and
      Director








Date: April
      8, 2005
    By: /s/
      Joseph W. BatyJoseph W.
      BatyExecutive
      Vice President andChief
      Financial Officer











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