<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 2000
/ / 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 January 2, 2001.)
<PAGE> 2
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>
November 30, May 31,
ASSETS 2000 2000
--------- --------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,422 $ 3,011
Receivables 39,542 53,522
Inventories 49,166 47,113
Prepaid expenses and other 5,179 4,982
Deferred taxes 6,888 6,560
--------- --------
Total current assets 103,197 115,188
--------- --------
Property and equipment, net 44,556 47,198
--------- --------
Other assets:
Intangible assets, net 46,007 49,412
Deposits and other assets 7,872 6,745
Notes receivable related to
stock performance units 4,188 4,188
Deferred taxes 6,184 4,537
--------- --------
Total other assets 64,251 64,882
--------- --------
Total assets $ 212,004 $227,268
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 28,643 $ 32,650
Accrued expenses 16,587 21,735
Earnout amounts payable -- 2,796
Current portion of long-term debt (Note 2) 16,005 15,131
Income taxes payable 230 549
--------- --------
Total current liabilities 61,465 72,861
--------- --------
Long-term debt 62,231 67,749
--------- --------
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-10,562,004 and 9,363,778 105 94
Class B common stock, par value $.01 per share; shares
authorized-25,000,000; shares issued and
outstanding-15,687,432 157 157
Additional paid-in capital 86,755 83,225
Other accumulated comprehensive loss (6,679) (5,003)
Retained earnings 7,970 8,185
--------- --------
Total stockholders' equity 88,308 86,658
--------- --------
Total liabilities and stockholders' equity $ 212,004 $227,268
========= ========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 3
WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
November 30,
----------------------------
2000 1999
---------- ---------
<S> <C> <C>
Net sales $ 78,538 $ 87,376
Cost of goods sold 48,243 54,215
---------- ---------
Gross profit 30,295 33,161
---------- ---------
Operating expenses:
Selling and marketing 18,764 18,360
General and administrative 6,537 7,434
Research and development 1,379 1,278
Amortization of intangible assets 740 843
Severance, recruiting and
reorganization costs -- 851
---------- ---------
Total operating expenses 27,420 28,766
---------- ---------
Income from operations 2,875 4,395
---------- ---------
Other income (expense):
Interest income 44 121
Interest expense (2,627) (2,758)
Other (150) (53)
---------- ---------
Total other expense, net (2,733) (2,690)
---------- ---------
Income before income taxes 142 1,705
Provision for income taxes 399 662
---------- ---------
Net income (loss) $ (257) $ 1,043
========== =========
Weighted average shares outstanding:
Basic 26,249,436 25,042,073
========== ==========
Diluted 26,249,436 25,047,282
========== ==========
Net income (loss) per share:
Basic $ (0.01) $ 0.04
======= =======
Diluted $ (0.01) $ 0.04
======= =======
Comprehensive income (loss) $(1,905) $ 838
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
November 30,
----------------------------
2000 1999
---------- ---------
<S> <C> <C>
Net sales $ 169,748 $ 177,343
Cost of goods sold 101,498 110,347
---------- ---------
Gross profit 68,250 66,996
---------- ---------
Operating expenses:
Selling and marketing 44,653 38,090
General and administrative 14,374 14,850
Research and development 2,926 2,280
Amortization of intangible assets 1,497 1,721
Litigation settlement (3,571) --
Plant consolidation and transition 648 --
Severance, recruiting and
reorganization costs -- 2,701
---------- ---------
Total operating expenses 60,527 59,642
---------- ---------
Income from operations 7,723 7,354
---------- ---------
Other income (expense):
Interest income 84 284
Interest expense (5,125) (5,638)
Other (178) (68)
---------- ---------
Total other expense, net (5,219) (5,422)
---------- ---------
Income before income taxes 2,504 1,932
Provision for income taxes 797 643
--------- ---------
Net income $ 1,707 $ 1,289
========== =========
Weighted average shares outstanding:
Basic 26,237,801 25,037,505
========== ==========
Diluted 26,240,129 25,045,745
========== ==========
Net income per share:
Basic $ 0.07 $ 0.05
======= =======
Diluted $ 0.07 $ 0.05
======= =======
Comprehensive income $ 31 $ 1,425
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
November 30,
------------------
2000 1999
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,707 $ 1,289
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for bad debts 682 1,030
Deferred taxes (1,975) 1,145
Depreciation and amortization 5,617 5,632
Amortization of original issue discount costs 245 --
Management and employee stock
compensation charges -- 201
Loss on disposition of equipment 16 4
Changes in operating assets and liabilities- net of assets acquired:
Receivables 13,298 9,519
Inventories (2,053) 8,920
Prepaid expenses and other (197) 1,256
Deposits and other assets (1,619) 1,540
Accounts payable (4,007) (10,086)
Accrued expenses (8,263) (1,630)
------- -------
Net cash provided by
operating activities 3,451 18,820
------- -------
Cash flows from investing activities:
Acquisition, net of cash acquired -- (1,164)
Purchase of property and equipment (2,266) (2,697)
Purchase of intangibles (106) (135)
Proceeds from disposition of equipment 31 7
Change in notes receivable -- 17
------- -------
Net cash used in investing activities (2,341) (3,972)
------- -------
Cash flows from financing activities:
Issuance of common stock 3,541 12
Dividends paid (1,922) (1,878)
Proceeds from debt 64,860 1,827
Payments on debt (68,296) (13,989)
------- -------
Net cash used in
financing activities (1,817) (14,028)
------- -------
Effect of exchange rate changes on cash 118 59
------- -------
Increase (decrease) in cash and cash equivalents (589) 879
Cash and cash equivalents, beginning of period 3,011 1,926
------- -------
Cash and cash equivalents, end of period $ 2,422 $ 2,805
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
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 fiscal year ended May 31, 2000 as
filed with the Securities and Exchange Commission. The May 31, 2000 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. The Company is a majority-owned subsidiary of Weider
Health and Fitness ("WHF").
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.
2. CREDIT FACILITY
Effective June 30, 2000, the Company and its domestic subsidiaries
entered into a new $90.0 million senior credit facility (the "Credit Facility")
with Bankers Trust Company. The Credit Facility replaced the Company's previous
credit facility, which consisted of a revolving line of credit that expired on
June 30, 2000.
The Credit Facility is comprised of a $30.0 million term loan and a
$60.0 million revolving loan. Under the revolving loan, the Company may borrow
up to the lesser of $60.0 million or the sum of (i) 85% of eligible accounts
receivable and (ii) the lesser of $30.0 million or 65% of the eligible
inventory. The Credit Facility contains customary terms and conditions,
including, among others, financial covenants regarding minimum cash flows and
limitations on indebtedness and the Company's ability to pay dividends under
certain circumstances. The obligations of the Company under the Credit Facility
are secured by a first priority lien on all owned or acquired tangible and
intangible assets of the Company and its domestic subsidiaries. Borrowings under
the Credit Facility bear interest at floating rates and the new Credit Facility
matures on March 31, 2005.
The Credit Facility is being used to fund the normal working capital
and capital expenditure requirements of the Company. At the inception of the
Credit Facility, the Company borrowed approximately $64.8 million (together with
the proceeds from the subordinated loan discussed below) to repay in full its
outstanding obligation under the previous credit facility and related financing
costs of the Credit Facility.
Concurrently with the Credit Facility, on June 30, 2000, the Company
entered into a $10.0 million senior subordinated loan agreement (the
"Subordinated Loan"). The proceeds from the Subordinated Loan were used to
6
<PAGE> 7
WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
repay outstanding obligations under the Company's previous credit facility. The
Subordinated Loan contains customary terms and conditions, including, among
others, financial covenants regarding minimum cash flows and limitations on
indebtedness and the Company's ability to pay dividends under certain
circumstances. The Subordinated Loan bears interest at 13% per annum and matures
on June 30, 2006. As part of the Subordinated Loan transaction, the Company
issued warrants to purchase up to 1,174,955 shares of the Company's Class A
common stock at an exercise price of $0.01 per share, subject to certain
customary antidilution provisions. The issuance of the warrants, exercised
effective August 3, 2000, resulted in the recognition of approximately $3.5
million in "original issue discount" costs (reflected as a reduction of
long-term debt) that will be recognized as an adjustment to the effective
interest rate over the life of the Subordinated Loan. The Company also granted
certain registration rights with respect to the common stock issuable under the
warrants pursuant to a Registration Rights Agreement dated as of June 30, 2000.
Amounts outstanding under the previous credit facility have been
reclassified as a long-term obligation at May 31, 2000.
3. RECEIVABLES
Receivables consist of the following:
<TABLE>
<CAPTION>
November 30, May 31,
2000 2000
------- -------
<S> <C> <C>
Trade accounts $47,071 $61,184
Other 1,140 929
------- -------
48,211 62,113
Less allowance for doubtful accounts
and sales returns (8,669) (8,591)
------- -------
Total $39,542 $53,522
======= =======
</TABLE>
4. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
November 30, May 31,
2000 2000
------- -------
<S> <C> <C>
Raw materials $16,166 $12,493
Work in process 3,302 2,210
Finished goods 29,698 32,410
------- -------
Total $49,166 $47,113
======= =======
</TABLE>
Inventory totaling approximately $1.8 million, primarily consisting of
a certain raw material, is included as a long-term asset in deposits and other
assets in the accompanying balance sheets.
7
<PAGE> 8
WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
5. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
November 30, May 31,
2000 2000
-------- -------
<S> <C> <C>
Cost in excess of fair value
of net assets acquired (goodwill) $52,284 $54,134
Patents and trademarks 10,366 10,601
Noncompete agreements 178 187
------- -------
62,828 64,922
Less accumulated amortization (16,821) (15,510)
------- -------
Total $46,007 $49,412
======= =======
</TABLE>
6. OPERATING SEGMENTS
The Company has two primary reportable segments. These segments include
the Company's U.S. based or domestic operations and the Company's international
operations. The Company has three primary areas within its domestic operations:
mass market; health food stores; and health clubs and gyms. The Company
manufactures and markets nutritional products, including a broad line of
vitamins, joint-related and other nutraceuticals, and sports nutrition
supplements in mass market; a broad line of vitamins, nutraceuticals and sports
nutrition products primarily through independent distributors and a significant
retailer in health food stores; and a broad line of sports nutrition products
primarily through distributors in health clubs and gyms. 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 in its international operations.
The accounting policies of these segments are the same as those
described in Note 1 to the consolidated financial statements (See 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. Certain noncash and other expenses, and domestic assets,
are not allocated to the areas within the domestic operating segment.
8
<PAGE> 9
WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Segment information for the six months ended November 30, 2000 and
1999, respectively, are summarized as follows:
<TABLE>
Income
(Loss)
Net From Interest
2000: Sales Operations Expense
---------- ---------- ----------
<S> <C> <C> <C>
Domestic Operations:
Mass market $ 82,203 $ 5,079 $ 1,664
Health food stores 12,876 (913) 319
Health clubs and gyms 10,853 (243) 272
Other 2,168 (463) 48
Unallocated 2,923 -- --
---------- ---------- ----------
108,100 6,383 2,303
International Operations 61,648 1,340 2,822
---------- ---------- ----------
$169,748 $ 7,723 $ 5,125
========== ========== ==========
Income
(Loss)
Net From Interest
1999: Sales Operations Expense
---------- ---------- ----------
Domestic Operations:
Mass market $ 85,814 $ 9,390 $ 1,725
Health food stores 21,177 (588) 965
Health clubs and gyms 10,500 (270) 621
Other 2,548 (697) 137
Unallocated (2,701) -- --
---------- ---------- ----------
120,039 5,134 3,448
International Operations 57,304 2,220 2,190
---------- ---------- ----------
$ 177,343 $ 7,354 $ 5,638
========== ========== ==========
</TABLE>
Reconciliation of total assets for the reportable segments is as
follows at November 30, 2000:
Total domestic assets $190,586
Total international assets 77,219
Eliminations (55,801)
----------
Total $212,004
==========
Capital expenditures for domestic and international operations amounted
to $1.1 million and $1.2 million, respectively, for the six months ended
November 30, 2000, and $1.8 million and $0.9 million, respectively, for the six
months ended November 30, 1999. The majority of international related long-lived
assets are located in Germany.
9
<PAGE> 10
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 three largest customers accounted for approximately 43%
and 44%, respectively, of net sales for the six months ended November 30, 2000
and 1999, respectively. At November 30, 2000 and May 31, 2000, amounts due from
these customers represented approximately 36% and 43%, respectively, of total
trade accounts receivable.
8. CONTINGENCIES
The Company has been named as a defendant in two lawsuits alleging that
consumption of certain of its products containing ephedrine caused injuries and
damages to two individuals. The Company disputes the allegations and is opposing
the lawsuits. 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. The Company cannot
assure you that it will not be subject to further private civil actions with
respect to its ephedrine products or that product liability insurance will
continue to be available.
During the first quarter of fiscal 2001, the Company received proceeds
of approximately $3.6 million relating to the settlement of certain antitrust
litigation brought by the Company and several other parties.
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
During the quarter ended August 31, 2000, the Company adopted SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 establishes accounting and reporting standards for derivative instruments
and hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. The adoption of SFAS No. 133 did not have a material impact on
the Company's financial statements.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") 101, "Revenue Recognition in Financial Statements."
SAB 101 establishes accounting and reporting standards for the recognition of
revenue. It states that revenue generally is realized or realizable and earned
when all of the following criteria are met: (1) persuasive evidence of an
arrangement exists; (2) delivery has occurred or services have been rendered;
(3) the seller's price to the buyer is fixed or determinable; and (4)
collectibility is reasonably assured. SAB 101 is effective for the Company's
financial statements in the fiscal quarter beginning March 1, 2001. The Company
has not determined the impact of adopting SAB 101 on the Company's financial
statements.
10
<PAGE> 11
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," "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.
Important factors that may effect future results include, but are not
limited to: the Company's ability to implement more sophisticated operating
systems and inventory management programs, the impact of competitive products
and pricing, the impact of new FDA dietary supplement regulations on the
Company's products and marketing plans, transition of the Company's joint
support product brand name from Schiff(R) Pain Free(TM) to Schiff(R) Move
Free(TM), dependence on individual products, dependence on individuals
customers, 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, the company's ability to identify,
recruit and integrate key management personnel, including the cost and timing
thereof, litigation and government regulatory action, uncertainty of market
acceptance of new products, and other risks indicated from time to time in the
Company's SEC reports, copies of which are available upon request from the
Company's investor relations department. The Company disclaims any obligation to
update any forward-looking statements whether as a result of new information,
future events or otherwise.
GENERAL
Weider Nutrition International, Inc. (the "Company") develops,
manufactures, markets, distributes and sells branded and private label vitamins,
nutritional supplements and sports nutrition products 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 850 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: sports nutrition; specialty,
vitamins, minerals and herbs; weight management; and nutrition bars. The Company
also markets a line of sportswear in Europe, primarily in Germany, under the
Venice Beach brand.
11
<PAGE> 12
The Company's principal executive offices are located at 2002 South
5070 West, Salt Lake City, Utah 84104 and its telephone number is (801)
975-5000. As used herein, the "Company" means Weider Nutrition International,
Inc. and its subsidiaries, except where indicated otherwise.
RESULTS OF OPERATIONS (UNAUDITED)
Three Months Ended November 30, 2000 Compared to Three Months Ended
November 30, 1999
The following table shows selected items expressed on an actual basis
and as a percentage of net sales for the respective interim periods:
<TABLE>
Three Months Ended November 30,
-------------------------------------------------
2000 1999
--------------------- ---------------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Net sales.......................... $ 78,538 100.0% $ 87,376 100.0%
Cost of goods sold................. 48,243 61.4 54,215 62.0
-------- ----- -------- -----
Gross profit........................ 30,295 38.6 33,161 38.0
-------- ----- -------- -----
Operating expenses.................. 27,420 34.9 27,915 31.9
Severance, recruiting and
reorganization costs.............. -- -- 851 1.0
-------- ----- -------- -------
Total operating expenses............ 27,420 34.9 28,766 32.9
-------- ----- -------- -------
-------- ----- -------- -------
Income from operations............. 2,875 3.7 4,395 5.1
Other expense, net.................. 2,733 3.5 2,690 3.1
Income taxes........................ 399 0.5 662 0.8
-------- ----- -------- ----
Net income (loss).................. $ (257) (0.3)% $ 1,043 1.2%
======== ===== ======== ====
</TABLE>
NET SALES. Net sales for the three months ended November 30, 2000
decreased $8.8 million, or 10.1%, to $78.5 million from $87.4 million for the
three months ended November 30, 1999. Sales to mass market retailers (including
food, drug, mass, club and convenience stores) and health food distributors and
retailers decreased while sales to international markets increased during the
three months ended November 30, 2000 compared to the three months ended November
30, 1999. Sales to health club and gym distributors were relatively constant for
the second quarter of fiscal 2001 compared to the second quarter of fiscal 2000.
Second quarter of fiscal 2001 sales to mass market retailers decreased
approximately 22.7% to $30.9 million from second quarter fiscal 2000 sales of
$40.1 million. The decrease in sales to mass market retailers was primarily the
result of decreased sales to existing accounts of certain leading branded
products. Net sales of Schiff(R) Move Free(TM) amounted to $12.1 million for the
second quarter of fiscal 2001 compared to $21.8 million for the second quarter
of fiscal 2000. The decrease in Schiff(R) Move Free(TM) sales resulted primarily
from industry slowdown and promotional timing considerations as well as private
label and other competitive factors. Sales to health food distributors and
retailers decreased approximately 38.1% to $6.5 million for the fiscal 2001
second quarter from $10.4 million for the fiscal 2000 second quarter. The
decrease in sales in the health food distribution channel resulted primarily
from reduced sales volume with GNC, the Company's most significant health food
retailer.
Sales to international markets increased 14.6% to $35.5 million for the
three months ended November 30, 2000 compared to $31.0 million for the three
months ended November 30, 1999. The increased sales volume is due primarily to
sportswear sales growth in the Company's European operations.
12
<PAGE> 13
GROSS PROFIT. Gross profit decreased approximately 7.8% to $30.3
million for the quarter ended November 30, 2000 compared to $33.2 million for
the quarter ended November 30, 1999. Gross profit, as a percentage of net sales,
was 38.6% for the quarter ended November 30, 2000 compared to 38.0% for the
quarter ended November 30, 1999. The increase in the gross profit percentage
resulted primarily from operating efficiencies, improved net raw material
costing, reduced credits for returned products and a decrease in provisions for
inventory obsolescence offset somewhat by lower margins on European sportswear
sales.
OPERATING EXPENSES. Operating expenses, including severance, recruiting
and reorganization costs for the second quarter of fiscal 2000, decreased
approximately 4.7% to $27.4 million for the fiscal 2001 second quarter from
$28.8 million for the fiscal 2000 second quarter. Excluding the effects of
severance, recruiting and reorganization costs, operating expenses were
relatively constant for the second quarter of fiscal 2001 in comparison to the
second quarter of fiscal 2000.
Selling and marketing expenses, including sales, marketing, adver-
tising, freight and other costs, increased approximately 2.2% to $18.8 million
for the fiscal 2001 second quarter from $18.4 million for the fiscal 2000 second
quarter. The increase in selling and marketing expenses resulted primarily from
increased marketing and personnel costs associated with the Company's brand
building initiatives substantially offset by decreases in media advertising and
certain direct selling expenses resulting from decreased sales volume.
General and administrative expenses decreased approximately 12.0% to
$6.5 million for the quarter ended November 30, 2000 compared to $7.4
million for the quarter ended November 30, 1999. The decrease in general and
administrative expenses for the second quarter of fiscal 2001 resulted primarily
from a decrease in legal and personnel related costs.
OTHER EXPENSE. Other expense, net, remained constant at $2.7 million
for the quarters ended November 30, 2000 and 1999.
PROVISION FOR INCOME TAXES. Provision for income taxes amounted to $0.4
million for the quarter ended November 30, 2000 compared to $0.7 million for the
quarter ended November 30, 1999. The approximate $0.3 million decrease resulted
primarily from the decrease in pre-tax earnings. The increase in the effective
tax rate resulted from rate differences for the Company's domestic and
international operations.
Six Months Ended November 30, 2000 Compared to Six Months Ended
November 30, 1999
NET SALES. Net sales for the six months ended November 30, 2000
decreased $7.6 million, or 4.3%, to $169.7 million from $177.3 million for the
six months ended November 30, 1999. Sales to mass market retailers and health
food distributors and retailers decreased during the six months ended November
30, 2000 compared to the six months ended November 30, 1999. Sales to health
club and gym distributors, and international markets increased during the first
six months of fiscal 2001 compared to the first six months of fiscal 2000.
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Sales to mass volume retailers decreased approximately 4.2% to $82.2
million for the six months ended November 30, 2000 from $85.8 million for the
six months ended November 30, 1999. The decrease in sales to mass market
retailers was primarily the result of decreased sales to existing accounts of
certain leading branded products. Net sales of Schiff(R) Move Free(TM) amounted
to $43.4 million for the first six months of fiscal 2001 compared to $46.1
million for the first six months of fiscal 2000. The decrease in Schiff(R) Move
Free(TM) sales resulted primarily from industry slowdown and promotional timing
considerations as well as private label and other competitive factors. Sales to
health food distributors and retailers decreased approximately 39.2% to $12.9
million for the first six months of fiscal 2001 from $21.2 million for fiscal
2000. The decrease in sales in the health food channel resulted primarily from
reduced sales volume with GNC, the Company's most significant health food
retailer. Sales to health club and gym distributors increased approximately 3.4%
to $10.9 million from $10.5 million for the six months ended November 30, 1999.
Sales to international markets increased 7.6% to $61.6 million for the
six months ended November 30, 2000 compared to $57.3 million for the six months
ended November 30, 1999. The increased sales volume is due to sportswear sales
growth in the Company's European operations.
GROSS PROFIT. Gross profit increased approximately 1.9% to $68.3
million for the six months ended November 30, 2000 compared to $67.0 million for
the six months ended November 30, 1999. Gross profit, as a percentage of net
sales, was 40.2% for the six months ended November 30, 2000 compared to 37.8%
for the six months ended November 30, 1999. The increase in the gross profit
percentage resulted primarily from operating efficiencies, improved net raw
material costing, reduced credits for returned products and a decrease in
provisions for inventory obsolescence offset somewhat by lower margins on
European sportswear sales.
OPERATING EXPENSES. Operating expenses, including litigation settlement
income and plant consolidation and transition costs for the six months ended
November 30, 2000 and severance, recruiting and reorganization costs for the six
months ended November 30, 1999, increased approximately 1.5% to $60.5 million
for the first six months of fiscal 2001 from $59.6 million for the first six
months of fiscal 2000. During the first six months of fiscal 2001 the Company
completed the consolidation of beverage manufacturing to its South Carolina
facility. In conjunction with the closing of the Company's Las Vegas, Nevada
beverage facility, the Company recognized approximately $0.6 million in net
consolidation and transition related costs. Also, during the first quarter of
fiscal 2001, the Company received $3.6 million from the settlement of
litigation. Excluding the effects of these events, operating expenses increased
$6.5 million, or 11.4% during the first six months of fiscal 2001 in comparison
to the first six months of fiscal 2000. The increase resulted primarily from the
continued implementation of an expanded marketing plan resulting in significant
increases in selling, marketing and promotional costs.
Selling and marketing expenses, including sales, marketing, adver-
tising, freight and other costs, increased approximately 17.2% to $44.7 million
for the first six months of fiscal 2001 from $38.1 million for the first six
months of fiscal 2000. The increase in selling and marketing expenses resulted
primarily from increased marketing, promotion and personnel costs associated
with the Company's brand building initiatives as well as increased promotional
spending in support of the Schiff(R) Pain Free(TM) to Schiff(R) Move Free(TM)
product name transition as well as other promotional
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<PAGE> 15
programs. The Company expects the increase in selling and marketing expenses as
a percentage of net sales, in comparison to prior fiscal periods, to continue in
future periods.
General and administrative expenses decreased approximately 3.2% to
$14.4 million for the six months ended November 30, 2000 compared to $14.9
million for the six months ended November 30, 1999. The decrease in general and
administrative expenses for the first six months of fiscal 2001 resulted
primarily from a decrease in certain personnel related expenses.
OTHER EXPENSE. Other expense, net, amounted to $5.2 million for the six
months ended November 30, 2000 compared to $5.4 million for the six months ended
November 30, 1999. The net decrease of approximately $0.2 million resulted
primarily from decreased interest costs associated with a reduction in debt.
PROVISION FOR INCOME TAXES. Provision for income taxes amounted to $0.8
million for the six months ended November 30, 2000 compared $0.6 million for the
six months ended November 30, 1999. The increase resulted primarily from an
increase of pre-tax earnings and the net effect of tax rate differences for the
Company's domestic and international operations.
LIQUIDITY AND CAPITAL RESOURCES. Effective June 30, 2000, the Company
and its domestic subsidiaries entered into a new $90.0 million senior credit
facility (the "Credit Facility") with Bankers Trust Company. The Credit Facility
replaced the Company's previous credit facility, which consisted of a revolving
line of credit that expired on June 30, 2000.
The Credit Facility is comprised of a $30.0 million term loan and a
$60.0 million revolving loan. Under the revolving loan, the Company may borrow
up to the lesser of $60.0 million or the sum of (i) 85% of eligible accounts
receivable and (ii) the lesser of $30.0 million or 65% of the eligible
inventory. The Credit Facility contains customary terms and conditions,
including, among others, financial covenants regarding minimum cash flows and
limitations on indebtedness and the Company's ability to pay dividends under
certain circumstances. The obligations of the Company under the Credit Facility
are secured by a first priority lien on all owned or acquired tangible and
intangible assets of the Company and its domestic subsidiaries. The Credit
Facility is being used to fund the normal working capital and capital
expenditure requirements of the Company. At the inception of the Credit
Facility, the Company borrowed approximately $64.8 million (together with the
proceeds from the subordinated loan discussed below) to repay in full its
outstanding obligation under the previous credit facility and related financing
costs of the Credit Facility. At November 30, 2000, the Company had
approximately $11.2 million in available revolving loan funds.
Concurrently with the Credit Facility, on June 30, 2000 the Company
entered into a $10.0 million senior subordinated loan agreement (the
"Subordinated Loan"). The proceeds from the Subordinated Loan were used to repay
outstanding obligations under the Company's previous credit facility. The
Subordinated Loan contains customary terms and conditions, including, among
others, financial covenants regarding minimum cash flows and limitations on
indebtedness and the Company's ability to pay dividends under certain
circumstances.
The Company's working capital remained relatively constant, amounting
to approximately $41.7 million and $42.3 million, respectively, at November 30,
2000 and May 31, 2000.
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<PAGE> 16
The Company expects to fund its long-term capital requirements for the
next twelve months through the use of operating cash flow supplemented as
necessary by borrowings under both the Credit Facility and Haleko's approximate
$17.0 million secured credit facility. The Company also from time to time may
evaluate strategic acquisitions as the nutritional supplements industry
continues to consolidate. The funding of future acquisitions, if any, may
require other debt financing or the issuance of additional equity.
The Company paid a quarterly dividend of $0.0375 per share subsequent
to November 30, 2000. The dividend was declared to be payable on December 20,
2000 to holders of all classes of common stock of record at the close of
business on December 8, 2000. The Company's Board of Directors will determine
dividend policy in the future based upon, among other things, the Company's
results of operations, financial condition, contractual restrictions and other
factors deemed relevant at the time. In addition, the New Credit Facility
contains certain customary financial covenants that may limit the Company's
ability to pay dividends on its common stock. Accordingly, there can be no
assurance that the Company will be able to sustain the payment of dividends in
the future.
IMPACT OF INFLATION. The Company has historically been able to pass
inflationary increases for raw materials and other costs through to its
customers and anticipates that it will be able to continue to do so in the
future.
SEASONALITY. The Company's business is seasonal, with lower sales
typically realized during the first and second fiscal quarters and higher sales
typically realized during the third and fourth fiscal quarters. The Company
believes such fluctuations in sales are the result of greater marketing and
promotional activities toward the end of each fiscal year, customer buying
patterns, including seasonal sportswear considerations, and consumer spending
patterns related primarily to the consumers' interest in achieving personal
health and fitness goals after the beginning of each new calendar year and
before the summer fashion season.
Furthermore, as a result of changes in product sales mix 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 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.
16
<PAGE> 17
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 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.
The Company's Annual Meeting of Shareholders was held on November 9,
2000 for the following purposes:
Proposal One: Election of the Company's Board of Directors.
FOR WITHHELD AUTHORITY
Eric Weider 163,269,370 70,943
George Lengvari 163,267,270 73,043
Bruce J. Wood 163,270,070 70,243
Ronald L. Corey 163,267,670 72,643
Donald G. Drapkin 163,267,470 72,843
David J. Gustin 163,269,270 71,043
Roger H. Kimmel 163,267,570 72,743
H. F. Powell 163,270,470 69,843
Proposal Two: Ratification of the appointment of Deloitte & Touche LLP as the
Company's independent auditors for the fiscal year ending May 31,
2001.
FOR AGAINST ABSTAIN/BROKER NON-VOTES
----------- ------- ------------------------
163,322,214 17,769 330
Item 5. OTHER INFORMATION.
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
2.1 Stock Purchase Agreement, dated July 9, 1998, by and among Weider
Nutrition Group, Inc. and Wolfgang Brandt and Eberhardt Schluter. (2)
2.2 Amendment Deed to Stock Purchase Agreement, dated July 24, 1998. (2)
2.3 Share Transfer Deed, dated July 24, 1998. (2)
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<PAGE> 18
3.1 Amended and Restated Certificate of Incorporation of Weider Nutrition
International, Inc. (1)
3.2 Amended and Restated Bylaws of Weider Nutrition International, Inc. (1)
4.1 Credit Agreement dated as of June 30, 2000 among Weider Nutrition
International, Inc. and Bankers Trust Company. (4)
4.2 Senior Subordinated Loan Agreement dated as of June 30, 2000 among
Weider Nutrition International, Inc., Wynnchurch Capital Partners,
L.P., and Wynnchurch Capital Partners Canada, L.P. (4)
4.3 Warrants to Purchase Shares of Class A Common Stock of Weider Nutrition
International, Inc. (4)
4.4 Registration Rights Agreement dated as of June 30, 2000 among Weider
Nutrition International, Inc., Wynnchurch Capital Partners, L.P. and
Wynnchurch Capital Partners Canada, L.P. (4)
4.5 First Amendment to Credit Agreement dated as of June 30, 2000 among
Weider Nutrition International, Inc. and Bankers Trust Company. (5)
4.6 First Amendment to Senior Subordinated Loan Agreement dated as of June
30, 2000 among Weider Nutrition International, Inc., Wynnchurch Capital
Partners, L.P. and Wynnchurch Capital Partners Canada, L.P. (7)
10.1 Build-To-Suit Lease Agreement, dated March 20, 1996, between SCI
Development Services Incorporated and Weider Nutrition Group, Inc. (1)
10.2 Agreement by and between Joseph Weider and Weider Health and Fitness.
(1)
10.3 1997 Equity Participation Plan of Weider Nutrition International, Inc.
(1)
10.4 Form of Tax Sharing Agreement by and among Weider Nutrition
International, Inc. and its subsidiaries and Weider Health and Fitness
and its subsidiaries. (1)
10.6 Form of Employment Agreement between Weider Nutrition International,
Inc. and Robert K. Reynolds, as amended. (5)
10.7 Form of Senior Executive Employment Agreement between Weider Nutrition
International, Inc. and certain senior executives of the Company. (1)
10.8 Advertising Agreement between Weider Nutrition International, Inc. and
Weider Publications, Inc. (1)
10.9 License Agreement between Mariz Gestao E Investmentos Limitada and
Weider Nutrition Group Limited. (1)
10.10 Form of Employment Agreement between Weider Nutrition International,
Inc. and Bruce J. Wood. (3)
10.11 Agreement between the Company and Bruce J. Wood. (6)
10.12 Form Agreement between the Company and certain executives of the
Company. (6)
21 Subsidiaries of Weider Nutrition International, Inc. (5)
27.1 Financial Data Schedule Summary (7)
-------------------------------------------
(1) Filed as an Exhibit to the Company's Registration Statement on From S-1
(File No. 333-12929) and incorporated herein by reference.
(2) Previously filed in the Company's Current Report on Form 8-K dated as
of July 24, 1998 and incorporated herein by reference.
(3) Previously filed in the Company's Current Report on From 10-K dated as
of August 30, 1999 and incorporated herein by reference.
(4) Previously filed in the Company's Current Report on Form 8-K dated as
of June 30, 2000 and incorporated herein by reference.
(5) Previously filed in the Company's Current Report on Form 10-K as of
August 29, 2000 and incorporated herein by reference.
(6) Previously filed in the Company's Current Report on Form 10-K/A as of
September 28, 2000 and incorporated herein by reference.
(7) Filed herewith.
-------------------------------------------
(b) Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WEIDER NUTRITION INTERNATIONAL, INC.
Date: January 15, 2001 By: /s/ Bruce J. Wood
----------------------------------
BRUCE J. WOOD
President, Chief Executive Officer
and Director
Date: January 15, 2001 By: /s/ Joseph W. Baty
----------------------------------
JOSEPH W. BATY
Executive Vice President and
Chief Financial Officer
19
