UNITED STATES


SECURITIES AND EXCHANGE
COMMISSION


WASHINGTON, D.C.
20549








FORM 10-Q





þ
            QUARTERLY REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For the quarterly period ended
      August 31, 2008q
            TRANSITION REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For the transition period from
      ____ to ____.Commission file
      number:001-14608





SCHIFF NUTRITION INTERNATIONAL,
INC.


(Exact name of registrant as specified
in its charter)





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





(801) 975-5000


(Registrant’s telephone number,
including area code)





Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days.  YesþNoq





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





Large Accelerated Filerq                                                                                                          Accelerated Filerq


Non-Accelerated Filerq(Do not check if a
smaller reporting
company)                                                                              Smaller reporting companyþ





Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).  YesqNoþ





As of October6, 2008 the registrant had outstanding12,405,559shares of Class A common stock and
14,973,148 shares of Class B common stock.




Schiff
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
 1.
              BASIS OF PRESENTATION
      AND OTHER MATTERS
 2.
              AVAILABLE-FOR-SALE
      SECURITIES
 3.
              RECEIVABLES,
      NET
 4.
              INVENTORIES
 5.
              GOODWILL AND
      INTANGIBLE ASSETS, NET
 6.
              ACCRUED
      EXPENSES
 7.
              CAPITAL
      STRUCTURE
 8.
              EARNINGS PER
      SHARE
 9.
              CONCENTRATION OF
      CREDIT RISK AND SIGNIFICANT CUSTOMERS AND
    PRODUCTS
 10.
              COMMITMENTS AND
      CONTINGENCIES
 11.
              RECENTLY ISSUED
      ACCOUNTING STANDARDS
 
 ITEM
      2.
              MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
 -
              General
 -
              Results of
      Operations (unaudited)
 -
              Liquidity and
      Capital Resources
 -
              Critical
      Accounting Policies and
Estimates
 -
              Impact of
      Inflation
 -
              Seasonality
 
 ITEM
      3.
              QUANTITATIVE AND
      QUALITATIVE DISCLOSURES ABOUT MARKET
  RISK
 ITEM
      4T.
              CONTROLS AND
      PROCEDURES
 
 PART II. OTHER
INFORMATION
 
 ITEM
      1.
              LEGAL
      PROCEEDINGS
 ITEM
      1A.
              RISK
      FACTORS
 ITEM
      2.
              UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF
  PROCEEDS
 ITEM
      3.
              DEFAULTS UPON
      SENIOR SECURITIES
 ITEM
      4.
              SUBMISSION OF
      MATTERS TO A VOTE OF SECURITY
HOLDERS
 ITEM
      5.
              OTHER
      INFORMATION
 ITEM
      6.
              EXHIBITS
 
 SIGNATURES
 
 Exhibit
      31.1
              Certification of CEO pursuant to Section 302 of the
      Sarbanes-Oxley Act
 Exhibit
      31.2
              Certification of CFO pursuant to Section 302 of the
      Sarbanes-Oxley Act
 Exhibit
      32.1
              CEO and
      CFO Certifications pursuant to Section 906 of the Sarbanes-Oxley
      Act





PART I. FINANCIAL INFORMATION





ITEM 1.FINANCIAL
STATEMENTS





SCHIFF NUTRITION
INTERNATIONAL, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE
SHEETS


(inthousands, except share data)





August 31,
      2008
            
            
            May 31,2008ASSETS
            
            (unaudited)Current
    assets:Cash and cash
      equivalents
            
            $
            44,400
            
            
            $
            45,979Available-for-sale
      securities
            
            
            1,000
            
            
            
            3,298Receivables,
      net
            
            
            24,478
            
            
            
            22,536Inventories
            
            
            32,013
            
            
            
            29,233Prepaid expenses and
      other
            
            
            1,277
            
            
            
            1,948Deferred taxes,
      net
            
            
            2,564
            
            
            
            1,761Total current
      assets
            
            
            105,732
            
            
            
            104,755Property and equipment,
      net
            
            
            13,025
            
            
            
            13,567Other
      assets:Goodwill
            
            
            4,346
            
            
            
            4,346Available-for-sale
      securities
            
            
            1,265
            
            
            
            1,265Deposits and other
      assets
            
            
            8
            
            
            
            12Deferred taxes,
      net
            
            
            503
            
            
            
            541Total other
      assets
            
            
            6,122
            
            
            
            6,164Total
      assets
            
            $
            124,879
            
            
            $
            124,486LIABILITIES AND STOCKHOLDERS'
      EQUITYCurrent
      liabilities:Accounts
      payable
            
            $
            10,911
            
            
            $
            11,075Accrued
      expenses
            
            
            9,745
            
            
            
            11,153Dividends
      payable
            
            
            45
            
            
            
            1,046Income taxes
      payable
            
            
            671
            
            
            
            —Total current
      liabilities
            
            
            21,372
            
            
            
            23,274Long-term
      liabilities:Dividends
      payable
            
            
            1,193
            
            
            
            1,201Other
            
            
            535
            
            
            
            524Total long-term
      liabilities
            
            
            1,728
            
            
            
            1,725Commitments and contingencies
      (Note 10)Stockholders'
      equity:Preferred stock, par value $.01
      per share; shares authorized-10,000,000; no shares issued and
      outstanding
            
            
            —
            
            
            
            —Class A common stock, par value
      $.01 per share; shares authorized-50,000,000; shares issued and
      outstanding-12,296,270 and 11,782,390
            
            
            123
            
            
            
            118Class B common stock, par value
      $.01 per share; shares authorized-25,000,000; shares issued and
      outstanding-14,973,148
            
            
            150
            
            
            
            150Additional paid-in
      capital
            
            
            88,430
            
            
            
            89,393Retained
      earnings
            
            
            13,076
            
            
            
            9,826Total stockholders'
      equity
            
            
            101,779
            
            
            
            99,487Total liabilities and
      stockholders' equity
            
            $
            124,879
            
            
            $
            124,486







See notes to condensed consolidated
financial statements.





2
 SCHIFF NUTRITION INTERNATIONAL, INC. AND
SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
 (in
thousands, except share data)
 (unaudited)








Three Months EndedAugust 31,2008
            
            
            2007Net sales
            
            $
            47,790
            
            
            $
            40,727Cost of goods
      sold
            
            
            29,912
            
            
            
            24,306Gross
profit
            
            
            17,878
            
            
            
            16,421Operating
      expenses:Selling and
      marketing
            
            
            8,133
            
            
            
            6,756General and
      administrative
            
            
            3,737
            
            
            
            6,787Research and
      development
            
            
            988
            
            
            
            1,026Total operating
      expenses
            
            
            12,858
            
            
            
            14,569Income from
      operations
            
            
            5,020
            
            
            
            1,852Other income
      (expense):Interest
      income
            
            
            307
            
            
            
            821Interest
      expense
            
            
            (26
            )
            
            
            (27
            )Other,
      net
            
            
            (2
            )
            
            
            4Total other income,
      net
            
            
            279
            
            
            
            798Income before income
      taxes
            
            
            5,299
            
            
            
            2,650Income tax
      expense
            
            
            2,050
            
            
            
            1,002Net income
            
            $
            3,249
            
            
            $
            1,648Weighted average shares
      outstanding:Basic
            
            
            27,210,303
            
            
            
            26,622,423Diluted
            
            
            28,627,446
            
            
            
            27,426,939Net income per
      share:Basic
            
            $
            0.12
            
            
            $
            0.06Diluted
            
            $
            0.11
            
            
            $
            0.06Comprehensive
      income
            
            $
            3,249
            
            
            $
            1,648







See notes to condensed consolidated
financial statements.





3
 SCHIFF NUTRITION INTERNATIONAL, INC. AND
SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in
thousands, except share data)
 (unaudited)








Three Months EndedAugust 31,2008
            
            
            2007Cash flows from operating
      activities:Net income
            
            $
            3,249
            
            
            $
            1,648Adjustments to reconcile net
      income to net cash provided by (used in) operating
      activities:Deferred
      taxes
            
            
            (765
            )
            
            
            (264
            )Depreciation and
      amortization
            
            
            805
            
            
            
            886Amortization of financing
      fees
            
            
            4
            
            
            
            4Stock-based
      compensation
            
            
            106
            
            
            
            3,937Excess tax benefit from equity
      instruments
            
            
            (161
            )
            
            
            (262
            )Other
            
            
            3
            
            
            
            2Changes in operating assets and
      liabilities:Receivables
            
            
            (1,942
            )
            
            
            (300
            )Inventories
            
            
            (2,780
            )
            
            
            (1,777
            )Prepaid expenses and
      other
            
            
            671
            
            
            
            808Deposits and other
      assets
            
            
            —
            
            
            
            31Accounts
      payable
            
            
            (183
            )
            
            
            67Other current
      liabilities
            
            
            (576
            )
            
            
            (1,850
            )Other long-term
      liabilities
            
            
            11
            
            
            
            10Net cash provided by (used in)
      operating activities
            
            
            (1,558
            )
            
            
            2,940Cash flows from investing
      activities:Purchase of property and
      equipment
            
            
            (245
            )
            
            
            (1,664
            )Purchase of available-for-sale
      securities
            
            
            (500
            )
            
            
            (6,040
            )Proceeds from sale of
      available-for-sale securities
            
            
            2,800
            
            
            
            27,852Net cash provided by investing
      activities
            
            
            2,055
            
            
            
            20,148Cash flows from financing
      activities:Proceeds from stock options
      exercised
            
            
            —
            
            
            
            34Purchase and retirement of common
      stock
            
            
            (1,226
            )
            
            
            (120
            )Excess tax benefit from equity
      instruments
            
            
            161
            
            
            
            262Dividends
      paid
            
            
            (1,009
            )
            
            
            (42,618
            )Net cash used in financing
      activities
            
            
            (2,074
            )
            
            
            (42,442
            )Effect of exchange rate changes on
      cash
            
            
            (2
            )
            
            
            —Decrease in cash and cash
      equivalents
            
            
            (1,579
            )
            
            
            (19,354
            )Cash and cash equivalents,
      beginning of period
            
            
            45,979
            
            
            
            34,463Cash and cash equivalents, end of
      period
            
            $
            44,400
            
            
            $
            15,109







See notes to condensed consolidated
financial statements.





4
 SCHIFF NUTRITION INTERNATIONAL, INC. AND
SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (dollars
in thousands, except share data)





1.BASIS OF PRESENTATION AND OTHER
MATTERS





The accompanying unaudited interim
condensed consolidated financial statements (“interim financial statements”) of
Schiff Nutrition International, Inc. and its subsidiaries (the “Company,” “we,”
“us” and “our”) 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, 2008 as filed with the Securities and Exchange Commission
(“SEC”).  The May 31, 2008 condensed consolidated balance sheet,
included herein, was derived from our audited financial statements, but all
disclosures required by generally accepted accounting principles are not
provided in the accompanying footnotes.  We are a majority-owned
subsidiary of Weider Health and Fitness (“WHF”).





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





OnMarch 17, 2006, the Compensation Committee of our
Board of Directors, pursuant to our 2004 Incentive Award Plan, approved the
adoption of a long term incentive plan involving the grant of performance based
restricted stock units (the “Units”).  OnMarch 20, 2006, a total of 1,437,200 Units were issued
to certain officers and employees.  Each Unit represents the right to
receive one share of the Company’s Class A common stock, subject to certain
performance based vesting requirements.  The Unitsvestedbased on the Company’s performance in
relation to certain specified pre-established performance criteria targets over
a performance period beginning on January 1, 2006 and expiring on May 31,
2008.  The performance criteria upon which the Unitsvested wasbased upon a “Business Value Created”
formula, whichwascomprised of two performance criteria
components: operating earnings and return on net capital.  Based upon
the amount of Business ValueCreated in accordance with the formula,
the Units vested in full at May 31, 2008.  The grant date fair value
of each Unit was $5.11.  We recognizedcompensation expense over the
performance period based on a periodic assessment of the probability that the
performance criteriawouldbe achieved.  For the fiscal
2008 first quarter, we recognized compensation expense of $812, and the related
tax benefit of approximately $324.





During the fiscal 2009 first quarter, we
issued, at $5.47 per share, 466,891 shares of Class A common stock, net of
206,509 shares withheld and effectively reacquired in connection with the
payment of individual income taxes, to certain employees for certain Units
vested at May 31, 2008.  The shares underlying the remaining vested
Units will be issued on specified future dates in accordance with previous
deferral elections as determined by certain recipients.  Also during
the fiscal 2009 first quarter, we withheld and effectively reacquired, at an
average price of approximately $6.77 per share, 48,812 shares from certain
employees in connection with non-cash net settlement(s) resulting from options
exercised.  Pursuant to our 2004 Incentive Award Plan, we provide a
net settlement arrangement for employees and directors whereby we withhold
shares with a fair value on the date of exercise equal to the option exercise
price from shares that would otherwise be issued upon exercise of the vested
options.  Concurrent with the net settlement(s), we withheld and
effectively reacquired, at an average price of approximately $6.77 per share,
14,199 additional shares in connection with the payment of individual income
taxes.




Purchase of property and equipment
included in accounts payable amounted to $18 and $336, respectively, for the
fiscal 2009and 2008first quarters.





2.AVAILABLE-FOR-SALE
SECURITIES




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





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




August 31,
      2008
            
            
            May 31,2008Federal, state and municipal debt
      securities
            
            $
            965
            
            
            $
            3,764Corporate debt
      securities
            
            
            800
            
            
            
            799Certificate of
      deposit
            
            
            500
            
            
            
            —2,265
            
            
            
            4,563Less long-term
      portion
            
            
            1,265
            
            
            
            1,265$
            1,000
            
            
            $
            3,298




Despite the underlying long-term
contractual maturity of ARS, there was generally a ready liquid market for these
securities based on the interest reset mechanism.  However, as a
result of current negative liquidity and uncertainty in financial credit
markets, we have experienced “failed” auctions associated with our
ARS.  In the case of a failed auction, the ARS become illiquid
long-term bonds (until a future auction is successful or the security is called
prior to the contractual maturity date by the issuer) and the rates are reset in
accordance with terms in the prospectus/offering circular.  At August
31, 2008, total available-for-sale securities included $1,265 in ARS which
experienced remarketing failures and are included in long-term
assets.TheseARS consist primarily of fully insured,
AAA rated municipal or state agency issued securities. Contractual maturities of
debt securities are as follows at August 31, 2008:




Less than one
      year
            
            $
            500One to five
      years
            
            
            —Over five
    years
            
            
            1,265Total
            
            $
            1,765




The amount of unrealized gains or losses
for the fiscal 2009and 2008 first quarterwas not
significant.







5
 SCHIFF
NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (continued)
 (dollars
in thousands, except share data)







Available-for-sale securities were
measured at fair value at August 31, 2008, using:
 
 Quoted prices in active markets
      for identical assets (Level 1)
              
              $
              1,000Significant other observable
      inputs (Level 2)
              
              
              —Significant unobservable inputs
      (Level 3)
              
              
              1,265$
              2,265
  There were no changes in the beginning
and ending balances, including gains or losses, purchases, sales, issuances or
settlements, or transfers in or out, of available-for-sale securities measured
at fair value using significant unobservable inputs.


3.RECEIVABLES,
NET





Receivables, net, consist of the
following:




August 31,
      2008
            
            
            May 31,
      2008Trade
    accounts
            
            $
            26,493
            
            
            $
            21,938Refundable income
      taxes
            
            
            —
            
            
            
            1,969Other
            
            
            59
            
            
            
            16226,552
            
            
            
            24,069Less allowances for doubtful
      accounts, sales returns and discounts
            
            
            (2,074
            )
            
            
            (1,533
            )Total
            
            $
            24,478
            
            
            $
            22,536





4.INVENTORIES





Inventories consist of the
following:




August 31,
      2008
            
            
            May 31,
      2008Raw
    materials
            
            $
            12,093
            
            
            $
            9,458Work in
      process
            
            
            1,414
            
            
            
            1,897Finished
    goods
            
            
            18,506
            
            
            
            17,878Total
            
            $
            32,013
            
            
            $
            29,233





5.GOODWILL AND INTANGIBLE ASSETS,
NET





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





August 31,
    2008
            
            
            May 31,
2008Gross 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
            $
            700
            
            $
            (700
            )
            
            $
            —
            
            
            $
            2,090
            
            
            $
            (2,090
            )
            
            $
            —





Estimated amortization expense, assuming
no changes in our intangible assets, is zero for all future fiscal
years.





The carrying amount of goodwill did not
change during the fiscal 2009and 2008first quarters.











6
 SCHIFF
NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (continued)
 (dollars
in thousands, except share data)







6.ACCRUED
EXPENSES
 
 Accrued expenses consist of the
following:
  August 31,
      2008
              
              
              May 31,
      2008Accrued personnel related
      costs
              
              $
              1,822
              
              
              $
              4,011Accrued promotional
      costs
              
              
              6,069
              
              
              
              5,117Other
              
              
              1,854
              
              
              
              2,025Total
              
              $
              9,745
              
              
              $
              11,153
 7.CAPITAL
STRUCTURE





We have two classes of common stock
outstanding.  Both classes of common stock generally have identical
rights and privileges, with the exception of voting and conversion, or transfer
rights.  Each holder of Class A or Class B common stock is entitled to
share ratably in any dividends, liquidating distributions or consideration
resulting from certain business combinations.  However, each holder of
Class A common stock is entitled to one vote for each share held while each
holder of Class B common stock is entitled to ten votes for each share
held.  The holders of the Class A common stock and Class B common
stock vote together as a single class.  Class A common stock cannot be
converted into any other securities of the Company, while Class B common stock
holders have the right to convert their shares into Class A common stock on a
one-to-one basis.  In addition, generally, any shares of Class B
common stock that are transferred will automatically convert into shares of
Class A common stock on a one-to-one basis.





8.EARNINGS PER
SHARE





The following is a reconciliation of the
numerators and the denominators of the basic and diluted earnings per share
computations (dollars in thousands):




Three Months Ended August
      31,2008
            
            
            2007Income available to common
      shareholders (numerator):Net income
            
            $
            3,249
            
            
            $
            1,648Adjustments
            
            
            —
            
            
            
            —Income on which basic and diluted
      earnings per share are calculated
            
            $
            3,249
            
            
            $
            1,648Weighted-average number of common
      shares outstanding (denominator):Basic
            
            
            27,210,303
            
            
            
            26,622,423Add-incremental shares from
      restricted stock
            
            
            14,763
            
            
            
            —Add-incremental shares from
      restricted stock units
            
            
            740,758
            
            
            
            127,564Add-incremental shares from stock
      options
            
            
            661,622
            
            
            
            676,952Diluted
            
            
            28,627,446
            
            
            
            27,426,939





Options to purchase 32,000 shares of
Class A common stock at prices ranges from $6.00 to $7.05 per share were
outstanding during the fiscal 2009first quarter but were not included in
the computation of diluted earnings per share because the options’ exercise
prices were greater than the average market price of the common
shares.





9.CONCENTRATION OF CREDIT RISK AND
SIGNIFICANT CUSTOMERS AND PRODUCTS





Financial instruments that potentially
subject us to significant concentrations of credit risk consist primarily of
cash and cash equivalents, available-for-sale securities and accounts
receivable.  Historically, we invested our excess cash in
high-quality, liquid money market accounts, commercial paper, ARS and other
variable rate debt and equity securities.  While the underlying
securities generally have contractual maturities between 20 and 30 years, the
interest rates on ARS typically reset at intervals between 7 to 35
days.  Despite the underlying long-term maturity of these securities,
from the investor’s perspective, such securities were priced and subsequently
tradedas short-term investments because of
the interest rate reset feature.  As a result, we generally had the
ability to quickly liquidate these securities.








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




As a result of current negative
liquidity and uncertainty in financial credit markets, we elected to liquidate
our investments in ARS and other variable rate debt
securities.  Proceeds from the sale of these available-for-sale
securities were invested in money market accounts, certificates of deposit,
United States Treasury Bills with maturities of three months or less, and
high-quality commercial paper, substantially all of which are
included in cash and cash equivalents.  Generally, our cash and
cash equivalents exceed Federal Deposit Insurance Corporation limits on
insurable amounts; thus exposing us to certain credit risk.  We
minimize our risk by investing in or through major financial
institutions.  We have not experienced any realized losses on our cash
equivalents and available-for-sale securities.
 
 At August 31, 2008, we held
approximately $2,265 in available-for-sale securities; consisting of
approximately $1,265 in ARS, along with corporate debt securities andacertificate of
deposit.TheARS consist primarily of
fully insured, AAA rated municipal or state agency issued securities. In
determining the fair value of our available-for-sale securities at August 31,
2008, we have taken into consideration fair values determined by the financial
institutions, current credit rating of the debt securities, insurance
provisions, discounted cash flow analysis, as deemed appropriate, and our
current liquidity position. Although we believe the remaining ARS and other
available-for-sale securities will ultimately be liquidated at or near ourcurrent carrying
value, any substantial
impairment in the value of these securities could adversely impact our results
of operations and financial condition.




With respect to accounts receivable, we
perform ongoing credit evaluations of our customers and monitor collections from
customers continuously.  We maintain an allowance for doubtful
accounts which is based upon historical experience as well as specific customer
collection issues.  Historically, bad debt expenses have not been
significant and have been within expectations and allowances
established.  However, we cannot guarantee that we will continue to
experience the same credit loss rates that we have in the past.  If
the financial condition of one or more of our customers were to deteriorate,
additional allowances may be required.





The combined net sales to our two
largest customers are significant.  At August 31, 2008 and May 31,
2008, respectively, amounts due from Customer A represented approximately 37%
and 53%, and amounts due from Customer B represented approximately 39% and 24%,
of total trade accounts receivable.  For the first quarter of fiscal
2009and 2008, respectively, Customer A accounted for
approximately 44% and 39% and Customer B accounted for approximately 29% and 34%
of total net sales.  Net sales of our Schiff®Move
Free®brand accountedfor
approximately 41% and 51%, respectively, of total net sales for the fiscal
2009and 2008first quarters.





10.COMMITMENTS AND
CONTINGENCIES





From time to time, we are involved in
claims, legal actions and governmental proceedings that arise from our business
operations.  Although ultimate liability cannot be determined at the
present time, based on available information, we do not believe the resolution
of these matters will have a material adverse effect on our results of
operations and financial condition.  However, it is possible that
future litigation could arise, or that developments could occur in existing
litigation, that could have a material adverse effect on our results of
operations and financial condition.





11.RECENTLY ISSUED ACCOUNTING
STANDARDS





In September 2006, the FASB issued
Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value
Measurement,” that defines fair value, establishes a framework for measuring
fair value, and expands disclosures about fair value
measurements.  SFAS No. 157 retains the exchange price notion in
defining fair value and clarifies that the exchange price is the price in an
orderly transaction between market participants to sell the asset or transfer
the liability in the market in which the reporting entity would transact for the
asset or liability.  The definition focuses on the price that would be
received to sell the asset or paid to transfer the liability (an exit price),
not the price that would be paid to acquire the asset or received to assume the
liability (an entry price).  SFAS No. 157 expands disclosure about the
use of fair value to measure assets and liabilities in interim and annual
periods subsequent to initial recognition.  The additional disclosure
focuses on the inputs used to measure fair value and the effect of the
measurements on net income for the reporting period.  The fair value
measurement and disclosure provisions of SFAS No. 157 are effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years.  In February 2008, the
FASB issued Staff Position ("FSP") 157-2.  FSP 157-2 delays the
effective date of SFAS No. 157 for all non-financial assets and liabilities that
are recognized or disclosed at fair value in the financial statements on a
nonrecurring basis.  FSP 157-2 is effective for fiscal years beginning
after November 15, 2008, and interim periods within those fiscal
years.On June
1, 2008, we applied the provisions of SFAS No. 157 to our financial assets and
liabilities.  The partial adoption of SFAS No. 157 did not
significantly impact our results of operations and financial
condition.  Pursuant to FSP 157-2, we have not yet applied the
provisions of SFAS No. 157 to certain non-financial assets and liabilities,
including primarily property and equipment, goodwill and other intangible
assets.We have
not yet determined the impact ofapplying the provisions ofSFAS No. 157to such assets and liabilitieson our results of
operations and financial condition.





In February 2007, the FASB issued SFAS
No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,”
which permits entities to choose to measure many financial instruments and
certain other items at fair value that are not currently required to be measured
at fair value.  SFAS No. 159 also establishes presentation and
disclosure requirements designed to facilitate comparisons between entities that
choose different measurement attributes for similar types of assets and
liabilities.  The measurement and disclosure provisions of SFAS No.
159 are effective as of the beginning of an entity’s first fiscal year that
begins after November 15, 2007.  We did not elect to measure any such
existing financial instruments or other items at fair value.





8





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 condensed consolidated financial
statements, including the notes thereto, appearing elsewhere in this Quarterly
Report on Form 10-Q and other reports filed with the SEC. Sections of this Form
10-Q including, in particular, our Management’s Discussion and Analysis of
Financial Condition and Results of Operations, 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 (the
“Exchange Act”).  These statements 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,” “intends,” or similar expressions, are forward-looking
statements.  These statements are subject to risks and uncertainties,
certain of which are beyond our control, and therefore, actual results may
differ materially.  Important factors that may cause results to
materially differ from these forward-looking statements include, but are not
limited to, the factors indicated from time to time in our reports filed with
the SEC, copies of which are available upon request from our investor relations
group or which may be obtained at the SEC’s website
(www.sec.gov).  Forward-looking statements only speak as of the date
hereof and we do not undertake and expressly disclaim any obligation to update
or release any revisions to any forward-looking statement whether as a result of
new information, future events or otherwise, except as required by
law.





General





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





During fiscal 2008 and the fiscal 2009
first quarter, we continued to provide selling and marketing support intended
both to defend our overall Move Free business against competition, including
private label, and ultimately to increase our market share in the joint care
product category.During our fiscal 2008 third
quarter, we announcedtheintroduction of smaller tablets for our
existing Move Free items as well as the launch of a Move Free line
extension.  Operating results for fiscal 2009, as compared to fiscal 2008,areimpacted by the shifting of advertising
support from the first half to the second half of fiscal 2008 in support of
these Move Free marketing initiatives.  As a result, advertising
expense for the first quarter of fiscal 2009 wasgreaterthan the amount recognized in the
corresponding prior year period.Operating results for fiscal 2009
arealsoimpacted by incremental private label
business awarded in the latter part of fiscal 2008.The incremental business
coupled with increased volume from existing business resulted in a significant
change in quarter over quarter sales mix.   The significant
increase in lower-margin private label sales resulted in an overall lower gross
profit margin for the fiscal 2009 first quarter, as compared to the fiscal 2008
first quarter.During the latter part of fiscal 2008,
we introduced MegaRed®, an omega-3 krill oil product, into
Costco.  During the fiscal 2009 first quarter, we continued the
introduction of MegaRed into certain other retail
accounts.During fiscal 2008 and continuing in
fiscal 2009, we are attempting to increase distribution of our joint care
products in international markets.  Subject to competitive joint care
product category pricing pressures, including private label, the success of
incremental private label and new product sales and the ability to increase our
distribution in international markets, we expecta low double-digit increase in fiscal 2009 net
sales, as compared to fiscal 2008 net sales, primarily driven by incremental
private label business.





Our operating results for the fiscal
2008 first quarterwereimpacted by the declaration of a
special cash dividend in July 2007.  In connection with the
declaration of the special dividend, our Board of Directors approved certain
dividend equivalent rights allowing holders (employees and directors) of certain
equity awards, including stock options and restricted stock units, to receive
cash dividends on each share of common stock underlying the stock options and
restricted stock units.  As a result, we recognized a non-cash
compensation expense, and a corresponding increase in additional paid-in
capital, of approximately $3.0 million during the fiscal 2008 first
quarter.





Recently, we have experienced increases
in certain raw material prices.  Although, the impact of these
increases on fiscal 2009 first quarter gross profit was minimal, these increases
could have a more negative impact on our gross profit and operating results for
subsequent quarters.





Our historical results have been
affected by a variety of factors, including the implementation of strategic
initiatives and measures intended to refine our growth and business
strategies.  We continue to consider, evaluate and adjust these
initiatives and our growth and business strategies to enhance our results of
operations and profitability.  However, we cannot assure you that our
decisions and actions relating to the implementation, adjustment or continuation
of such initiatives and strategies will not adversely affect our results of
operations and financial condition.





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





9





Results of Operations
(unaudited)


Three Months Ended August 31, 2008
Compared to Three Months


Ended August 31,
2007





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





2008
            
            
            2007Net sales
            
            $
            47,790
            
            
            
            100.0
            %
            
            $
            40,727
            
            
            
            100.0
            %Cost of goods
      sold
            
            
            29,912
            
            
            
            62.6
            
            
            
            24,306
            
            
            
            59.7Gross
      profit
            
            
            17,878
            
            
            
            37.4
            
            
            
            16,421
            
            
            
            40.3Operating
      expenses:Selling and
      marketing
            
            
            8,133
            
            
            
            17.0
            
            
            
            6,756
            
            
            
            16.6General and
      administrative
            
            
            3,737
            
            
            
            7.8
            
            
            
            6,787
            
            
            
            16.6Research and
      development
            
            
            988
            
            
            
            2.1
            
            
            
            1,026
            
            
            
            2.5Total operating
      expenses
            
            
            12,858
            
            
            
            26.9
            
            
            
            14,569
            
            
            
            35.7Income from
      operations
            
            
            5,020
            
            
            
            10.5
            
            
            
            1,852
            
            
            
            4.6Other income,
      net
            
            
            279
            
            
            
            0.6
            
            
            
            798
            
            
            
            2.0Income tax
      expense
            
            
            (2,050
            )
            
            
            (4.3
            )
            
            
            (1,002
            )
            
            
            (2.5
            )Net income
            
            $
            3,249
            
            
            
            6.8
            %
            
            $
            1,648
            
            
            
            4.1
            %





Net
Sales.Net sales
increased approximately 17.3% to $47.8 million for the fiscal 2009 first
quarter, from $40.7 million for the fiscal 2008 first quarter, primarily due to
an increase in private label sales.





Aggregate branded net sales remained
relatively constant at $32.5 million and $32.3 million, respectively, for the
fiscal 2009 and 2008 first quarters.  An increase in sales volume of
approximately $2.2 million, or 5.1%, was offset by an increase in sales
promotional incentives classified as sales price reductions and an increase in
actual and potential product returns.  Classification of promotional
costs as a sales reduction is required when the promotion effectively represents
a price reduction.  The increase in branded sales volume was primarily
attributable to the introduction of new products, partially offset by a decrease in
overall joint care category sales volume.Move Free net sales were
$19.4 million and $20.8 million, respectively, for the fiscal 2009and 2008first quarters. The decrease primarily
resulted froman increase
in promotional incentives and product returns.





Private label sales increased
approximately 81.9% to $15.3 million for the fiscal 2009 first quarter, from
$8.4 million for the fiscal 2008 first quarter, primarily due to incremental
business awarded in the latter part of fiscal 2008and an increase in customer promotional
activity on existing business.  Private label sales are
expected to continue to increase in fiscal 2009, compared to fiscal 2008, due to
incremental businessand
volume increases in existing business.





Gross
Profit.Gross
profit increased approximately 8.9% to $17.9 million for the fiscal 2009 first
quarter, from $16.4million for the fiscal 2008 first
quarter.  Gross profit, as a percentage of net sales, decreased to
37.4% for the fiscal 2009 first quarter, from 40.3% for the fiscal 2008 first
quarter.These
changes reflect the significant increase in private label sales volume resulting
in amuch higher mix of
lower-margin private label sales.Increasing raw material costs did not
significantly impact the fiscal 2009 first quarter, but could negatively impactsubsequentfiscal 2009
quarters.





Operating
Expenses.Operating expenses decreased
approximately 11.7% to $12.9 million for the fiscal 2009 first quarter, from
$14.6 million for the fiscal 2008 first quarter.  Operating expenses,
as a percentage of net sales, were 26.9% and 35.7%, respectively, for the fiscal
2009 and 2008 first quarters.  Thedecrease in operating expenses resulted
primarily from a significant decrease in general and administrative expenses,
partially offset by an increase in selling and marketing
expenses.





Selling and marketing expenses,
including sales, marketing, advertising, freight and other costs, increased to
approximately $8.1 million for the fiscal 2009 first quarter, from $6.8 million
for the fiscal 2008 first quarter, primarily due to an increase in advertising
and other promotional expenses and an increase in freight costs.The increase in advertising
is primarily due to the impact of shifting advertising spending from the first
half to the second half of fiscal 2008 in support of certain Move Free marketing
initiatives.  Freight costs increased due to higher sales volumes and
increases in fuel costs.





General and administrative expenses
decreased to approximately $3.7 million for the fiscal 2009 first quarter, from
approximately $6.8 million for the fiscal 2008 first quarter.  The
fiscal 2008 first quarter includes the recognition of approximately $2.8 million
in incremental compensation expense for the special dividend.  The
special dividend compensation expense represents a non-cash charge for dividend
equivalent rights received by holders (employees and directors) of certain
equity awards, including stock options and restricted stock
units.The
fiscal 2008 first quarter also includes an approximate $0.7 million expense
associated with the previous long-term management incentive
plan.  Development of a new long-term incentive plan is currently in
process.  These reductions were partially offset by moderate increases
in other personnel related costs and professional fees.





10






Research and development costs remained
relatively constant at approximately $1.0 million for the fiscal 2009 and 2008
first quarters.





Other
Income/Expense.Other income, net, was $0.3 million for
the fiscal 2009 first quarter, compared to $0.8 million for the fiscal 2008
first quarter.  The decrease was primarily due to a reduction in
interest income resulting from a decrease in cash and available-for-sale
securities reflecting the impact of the fiscal 2008 first quarter special
dividend, which was funded from cash and liquidation of available-for-sale
securities.





Provision for Income
Taxes.Provision
for income taxes was $2.1 million for the fiscal 2009 first quarter, compared to
$1.0 million for the fiscal 2008 first quarter.  The increase resulted
from an increase in pre-tax income and a moderate increase in our effective tax
rate primarily due to a decrease in tax-exempt interest income.  The
fiscal 2009 first quarter tax rate was 38.7%, compared to the fiscal 2008 first
quarter tax rate of 37.8%.





Liquidityand
Capital Resources





Working capital increased approximately
$2.9 million to $84.4 million at August 31, 2008, from $81.5 million at May 31,
2008.  An
approximate $3.9 million reduction in cash and cash equivalents and
available-for-sale securities includes, among other factors, an increase
in inventories, a decrease in accrued expenses, the payment of
approximately $1.0 million in dividends resulting from the vesting of certain
restricted stock units and the payment of approximately $1.1 million in
individual income taxes resulting from withholding and effectively reacquiring
206,509 shares of the 673,400 shares of Class A common stock issued in exchange
for the fully vested restricted stock units.  The approximate $2.8
million increase in inventories primarily reflects an increase in both
quantities and costs of certain raw materials.  The approximate $1.4
million decrease in accrued expenses was primarily due to the payment of accrued
management annual incentive costs, partially offset by an increase in accrued
promotional expenses.  In addition, net receivables increased
approximately $1.9 million, reflecting an approximate $4.0 million increase in
net trade accounts receivable primarily due to an increase in net sales for
August of fiscal 2009, as compared to May of fiscal 2008, partially offset by a
$2.0 million reduction in refundable income taxes.  The overall $2.6
million change in income taxes receivable/payable was primarily due to fiscal
2009 first quarter operating results.  Prepaid expenses also decreased
approximately $0.7 million, primarily due to a reduction in prepaid insurance as
certain annual insurance policies were renewed at September 1,
2008.





As a result of current negative
liquidity and uncertainty in financial credit markets, wehave continuedto liquidate our investments in ARS and
other variable rate debt securities.  Proceeds from the sale of these
available-for-sale securities were invested in money market accounts,
certificates of deposit, United States Treasury Bills with maturities of three
months or less, and high-quality commercial paper,substantially allof which areincludedin cash and cash
equivalents.  At August 31, 2008, we held approximately $2.3 million
in available-for-sale securities; including approximately $1.3 million in ARS,
which are generally fully insured, AAA rated municipal or state agency issued
securities.  Although we have experienced failed auctionswith each of these ARS, and will
therefore not be able to access our funds invested in these ARS until future
auctions of these investments are successful, or the securities are called by
the issuer; we believe we will be able to successfully liquidate these
investments in a reasonable period of time.  However, we believe the
unsuccessful liquidation of some, or all, of these securities over the next
twelve months will not significantly impact our current liquidity
needs.





OnJune 30, 2004, we entered into, through our
wholly-owned direct operating subsidiary Schiff Nutrition Group,
Inc.  (“SNG”), a $25.0 million revolving credit facility (the “Credit
Facility”) with KeyBank National Association, as Agent.  In August
2006, we extended the maturity of the Credit Facility fromJune 30, 2007toJune 30, 2009.  The Credit Facility
contains customary terms and conditions, including, among others, financial
covenants that may limit our ability to pay dividends on our common stock and
certain other restrictions.  Our obligations under the Credit Facility
are secured by a first priority security interest on all of the capital stock of
SNG.  If our total coverage ratio exceeds a certain limit, our
obligations will also be secured by a first priority security interest in all of
our domestic assets.  In the event we exceed certain other ratio
limits, we will be subject to a borrowing base and will be able to borrow up to
a lesser of $25.0 million or the sum of (i) 85% of eligible accounts receivable
and (ii) 65% of eligible inventory.  Borrowings under the Credit
Facility bear interest at floating rates based on the KeyBank National
Association prime rate or the Federal Funds effective rate.  The
Credit Facility can be used to fund our normal working capital and capital
expenditure requirements, with availability to fund certain permitted strategic
transactions.  At August 31, 2008, there were no amounts outstanding
and $25.0 million was available for borrowing under the Credit
Facility.





We believe that our cash and cash
equivalents, 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 or complimentary to our existing business.  We could
use cash and financing sources discussed herein, or financing sources that
subsequently become available, to fund acquisitions or
investments.  In addition, we may consider issuing additional debt or
equity securities in the future to fund potential acquisitions or growth, or to
refinance existing debt.  If a material acquisition, divestiture or
investment is completed, our operating results and financial condition could
change materially in future periods.  However, no assurance can be
given that additional funds will be available on satisfactory terms, or at all,
to fund such activities.





11






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 Facility
contains certain customary financial covenants that may limit our ability to pay
dividends on our common stock.  We can give no assurance that we will
pay dividends in the future.





A summary of our outstanding contractual
obligations at August 31, 2008 is as follows (in thousands):





Contractual Cash
      Obligations
            
            Total Amounts
      Committed
            
            
            Less than
              1 Year
            
            
            1-3
              Years
            
            
            3-5
              Years
            
            
            More than
              5 YearsOperating
      leases
            
            $
            10,720
            
            
            $
            2,403
            
            
            $
            4,658
            
            
            $
            3,659
            
            
            $
            —Purchase obligations(1)
            
            
            21,828
            
            
            
            21,828
            
            
            
            —
            
            
            
            —
            
            
            
            —Total
      obligations
            
            $
            32,548
            
            
            $
            24,231
            
            
            $
            4,658
            
            
            $
            3,659
            
            
            $
            —





(1)
            Purchase obligations consist
      primarily of open purchase orders for goods and services, including
      primarily raw materials, packaging and outsourced contract manufacturing
      commitments.





CriticalAccounting
Policies and Estimates





In preparing our condensed consolidated
financial statements, we make assumptions, estimates and judgments that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the dates of the condensed consolidated financial
statements and the reported amounts of net sales and expenses during the
reported periods.  We periodically evaluate our estimates and
judgments related to the valuation of available-for-sale securities, inventories
and intangible assets, allowances for doubtful accounts, sales returns and
discounts, uncertainties related to certain tax benefits, valuation of deferred
tax assets, valuation of share-based payments and recoverability of long-lived
assets.  Note 1 of Notes to the Consolidated Financial Statements
contained in our Annual Report on Form 10-K for the year ended May 31, 2008,
filed with the SEC, describes the accounting policies governing each of these
matters.  Our estimates are based on historical experience and on our
future expectations that are believed to be reasonable.  The
combination of these factors forms the basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from
other sources.  Actual results may differ from our current estimates
and those differences may be material.





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





·
            We provide for inventory valuation
      adjustments for estimated obsolescence or unmarketable inventory equal to
      the difference between the cost of inventory and the estimated market
      value based upon assumptions about future demand, market conditions and/or
      liquidation value.  For both the fiscal 2009 and 2008 first
      quarters, inventory valuation adjustments resulted in a decrease in our
      gross profit and operating income of approximately $0.1
      million.  If actual demand and/or market conditions are less
      favorable than those projected by management, additional inventory
      write-downs would be
required.





·
            We maintain allowances for
      doubtful accounts, sales returns and discounts for estimated losses
      resulting from customer exposures, including among others, product
      returns, inability to make payments and expected utilization of offered
      discounts.  Changes in our allowances for doubtful accounts,
      sales returns and discounts resulted in an decrease in our gross profit
      and operating income of approximately $0.5 million for the fiscal 2009
      first quarter.  Changes in these allowances did not
      significantly impact gross profit and operating income for the fiscal 2008
      first quarter.  At August 31, 2008 and May 31, 2008, our
      allowances for doubtful accounts, sales returns and discounts amounted to
      approximately $2.1 million and $1.5 million,
      respectively.  Actual results may differ from our current
      estimates, resulting in adjustment of the respective
      allowance(s).





·
            We recognize tax benefits relative
      to certain tax positions in which we may be uncertain as to whether that
      tax position will ultimately be sustained as filed in our tax
      return.  The recognition or derecognition of these tax benefits
      is subject to periodic evaluation of the sustainability of the tax
      position based upon changes in facts, circumstances or available
      information.  Changes in the recognition of these tax benefits
      did not significantly impact net income for the fiscal 2009 and 2008 first
      quarters.At both August 31,
      2008 and May 31, 2008, unrecognized tax benefits totaled approximately
      $0.5 million.





·
            We currently have deferred tax
      assets resulting from 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.  At August 31, 2008 and May 31, 2008, deferred tax
      asset valuation allowances were
nil.




12




·
            We recognizedcompensation expense for certain
      performance based equity instrument awards (share-based payments) over the
      performance period based on a periodic assessment of the probability that
      the performance criteria wouldbe achieved.  Our
      periodic assessment of the probability that the performance criteria
      wouldbe achieved consideredsuch factors as historical
      financial results and future financial expectations, including an analysis
      of sales trends and operating margins; as well as changes in the
      nutritional supplements industry and competitive
      environment.  For the fiscal 2009 first quarter, we did not
      recognize any compensation expense since the performance criteria for
      existing awards was achieved and the equity instruments were fully vested
      as of May 31, 2008.  For the fiscal 2008 first quarter, we recognized
      compensation expense related to existing awards of approximately $0.8
      million





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





Impactof
Inflation





Inflation affects the cost of raw
materials, goods and services we use.  In recent years, inflation has
been modest.  We seek to mitigate the adverse effects of inflation
primarily through improved productivity, strategic buying initiatives, and cost
containment programs.  However, the nutritional supplement industry
competitive environment limits our ability to recover higher costs resulting
from inflation by raising prices.  See further discussion of raw
material pricing matters in the “General” and “Results of Operations” sections
above.





Seasonality





Our business is not inherently seasonal;
however, we experience 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.





ITEM3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK





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





Our cash flows and net earnings may be
subject to fluctuations resulting from changes in interest rates.  Our
current policy does not allow speculation in derivative instruments for profit
or execution of derivative instrument contracts for which there is no underlying
exposure.  We do not use financial instruments for trading
purposes.  We measure market risk, related to our holdings of
financial instruments, based on changes in interest rates utilizing a
sensitivity analysis.  Our Credit Facility, under which borrowings
bear interest at floating rates, had no amounts outstanding at August 31,
2008.  Interest income earned on our short-term investments is
impacted by changes in interest rates.  We do not believe that a
hypothetical 10% change in interest rates would have a material effect on our
pretax earnings or cash flows.





ITEM4T. 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 SEC’s rules and forms and that such
information is accumulated and communicated to our management, including our
Chief Executive Officer and Chief Financial Officer, as appropriate, to allow
for timely decisions regarding required disclosure.  In designing and
evaluating the disclosure controls and procedures, we recognize that any
controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving the desired control objectives, and we
are required to apply our judgment in evaluating the cost-benefit relationship
of possible controls and procedures.





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




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





13
 PARTII. OTHER INFORMATION





ITEM1. LEGAL
PROCEEDINGS





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





ITEM1A. RISK FACTORS





There have been no material changes to
the risk factors previously disclosed by us in Part I, Item 1A of our Annual
Report on Form 10-K for the year ended May 31, 2008.





ITEM2. UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS





None





ITEM3. DEFAULTS UPON SENIOR
SECURITIES





None.





ITEM4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS





None.





ITEM5. OTHER
INFORMATION





Not applicable.





ITEM6. EXHIBITS





3.1.
            Amended and Restated Certificate
      of Incorporation of Schiff Nutrition International,
      Inc.  (1)3.2.
            Amended and Restated Bylaws of
      Weider Nutrition International,
      Inc.  (2)4.1.
            Revolving Credit Agreement dated
      as ofJune 30,
      2004between Weider
      Nutrition Group, Inc. and KeyBank National
      Association.  (3)4.2.
            Form of specimen Class A common
      stock certificate.  (4)31.1.
            Certification of Chief Executive
      Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act.  (5)31.2.
            Certification of Chief Financial
      Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act.(5)32.1.
            Certification of Chief Executive
      Officer and Chief Financial Officer pursuant to Section 906 of the
      Sarbanes-Oxley Act.  (6)





1.
            Previously field in the Company’s
      Quarterly Report on Form 10-Q filed onJanuary 17, 2006and incorporated herein by
      reference.2.
            Previously filed in the Company's
      Registration Statement on Form S-1 (File No.  333-12929) and
      incorporated herein by reference.3.
            Previously filed in the Company's
      Current Report on Form 8-K filed onJuly 8, 2004and incorporated herein by
      reference.4.
            Previously filed in the Company’s
      Annual Report on Form 10-K filed onAugust 29, 2006and incorporated herein by
      reference.5.
            Filed
      herewith.6.
            Furnished
      herewith.





14





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








SCHIFF NUTRITION INTERNATIONAL,
INC.








Date:October 8, 2008
            By:
            /s/Bruce
      J. WoodBruce J.
      WoodPresident, Chief Executive Officer
      and Director








Date:October 8, 2008
            By:
            /s/Joseph
      W. BatyJoseph W.
      BatyExecutive Vice President and Chief
      Financial Officer








15