August 31,			May 31,
		2004			2004
ASSETS		(unaudited)
Current assets:
Cash and cash equivalents		$	14,528		$	7,449
Receivables, net			33,910			35,620
Inventories			32,252			28,431
Prepaid expenses and other			2,566			5,021
Deferred taxes			2,783			2,419
Total current assets			86,039			78,940
Property and equipment, net			24,218			24,618
Other assets:
Goodwill			4,346			4,346
Intangible assets, net			4,903			5,146
Deposits and other assets			1,654			1,874
Total other assets			10,903			11,366
Total assets		$	121,160		$	114,924
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	17,897		$	16,116
Accrued expenses			13,548			15,277
Current portion of long-term debt			1,438			1,091
Income taxes payable			1,006			--
Total current liabilities			33,889			32,484
Long-term debt			--			133
Deferred taxes			7,811			6,494
Commitments and contingencies (Note 7)
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-11,105,997 and 11,127,166			111			111
Class B common stock, par value $.01 per share; shares
authorized-25,000,000; shares issued and outstanding-14,973,148			150			150
Additional paid-in capital			83,809			83,902
Deferred compensation costs			(586	)		(635	)
Other accumulated comprehensive loss			(4,057	)		(4,060	)
Retained earnings (accumulated deficit)			33			(3,655	)
Total stockholders’ equity			79,460			75,813
Total liabilities and stockholders’ equity		$	121,160		$	114,924

See notes to condensed consolidated financial statements.

	3

		Three Months Ended August 31,
		2004			2003
Net sales		$	69,766		$	63,641
Cost of goods sold			41,847			39,348
Gross profit			27,919			24,293
Operating expenses:
Selling and marketing			13,995			14,496
General and administrative			6,294			5,383
Research and development			1,174			1,214
Amortization of intangible assets			267			142
Total operating expenses			21,730			21,235
Income from operations			6,189			3,058
Other income (expense):
Interest income			22			147
Interest expense			(178	)		(333	)
Other, net			(35	)		(155	)
Total other expense, net			(191	)		(341	)
Income from continuing operations before income taxes			5,998			2,717
Income tax expense			2,310			1,088
Net income from continuing operations			3,688			1,629
Income from discontinued operations, net of income taxes			--			566
Net income		$	3,688		$	2,195
Weighted average shares outstanding:
Basic			25,745,747			26,237,002
Diluted			26,563,674			26,744,821
Net income per share-basic and diluted:
Net income from continuing operations		$	0.14		$	0.06
Net income from discontinued operations			--			0.02
Net income		$	0.14		$	0.08
Comprehensive income		$	3,691		$	3,030

See notes to condensed consolidated financial statements.

	4

		Three Months Ended August 31,
		2004			2003
Cash flows from operating activities:
Net income		$	3,688		$	2,195
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Provision for (recovery of) bad debts			19			(455	)
Deferred taxes			953			1,226
Depreciation and amortization			1,324			1,225
Loss (gain) on sale of assets held for sale and property and equipment			1			(950	)
Amortization of financing fees			99			102
Amortization of deferred compensation costs			73			24
Tax benefit from stock options exercised			3			--
Changes in operating assets and liabilities:
Receivables			1,691			(4,019	)
Inventories			(3,821	)		(1,836	)
Prepaid expenses and other			2,455			1,628
Deposits and other assets			97			(54	)
Accounts payable			1,781			2,414
Other current liabilities			(731	)		(2,388	)
Net cash provided by (used in) operating activities			7,632			(888	)
Cash flows from investing activities:
Purchase of property and equipment			(713	)		(330	)
Purchase of intangibles			(7	)		--
Proceeds from disposition of assets held for sale and property and equipment			--			6,510
Collection of notes receivable			--			4
Net cash provided by (used in) investing activities			(720	)		6,184
Cash flows from financing activities:
Issuance of common stock			12			--
Acquisition and retirement of treasury stock			(108	)		--
Net change in revolving line-of-credit			(2	)		50
Proceeds from debt			380			109
Payments on debt			(160	)		(4,256	)
Net cash provided by (used in) financing activities			122			(4,097	)
Effect of exchange rate changes on cash			45			102
Increase in cash and cash equivalents			7,079			1,301
Cash and cash equivalents, beginning of period			7,449			3,463
Cash and cash equivalents, end of period		$	14,528		$	4,764

See notes to condensed consolidated financial statements.

	5

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

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

Effective in our fiscal 2004 first quarter, we sold substantially all of the assets of our Haleko Venice Beach^® sports apparel business to Hucke AG, a German apparel company, for initial net cash proceeds of approximately $6,510. In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, the operating results for Venice Beach are reflected as discontinued operations for the fiscal 2004 first quarter. Accordingly, we recognized after-tax income from discontinued operations of approximately $566, including an after-tax gain on disposal of approximately $578. Fiscal 2004 first quarter results from discontinued operations were subsequently impacted by certain lease related and other costs, as well as by final settlement of net assets sold in the transaction, which ultimately resulted in cumulative net cash proceeds of approximately $7.1 million and inco me from discontinued operations, net of income taxes, of approximately $0.8 million for fiscal 2004.

Effective August 16, 2002, we issued 640,000 restricted shares of Class A common stock to certain officers and employees. The aggregate value of these restricted shares was approximately $1,038, which we are expensing on a straight-line basis over the accompanying five-year vesting period. During the fiscal 2005 first quarter, 124,600 of these restricted shares vested. During the fiscal 2004 first quarter, 128,000 of these restricted shares vested and 13,600 were cancelled as a result of the voluntary termination of certain employees.

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

Proforma information regarding net income and net income per share is required by SFAS No. 123, as amended by SFAS No. 148, and has been determined as if we had accounted for our employee stock options and unvested restricted stock under the fair value method of SFAS No. 123. For the purposes of proforma disclosure, the estimated fair value of the stock options is amortized to expense over the options’ vesting period. Our proforma net income and net income per share for the fiscal 2005 and 2004 first quarters are as follows:

	6

 

		August 31,			May 31,
		2004			2004
Trade accounts		$	39,777		$	40,982
Other, including income taxes			627			1,142
			40,404			42,124
Less allowance for doubtful accounts, sales returns and discounts			(6,494	)		(6,504	)
Total		$	33,910		$	35,620

 

       Inventories consist of the following:

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

		August 31, 2004									May 31, 2004
		Gross Carrying Amount			Accumul. Amortiz.			Net Book Value			Gross Carrying Amount			Accumul. Amortiz.			Net Book Value
Goodwill		$	4,346		$	--		$	4,346		$	4,346		$	--		$	4,346
Intangible assets-patents     and trademarks		$	10,462		$	(5,559	)	$	4,903		$	10,365		$	(5,219	)	$	5,146

Estimated amortization expense, assuming no changes in our intangible assets, for each of the five succeeding fiscal years, beginning with fiscal 2005, is $1,056 (2005), $1,059 (2006), $1,035 (2007), $1,017 (2008), and $820 (2009).

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

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

	7

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

The accounting policies of these business units are the same as those described in Note 1 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended May 31, 2004. We evaluate the performance of our business units based on actual and expected operating results of the respective business units. Certain domestic assets are not allocated to the Schiff Specialty and Active Nutrition units. Accordingly, asset segment information is provided on a total domestic and non-domestic basis consistent with the manner in which management evaluates the business.

Effective in our fiscal 2005 first quarter, we retroactively reclassified Schiff export net sales and operating results from our Active Nutrition Unit to our Schiff Specialty Unit. Schiff export net sales and operating income previously included in Active Nutrition operating results for the fiscal 2004 first quarter were $1,013 and $540, respectively.

Segment information for the fiscal 2005 and 2004 first quarters is summarized as follows:

		Net Sales			Income (Loss) From Operations			Interest Expense
2005:
Schiff Specialty		$	41,762		$	4,805		$	123
Haleko			19,375			795			40
Active Nutrition			10,327			572			15
Eliminations			(1,698	)		17			--
		$	69,766		$	6,189		$	178
2004:
Schiff Specialty		$	40,045		$	3,552		$	201
Haleko			16,519			160			130
Active Nutrition			8,410			(678	)		20
Eliminations			(1,333	)		24			(18	)
		$	63,641		$	3,058		$	333

Reconciliation of total assets for domestic and international operations is as follows:

		August 31,			May 31,
		2004			2004
Total domestic assets		$	133,640		$	127,376
Total international assets			46,952			46,689
Eliminations			(59,432	)		(59,141	)
Total		$	121,160		$	114,924

Capital expenditures for domestic and international operations were $654 and $59, respectively, for the fiscal 2005 first quarter, and $157 and $173, respectively, for the fiscal 2004 first quarter.

	8

Our two largest customers combined accounted for approximately 46% and 51%, respectively, of net sales for the fiscal 2005 and 2004 first quarters.  At August 31, 2004, and May 31, 2004, amounts due from these customers represented approximately 38% of total trade accounts receivable. Net sales of our Schiff Move Free^® brand accounted for approximately 27% and 28%, respectively, of total net sales for the fiscal 2005 and 2004 first quarters.

We are currently named as a defendant in two lawsuits alleging that consumption of certain of our discontinued products containing ephedra caused or contributed to injuries and damages. We dispute the allegations and our insurance carriers have assumed defense of one of the matters. The second matter is not covered by insurance. We believe that, after taking into consideration our insurance coverage, these lawsuits, if successful, generally would not have a material adverse effect on our results of operations and financial condition. However, one or more large punitive damage awards, which are generally not covered by insurance, or a large adverse award in a lawsuit not covered by insurance, could have a material adverse effect on our results of operations and financial condition. In connection with the sale of the American Body Building and Science Foods brands in July 2002, we discontinued the sale of products that contain ephedra. However, we cannot assure you that we will not be subject to further litigation with respect to ephedra products we previously sold.

We are currently named as a defendant along with numerous other supplement and nutrition companies in purported class actions in Florida, Illinois and New Jersey state courts, alleging that androstenedione and other purportedly similar products were sold by defendants in violation of certain statutes and utilizing false and misleading claims and advertising. We dispute the allegations and are opposing the lawsuits.

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

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

	9

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

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

Effective in our fiscal 2004 first quarter, we sold substantially all of the assets relating to Haleko's Germany-based Venice Beach sports apparel brand. The transaction included the sale of Venice Beach receivables, inventories, intellectual property and certain fixed assets and the assumption by the purchaser of approximately 47 Venice Beach employees. The initial net cash proceeds from the sale were approximately $6.5 million. In accordance with SFAS No. 144, operating results for Venice Beach are reflected as discontinued operations for the fiscal 2004 first quarter. Fiscal 2004 first quarter results from discontinued operations were subsequently impacted by certain lease related and other costs, as well as by final settlement of net assets sold in the transaction, which ultimately resulted in cumulative net cash proceeds of approximately $7.1 million and income from discontinued operations, net of income taxes, of approximately $0.8 million for fiscal 2004.

During fiscal 2004, we entered into settlement agreements with five former employees relating to certain outstanding notes due to us, including interest accrued thereon. As a result of the respective settlement agreements, we received an aggregate of $99,000 in cash and acquired and retired a total of

	10

966,609 shares of our Class A common stock valued at approximately $3.8 million as full payment of principal and interest accrued on the notes. Settlement agreements entered into during the fiscal 2004 first quarter resulted in recoveries of previously recognized notes receivable valuation allowances of approximately $0.5 million, reflected as a reduction of general and administrative expense, and recognition of contractually due interest income of approximately $0.1 million.

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

The following tables show comparative results for continuing operations, by business unit, for the three months ended August 31, 2004 and 2003. Certain indirect costs, including primarily general and administrative and research and development expenses, are charged to the business units based on various allocation methodologies.

 

 

 

	11

Active Nutrition net sales increased approximately 22.8% to $10.3 million for the fiscal 2005 first quarter, from $8.4 million for the fiscal 2004 first quarter. The increase was primarily attributable to incremental distribution in our Weider branded European business and the impact of foreign currency exchange rates.

Gross Profit. Gross profit increased approximately 14.9% to $27.9 million for the fiscal 2005 first quarter, from $24.3 million for the fiscal 2004 first quarter. Gross profit increased in each of our business units, primarily resulting from increased sales, changes in sales mix and a reduction in sales returns and inventory related charges. Gross profit, as a percentage of net sales, was 40.0% for the fiscal 2005 first quarter, compared to 38.2% for the fiscal 2004 first quarter. Gross profit percentage increased primarily in our Schiff Specialty unit with more modest increases in our Haleko and Active Nutrition business units.

Schiff Specialty gross profit increased approximately 10.9% to $15.9 million for the fiscal 2005 first quarter, from $14.4 million for the fiscal 2004 first quarter. Gross profit, as a percentage of net sales, was 38.1% for the fiscal 2005 first quarter, compared to 35.9% for the fiscal 2004 first quarter. The percentage increase resulted primarily from an increase in higher margin Schiff Move Free and other joint product sales, as well as a decrease in lower margin private label sales volume.

Haleko gross profit increased approximately 17.8% to $7.6 million for the fiscal 2005 first quarter, from $6.5 million for the fiscal 2004 first quarter primarily resulting from increased sales. Gross profit, as a percentage of net sales, remained relatively consistent at 39.4% and 39.2%, respectively, for the fiscal 2005 and 2004 first quarters.

Active Nutrition gross profit increased approximately 26.5% to $4.4 million for the fiscal 2005 first quarter, from $3.5 million for the fiscal 2004 first quarter primarily resulting from increased sales. Gross profit, as a percentage of net sales, was 42.3% for the fiscal 2005 first quarter, compared to 41.0% for the fiscal 2004 first quarter. The percentage increase was primarily attributable to reduced charges for inventory valuation and sales return adjustments.

Operating Expenses. Operating expenses increased approximately 2.3% to $21.7 million for the fiscal 2005 first quarter, from $21.2 million for the fiscal 2004 first quarter. An increase in general and administrative expense was partially offset by a decrease in selling and marketing costs, primarily reflected in our Schiff Specialty and Active Nutrition business units.

Selling and marketing expenses, including sales, marketing, advertising, freight and other costs, decreased to approximately $14.0 million for the fiscal 2005 first quarter, from $14.5 million for the fiscal 2004 first quarter. The decrease in selling and marketing expenses resulted primarily from an increase in promotional costs classified as a direct reduction of net sales. Increases in direct sales incentives provided to customers were offset by reduced media advertising, primarily in our Schiff Specialty unit.

General and administrative expenses increased to approximately $6.3 million for the fiscal 2005 first quarter, from $5.4 million for the fiscal 2004 first quarter. The prior period amount includes approximately $0.5 million in recoveries of previously recognized notes receivable valuation allowances, which is reflected as a reduction in general and administrative expense.

Research and development costs remained constant at approximately $1.2 million quarter over quarter. Amortization of intangibles increased due to a reduction in the estimated remaining useful lives of certain Haleko unit trademarks.

Other Income/Expense. Other income/expense, net, was $0.2 million expense for the fiscal 2005 first quarter, compared to $0.3 million expense for the fiscal 2004 first quarter. Interest expense decreased as a result of reduced aggregate indebtedness and a reduction of financing fees under the current credit facility. Fiscal 2004 first quarter interest income includes interest recognized from the settlement of certain notes receivable.

Provision for Income Taxes. Provision for income taxes was $2.3 million for the fiscal 2005 first quarter, compared to $1.1 million for the fiscal 2004 first quarter. The change resulted primarily from an increase in pre-tax income, partially offset by a modest reduction in our effective tax rate.

	12

Working capital increased $5.6 million to approximately $52.1 million at August 31, 2004, from $46.5 million at May 31, 2004.  Working capital at August 31, 2004 includes an increase in inventories primarily due to joint product category growth, some build-up of raw materials, our pending Lubriflex³ new product launch and foreign currency impact.

Effective June 30, 2000, we were party to a senior credit facility (the “Credit Facility”) with Bankers Trust Company, on behalf of our domestic subsidiaries. The Credit Facility, as subsequently amended, was comprised of a $45.0 million revolving loan. Under the revolving loan, we were able to borrow up to the lesser of $45.0 million or the sum of (i) 85% of eligible accounts receivable and (ii) the lesser of $22.5 million or 65% of the eligible inventory. The Credit Facility contained customary terms and conditions, including, among others, financial covenants regarding minimum cash flows and limitations on indebtedness and our ability to pay dividends under certain circumstances. Our obligations under the Credit Facility were secured by a first priority lien on all owned or acquired tangible and intangible assets of our domestic subsidiaries. The Credit Facility was being used to fun d our normal working capital and capital expenditure requirements. The Credit Facility was terminated on June 30, 2004 in favor of a new credit facility discussed below.

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

Our European working capital needs (primarily our Haleko business unit) are supported by a Germany-based secured credit facility (the “Haleko Facility”) that is subject to annual renewal in or around June. Our obligations under the Haleko Facility are secured by a first priority lien on substantially all Haleko tangible and intangible assets. In July 2004, we renewed the Haleko Facility with Deutsche Bank AG in the approximate amount of $9.6 million (at recent exchange rates) on terms substantially similar to the previous facility. At August 31, 2004, there was approximately $0.8 million outstanding and $8.3 million available under the Haleko Facility.

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

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

	13

 

A summary of our outstanding contractual obligations at August 31, 2004 is as follows:

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

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

Historically, we have been able to pass inflationary increases for raw materials and other costs on to our customers through price increases. While we will continue efforts to do so in the future, we cannot assure you that we will be successful.

	14

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

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

Important factors that may cause these forward looking statements to be false include, but are not limited to:

• the inability to reach a definitive agreement with WHF regarding the sale of certain Weider branded assets;
• the inability to successfully implement marketing and promotional programs behind our Schiff Move Free brand and other branded new products;
• the inability to successfully launch and gain distribution for our Schiff Lubriflex³ product and Schiff Move Free product enhancements;
• the inability to achieve cost savings and operational efficiencies;
• the inability to increase operating margins and increase revenues; 
• dependence on individual products and customers;
• the inability to successfully relaunch brands in our Haleko business unit;
• 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 the inability to obtain customer acceptance of new product introductions; 
• changes in laws and regulations, including recently proposed FDA regulations regarding good manufacturing practices; 
• litigation and government regulatory action;
• lack of available product liability insurance for products containing ephedra; 
• adverse publicity regarding the consumption of nutritional supplements;
• changes in accounting standards; and
• other factors indicated from time to time in our SEC reports, copies of which are available upon request from our investor relations department or may be  obtained at the SEC's website (www.sec.gov).

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

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

 

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

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

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

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

	15

 

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

The following table presents information regarding repurchases of our Class A Common Stock during the fiscal 2005 first quarter:

Period		Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs		Maximum number of shares that may yet be purchased under the plans or programs
June 1 - June 30		--		--		--		--
July 1 - July 31		--		--		--		--
August 1 - August 31		27,406(1)		$3.95		--		--
Total		27,406		$3.95		--		--

⁽¹⁾ Repurchase of these shares was to satisfy employee tax withholding obligations due upon vesting of restricted shares.

Not applicable

Not applicable

Not applicable

31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

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

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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.

Date: October 14, 2004	By: /s/ Bruce J. Wood
	Bruce J. Wood
	President, Chief Executive
	Officer and Director

Date: October 14, 2004	By: /s/ Joseph W. Baty
	Joseph W. Baty
	Executive Vice President and
	Chief Financial Officer

 

 

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