Schiff Nutrition International (WNI) 10-Q 2001 Q4 Quarterly report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

/x/
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, 2001

/ / TRANSITION REPORT PURSUANT TO SECTION 12 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from               to              .

Commission file number:
333-12929

WEIDER NUTRITION INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)

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

    The number of shares outstanding of the Registrant's common stock is 26,249,436 (as of January 4, 2002).

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)

				November 30, 2001			May 31, 2001
				(unaudited)
ASSETS
Current assets:
	Cash and cash equivalents			$	2,434		$	2,293
	Receivables, net				37,544			46,710
	Inventories				43,993			56,028
	Prepaid expenses and other				2,654			3,171
	Deferred taxes				6,097			6,486
		Total current assets			92,722			114,688
Property and equipment, net					35,437			37,658
Other assets:
	Intangible assets, net				42,286			43,561
	Deposits and other assets				5,950			5,946
	Notes receivable related to stock performance units, net				4,067			4,227
	Deferred taxes				2,620			2,992
		Total other assets			54,923			56,726
			Total assets	$	183,082		$	209,072
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable			$	18,706		$	34,181
	Accrued expenses				12,936			15,327
	Current portion of long-term debt				22,227			19,537
	Income taxes payable				1,415			336
		Total current liabilities			55,284			69,381
Long-term debt					47,603			53,891
Commitments and contingencies
Stockholders' equity:
	Preferred stock, par value $.01 per share; shares authorized—10,000,000; no shares issued and outstanding				—			—
	Class A common stock, par value $.01 per share; shares authorized—50,000,000; shares issued and outstanding—11,276,288 and 10,562,004				112			105
	Class B common stock, par value $.01 per share; shares authorized—25,000,000; shares issued and outstanding—14,973,148 and 15,687,432				150			157
	Additional paid-in capital				86,897			86,897
	Other accumulated comprehensive loss				(5,262	)		(5,864	)
	Retained earnings (deficit)				(1,702	)		4,505
		Total stockholders' equity			80,195			85,800
			Total liabilities and stockholders' equity	$	183,082		$	209,072

See notes to condensed consolidated financial statements.

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WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except share data)
(unaudited)

		Three Months Ended November 30,
		2001			2000
Net sales		$	77,933		$	78,538
Cost of goods sold			50,945			48,243
Gross profit			26,988			30,295
Operating expenses:
	Selling and marketing		16,608			18,539
	General and administrative		6,155			6,693
	Research and development		1,134			1,448
	Amortization of intangible assets		826			740
	Severance and reorganization costs		1,500			—
Total operating expenses			26,223			27,420
Income from operations			765			2,875
Other income (expense):
	Interest income		25			44
	Interest expense		(1,961	)		(2,627	)
	Other		(343	)		(150	)
Total other expense, net			(2,279	)		(2,733	)
Income (loss) before income taxes			(1,514	)		142
Provision for income taxes			2,372			399
Net loss		$	(3,886	)	$	(257	)
Weighted average shares outstanding:
	Basic		26,249,436			26,249,436
	Diluted		26,249,436			26,249,436
Net loss per share:
	Basic	$	(0.15	)	$	(0.01	)
	Diluted	$	(0.15	)	$	(0.01	)
Comprehensive loss		$	(3,181	)	$	(1,905	)

See notes to condensed consolidated financial statements.

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WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except share data)
(unaudited)

		Six Months Ended November 30,
		2001			2000
Net sales		$	165,087		$	169,748
Cost of goods sold			104,899			101,498
Gross profit			60,188			68,250
Operating expenses:
	Selling and marketing		39,680			44,203
	General and administrative		12,862			14,686
	Research and development		1,617			3,064
	Amortization of intangible assets		2,523			1,497
	Severance and reorganization costs		1,500			—
	Litigation settlement		—			(3,571	)
	Plant consolidation and transition		—			648
Total operating expenses			58,182			60,527
Income from operations			2,006			7,723
Other income (expense):
	Interest income		53			84
	Interest expense		(4,179	)		(5,125	)
	Other		(559	)		(178	)
Total other expense, net			(4,685	)		(5,219	)
Income (loss) before income taxes			(2,679	)		2,504
Provision for income taxes			1,559			797
Net income (loss)		$	(4,238	)	$	1,707
Weighted average shares outstanding:
	Basic		26,249,436			26,237,801
	Diluted		26,249,436			26,240,129
Net income (loss) per share:
	Basic	$	(0.16	)	$	0.07
	Diluted	$	(0.16	)	$	0.07
Comprehensive income (loss)		$	(3,636	)	$	31

See notes to condensed consolidated financial statements.

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WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)

				Six Months Ended November 30,
				2001			2000
Cash flows from operating activities:
	Net income (loss)			$	(4,238	)	$	1,707
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Provision for (recovery of) bad debts			(70	)		682
		Deferred taxes			761			(1,975	)
		Depreciation and amortization			5,028			5,617
		Amortization of original issue discount			294			245
	Changes in operating assets and liabilities:
		Receivables			9,236			13,298
		Inventories			12,035			(2,053	)
		Prepaid expenses and other			517			(197	)
		Deposits and other assets			481			(1,572	)
		Accounts payable			(15,475	)		(4,007	)
		Accrued expenses			(990	)		(8,070	)
			Net cash provided by operating activities		7,579			3,675
Cash flows from investing activities:
	Purchase of intangibles				(80	)		(106	)
	Purchase of property and equipment				(1,131	)		(2,266	)
			Net cash used in investing activities		(1,211	)		(2,372	)
Cash flows from financing activities:
	Issuance of warrants/common stock				—			3,541
	Dividends paid				(1,969	)		(1,922	)
	Net change in revolving line-of-credit				(142	)		(42,502	)
	Proceeds from debt				1,619			40,025
	Payments on debt				(5,744	)		(959	)
			Net cash used in financing activities		(6,236	)		(1,817	)
Effect of exchange rate changes on cash					9			(75	)
Increase (decrease) in cash and cash equivalents					141			(589	)
Cash and cash equivalents, beginning of period					2,293			3,011
Cash and cash equivalents, end of period				$	2,434		$	2,422

See notes to condensed consolidated financial statements.

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WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
(unaudited)

1.  BASIS OF PRESENTATION AND OTHER MATTERS

    The accompanying unaudited interim consolidated financial statements ("interim financial statements") do not include all disclosures provided in the annual consolidated financial statements. These interim financial statements should be read in conjunction with the consolidated financial statements and the footnotes thereto contained in the Weider Nutrition International, Inc. (the "Company") Annual Report on Form 10-K for the year ended May 31, 2001 as filed with the Securities and Exchange Commission. The May 31, 2001 consolidated balance sheet was derived from audited financial statements, but all disclosures required by accounting principles generally accepted in the United States of America are not provided in the accompanying footnotes.

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

    The Company is a majority-owned subsidiary of Weider Health and Fitness ("WHF"). WHF is the owner of the Class B common stock. During the fiscal 2002 second quarter, WHF transferred ownership of 714,284 shares of Class B common stock to certain individuals. Upon transfer, the shares convert to Class A common stock which has the effect (only) of eliminating a super voting right associated with the Class B common stock. This conversion of Class B shares to Class A shares is recognized as a reclassification between common stock equity accounts in the accompanying condensed consolidated balance sheet at November 30, 2001.

    The Company's effective tax rate for the fiscal 2002 second quarter was impacted by the recognition of an approximate $1.8 million valuation provision to write-down previously recognized tax assets. Furthermore, the Company is currently not recognizing an income tax benefit on losses incurred by its Haleko subsidiary.

2.  RECEIVABLES, NET

    Receivables consist of the following:

		November 30, 2001			May 31, 2001
Trade accounts		$	45,153		$	53,485
Other			1,092			1,066
			46,245			54,551
Less allowance for doubtful accounts and sales returns			(8,701	)		(7,841	)
	Total	$	37,544		$	46,710

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3.  INVENTORIES

    Inventories consist of the following:

		November 30, 2001		May 31, 2001
Raw materials		$	16,125	$	21,159
Work in process			1,757		1,273
Finished goods			26,111		33,596
	Total	$	43,993	$	56,028

4.  INTANGIBLE ASSETS, NET

    Intangible assets consist of the following:

		November 30, 2001			May 31, 2001
Cost in excess of fair value of net assets acquired (goodwill)		$	51,654		$	51,381
Patents and trademarks			10,825			10,679
Noncompete agreements			186			184
			62,665			62,244
Less accumulated amortization			(20,379	)		(18,683	)
	Total	$	42,286		$	43,561

    See Note 9 regarding the pending adoption of Statement of Financial Accounting Standard ("SFAS") No. 142.

5.  NOTES RECEIVABLE RELATED TO STOCK PERFORMANCE UNITS, NET

    Notes receivable related to stock performance units consist of the following:

		November 30, 2001			May 31, 2001
Notes receivable		$	4,227		$	4,227
Less allowance for unrealizable amounts			(160	)		—
	Total	$	4,067		$	4,227

    The notes receivable are collateralized by debtors shares of the Company's Class A common stock and are repayable beginning in June of 2002. Recognition of future provision(s) for unrealizable amounts will depend on the closing price of the Company's Class A common stock, among other considerations.

6.  OPERATING SEGMENTS

    Historically, the Company has had two primary reportable segments. These segments include the Company's U.S. based or domestic operations, and the Company's international operations (primarily Germany). The Company has three primary divisions within its domestic operations: mass market; health food store; and health club and gym. The Company manufactures and markets nutritional

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products, including a broad line of vitamins, joint-related and other nutraceuticals, and sports nutrition supplements through its mass market division; a broad line of vitamins, nutraceuticals and sports nutrition products through independent distributors and a significant retailer in its health food store division; and a broad line of sports nutrition products primarily through distributors in its health club and gym division. The Company also manufactures and markets nutritional and other products, including a broad line of sports nutrition supplements and sportswear, together with certain other nutraceuticals within its international operations.

    The accounting policies of these segments are the same as those described in Note 1 to the consolidated financial statements in the Company's Annual Report on Form 10-K. The Company evaluates the performance of its operating segments based on actual and expected operating results of the respective segments and/or divisions. Certain noncash and other expenses, and domestic assets, are not allocated to the divisions within the domestic operating segment.

    Recently, management initiated a plan to reorganize the Company into three business units. These business units will include the Schiff® Specialty Nutrition Unit, the Active Nutrition Unit and the Haleko Unit (the Company's primary European subsidiary). Upon completion of the reorganization, the business units will be managed independently, each with its own research and development, and sales and marketing resources, supported by operations and technical services, and administrative functions. The Company expects to modify its segment reporting information to closely align with the newly formed business units. Management expects to begin reporting the modified segment information upon completion of the reorganization which should be prior to the time the Company files its fiscal 2002 Annual Report on Form 10-K. As of November 30, 2001, the Company is providing segment reporting data consistent with its historical practice.

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    Segment information for the six months ended November 30, 2001 and 2000, respectively, are summarized as follows:

				Net Sales		Income (Loss) From Operations			Interest Expense
2001:
	Domestic Operations:
		Mass market		$	85,607	$	9,397		$	860
		Health food stores			6,083		(640	)		114
		Health clubs and gyms			11,092		(1,500	)		166
		Other			1,347		106			15
		Unallocated			—		(900	)		—
					104,129		6,463			1,155
	International Operations				60,958		(4,457	)		3,024
			Total	$	165,087	$	2,006		$	4,179

				Net Sales		Income (Loss) From Operations			Interest Expense
2000:
	Domestic Operations:
		Mass market		$	82,203	$	5,079		$	1,664
		Health food stores			12,876		(913	)		319
		Health clubs and gyms			10,853		(243	)		272
		Other			2,168		(463	)		48
		Unallocated			—		2,923			—
					108,100		6,383			2,303
	International Operations				61,648		1,340			2,822
			Total	$	169,748	$	7,723		$	5,125

    Reconciliation of total assets for the reportable segments is as follows:

		November 30, 2001			May 31, 2001
Total domestic assets		$	174,517		$	191,040
Total international assets			72,474			79,127
Eliminations			(63,909	)		(61,095	)
	Total	$	183,082		$	209,072

    Capital expenditures for domestic and international operations amounted to $0.8 million and $0.3 million, respectively, for the six months ended November 30, 2001, and $1.1 million and $1.2 million, respectively, for the six months ended November 30, 2000.

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7.  SALES TO MAJOR CUSTOMERS

    The Company's two largest customers accounted for approximately 42% and 38%, respectively, of net sales for the six months ended November 30, 2001 and 2000, respectively. At November 30, 2001 and May 31, 2001, amounts due from these customers represented approximately 27% and 44%, respectively, of total trade accounts receivable.

8.  CONTINGENCIES

    The Company is currently named as a defendant in three lawsuits alleging that consumption of certain of its products containing ephedrine caused injuries and damages to certain individuals. The Company disputes the allegations and has tendered the matters to its insurance carriers, which have assumed defense of the matters.

    The Company believes that, after taking into consideration the Company's insurance coverage, such lawsuits, if successful, would not have a material adverse effect on the Company's financial condition. However, one or more large punitive damage awards, which are generally not covered by insurance, could have a material adverse effect on the Company's financial condition. The Company cannot assure you that it will not be subject to further private civil actions with respect to its ephedrine products. Prior to September 1, 2001, the Company maintained both primary and excess product liability insurance coverage regarding its ephedrine products. Upon renewing the Company's comprehensive and product liability insurance coverage, as of September 1, 2001, the Company currently maintains primary but not excess product liability coverage regarding its ephedrine products. No assurance can be given that product liability insurance regarding ephedrine will be adequate to cover liabilities or continue to be available at a reasonable cost, if at all. The absence of excess product liability insurance regarding ephedrine products may have an adverse impact on the Company's financial condition or operating results in the event of a significant adverse decision against the Company.

    From time to time, the Company is involved in other claims, legal actions and governmental proceedings that arise from the Company's business operations. Although ultimate liability cannot be determined at the present time, the Company believes that any liability resulting from these matters, if any, after taking into consideration the Company's insurance coverage, will not have a material adverse effect on the Company's financial position or cash flows.

9.  RECENTLY ISSUED ACCOUNTING STANDARDS

    In May 2000, and April 2001, the Financial Accounting Standards Board ("FASB") issued Emerging Issues Task Force ("EITF") No. 00-14, and No. 00-25, respectively. These EITF's address the recognition, measurement and income statement classification for certain sales incentives or consideration offered or paid by the Company to retailers, distributors or end consumers. Those provisions of these EITF's where consensus was reached by the FASB are effective for the Company's financial statements at March 1, 2002. The Company has determined that the impact of adopting these EITF's on the Company's financial statements is not material. However, the "cost" of certain sales incentives or consideration previously recognized in the Company's financial statements as operating expenses will be reclassified as reductions in net sales and/or increases in cost of goods sold. If the Company had adopted these EITF's at June 1, 2001, and applied the applicable provisions retroactively, gross profit for the six months ended November 30, 2001 and 2000 would have decreased by

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approximately $6.6 million and $5.5 million, respectively, and selling and marketing expenses would have decreased by like amounts for the respective periods.

    In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets," which supercedes APB No. 17, "Intangible Assets." SFAS No. 142 establishes accounting and reporting standards for goodwill and other intangible assets. SFAS No. 142, which includes the requirements to test goodwill and intangible assets with indefinite lives for impairment rather than amortize them, is effective for the Company's financial statements as of June 1, 2002. While the Company has not completed its analysis of SFAS No. 142, the impact to the consolidated financial statements of its adoption may be material.

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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. 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 the Company's control, and, therefore, actual results may differ materially. The Company disclaims any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

Important factors that may affect future results include, but are not limited to: the inability to achieve cost savings and operational efficiencies through reorganization, dependence on individual products, the inability to successfully restructure Haleko and make it profitable, dependence on individual customers, the impact of competitive products and pricing, the impact of new Food and Drug Administration ("FDA") dietary supplement regulations on the Company's products and marketing plans, market and industry conditions including pricing, demand for products, level of trade inventories and raw materials availability and pricing, the success of product development and new product introductions into the marketplace, changes in laws and regulations, litigation and government regulatory action, lack of available product liability insurance for products containing ephedrine, uncertainty of market acceptance of new products, adverse publicity regarding the consumption of nutritional supplements, and other factors discussed from time to time in the Company's SEC reports, copies of which are available upon request from the Company's investor relations department.

General

    Weider Nutrition International, Inc. (the "Company") develops, manufactures, markets, distributes and sells branded and private label nutritional supplements in the United States and throughout the world. The Company offers a broad range of capsules and tablets, powdered drink mixes, bottled beverages and nutrition bars consisting of approximately 875 nutritional supplement stock keeping units ("SKUs") domestically and internationally. The Company has a portfolio of recognized brands, including Schiff®, Weider®, American Body Building™, Tiger's Milk®, Multipower® and Multaben that are primarily marketed through mass market, health food store and/or health club and gym distribution channels. The Company markets its branded nutritional supplement products, both domestically and internationally, in four principal categories: specialty, vitamins, minerals and herbs; sports nutrition; weight management; and nutrition bars. The Company also markets a line of sportswear in Europe, primarily in Germany, under the Venice Beach brand.

    During the latter part of the fiscal 2002 second quarter, management initiated a plan to reorganize the Company into three business units. Upon completion of the reorganization, these business units will include the Schiff® Specialty Nutrition Unit, the Active Nutrition Unit and the Haleko Unit.

    The Schiff® Specialty Nutrition Unit will contain the Schiff® and Schiff® Move Free™ brands. The Active Nutrition Unit will include the American Body Building™, Tiger's Milk® and Weider® branded global businesses. The Haleko Unit, Weider's primary European subsidiary, will include the

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Multipower® and Multaben nutritional supplement brands as well as the Venice Beach sports apparel business.

    The Company's principal executive offices are located at 2002 South 5070 West, Salt Lake City, Utah 84104 and its telephone number is (801) 975-5000. As used herein, the "Company" means Weider Nutrition International, Inc. and its subsidiaries, except where indicated otherwise.

Results of Operations (Unaudited)

Three Months Ended November 30, 2001 Compared to Three Months Ended November 30, 2000

    The following table shows selected items expressed on an actual basis and as a percentage of net sales for the respective interim periods:

	Three Months Ended November 30,
	2001					2000
	(dollars in thousands)
Net sales	$	77,933		100.0	%	$	78,538		100.0	%
Cost of goods sold		50,945		65.4			48,243		61.4
Gross profit		26,988		34.6			30,295		38.6
Operating expenses		24,723		31.7			27,420		34.9
Severance and reorganization costs		1,500		1.9			—		—
Total operating expenses		26,223		33.6			27,420		34.9
Income from operations		765		1.0			2,875		3.7
Other expense, net		2,279		3.0			2,733		3.5
Income taxes		2,372		3.0			399		.5
Net loss	$	(3,886	)	(5.0	)%	$	(257	)	(.3	)%

    Net Sales.  Net sales for the three months ended November 30, 2001 remained relatively constant at $77.9 million compared to $78.5 million for the three months ended November 30, 2000. Domestically, net sales increased approximately 4.5% to $45.0 million for the fiscal 2002 second quarter from $43.1 million for the fiscal 2001 second quarter. Internationally, net sales decreased approximately 7.2% to $32.9 million for the fiscal 2002 second quarter from $35.5 million for the fiscal 2001 second quarter.

    Fiscal 2002 second quarter sales to domestic mass market retailers increased approximately 18.6% to $36.7 million from fiscal 2001 second quarter sales of $30.9 million. The increase in sales to mass market retailers was primarily the result of increased sales to existing accounts of the Company's Schiff® and Schiff® Move Free™ branded products. Net sales of Schiff® Move Free™ amounted to $16.0 million for the second quarter of fiscal 2002, compared to $12.1 million for the second quarter of fiscal 2001. Sales to domestic health food store distributors and retailers decreased approximately 60.8% to $2.5 million for the fiscal 2002 second quarter from $6.5 million for the fiscal 2001 second quarter, primarily as a result of reduced sales volume with GNC.

    International sales volume decreased primarily due to a reduction in sportswear sales partially offset by an increase in private label and branded nutritional supplement sales. Net sales of sportswear decreased 35.6% to approximately $9.1 million for the three months ended November 30, 2001 from approximately $14.1 million for the three months ended November 30, 2000. The reduction in

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sportswear net sales resulted primarily from a decrease in shipments to department stores and the implementation of strategic measures aimed at improving margins on reduced revenues, by focusing the apparel business in more profitable accounts.

    Gross Profit.  Gross profit decreased approximately 10.9% to $27.0 million for the quarter ended November 30, 2001, compared to $30.3 million for the quarter ended November 30, 2000. Gross profit, as a percentage of net sales, was 34.6% for the quarter ended November 30, 2001, compared to 38.6% for the quarter ended November 30, 2000. The decrease in the gross profit percentage was primarily attributable to international operating results, including discounted Venice Beach sportswear sales and inventory related charges, together with an increase in lower margin private label nutritional supplement sales.

    Operating Expenses.  Operating expenses, including severance and reorganization costs of $1.5 million associated with the Company's business unit realignment, decreased approximately 4.4% to $26.2 million for the fiscal 2002 second quarter from $27.4 million for the fiscal 2001 second quarter. The reduction in operating expenses was primarily attributable to a decrease in domestic selling and marketing expenses.

    Selling and marketing expenses decreased approximately 10.4% to $16.6 million for the fiscal 2002 second quarter from $18.5 million for the fiscal 2001 second quarter. The decrease in selling and marketing expenses resulted primarily from the Company's decision to reduce discretionary domestic national advertising.

    General and administrative expenses decreased approximately 8.1% to $6.2 million for the quarter ended November 30, 2001 from $6.7 million for the quarter ended November 30, 2000. The decrease in general and administrative expenses for the fiscal 2002 second quarter resulted primarily from a decrease in outside professional and legal related costs.

    Other Expense.  Other expense, net, was $2.3 million for the quarter ended November 30, 2001, compared to $2.7 million for the quarter ended November 30, 2000. Reductions in net interest expense, associated with a lower overall effective borrowing rate, were partially offset by an increase in other non-operating costs. The increase in other non-operating costs was primarily attributable to provisions for potentially unrealizable interest accrued on notes receivable related to stock performance units.

    Provision for Income Taxes.  Provision for income taxes was $2.4 million for the quarter ended November 30, 2001, compared to $0.4 million for the quarter ended November 30, 2000. The change resulted from the decrease in pre-tax earnings and the net effect of tax rate differences for the Company's domestic and international operations.

    During the second quarter of fiscal 2002, the Company recognized a non-cash valuation provision of $1.8 million to write-down previously recognized tax assets primarily pertaining to its Haleko subsidiary. In addition, the Company is currently not recognizing an income tax benefit on losses incurred by the Haleko subsidiary.

Six Months Ended November 30, 2001 Compared to Six Months Ended November 30, 2000

    Net Sales.  Net sales for the six months ended November 30, 2001 decreased $4.7 million, or 2.7%, to $165.1 million from $169.7 million for the six months ended November 30, 2000. Domestically, net sales decreased approximately 3.7% to $104.1 million for the six months ended November 30, 2001, from $108.1 million for the six months ended November 30, 2000. Internationally, net sales declined

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slightly to $61.0 million for the first six months of fiscal 2002 from $61.6 million for the prior comparable period. Consolidated nutritional supplement revenues remained constant at approximately $150.0 million for the six-month periods ended November 30, 2001 and 2000.

    Sales to domestic mass market retailers increased approximately 5.1% to $86.4 million for the six months ended November 30, 2001 from $82.2 million for the six months ended November 30, 2000. The increase in sales to mass market retailers was primarily the result of increased private label sales to existing accounts. Sales to domestic health food store distributors and retailers decreased approximately 57.9% to $5.4 million for the first six months of fiscal 2002 from $12.9 million for the first six months of fiscal 2001. The decrease in sales in the health food distribution channel resulted primarily from reduced sales volume with GNC.

    International sales volume remained relatively constant for the respective six-month periods, as increased nutritional supplement revenues were offset by a reduction in sales of sportswear apparel. Net sales of nutritional supplements to international accounts increased approximately 10.0% to $46.0 million for the first six months of fiscal 2002 from $42.0 million for the first six months of fiscal 2001, primarily due to an increase in private label sales volume. The reduction in sportswear net sales resulted primarily from a decrease in shipments to department stores.

    Gross Profit.  Gross profit decreased approximately 11.8% to $60.2 million for the six months ended November 30, 2001 compared to $68.3 million for the six months ended November 30, 2000. Gross profit, as a percentage of net sales, was 36.5% for the six months ended November 30, 2001 compared to 40.2% for the six months ended November 30, 2000. The decrease in the gross profit percentage resulted primarily from a significant decrease in gross margins on European sportswear sales and lower gross margins on increased international and domestic private label sales.

    Operating Expenses.  Operating expenses for the first six months of fiscal 2002 decreased approximately 3.9% to $58.2 million from $60.5 million for the first six months of fiscal 2001. During the first six months of fiscal 2002, the Company recognized $1.5 million of severance and reorganization costs. During the first six months of fiscal 2001, the Company received approximately $3.6 million from the settlement of litigation. Also, during the first six months of fiscal 2001, the Company closed its Las Vegas, Nevada facility and completed the consolidation of beverage manufacturing to its South Carolina facility, recognizing approximately $0.6 million in net consolidation and transition related costs. Excluding the effects of these items, operating expenses decreased $6.8 million, or 10.7%, during the first six months of fiscal 2002 in comparison to the first six months of fiscal 2001. The decrease resulted primarily from reductions in selling and marketing expenses and general and administrative related costs.

    Selling and marketing expenses decreased approximately 10.2% to $39.7 million for the first six months of fiscal 2002 from $44.2 million for the first six months of fiscal 2001. The decrease in selling and marketing expenses resulted primarily from decreased promotional costs and was impacted by expenses incurred in the first six months of the prior year associated with the Company's Schiff® Move Free® brand name transition.

    General and administrative expenses decreased approximately 12.3% to $12.9 million for the six months ended November 30, 2001 from $14.7 million for the six months ended November 30, 2000. The decrease in general and administrative expenses for the first six months of fiscal 2002 resulted primarily from a decrease in outside professional costs, personnel related expenses and legal related costs.

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    Other Expense.  Other expense, net, was $4.7 million for the six months ended November 30, 2001, compared to $5.2 million for the six months ended November 30, 2000. Reductions in net interest expense, primarily due to a lower overall effective borrowing rate, were partially offset by an increase in other non-operating costs. The increase in other non-operating costs was primarily attributable to provisions for potentially unrealizable interest accrued on notes receivable related to stock performance units.

    Provision for Income Taxes.  Provision for income taxes was $1.6 million for the six months ended November 30, 2001, compared to $0.8 million for the six months ended November 30, 2000. The change resulted primarily from the decrease in pre-tax earnings and the net effect of tax rate differences of the Company's domestic and international operations. During the first six months of fiscal 2002, the Company did not recognize an income tax benefit on losses incurred by its Haleko subsidiary.

    Liquidity and Capital Resources.  The Company's working capital decreased $7.9 million to approximately $37.4 million at November 30, 2001 from $45.3 million at May 31, 2001. The decrease in working capital resulted primarily from decreases in receivables and inventories, partially offset by a decrease in accounts payable. Inventories decreased approximately $12.0 million primarily as a result of continuing improvements in inventory management and the timing of shipments to customers. The decrease in receivables of $9.2 million was primarily attributable to lower sales in the second quarter of fiscal 2002, as compared to the fourth quarter of fiscal 2001.

    The Company and its domestic subsidiaries have a $90.0 million senior credit facility (the "Credit Facility") with Bankers Trust Company. The Credit Facility is comprised of a $30.0 million amortizing term loan and a $60.0 million revolving loan. Under the revolving loan, the Company may borrow up to the lesser of $60.0 million or the sum of (i) 85% of eligible accounts receivable and (ii) the lesser of $30.0 million or 65% of the eligible inventory. The Credit Facility contains customary terms and conditions, including, among others, financial covenants regarding minimum cash flows and limitations on indebtedness and the Company's ability to pay dividends under certain circumstances. The obligations of the Company under the Credit Facility are secured by a first priority lien on all owned or acquired tangible and intangible assets of the Company and its domestic subsidiaries. The Credit Facility is being used to fund the normal working capital and capital expenditure requirements of the Company. At November 30, 2001, the Company had approximately $9.1 million in available revolving loan funds.

    The Company's domestic operations are also supported by a $10.0 million senior subordinated loan agreement (the "Subordinated Loan"). The Subordinated Loan contains customary terms and conditions, including, among others, financial covenants regarding minimum cash flows and limitations on indebtedness and the Company's ability to pay dividends under certain circumstances.

    The Company's European working capital needs (primarily Haleko) are supported by a Germany based secured credit facility (the "Haleko Facility") that renews annually, in June. During the fiscal 2002 second quarter, the Company agreed to terms with Deutsche Bank AG whereby certain provisions of the Haleko Facility would be modified. The agreed upon modifications, finalized in December 2001, included an increase to approximately $21.6 million in the revolving loan and a formal waiver of compliance with certain covenants through at least February 28, 2002. At December 31, 2001, the Company had approximately $5.7 million in available revolving loan funds.

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    The Company expects to fund its long-term capital requirements for the next twelve months through the use of operating cash flow supplemented as necessary by borrowings under both the domestic Credit Facility and the Haleko Facility. The Company also from time to time may evaluate strategic acquisitions as the nutritional supplements industry continues to consolidate. The funding of future acquisitions, if any, may require other debt financing or the issuance of additional equity.

    The Company paid a quarterly dividend of $0.0375 per share subsequent to November 30, 2001. The dividend was declared to be payable on December 20, 2001 to holders of all classes of common stock of record at the close of business on December 7, 2001. The Company's Board of Directors will determine dividend policy in the future based upon, among other things, the Company's results of operations and financial condition, industry and economic trends, contractual restrictions, reinvestment alternatives and other factors deemed relevant at the time. Furthermore, management continues to evaluate the Company's overall operating cash flow by scrutinizing spending, analyzing supply chain processes and evaluating dividend policy against reinvestment alternatives. Accordingly, there can be no assurance that the Company will pay dividends in the future.

    Impact of Inflation.  The Company has historically been able to pass inflationary increases for raw materials and other costs through to its customers and anticipates that it will be able to continue to do so in the future. However, there can be no assurance that the Company will be able to pass inflationary increases on to its customers.

    Seasonality.  The Company's business is seasonal, with lower sales typically realized during the first and second fiscal quarters and higher sales typically realized during the third and fourth fiscal quarters. The Company believes such fluctuations in sales are the result of greater marketing and promotional activities toward the end of each fiscal year, customer buying patterns, including seasonal sportswear considerations, and consumer spending patterns related primarily to the consumers' interest in achieving personal health and fitness goals after the beginning of each new calendar year and before the summer fashion season.

    Furthermore, as a result of changes in product sales mix, promotional timing considerations and other factors, as discussed above, the Company experiences fluctuations in gross profit and operating margins on a quarter-to-quarter basis.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

    The following discussion involves forward-looking statements of market risk, which assume for analytical purposes 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 projections by the Company of future events or losses.

    The Company's cash flows and net earnings (or losses) are subject to fluctuations resulting from changes in interest rates and foreign exchange rates. The Company currently is not party to any significant derivative instruments and its current policy does not allow speculation in derivative instruments for profit or execution of derivative instrument contracts for which there are no underlying exposure. The Company does not use financial instruments for trading purposes.

    The Company measures its market risk, related to its holdings of financial instruments, based on changes in interest rates utilizing a sensitivity analysis. The Company does not believe that a hypothetical 10% change in interest rates would have a material effect on the Company's pretax earnings (or losses) or cash flows.

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PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings.

    The information set forth in Note 8 to Condensed Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q is incorporated herein by reference.

Item 2.  Changes in Securities.

    Not applicable.

Item 3.  Defaults Upon Senior Securities.

    Not applicable.

Item 4.  Submission of Matter to a Vote of Security Holders.

    The Company's Annual Meeting of Shareholders was held on October 30, 2001 for the following purposes:

        Proposal One:  Election of the Company's Board of Directors.

	For	Withheld Authority
Eric Weider	163,329,896	78,155
George F. Lengvari	163,343,096	64,955
Bruce J. Wood	163,330,396	77,655
Ronald L. Corey	163,343,096	64,955
David J. Gustin	163,343,296	64,755
Roger H. Kimmel	163,343,096	64,955
Brian P. McDermott	163,343,096	64,955
H. F. Powell	163,343,096	64,955

Item 5.  Other Information.

    Not applicable.

Item 6.  Exhibits and Reports on Form 8-K

(a)

Exhibits:

2.1	Stock Purchase Agreement, dated July 9, 1998, by and among Weider Nutrition Group, Inc. and Wolfgang Brandt and Eberhardt Schlüter.(2)
2.2	Amendment Deed to Stock Purchase Agreement, dated July 24, 1998.(2)
2.3	Share Transfer Deed, dated July 24, 1998.(2)
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)
4.1	Credit Agreement dated as of June 30, 2000 among Weider Nutrition International, Inc. and Bankers Trust Company.(4)
4.2	Senior Subordinated Loan Agreement dated as of June 30, 2000 among Weider Nutrition International, Inc., Wynnchurch Capital Partners, L.P., and Wynnchurch Capital Partners Canada, L.P.(4)
4.3	Warrants to Purchase Shares of Class A Common Stock of Weider Nutrition International, Inc.(4)
4.4	Registration Rights Agreement dated as of June 30, 2000 among Weider Nutrition International, Inc., Wynnchurch Capital Partners, L.P. and Wynnchurch Capital Partners Canada, L.P.(4)

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4.5	First Amendment to Credit Agreement dated as of June 30, 2000 among Weider Nutrition International, Inc. and Bankers Trust Company.(5)
4.6	First Amendment to Senior Subordinated Loan Agreement dated as of June 30, 2000 among Weider Nutrition International, Inc., Wynnchurch Capital Partners, L.P. and Wynnchurch Capital Partners Canada,  L.P.(7)
4.7	Second Amendment to Credit Agreement dated as of June 30, 2000 among Weider Nutrition International, Inc. and Bankers Trust Company.(8)
4.8	Second Amendment to Senior Subordinated Loan Agreement dated as of June 30. 2000 among Weider Nutrition International, Inc., Wynnchurch Capital Partners, L.P. and Wynnchurch Capital Partners Canada,  L.P.(8)
10.1	Build-To-Suit Lease Agreement, dated March 20, 1996, between SCI Development Services Incorporated and Weider Nutrition Group, Inc.(1)
10.2	Agreement by and between Joseph Weider and Weider Health and Fitness.(1)
10.3	1997 Equity Participation Plan of Weider Nutrition International, Inc.(1)
10.4	Form of Tax Sharing Agreement by and among Weider Nutrition International, Inc. and its subsidiaries and Weider Health and Fitness and its subsidiaries.(1)
10.6	Form of Employment Agreement between Weider Nutrition International, Inc. and Robert K. Reynolds, as amended.(5)
10.7	Form of Senior Executive Employment Agreement between Weider Nutrition International, Inc. and certain senior executives of the Company.(1)
10.8	Advertising Agreement between Weider Nutrition International, Inc. and Weider Publications, Inc.(1)
10.9	License Agreement between Mariz Gestao E Investmentos Limitada and Weider Nutrition Group Limited.(1)
10.10	Form of Employment Agreement between Weider Nutrition International, Inc. and Bruce J. Wood.(3)
10.11	Agreement between the Company and Bruce J. Wood.(6)
10.12	Form Agreement between the Company and certain executives of the Company.(6)
10.13	Amendments to 1997 Equity Participation Plan of Weider Nutrition International, Inc.(9)
21	Subsidiaries of Weider Nutrition International, Inc.(8)

(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)

Previously filed in the Company's Current Report on Form 8-K dated as of July 24, 1998 and incorporated herein by reference.

(3)

Previously filed in the Company's Current Report on Form 10-K dated as of August 30, 1999 and incorporated herein by reference.

(4)

Previously filed in the Company's Current Report on Form 8-K dated as of June 30, 2000 and incorporated herein by reference.

(5)

Previously filed in the Company's Current Report on Form 10-K as of August 29, 2000 and incorporated herein by reference.

(6)

Previously filed in the Company's Current Report on Form 10-K/A as of September 28, 2000 and incorporated herein by reference.

(7)

Previously filed in the Company's Current Report on Form 10-Q as of January 15, 2001 and incorporated herein by reference.

(8)

Previously filed in the Company's Current Report on Form 10-K as of August 29, 2001 and incorporated herein by reference.

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(9)

Filed herewith.

(b)

Reports on Form 8-K

None

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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: January 14, 2002	By:	/s/ BRUCE J. WOOD   Bruce J. Wood President, Chief Executive Officer and Director
Date: January 14, 2002	By:	/s/ JOSEPH W. BATY   Joseph W. Baty Executive Vice President and Chief Financial Officer

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QuickLinks

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands, except share data)
WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands, except share data) (unaudited)
WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands, except share data) (unaudited)
WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) (unaudited)
WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands) (unaudited)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk

PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Item 2. Changes in Securities.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matter to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K

SIGNATURES