`<Page>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28, 2002
/ / 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 87-0563574
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2002 SOUTH 5070 WEST
SALT LAKE CITY, UTAH 84104-4726
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code:
(801) 975-5000
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
The number of shares outstanding of the Registrant's common stock is 26,249,436
(as of March 4, 2002).
<Page>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<Table>
<Caption>
February 28, May 31,
2002 2001
----------- ---------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,070 $ 2,293
Receivables, net 36,535 46,710
Inventories 41,972 56,028
Prepaid expenses and other 2,001 3,171
Deferred taxes 3,785 6,486
--------- ---------
Total current assets 86,363 114,688
--------- ---------
Property and equipment, net 33,381 37,658
--------- ---------
Other assets:
Intangible assets, net 39,234 43,561
Deposits and other assets 5,619 5,946
Notes receivable related to
stock performance units, net 3,646 4,227
Deferred taxes 3,207 2,992
--------- ---------
Total other assets 51,706 56,726
--------- ---------
Total assets $ 171,450 $ 209,072
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 18,126 $ 34,181
Accrued expenses 15,418 15,327
Current portion of long-term debt 21,960 19,537
Income taxes payable 1,418 336
--------- ---------
Total current liabilities 56,922 69,381
--------- ---------
Long-term debt 34,767 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 85,912 86,897
Other accumulated comprehensive loss (5,960) (5,864)
Retained earnings (deficit) (453) 4,505
--------- ---------
Total stockholders' equity 79,761 85,800
--------- ---------
Total liabilities and stockholders' equity $ 171,450 $ 209,072
========= =========
</Table>
See notes to condensed consolidated financial statements.
2
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WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<Table>
<Caption>
Three Months Ended
February 28,
-----------------------------------
2002 2001
------------ ------------
Net sales $ 79,112 $ 91,475
Cost of goods sold 47,374 57,789
------------ ------------
Gross profit 31,738 33,686
------------ ------------
Operating expenses:
Selling and marketing 18,611 23,607
General and administrative 6,990 7,168
Research and development 1,105 1,411
Amortization of intangible assets 866 853
Litigation settlement (193) --
------------ ------------
Total operating expenses 27,379 33,039
------------ ------------
Income from operations 4,359 647
------------ ------------
Other income (expense):
Interest income 19 14
Interest expense (1,740) (2,597)
Other (108) (50)
------------ ------------
Total other expense, net (1,829) (2,633)
------------ ------------
Income (loss) before income taxes 2,530 (1,986)
Provision for income taxes (benefit) 1,281 (1,334)
------------ ------------
Net income (loss) $ 1,249 $ (652)
============ ============
Weighted average shares outstanding:
Basic 26,249,436 26,249,436
============ ============
Diluted 26,249,436 26,249,436
============ ============
Net income (loss) per share:
Basic $ 0.05 $ (0.02)
============ ============
Diluted $ 0.05 $ (0.02)
============ ============
Comprehensive income $ 551 $ 1,121
============ ============
</Table>
See notes to condensed consolidated financial statements.
3
<Page>
WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<Table>
<Caption>
Nine Months Ended
February 28,
----------------------------------
2002 2001
------------ ------------
Net sales $ 244,199 $ 261,223
Cost of goods sold 152,273 159,287
------------ ------------
Gross profit 91,926 101,936
------------ ------------
Operating expenses:
Selling and marketing 58,291 67,810
General and administrative 19,877 21,854
Research and development 3,628 4,475
Amortization of intangible assets 2,483 2,350
Severance and reorganization costs 1,724 --
Litigation settlement (442) (3,571)
Plant consolidation and transition -- 648
------------ ------------
Total operating expenses 85,561 93,566
------------ ------------
Income from operations 6,365 8,370
------------ ------------
Other income (expense):
Interest income 72 98
Interest expense (5,919) (7,722)
Other (667) (228)
------------ ------------
Total other expense, net (6,514) (7,852)
------------ ------------
Income (loss) before income taxes (benefit) (149) 518
Provision for income taxes (benefit) 2,840 (537)
------------ ------------
Net income (loss) $ (2,989) $ 1,055
============ ============
Weighted average shares outstanding:
Basic 26,249,436 26,241,679
============ ============
Diluted 26,249,436 26,243,231
============ ============
Net income (loss) per share:
Basic $ (0.11) $ 0.04
============ ============
Diluted $ (0.11) $ 0.04
============ ============
Comprehensive income (loss) $ (3,085) $ 1,152
============ ============
</Table>
See notes to condensed consolidated financial statements.
4
<Page>
WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<Table>
<Caption>
Nine Months Ended
February 28,
--------------------------
2002 2001
-------- --------
Cash flows from operating activities:
Net income (loss) $ (2,989) $ 1,055
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Provision for uncollectible receivables 974 962
Deferred taxes 2,487 631
Depreciation and amortization 7,591 8,097
Amortization of original issue discount 441 392
Management and employee stock compensation
charges -- 201
Changes in operating assets and liabilities:
Receivables 9,801 (528)
Inventories 14,056 (6,895)
Prepaid expenses and other 1,170 856
Deposits and other assets 1,114 335
Accounts payable (16,056) 2,275
Accrued expenses 2,212 (8,953)
-------- --------
Net cash provided by (used in)
operating activities 20,801 (1,572)
-------- --------
Cash flows from investing activities:
Purchase of intangibles (101) (136)
Purchase of property and equipment (2,214) (2,638)
Sale of available-for-sale securities 1,004 --
-------- --------
Net cash used in investing activities (1,311) (2,774)
-------- --------
Cash flows from financing activities:
Issuance of warrants/common stock -- 3,541
Dividends paid (2,954) (2,906)
Net change in revolving line-of-credit (11,466) (42,761)
Proceeds from debt 1,832 47,632
Payments on debt (7,074) (1,599)
-------- --------
Net cash provided by (used in)
financing activities (19,662) 3,907
-------- --------
Effect of exchange rate changes on cash (51) (74)
-------- --------
Decrease in cash and cash equivalents (223) (513)
Cash and cash equivalents, beginning of period 2,293 3,011
-------- --------
Cash and cash equivalents, end of period $ 2,070 $ 2,498
======== ========
</Table>
See notes to condensed consolidated financial statements.
5
<Page>
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 converted 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 February
28, 2002.
The Company's effective tax rate for fiscal 2002 was impacted by the second
quarter 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:
<Table>
<Caption>
February 28, May 31,
2002 2001
------------ --------
Trade accounts $ 45,591 $ 55,068
Other 1,438 1,066
-------- --------
47,029 56,134
Less allowance for doubtful accounts
and sales returns (10,494) (9,424)
-------- --------
Total $ 36,535 $ 46,710
======== ========
</Table>
6
<Page>
WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
3. INVENTORIES
Inventories consist of the following:
<Table>
<Caption>
February 28, May 31,
2002 2001
----------- -------
Raw materials $13,818 $21,159
Work in process 3,478 1,273
Finished goods 24,676 33,596
------- -------
Total $41,972 $56,028
======= =======
</Table>
4. INTANGIBLE ASSETS, NET
Intangible assets consist of the following:
<Table>
<Caption>
February 28, May 31,
2002 2001
----------- -------
Cost in excess of fair value
of net assets acquired (goodwill) $ 49,500 $ 51,381
Patents and trademarks 10,563 10,679
Noncompete agreements 178 184
-------- --------
60,241 62,244
Less accumulated amortization (21,007) (18,683)
-------- --------
Total $ 39,234 $ 43,561
======== ========
</Table>
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:
<Table>
<Caption>
February 28, May 31,
2002 2001
----------- --------
Notes receivable $ 4,246 $ 4,227
Less allowance for
unrealizable amounts (600) --
------- -------
Total $ 3,646 $ 4,227
======= =======
</Table>
The notes receivable are generally 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,
among other considerations, the closing price of the Company's Class A common
stock. A portion of, or the entire net book value of the notes receivable may
subsequently be reclassified as treasury stock and reflected as a reduction to
stockholders' equity.
7
<Page>
WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
6. OPERATING SEGMENTS
The Company currently has two reportable segments: the U.S. based or
domestic operations and the 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 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 large 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(R) 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 are anticipated to 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
February 28, 2002, the Company is providing segment reporting data consistent
with its historical practice.
8
<Page>
WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Segment information for the nine months ended February 28, 2002 and 2001,
respectively, are summarized as follows:
<Table>
<Caption>
Income
(Loss)
Net From Interest
2002: Sales Operations Expense
-------- ---------- --------
Domestic Operations:
Mass market $130,346 $ 15,700 $ 1,211
Health food store 7,244 (1,930) 133
Health club and gym 15,646 (2,042) 227
Other 1,800 (358) 18
Unallocated -- (707) --
-------- -------- --------
155,036 10,663 1,589
International Operations 89,163 (4,298) 4,330
-------- -------- --------
Total $244,199 $ 6,365 $ 5,919
======== ======== ========
</Table>
<Table>
<Caption>
Income
(Loss)
Net From Interest
2001: Sales Operations Expense
-------- ---------- --------
Domestic Operations:
Mass market $133,590 $ 9,639 $ 2,544
Health food store 17,627 (2,220) 394
Health club and gym 16,069 (262) 354
Other 2,674 (922) 55
Unallocated -- 2,923 --
-------- -------- --------
169,960 9,158 3,347
International Operations 91,263 (788) 4,375
-------- -------- --------
Total $261,223 $ 8,370 $ 7,722
======== ======== ========
</Table>
Reconciliation of total assets for the reportable segments is as follows:
<Table>
<Caption>
February 28, May 31,
2002 2001
------------ ---------
Total domestic assets $ 168,315 $ 191,040
Total international assets 67,442 79,127
Eliminations (64,307) (61,095)
--------- ---------
Total $ 171,450 $ 209,072
========= =========
</Table>
Capital expenditures for domestic and international operations amounted to
$1.6 million and $.6 million, respectively, for the nine months ended February
28, 2002, and $1.3 million and $1.3 million, respectively, for the nine months
ended February 28, 2001.
9
<Page>
WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
7. SALES TO MAJOR CUSTOMERS
The Company's two largest customers accounted for approximately 43% and 41%
of net sales for the nine months ended February 28, 2002 and 2001, respectively.
At February 28, 2002 and May 31, 2001, amounts due from these customers
represented approximately 29% and 22%, 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 November 2001, the Financial Accounting Standards Board ("FASB") issued
Emerging Issues Task Force ("EITF") No.01-9. This EITF, representing a summary
of previously issued EITF's, addresses 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. EITF No.01-9
is effective for the Company's financial statements at March 1, 2002. The
Company has determined that the impact of adopting this EITF on the Company's
financial statements is not material.
10
<Page>
WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
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 this EITF at June 1, 2001, and applied the applicable
provisions retroactively, gross profit for the nine months ended February 28,
2002 and 2001 would have decreased by approximately $12.9 million and $10.7
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. At
February 28, 2002, the net book value of the Company's intangible assets was
$39.2 million, including $32.4 million in goodwill. While the Company has not
completed its analysis of SFAS No. 142, the impact of its adoption to the
consolidated financial statements is expected to be material.
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, EXCEPT AS REQUIRED BY LAW.
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, THE INABILITY TO
SUCCESSFULLY UTILIZE AVAILABLE CASH RESULTING FROM SUSPENSION OF THE COMPANY'S
QUARTERLY DIVIDEND, DEPENDENCE ON INDIVIDUAL CUSTOMERS, THE IMPACT OF
COMPETITIVE PRODUCTS AND PRICING (INCLUDING PRIVATE LABEL), 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
11
<Page>
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 OR MAY BE OBTAINED AT THE SEC'S WEBSITE (WWW.SEC.GOV).
GENERAL
Weider Nutrition International, Inc. (the "Company") develops,
manufactures, markets and distributes 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(R), Weider(R), American Body
Building(TM), Tiger's Milk(R), Multipower(R) 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(R) Specialty Nutrition Unit, the Active Nutrition Unit and the Haleko
Unit.
The Schiff(R) Specialty Nutrition Unit will contain the Schiff(R) and
Schiff(R) Move Free(TM) brands, as well as private label capsule and tablet
business. Private label business is limited to those customers that otherwise
carry the Company's branded products. The Active Nutrition Unit will include the
American Body Building(TM), Tiger's Milk(R) and Weider(R) branded global
businesses. The Haleko Unit, the Company's primary European subsidiary, will
include the Multipower(R) and Multaben nutritional supplement brands as well as
the Venice Beach sports apparel and private label businesses. Upon completion of
the reorganization, the business units are anticipated to 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'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.
12
<Page>
RESULTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED FEBRUARY 28, 2002 COMPARED TO THREE MONTHS
ENDED FEBRUARY 28, 2001
The following table shows selected items expressed on an actual basis and
as a percentage of net sales for the respective interim periods:
<Table>
<Caption>
Three Months Ended February 28,
----------------------------------------------------------
2002 2001
------------------------ -------------------------
(dollars in thousands)
Net sales .................... $ 79,112 100.0% $ 91,475 100.0%
Cost of goods sold ........... 47,374 59.9 57,789 63.2
-------- ------ -------- -------
Gross profit ................. 31,738 40.1 33,686 36.8
-------- ------ -------- -------
Operating expenses ........... 27,572 34.8 33,039 36.1
Litigation settlement ........ (193) (.2) -- --
-------- ------ -------- -------
Total operating expenses ..... 27,379 34.6 33,039 36.1
-------- ------ -------- -------
Income from operations ....... 4,359 5.5 647 0.7
Other expense, net ........... 1,829 2.3 2,633 2.9
Income taxes (benefit) ....... 1,281 1.6 (1,334) (1.5)
-------- ------ -------- -------
Net income (loss) ............ $ 1,249 1.6% $ (652) (0.7)%
======== ====== ======== =======
</Table>
NET SALES. Net sales for the fiscal 2002 third quarter decreased $12.4
million, or 13.5%, to $79.1 million from $91.5 million for the fiscal 2001 third
quarter. Domestically, net sales decreased approximately 17.7% to $50.9 million
for the fiscal 2002 third quarter from $61.9 million for the fiscal 2001 third
quarter. Internationally, net sales decreased approximately 4.8% to $28.2
million for the fiscal 2002 third quarter from $29.6 million for the fiscal 2001
third quarter.
Fiscal 2002 third quarter sales to domestic mass market retailers decreased
approximately 14.2% to $44.1 million from fiscal 2001 third quarter sales of
$51.4 million. The decrease in sales to mass market retailers was primarily the
result of decreased sales to existing accounts of the Company's Schiff(R) Move
Free(TM) branded products. Net sales of Schiff(R) Move Free(TM) amounted to
$20.6 million for the fiscal 2002 third quarter, compared to $28.2 million for
the fiscal 2001 third quarter. As a result of continuing private label and other
competitive considerations, including pricing pressures, the Company expects net
sales of Schiff(R) Move Free(TM) to continue to decrease in the fiscal 2002
fourth quarter. Sales to domestic health food store distributors and retailers
decreased approximately 61.5% to $1.8 million for the fiscal 2002 third quarter
from $4.8 million for the fiscal 2001 third quarter, primarily as a result of
reduced sales volume with a large retailer.
International sales volume decreased primarily due to a reduction in
sportswear sales. Net sales of sportswear decreased 14.1% to approximately $8.8
million for the three months ended February 28, 2002 from approximately $10.2
million for the three months ended February 28, 2001. The reduction in
sportswear net sales resulted primarily from a decrease in shipments to certain
department stores and the implementation of strategic measures aimed at
improving margins, by focusing the apparel business in more profitable accounts.
Overall nutritional supplement and private label sales in international markets
were relatively constant for the three months ended February 28, 2002 and 2001.
The Company's product mix between branded and private label sales volume is
changing. Private label sales volume represented 22.3% of total net sales for
the three months ended February 28, 2002, compared to 20.7% for
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the three months ended February 28, 2001. The Company expects private label
sales volume, as a percentage of total net sales, to continue to increase.
GROSS PROFIT. Gross profit decreased approximately 5.8% to $31.7 million
for the quarter ended February 28, 2002, compared to $33.7 million for the
quarter ended February 28, 2001. Gross profit, as a percentage of net sales, was
40.1% for the quarter ended February 28, 2002, compared to 36.8% for the quarter
ended February 28, 2001. Domestic gross profit percentage increased to 42.7%
from 39.9% due to product sales mix, improved net raw material costs and
operating efficiencies. International gross profit percentage increased to 35.5%
from 30.5% primarily due to higher margins on sportswear sales and a decrease in
inventory related charges. As a result of continuing private label and other
competitive pressures, the Company expects gross profit, as a percentage of net
sales, to decrease in the fiscal 2002 fourth quarter.
OPERATING EXPENSES. Operating expenses decreased approximately 17.1% to
$27.4 million for the fiscal 2002 third quarter from $33.0 million for the
fiscal 2001 third quarter. The reduction in operating expenses was primarily
attributable to a decrease in domestic selling and marketing expenses.
Selling and marketing expenses decreased approximately 21.2% to $18.6
million for the fiscal 2002 third quarter from $23.6 million for the fiscal 2001
third quarter. The decrease in selling and marketing expenses resulted primarily
from the Company's decision to reduce discretionary domestic national
advertising and consumer marketing costs.
General and administrative expenses remained relatively constant for the
quarters ended February 28, 2002 and 2001 at approximately $7.0 million and $7.2
million, respectively.
OTHER EXPENSE. Other expense, net, was $1.8 million for the quarter ended
February 28, 2002, compared to $2.6 million for the quarter ended February 28,
2001. The decrease resulted from reductions in net interest expense, associated
with a reduction in debt and a lower overall effective borrowing rate.
PROVISION FOR INCOME TAXES. Provision for income taxes was $1.3 million for
the quarter ended February 28, 2002, compared to a $1.3 million tax benefit for
the quarter ended February 28, 2001. The change resulted from the increase in
pre-tax earnings and the net effect of tax rate differences for the Company's
domestic and international operations. In addition, the Company is currently not
recognizing an income tax benefit on losses incurred by the Haleko subsidiary.
NINE MONTHS ENDED FEBRUARY 28, 2002 COMPARED TO NINE MONTHS
ENDED FEBRUARY 28, 2001
NET SALES. Net sales for the nine months ended February 28, 2002 decreased
$17.0 million, or 6.5%, to $244.2 million from $261.2 million for the nine
months ended February 28, 2001. Domestically, net sales decreased approximately
8.8% to $155.0 million for the nine months ended February 28, 2002, from $170.0
million for the nine months ended February 28, 2001. Internationally, net sales
declined slightly to $89.2 million for the first nine months of fiscal 2002 from
$91.3 million for the prior comparable period.
Sales to domestic mass market retailers decreased approximately 2.3% to
$130.5 million for the nine months ended February 28, 2002 from $133.6 million
for the nine months ended February 28, 2001. The decrease in sales
14
<Page>
to mass market retailers was primarily the result of decreased sales of
Schiff(R) Move Free(TM) to existing accounts partially offset by an increase in
private label sales volume. Net sales of Schiff(R) Move Free(TM) amounted to
$61.6 million for the nine months ending February 28, 2002, compared to $71.5
million for the nine months ending February 28, 2001. As a result of continuing
private label and other competitive considerations, including pricing pressures,
the Company expects net sales of Schiff(R) Move Free(TM) to continue to decrease
in the fiscal 2002 fourth quarter. Sales to domestic health food store
distributors and retailers decreased approximately 58.9% to $7.2 million for the
first nine months of fiscal 2002 from $17.6 million for the first nine months of
fiscal 2001. The decrease in sales in the health food distribution channel
resulted primarily from reduced branded and private label sales volume with a
large retailer.
Internationally, reductions in sales of sportswear apparel were partially
offset by increases in private label sales. The reduction in sportswear net
sales of approximately $6.3 million, or 21.1%, resulted primarily from a
decrease in shipments to department stores. Sportswear sales volume amounted to
approximately $23.7 million and $30.0 million, respectively, for the nine months
ending February 28, 2002 and 2001. Overall, nutritional supplement and private
label sales amounted to $65.5 million and $61.3 million, respectively, for the
nine months ending February 28, 2002 and 2001.
Private label net sales volume represented 22.4% of total net sales for the
nine months ended February 28, 2002, compared to 18.9% for the nine months ended
February 28, 2001.
GROSS PROFIT. Gross profit decreased approximately 9.8% to $91.9 million
for the nine months ended February 28, 2002, compared to $101.9 million for the
nine months ended February 28, 2001. Gross profit, as a percentage of net sales,
was 37.6% for the nine months ended February 28, 2002, compared to 39.0% for the
nine months ended February 28, 2001. The decrease in the gross profit percentage
resulted primarily from a 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 nine months of fiscal
2002 decreased approximately 8.6% to $85.6 million from $93.6 million for the
first nine months of fiscal 2001. During the first nine months of fiscal 2002,
the Company recognized $1.7 million of severance and reorganization costs and
$.4 million of litigation settlement income. During the first nine months of
fiscal 2001, the Company received approximately $3.6 million from the settlement
of litigation. Also, during the first nine 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 $12.2 million, or 12.7%,
during the first nine months of fiscal 2002 in comparison to the first nine
months of fiscal 2001. The decrease resulted primarily from reductions in both
selling and marketing expenses and general and administrative related costs.
Selling and marketing expenses decreased approximately 14.0% to $58.3
million for the first nine months of fiscal 2002 from $67.8 million for the
first nine months of fiscal 2001. The decrease in selling and marketing expenses
resulted primarily from the Company's decision to reduce discretionary domestic
national advertising and consumer marketing costs, and was impacted by expenses
incurred in the first nine months of the prior year associated with the
Company's Schiff(R) Move Free(TM) brand name transition.
15
<Page>
General and administrative expenses decreased approximately 9.0% to $19.9
million for the nine months ended February 28, 2002 from $21.9 million for the
nine months ended February 28, 2001. The decrease in general and administrative
expenses resulted primarily from a decrease in outside professional and legal
related costs, personnel related expenses and depreciation expense.
OTHER EXPENSE. Other expense, net, was $6.5 million for the nine months
ended February 28, 2002, compared to $7.9 million for the nine months ended
February 28, 2001. Reductions in net interest expense, primarily due to a
reduction in debt and 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 $2.8 million for
the nine months ended February 28, 2002, compared to $0.5 million tax benefit
for the nine months ended February 28, 2001. The change resulted primarily from
the increase in pre-tax earnings and the net effect of tax rate differences of
the Company's domestic and international operations. During the first nine
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
$15.9 million to approximately $29.4 million at February 28, 2002 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 $14.1 million primarily as
a result of continuing improvements in inventory management, the timing of
shipments to customers and lower revenues. The decrease in receivables of $10.2
million was primarily attributable to lower sales in the third 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. The term loan, with an outstanding balance of $21.1
million at February 28, 2002, requires repayment of $5.3 million over the next
twelve-month period. 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 February 28, 2002, the outstanding
balance of the revolving loan was $10.2 million, and the Company had
approximately $19.0 million in available revolving loan funds.
The Company's domestic operations are also supported by a $10.0 million
senior subordinated loan (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.
16
<Page>
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 $21.1 million in the
revolving loan and an agreement to waive compliance with certain covenants, as
necessary, through April 30, 2002, as extended. At February 28, 2002, the
outstanding balance of the Haleko Facility was $14.5 million, included in
current portion of long-term debt, and the Company had approximately $6.1
million in available revolving loan funds.
In February 2002, the Company announced the suspension of its $0.0375
quarterly dividend on its common stock. The Company anticipates that the
available cash from the dividend suspension, approximately $1.0 million
quarterly, will be utilized for debt reduction, sales and marketing initiatives,
research and development, and other general corporate purposes. The Company
believes that available revolving loan funds and cash generated from operations
provide the Company with sufficient resources for the next twelve months.
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 can be seasonal, with lower sales
realized during the first and second fiscal quarters and higher sales 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.
17
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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.
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.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Not applicable.
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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: March 22, 2002 By: /s/ Bruce J. Wood
-------------------------------
Bruce J. Wood
President, Chief Executive Officer
and Director
Date: March 22, 2002 By: /s/ Joseph W. Baty
-------------------------------
Joseph W. Baty
Executive Vice President and
Chief Financial Officer
19