Schiff Nutrition International (WNI) 8-K/A Financial Statements and Exhibits

Exhibit 99.2

SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA FINANCIAL INFORMATION

INTRODUCTION

The following are the unaudited pro forma consolidated financial statements of Schiff Nutrition International, Inc. and Subsidiaries (“Schiff,” “we,” “us” or “our”) as of and for the nine months ended February 28, 2011, and for the year ended May 31, 2010.  The unaudited pro forma consolidated balance sheet assumes that our acquisition (the “Acquisition” or “Business Acquired”) on June 1, 2011 of certain inventory, receivables and intellectual property, among other things (collectively, the “Assets”) and assumption of certain liabilities (the “Liabilities”) from Ganeden Biotech, Inc. (“Ganeden”), occurred as of February 28, 2011.  The unaudited pro forma consolidated statement of operations for the nine months ended February 28, 2011 assumes that the Acquisition occurred on June 1, 2010.  The unaudited pro forma consolidated statement of operations for the year ended December 31, 2010 assumes that the Acquisition occurred on June 1, 2009.   These transaction adjustments are presented in the notes to the unaudited pro forma financial statements.

The pro forma financial statements reflect the following transactions:

·   our acquisition of the Assets and assumption of Liabilities from Ganeden, together with the allocation of the purchase price;

·   our borrowing of $40.0 million under our revolving credit facility and the use of those proceeds to finance the Acquisition;

·   our amortization of intangibles recognized in conjunction with the Acquisition; and

·   our payment of royalties pursuant to the terms of the Intellectual Property License Agreement (the “License Agreement”) that we entered into with Ganeden in conjunction with the Acquisition.

The unaudited pro forma consolidated balance sheet and unaudited pro forma consolidated statements of operations were derived by adjusting our historical financial statements.  The adjustments, including purchase price allocation, are based on currently available information and certain estimates and assumptions and, therefore, the actual adjustments may differ from the pro forma adjustments. The acquisition has been accounted for using the acquisition method of accounting and, accordingly, the total estimated purchase consideration of the acquisition was allocated to the tangible assets and identifiable intangible assets acquired and liabilities assumed based on their relative fair values. The excess of the purchase consideration over the net tangible and identifiable intangible assets acquired and liabilities assumed was recorded as goodwill. Determination of the purchase price and allocations of the purchase price used in the unaudited pro forma consolidated financial statements are based upon preliminary estimates and assumptions. These preliminary estimates and assumptions could change significantly during the measurement period as we finalize the valuations of the net tangible assets and intangible assets acquired and liabilities assumed. Any change could result in material variances between our future financial results and the amounts presented in these unaudited consolidated financial statements, including variances in fair values recorded, as well as expenses associated with these items. The unaudited pro forma consolidated financial statements do not purport to present our financial position or results of operations had the Acquisition actually been completed as of the dates indicated.  Moreover, the statements do not project our financial position or results of operations for any future date or period.

The unaudited pro forma consolidated financial statements, including the notes thereto, should be read in conjunction with our historical financial statements, filed with the SEC, for our Annual Report on Form 10-K for the year ended May 31, 2010 filed on August 17, 2010, our Quarterly Reports on Form 10-Q for the three-month period ended August 31, 2010, for the six-month period ended November 30, 2010 and nine-month period ended February 28, 2011 filed on October 1, 2010, January 7, 2011, and April 14, 2011, respectively.

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SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

FEBRUARY 28, 2011

(in thousands except share data)

	Schiff Historical			Business Acquired		Pro Forma Adjustments		Note References	Schiff Pro Forma
ASSETS
Current assets:
Cash and cash equivalents	$	31,927		$	—	$	—		$	31,927
Available-for-sale securities		6,051			—		—			6,051
Receivables, net		23,374			2,544		—			25,918
Inventories		38,340			2,498		—			40,838
Prepaid expenses		1,907			389		—			2,296
Deferred taxes, net		2,889			—		—			2,889
Total current assets		104,488			5,431		—			109,919
Property and equipment, net		14,258			—		—			14,258
Other assets:
Goodwill		4,346			—		7,834	(A)		12,180
Other intangibles		—			169		28,675	(A)		28,844
Available-for-sale securities		1,718			—		—			1,718
Other assets		287			—		—			287
Deferred taxes, net		—			—		—			—
Total other assets		6,351			169		36,509			43,029
Total assets	$	125,097		$	5,600	$	36,509		$	167,206
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
Accounts payable	$	13,960		$	1,395	$	—		$	15,355
Accrued expenses		13,937			714		—			14,651
Dividends payable		1,764			—		—			1,764
Income taxes payable		393			—		—			393
Total current liabilities		30,054			2,109		—			32,163
Long-term liabilities:
Line-of-Credit		—			—		40,000	(B)		40,000
Dividends payable		857			—		—			857
Deferred taxes, net		445			—		—			445
Other		1,243			—		—			1,243
Total long-term liabilities		2,545			—		40,000			42,545
Stockholders' equity:
Preferred stock		—			—		—			—
Class A common stock		209			—		—			209
Class B common stock		75			—		—			75
Additional paid-in capital		87,449			—		—			87,449
Accumulated other comprehensive loss		(61	)		—		—			(61	)
Retained earnings		4,826			—		—			4,826
					—
Total stockholders' equity		92,498			—		—			92,498
Total liabilities and stockholders' equity	$	125,097		$	2,109	$	40,000		$	167,206

The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.

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SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED FEBRUARY 28, 2011

(in thousands, except share data)

	Schiff Historical			Business Acquired		Pro Forma Adjustments			Note References	Schiff Pro Forma
Net sales	$	161,776		$	13,901	$	—			$	175,677
Cost of goods sold		100,394			6,069		—				106,463
Gross profit		61,382			7,832		—				69,214
Operating expenses:
Selling and marketing		26,241			5,301		392		(E)		31,934
General and administrative		16,941			1,419		—				18,360
Research and development		2,926			—		—				2,926
Amortization of intangibles		—			—		803		(D)		803
Total operating expenses		46,108			6,720		1,195				54,023
Income from operations		15,274			1,112		(1,195	)			15,191
Other income (expense):
Interest income		151			—		—				151
Interest expense		(320	)		—		(780	)	(C)		(1,100	)
Other, net		(30	)		—		—				(30	)
Total other expense, net		(199	)		—		(780	)			(979	)
Income before income taxes		15,075			1,112		(1,975	)			14,212
Income tax expense		5,505			—		(315	)	(F)		5,190
Net income	$	9,570		$	1,112	$	(1,660	)		$	9,022
Weighted average shares outstanding:
Basic		28,862,990									28,862,990
Diluted		29,178,456									29,178,456
Net income per share:
Basic	$	0.33								$	0.31
Diluted	$	0.33								$	0.31

The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.

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SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED MAY 31, 2010

(In thousands, except share data)

	Schiff Historical			Business Acquired		Pro Forma Adjustments			Note References	Schiff Pro Forma
Net sales	$	204,887		$	16,137	$	—			$	221,024
Cost of goods sold		119,837			7,196		—				127,033
Gross profit		85,050			8,941		—				93,991
Operating expenses:
Selling and marketing		33,611			5,628		455		(E)		39,694
General and administrative		17,883			2,006		—				19,889
Research and development		4,746			—		—				4,746
Amortization of intangibles		—			—		1,070		(D)		1070
Total operating expenses		56,240			7,634		1,525				65,399
Income from operations		28,810			1,307		(1,525	)			28,592
Other income (expense):
Interest income		174			—		—				174
Interest expense		(350	)		—		(1,040	)	(C)		(1,390	)
Other, net		8			—		—				8
Total other expense, net		(168	)		—		(1,040	)			(1,208	)
Income before income taxes		28,642			1,307		(2,565	)			27,384
Income tax expense		10,196			—		(448	)	(F)		9,748
Net income	$	18,446		$	1,307	$	(2,117	)		$	17,636
Weighted average shares outstanding:
Basic		28,360,184									28,360,184
Diluted		28,928,162									28,928,162
Net income per share:
Basic	$	0.65								$	0.62
Diluted	$	0.64								$	0.61

The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.

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SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

1.   Basis of Presentation, the Acquisition and Related Transactions

The historical financial information is derived from the consolidated financial statements of the Company and the financial statements of the Acquisition.  The pro forma adjustments have been prepared as if the transactions, as described below, had taken place on February 28, 2011, in the case of the pro forma consolidated balance sheet, as of June 1, 2009, in the case of the pro forma consolidated statement of operations for the year ended May 31, 2010, and as of June 1, 2010, in the case of the pro forma consolidated statement of operations for the nine months ended February 28, 2011.

The pro forma financial statements reflect the following transactions:

·   our acquisition of the Assets and assumption of Liabilities from Ganeden;

·   our borrowing of $40,000 under our revolving credit facility and the use of those proceeds to finance the Acquisition;

·   our amortization of intangibles recognized in conjunction with the Acquisition; and

·   our payment of royalties pursuant to the terms of the Intellectual Property License Agreement (the "License Agreement”) that we entered into with Ganeden in conjunction with the Acquisition.

2.   Pro Forma Adjustments and Assumptions

(A)   Reflects the allocation of the $40,000 purchase price. The acquisition has been accounted for using the acquisition method of accounting and, accordingly, the total estimated purchase consideration of the acquisition was allocated to the tangible assets and identifiable intangible assets acquired and liabilities assumed based on their relative fair values. The excess of the purchase consideration over the net tangible and identifiable intangible assets acquired and liabilities assumed was recorded as goodwill. Determination of the purchase price and allocations of the purchase price used in the unaudited pro forma consolidated financial statements are based upon preliminary estimates and assumptions. These preliminary estimates and assumptions could change significantly during the measurement period as we finalize the valuations of the net tangible assets and intangible assets acquired and liabilities assumed. Any change could result in material variances between our future financial results and the amounts presented in these unaudited consolidated financial statements, including variances in fair values recorded, as well as expenses associated with these items.   The unaudited pro forma consolidated financial statements, including the notes thereto, should be read in conjunction with our historical financial statements, filed with the SEC, for our Annual Report on Form 10-K for the year ended May 31, 2010 filed on August 17, 2010, our Quarterly Reports on Form 10-Q for the three-month period ended August 31, 2010, for the six-month period ended November 30, 2010 and nine-month period ended February 28, 2011 filed on October 1, 2010, January 7, 2011, and April 14, 2011, respectively.

(B)   Reflects the borrowing of $40,000 under our existing credit facility.

(C)   Reflects interest expense incurred on the borrowing of $40,000 under our revolving credit facility in connection with the Acquisition offset by a reduction in unused credit facility fees of $75 for the nine months ended February 28, 2011, and $100 for the year ended May 31, 2010.  Interest expense is based on an average rate of three-month LIBOR of 0.35%, plus the applicable margin of 2.50% under the revolving credit facility for both the year ended May 31, 2010 and the nine months ended February 28, 2011.  A one percentage point increase or decrease in interest rates would result in an increase of decrease in interest expense related to this transaction of $400 and $300, respectively, for the year ended May 31, 2010 and the nine months ended February 28, 2011.

(D)   Reflects amortization of other intangibles with finite lives aggregating $13,441 using the straight-line method over estimated useful lives of 5 to 20 years.

(E)   Reflects our payment of royalties equal to 3.0% of net sales (as defined) pursuant to the terms of the License Agreement.

(F)   Reflects income tax effect of both the "Business Acquired" and the "Pro Forma Adjustments" using the "Schiff Historical" effective tax rate of 36.5% for the nine months ended February 28, 2011, and 35.6% for the year ended May 31, 2010.

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