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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended August 31, 2009
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ____ to ____.
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Commission file number:
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001-14608
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SCHIFF NUTRITION INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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87-0563574
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(State or other jurisdiction
of incorporation or organization)
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(I.R.S. Employer
Identification No.)
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2002 South 5070 West
Salt Lake City, Utah
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84104-4726
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(Address of principal
executive offices)
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(Zip Code)
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(801) 975-5000
(Registrant’s telephone number, including area code)
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
þ
No
q
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rul 405 of Regulation S-T (
§
232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes
q
No
q
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
q
Accelerated
Filer
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Non-Accelerated Filer
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(Do not check if a smaller reporting company)
Smaller
reporting company
þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
q
No
þ
As of October 6, 2009 the registrant had outstanding 12,742,734 shares of Class A common stock and 14,973,148 shares of Class B common stock.
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PART I. FINANCIAL INFORMATIO
N
ITEM 1. FINANCIAL STATEMENTS
SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
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August 31, 2009
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May 31,
2009
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Current assets:
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Cash and cash equivalents
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Available-for-sale securities
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Inventories
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Prepaid expenses and other
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Deferred taxes, net
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Total current assets
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Property and equipment, net
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Other assets:
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Available-for-sale securities
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Deferred taxes, net
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Total other assets
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Total assets
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$
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$
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Accounts payable
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$
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$
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Dividends payable
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Total current liabilities
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Dividends payable
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Deferred taxes, net
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Total long-term liabilities
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Commitments and contingencies
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Preferred stock, par value $.01 per share; shares authorized-10,000,000; no shares issued and outstanding
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Class A common stock, par value $.01 per share; shares authorized-50,000,000; shares issued and outstanding-12,708,867 and 12,660,932
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Class B common stock, par value $.01 per share; shares authorized-25,000,000; shares issued and outstanding-14,973,148
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Additional paid-in capital
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Accumulated other comprehensive loss
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Retained earnings
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Total stockholders' equity
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Total liabilities and stockholders' equity
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$
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$
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See notes to condensed consolidated financial statements.
Back to top
SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data)
(unaudited)
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Three Months Ended
August 31,
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Selling and marketing
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8,133
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General and administrative
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Research and development
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988
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Total operating expenses
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12,858
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Income from operations
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5,020
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Other income (expense):
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Interest expense
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)
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(26
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Income before income taxes
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Income tax expense
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2,050
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Net income
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$
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$
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3,249
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Weighted average shares outstanding:
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Diluted
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28,627,446
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Net income per share:
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Diluted
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$
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$
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0.11
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Comprehensive income
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$
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$
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3,249
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See notes to condensed consolidated financial statements.
Back to top
SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
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Three Months Ended
August 31,
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Cash flows from operating activities:
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Adjustments to reconcile net income to net cash provided by (used in) operating activities:
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Depreciation and amortization
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735
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805
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Amortization of financing fees
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Stock-based compensation
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421
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106
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Excess tax benefit from equity instruments
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Other
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6
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3
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Changes in operating assets and liabilities:
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Receivables
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3,505
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(1,942
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Prepaid expenses and other
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(95
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671
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Accounts payable
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1,105
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(183
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Other current liabilities
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Other long-term liabilities
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384
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11
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Net cash provided by (used in) operating activities
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11,620
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(1,558
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Cash flows from investing activities:
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Purchase of property and equipment
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Purchase of available-for-sale securities
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(3,255
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)
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(500
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Proceeds from sale of available-for-sale securities
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Net cash provided by (used in) investing activities
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Cash flows from financing activities:
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Proceeds from stock options exercised
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11
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—
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Purchase and retirement of common stock
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Excess tax benefit from equity instruments
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245
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161
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Payment for debt issue costs
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Net cash used in financing activities
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Effect of exchange rate changes on cash
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Decrease in cash and cash equivalents
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Cash and cash equivalents, beginning of period
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52,648
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45,979
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Cash and cash equivalents, end of period
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$
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48,720
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$
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44,400
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See notes to condensed consolidated financial statements.
Back to top
SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
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1.
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BASIS OF PRESENTATION AND OTHER MATTERS
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The accompanying unaudited interim condensed consolidated financial statements (“interim financial statements”) of Schiff Nutrition International, Inc. and its subsidiaries (the “Company,” “we,” “us” and “our”) 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, 2009 as filed with the Securities and Exchange Commission (“SEC”). The May 31, 2009 condensed consolidated balance sheet, included herein, was derived from our 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 necessary for a fair presentation of our financial position and results of operations. 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.
In July 2009, our Board of Directors approved a $0.50 per share special cash dividend, which was paid on August 28, 2009 to shareholders of record of Class A and Class B common stock at the close of business on August 14, 2009. In connection with the declaration of the special dividend, our Board of Directors approved dividend
equivalent rights, allowing holders (employees and directors) of certain equity awards, including stock options and restricted stock units, to receive cash dividends on each share of common stock underlying the stock options and restricted stock units. In aggregate, at August 14, 2009, the record date, we had outstanding approximately 29.9 million shares of common stock (including shares of common stock underlying equity awards subject to dividend equivalent rights), including approximately 27.6 million
shares of outstanding Class A and Class B common stock, approximately 1.3 million shares of Class A common stock underlying outstanding stock options, and approximately 1.0 million shares of Class A common stock underlying outstanding restricted stock units. The aggregate amount of the special dividend was approximately $14,945, presuming 100% vesting of shares underlying equity awards; $7,458 for holders of Class A common stock, including $1,123 for Class A common stock underlying equity awards, and
$7,487 for the holder of Class B common stock.
The special dividend was funded from cash and cash equivalents. Approximately $14,405 of the distribution occurred on August 28, 2009. With respect to outstanding stock options and restricted stock units that were unvested as of August 14, 2009, or for which the issuance of shares underlying vested restricted stock
units has been deferred, the $0.50 per share dividend will not be distributed until after such equity awards vest or the deferred shares are issued.
On December 12, 2008, the Compensation Committee of our Board of Directors, pursuant to the Company’s 2004 Incentive Award Plan, approved the grant of long term incentive performance awards (“Performance Awards”) to certain officers and employees. The Performance Awards were granted based on a target award
value of $5,525, but will be earned based on the Company’s cumulative performance against three pre-established financial performance targets over a performance period commencing October 1, 2008 and ending on May 31, 2011, as follows: (i) 50% of the award opportunity will be based on cumulative net sales for the performance period; (ii) 35% of the award opportunity will be based on cumulative operating income for the performance period; and (iii) 15% of the award opportunity will be based on cumulative
net cash flow for the performance period; provided, however, that no amount will be earned or payable if cumulative operating income for the performance period does not meet or exceed a pre-established threshold amount. In the event that the cumulative operating income threshold is met, participants can earn from 17.5% of the target award value for the Company’s threshold performance against the cumulative operating income goal (and failure to meet the thresholds for the other two financial goals)
and up to 150% of the target award value for maximum Company performance against all three financial goals.
The earned value of the Performance Awards will vest on May 31, 2011 subject to continued service by the participant(s) through that date. The vested portion of the earned value of the Performance Awards will be paid in a combination of cash and shares of the Company’s Class A common stock. Two-thirds of the
earned value will be delivered to participants in cash (subject to any applicable plan limitations, less applicable taxes), and the remaining balance will be paid in shares, based on the closing price of the Company’s common stock on the day preceding the date of the Committee’s certification of the Company’s performance. No dividends will be paid or accrued with respect to shares granted in payment of the Performance Awards until such shares are issued.
SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
(continued)
(dollars in thousands, except share data)
Recognition of compensation expense and accrual of the corresponding liability related to the Performance Awards is based on the periodic assessment of the probability that the performance criteria will be achieved. Based on our probability assessment at August 31, 2009, we determined that the total estimated fair value of the
Performance Awards was $1,862. For the fiscal 2010 first quarter, we recognized $537 in compensation expense which represents the applicable change in the fair value of the Performance Awards based on the requisite service completed. At August 31, 2009, the total value of the Performance Awards recognized is $537, which is included in other long-term liabilities. At August 31, 2009, total unrecognized compensation expense, based on the estimated fair value as determined by our
assessment of the probability that the performance criteria will be achieved, was approximately $1,325. This amount, which is subject to change based on the estimated fair value determined at each future reporting period, is expected to be recognized over the remaining service period.
Also, on December 12, 2008, the Compensation Committee of our Board of Directors granted 240,500 restricted stock units (the “Units”) to certain employees not participating in the Performance Awards program. Each Unit represents the right to receive one share of the Company’s Class A common stock upon vesting. The
aggregate value of the Units at the grant date was approximately $1,332, which will be expensed over the vesting (service) period. The Units cliff vest on May 31, 2011, assuming the holder is still employed. Any dividends paid between the grant date and vesting will be payable to the holder upon vesting of the Units. For the fiscal 2010 first quarter, we recognized approximately $130 in compensation expense.
With respect to our Condensed Consolidated Statements of Cash Flows, purchase of property and equipment included in accounts payable amounted to $229 and $68, respectively, at August 31, 2009 and May 31, 2009. For the three months ended August 31, 2009 and 2008, cash interest and tax payments were not significant. Also,
during the fiscal 2010 first quarter, dividends declared but not paid totaled approximately $540.
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2.
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AVAILABLE-FOR-SALE SECURITIES
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Available-for-sale securities at fair value consist of the following:
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August 31,
2009
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May 31,
2009
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Certificates of deposit
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$
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4,485
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$
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4,241
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Corporate debt securities
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183
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138
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Federal, state and municipal debt securities
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468
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483
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5,136
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4,862
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Less long-term portion
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651
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621
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$
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4,485
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$
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4,241
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Available-for-sale securities include auction rate securities (“ARS”), long-term variable rate bonds tied to short-term interest rates that are reset through a “Dutch auction” process which occurs every 7 to 35 days, and other variable rate debt and equity securities. Despite the underlying long-term
contractual maturity of ARS, there generally was a ready liquid market for these securities based on the interest reset mechanism. However, as a result of negative liquidity and uncertainty in financial credit markets, we experienced “failed” auctions associated with our ARS. In the case of a failed auction, the ARS become illiquid long-term bonds (until a future auction is successful, the security is called prior to the contractual maturity date by the issuer, or the securities
mature) and the rates are reset in accordance with terms in the prospectus/offering circular. Total available-for-sale securities included $651 in debt securities, including $468 in illiquid ARS, valued below cost which are included in long-term assets at August 31, 2009. The ARS consist primarily of fully insured, state agency issued securities.
Back to top
SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
(continued)
(dollars in thousands, except share data)
Available-for-sale securities were measured at fair value, using:
|
|
|
August 31, 2009
|
|
|
May 31,
2009
|
|
|
|
|
|
|
|
|
|
|
Quoted prices in active markets for identical assets (Level 1)
|
|
$
|
4,668
|
|
|
$
|
4,379
|
|
|
Significant other observable inputs (Level 2)
|
|
|
—
|
|
|
|
—
|
|
|
Significant unobservable inputs (Level 3)
|
|
|
468
|
|
|
|
483
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,136
|
|
|
$
|
4,862
|
|
The following is a reconciliation of the beginning and ending balances of available-for-sale securities measured at fair value using significant unobservable inputs (Level 3):
|
|
|
Three Months Ended
August 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
483
|
|
|
$
|
1,265
|
|
|
Total losses (all unrealized and included in other comprehensive loss)
|
|
|
(15
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
468
|
|
|
$
|
1,265
|
|
Contractual maturities of debt securities are as follows at August 31, 2009:
|
Less than one year
|
|
$
|
—
|
|
|
One to five years
|
|
|
—
|
|
|
Over five years
|
|
|
651
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
651
|
|
At August 31, 2009, unrealized losses of approximately $88, net of income tax benefits of $61, were included in accumulated other comprehensive loss in the accompanying financial statements. The amount of unrealized gains or losses for the three months ended August 31, 2009 and 2008 was not significant.
Our other financial instruments, including primarily cash and cash equivalents, accounts receivable and accounts payable, when valued using market interest rates, would not be materially different from the amounts presented in these condensed consolidated financial statements.
Receivables, net, consist of the following:
|
|
|
August 31,
2009
|
|
|
May 31,
2009
|
|
|
|
|
|
|
|
|
|
|
Trade accounts
|
|
$
|
19,203
|
|
|
$
|
21,341
|
|
|
Refundable income taxes
|
|
|
—
|
|
|
|
1,644
|
|
|
Other
|
|
|
41
|
|
|
|
66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,244
|
|
|
|
23,051
|
|
|
Less allowances for doubtful accounts, sales returns and discounts
|
|
|
(2,033
|
)
|
|
|
(2,335
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
17,211
|
|
|
$
|
20,716
|
|
Back to top
SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
(continued)
(dollars in thousands, except share data)
Inventories consist of the following:
|
|
|
August 31,
2009
|
|
|
May 31,
2009
|
|
|
|
|
|
|
|
|
|
|
Raw materials
|
|
$
|
12,511
|
|
|
$
|
12,021
|
|
|
Work in process
|
|
|
1,186
|
|
|
|
1,270
|
|
|
Finished goods
|
|
|
16,577
|
|
|
|
16,733
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
30,274
|
|
|
$
|
30,024
|
|
Accrued expenses consist of the following:
|
|
|
August 31, 2009
|
|
|
May 31,
2009
|
|
|
|
|
|
|
|
|
|
|
Accrued personnel related costs
|
|
$
|
2,319
|
|
|
$
|
1,652
|
|
|
Accrued promotional costs
|
|
|
6,581
|
|
|
|
6,225
|
|
|
Other
|
|
|
1,238
|
|
|
|
1,604
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,138
|
|
|
$
|
9,481
|
|
We have outstanding two classes of common stock, both of which generally have identical rights and privileges, with the exception of voting and conversion, or transfer rights. Each holder of Class A or Class B common stock is entitled to share ratably in any dividends, liquidating distributions or consideration resulting from
certain business combinations. However, each holder of Class A common stock is entitled to one vote for each share held while each holder of Class B common stock is entitled to ten votes for each share held. The holders of the Class A common stock and Class B common stock vote together as a single class. Class A common stock cannot be converted into any other securities of the Company, while Class B common stock holders have the right to convert their shares into Class A common
stock on a one-to-one basis. In addition, generally, any shares of Class B common stock that are transferred will automatically convert into shares of Class A common stock on a one-to-one basis.
The following is a reconciliation of the numerators and the denominators of basic and diluted earnings per share computations:
|
|
|
Three Months Ended
August 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Income available to common shareholders (numerator):
|
|
|
|
|
|
|
|
Net income
|
|
$
|
4,391
|
|
|
$
|
3,249
|
|
|
Adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Income on which basic and diluted earnings per share are calculated
|
|
$
|
4,391
|
|
|
$
|
3,249
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding (denominator):
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
28,215,745
|
|
|
|
27,210,303
|
|
|
Add-incremental shares from restricted stock
|
|
|
24,681
|
|
|
|
14,763
|
|
|
Add-incremental shares from restricted stock units
|
|
|
74,617
|
|
|
|
740,758
|
|
|
Add-incremental shares from stock options
|
|
|
417,336
|
|
|
|
661,622
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
28,732,379
|
|
|
|
28,627,446
|
|
Back to top
SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
(continued)
(dollars in thousands, except share data)
Options to purchase 119,000 and 32,000 shares of Class A common stock, respectively, at exercise prices from $5.09 to $7.05 per share were outstanding during the fiscal 2010 and 2009 first quarters but were not included in the computation of diluted earnings per share because the exercise prices were greater than the average market price
of the common shares.
|
8.
|
CONCENTRATION
OF CREDIT RISK AND SIGNIFICANT CUSTOMERS AND PRODUCTS
|
Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash and cash equivalents, available-for-sale securities and accounts receivable.
Generally, our cash and cash equivalents, which may include money market accounts, certificates of deposit, United States Treasury Bills with maturities of three months or less, and high quality commercial paper, exceed Federal Deposit Insurance Corporation limits on insurable amounts; thus exposing us to certain credit risk. We
mitigate our risk by investing in or through major financial institutions. We have not experienced any realized losses on our cash equivalents and available-for-sale securities.
At August 31, 2009, we held approximately $5,136 in available-for-sale securities consisting of $4,485 in certificates of deposit and $651 in debt securities, including $468 in illiquid ARS which are fully insured state agency issued securities. In determining the fair value of our available-for-sale securities at August 31, 2009, we
have taken into consideration quoted market prices and/or other considerations, including, fair values determined by the respective financial institutions, current credit rating of the debt securities, insurance provisions, discounted cash flow analysis, as deemed appropriate, and our current liquidity position. Although we believe the remaining debt securities will ultimately be liquidated at or near our cost basis, any impairment in the value of these securities could adversely impact our results of operations
and financial condition.
With respect to accounts receivable, we perform ongoing credit evaluations of our customers and monitor collections from customers regularly. We maintain an allowance for doubtful accounts which is based upon historical experience as well as specific customer collection issues. Historically, bad debt expenses have
not been significant and have been within expectations and allowances established. However, we cannot guarantee that we will continue to experience the same credit loss rates that we have in the past. If the financial condition of one or more of our customers were to deteriorate, additional allowances may be required.
The combined net sales to our two largest customers are significant. At August 31, 2009 and May 31, 2009, respectively, amounts due from Customer A represented approximately 43% and 46%, and amounts due from Customer B represented approximately 26% and 24%, of total trade accounts receivable. For the first quarter
of fiscal 2010 and 2009, respectively, Customer A accounted for approximately 37% and 44% and Customer B accounted for approximately 40% and 29% of total net sales. Net sales of our Schiff® Move Free® brand accounted for approximately 36% and 41%, respectively, of total net sales for the fiscal 2010 and 2009 first quarters.
|
9.
|
COMMITMENTS
AND CONTINGENCIES
|
From time to time, we are involved in claims, legal actions and governmental proceedings that arise from our business operations. Although ultimate liability cannot be determined at the present time, based on available information, we do not believe the resolution of these matters will have a material adverse effect on our
results of operations and financial condition. However, it is possible that future litigation could arise, or that developments could occur in existing litigation, that could have a material adverse effect on our results of operations and financial condition.
On August 18, 2009, we entered into, through our wholly-owned direct operating subsidiary Schiff Nutrition Group, Inc. ("SNG"), a new $80,000 revolving credit facility (the “New Credit Facility”) with U.S. Bank National Association, as Agent. The New Credit Facility, which replaces our previous $25,000 credit facility
which expired on June 30, 2009, contains customary terms and conditions, including, among others, financial covenants that may limit our ability to pay dividends on our common stock and certain other restrictions. SNG’s obligations under the New Credit Facility are guaranteed by us and SNG’s domestic subsidiaries and secured by a first priority security interest in all of the capital stock of SNG and its current and future subsidiaries, as well as a first priority security interest in substantially
all of our domestic assets. Borrowings under the New Credit Facility bear interest at floating rates based on U.S. Bank’s prime rate, the Federal Funds rate, or the LIBOR rate. The New Credit Facility, which matures on August 18, 2012, can be used to fund our normal working capital and capital expenditure requirements, with availability to fund certain permitted strategic transactions. We
incurred
approximately $504 in debt issue costs related to the New Credit Facility which will be amortized over its three-year term. In addition, we are obligated to pay certain commitment fees on any unused amounts based on rates ranging from 0.25% to 0.50%. At August 31, 2009, there were no amounts outstanding and $80,000 was available for borrowing under the New Credit Facility.
SCHIFF NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
(continued)
(dollars in thousands, except share data)
|
10.
|
RECENTLY
ISSUED ACCOUNTING STANDARDS
|
In April 2009, the Financial Accounting Standards Board (“FASB”) staff issued Staff Position (“FSP”) No. FAS 107-1 and Accounting Principles Board (“APB”) 28-1, “Interim Disclosures about Fair Value of Financial Instruments.” FSP No. FAS 107-1 and APB 28-1 amend Statement of
Financial Accounting Standards (“SFAS”) Statement No. 107, “Disclosures about Fair Value of Financial Instruments,” to require disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements. FSP FAS 107-1 and APB 28-1 also amend APB Opinion No. 28, “Interim Financial Reporting,” to require these disclosures in all interim financial statements. FSP No. FAS 101-1 and APB 28-1 is effective for
interim reporting periods ending after June 15, 2009. We have included the required disclosures elsewhere in these Notes to Condensed Consolidated Financial Statements.
In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” which provides guidance on events that occur after the balance sheet date but prior to the issuance of the financial statements. SFAS No. 165 distinguishes events requiring recognition in the financial statements and those that may require disclosure
in the financial statements. Furthermore, SFAS No. 165 requires disclosure of the date through which subsequent events were evaluated. SFAS No. 165 is effective for interim and annual periods ending after June 15, 2009. The adoption of SFAS No. 165 did not have a material impact on our results of operations and financial condition. We have evaluated subsequent events through October 8, 2009, the date the interim financial statements were issued, and have recognized
or disclosed in these interim financial statements the effects, if any, of all subsequent events as required.
In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles,” (“Codification”), which supersedes all existing accounting standard documents and will become the single source of authoritative non-governmental generally
accepted accounting principles accepted in the United States. All other accounting literature not included in the Codification will be considered non-authoritative. The Codification was implemented on July 1, 2009 and will be effective for interim and annual periods ending after September 15, 2009. We expect to conform our interim financial statements and related notes to the new Codification for the fiscal quarter ending November 30, 2009.
|
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 condensed consolidated financial statements, including the notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q and other reports filed with the SEC. Sections of this Form 10-Q including, in particular, our Management’s
Discussion and Analysis of Financial Condition and Results of Operations, 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 (the “Exchange Act”). These statements 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,” “intends,” 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 materially. Important factors that may cause results
to materially differ from these forward-looking statements include, but are not limited to, the factors indicated from time to time in our reports filed with the SEC, copies of which are available upon request from our investor relations group or which may be obtained at the SEC’s website (
www.sec.gov)
. Forward-looking statements only speak as of the date hereof and we do not
undertake and expressly disclaim any obligation to update or release any revisions to any forward-looking statement whether as a result of new information, future events or otherwise, except as required by law.
General
Schiff Nutrition International, Inc. develops, manufactures, markets and distributes branded and private label vitamins, nutritional supplements and nutrition bars in the United States and throughout the world. We offer a broad range of capsules, tablets and nutrition bars. Our portfolio of recognized brands, including
Schiff, Move Free, MegaRed® and Tiger’s Milk®, is marketed primarily through the mass market (including club) and, to a lesser extent, health food store distribution channels.
During fiscal 2009 and the fiscal 2010 first quarter, we continued to provide selling and marketing support intended both to defend our overall Move Free business against competition, including private label, and ultimately to increase our market share in the joint care product category. During fiscal 2009, we introduced MegaRed,
an omega-3 krill oil product originally launched into Costco during the latter part of fiscal 2008, into many of our retail accounts and, during the second half of the fiscal year, we launched a national marketing campaign to support MegaRed growth. During the fiscal 2010 first quarter, we encountered temporary disruption in our ability to fulfill customer orders due to raw material supply issues. As a result, we elected to delay certain fiscal 2010 first quarter planned advertising support
to subsequent fiscal 2010 quarters. We believe we have resolved the temporary raw material supply issues, and we plan to continue to expand distribution of MegaRed into new accounts and resume our comprehensive national marketing initiative to support both the new and existing distribution of this product. Furthermore, we are continuing efforts to increase distribution of our joint care products and krill oil products in international markets. Subject to competitive joint care product category
pricing pressures, including private label, the success of new product sales, including MegaRed, the effectiveness of our branded marketing initiatives and the ability to increase our distribution in international markets, among other factors, we believe fiscal 2010 net sales, as compared to fiscal 2009 net sales, will reflect a low single-digit percentage increase.
Operating results for the fiscal 2010 first quarter, as compared to the fiscal 2009 first quarter, were positively impacted by a higher mix of branded sales. During the second half of fiscal 2009, we discontinued certain private label products resulting in a current quarter over quarter decrease in private label sales. This
decrease in lower-margin private label sales resulted in an overall higher gross margin for the fiscal 2010 first quarter, as compared to the fiscal 2009 first quarter. Our operating results for the fiscal 2010 first quarter, as compared to the fiscal 2009 first quarter, were also impacted by the deferral of certain advertising expenses as described above. We believe advertising expense for subsequent fiscal 2010 quarters will exceed the fiscal 2010 first quarter amount.
Our operating results for the fiscal 2010 first quarter were also impacted by the adoption of a long-term management incentive plan on December 12, 2008. See Note 1 of Notes to Condensed Consolidated Financial Statements for further description of the long-term management incentive plan and its impact on fiscal 2010 first
quarter operating results. Subject to the periodic assessment of the probability of achieving pre-established financial performance targets, our fiscal 2010 operating results, as compared to fiscal 2009, may continue to be impacted by the recognition of compensation expense related to these Performance Awards.
Our historical results have been affected by a variety of factors, including the implementation of strategic initiatives and measures intended to refine our growth and business strategies. We continue to consider, evaluate
and adjust these
initiatives and our growth and business strategies to enhance our results of operations and profitability. However, we cannot assure you that our decisions and actions relating to the implementation, adjustment or continuation of such initiatives and strategies will not adversely affect our results of operations and financial condition.
Our principal executive offices are located at 2002 South 5070 West, Salt Lake City, Utah 84104, and our telephone number is (801) 975-5000.
Results
of Operations (unaudited)
Three Months Ended August 31, 2009 Compared to Three Months
Ended August 31, 2008
The following tables show comparative results for selected items as reported and as a percentage of net sales for the three months ended August 31, (dollars in thousands):
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
48,565
|
|
|
|
100.0
|
%
|
|
$
|
47,790
|
|
|
|
100.0
|
%
|
|
|
|
|
29,403
|
|
|
|
60.5
|
|
|
|
29,912
|
|
|
|
62.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,162
|
|
|
|
39.5
|
|
|
|
17,878
|
|
|
|
37.4
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,633
|
|
|
|
13.6
|
|
|
|
8,133
|
|
|
|
17.0
|
|
|
General and administrative
|
|
|
4,259
|
|
|
|
8.8
|
|
|
|
3,737
|
|
|
|
7.8
|
|
|
|
|
|
1,244
|
|
|
|
2.6
|
|
|
|
988
|
|
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,136
|
|
|
|
25.0
|
|
|
|
12,858
|
|
|
|
26.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,026
|
|
|
|
14.5
|
|
|
|
5,020
|
|
|
|
10.5
|
|
|
Other income, net
|
|
|
36
|
|
|
|
—
|
|
|
|
279
|
|
|
|
0.6
|
|
|
|
|
|
(2,671
|
)
|
|
|
(5.5
|
)
|
|
|
(2,050
|
)
|
|
|
(4.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,391
|
|
|
|
9.0
|
%
|
|
$
|
3,249
|
|
|
|
6.8
|
%
|
Net Sales.
Net sales increased approximately 1.6% to $48.6 million for the fiscal 2010 first quarter, from $47.8 million for the fiscal 2009 first quarter, primarily due to an increase in branded net sales, substantially offset by a decrease in private label sales.
Aggregate branded net sales increased approximately 10.4% to $35.8 million for the fiscal 2010 first quarter, from $32.5 million for the fiscal 2009 first quarter. An increase in sales volume of approximately $3.5 million, or 7.5%, together with approximately $0.6 million in aggregate sales price increases and an approximate
$0.9 million decrease in sales return allowances, was offset by an increase in sales promotional incentives classified as sales price reductions. Classification of promotional costs as a sales reduction is required when the promotion effectively represents a price reduction. While our overall joint care category net sales reflected an approximate 4.0% quarter over quarter sales volume increase, the increase in branded sales volume was primarily attributable to an increase in MegaRed sales. Move
Free net sales were $17.5 million and $19.4 million, respectively, for the fiscal 2010 and 2009 first quarters. We believe the decrease in Move Free net sales, along with the increase in other joint care category net sales, primarily resulted from promotional timing considerations.
Private label sales decreased approximately 17.0% to $12.8 million for the fiscal 2010 first quarter, from $15.3 million for the fiscal 2009 first quarter, primarily due to the discontinuation of certain unprofitable private label products in the second half of fiscal 2009. With respect to our on going private label business,
an approximate $0.7 million sales volume decrease was more than offset by approximately $1.0 million in certain sales price increases instituted in the fiscal 2009 fourth quarter.
Gross Profit.
Gross profit increased approximately 7.2% to $19.2 million for the fiscal 2010 first quarter, from $17.9 million for the fiscal 2009 first quarter. Gross profit, as a percentage of net sales, increased to 39.5% for the fiscal 2010 first quarter,
from 37.4% for the fiscal 2009 first quarter, primarily resulting from the higher mix of branded sales. Subject to raw material pricing and the overall branded to private label sales mix, we believe fiscal 2010 gross profit percentage will be 36.0% to 38.0%, compared to a fiscal 2009 gross profit percent of 35.2%.
Operating Expenses.
Operating expenses decreased approximately 5.6% to $12.1 million for the fiscal 2010 first quarter, from $12.9 million for the fiscal 2009 first quarter. Operating expenses, as a percentage of net sales, were 25.0% and 26.9%, respectively,
for the fiscal 2010 and 2009 first quarters. The decrease in operating expenses resulted primarily from a significant decrease in selling and marketing expenses, partially offset by increases in general and administrative and research and development expenses.
Selling and marketing expenses, including sales, marketing, advertising, freight and other costs, decreased to approximately $6.6 million for the fiscal 2010 first quarter, from $8.1 million for the fiscal 2009 first quarter, primarily due to a temporary reduction in advertising expenses. As a result of certain raw material
supply issues for our MegaRed product, which we believe have since been resolved, we elected to temporarily delay certain television advertising originally scheduled for the fiscal 2010 first quarter. As a result, we believe advertising expense for the fiscal 2010 second quarter as well as subsequent fiscal 2010 quarters, will exceed the fiscal 2010 first quarter amount. In addition, increases in accrued long-term and annual management incentive program costs totaling approximately $0.3
million were substantially offset by a decrease in other personnel related costs primarily due to a reduction in head count.
General and administrative expenses increased to approximately $4.3 million for the fiscal 2010 first quarter, from approximately $3.7 million for the fiscal 2009 first quarter, primarily resulting from increases in accrued long-term and annual management incentive program costs totaling approximately $0.9 million, partially offset by
a decrease in legal and other professional fees.
Research and development costs increased to approximately $1.2 million for the fiscal 2010 first quarter, from approximately $1.0 million for the fiscal 2009 first quarter, primarily resulting from an increase in product clinical research costs.
Other Income/Expense.
Other income, net, was nil for the fiscal 2010 first quarter, compared to $0.3 million for the fiscal 2009 first quarter. The decrease was primarily due to an overall lower yield on investments.
Provision for Income Taxes.
Provision for income taxes was $2.7 million for the fiscal 2010 first quarter, compared to $2.1 million for the fiscal 2009 first quarter. The increase resulted from an increase in pre-tax income, partially offset by a moderate decrease
in our effective tax rate primarily due to an estimated increase in certain tax credits. The fiscal 2010 first quarter tax rate was 37.8%, compared to the fiscal 2009 first quarter tax rate of 38.7%.
Liquidity
and Capital Resources
Working capital decreased approximately $9.8 million to $82.4 million at August 31, 2009, from $92.2 million at May 31, 2009, reflecting an approximate $3.7 million reduction in cash and cash equivalents and available-for-sale securities, an approximate $3.5 million reduction in net receivables and an approximate $3.0 million increase
in current liabilities. The decrease in cash and cash equivalents and available-for-sale securities reflects the special dividend payment of approximately $14.4 million and capital expenditures of approximately $0.6 million, which more than offset the approximately $11.6 million in cash flows provided by operating activities. The decrease in net receivables reflects an approximate $1.8 million decrease in net trade accounts receivable primarily due to a decrease in net sales for August of
fiscal 2010, as compared to May of fiscal 2009, together with an approximate $1.6 million reduction in refundable income taxes. The overall $2.7 million change in income taxes receivable/payable was primarily due to income tax expense recognized as a result of the fiscal 2010 first quarter operating results. The approximate $0.7 million increase in accrued expenses primarily results from an increase in accrued annual management incentive costs.
At August 31, 2009, we held approximately $5.2 million in available-for-sale securities, consisting of approximately $4.5 million in certificates of deposit and approximately $0.7 million in debt securities; including approximately $0.5 million in illiquid ARS which are fully insured, state agency issued securities. Although
we have experienced failed auctions with these ARS, and will therefore not be able to access our funds invested in these ARS until future auctions of these investments are successful, or the securities are called by the issuer; we believe we will be able to successfully liquidate these investments. However, we believe the unsuccessful liquidation of some, or all, of these securities over the next twelve months will not significantly impact our current liquidity needs.
On June 30, 2004, we entered into, through our wholly-owned direct operating subsidiary Schiff Nutrition Group, Inc. (“SNG”), a $25.0 million revolving credit facility (the “Credit Facility”) with KeyBank National Association, as Agent. In August 2006, we extended the maturity of the Credit Facility
from June 30, 2007 to June 30, 2009. The Credit Facility contained customary terms and conditions, including, among others, financial covenants that limited our ability to pay dividends on our common stock and certain other restrictions. SNG’s obligations under the Credit
Facility were guaranteed by us and secured by a first priority security interest on all of the capital stock of SNG. The
Credit Facility, which expired on June 30, 2009, was available to fund our normal working capital and capital expenditure requirements, with additional availability to fund certain permitted strategic transactions.
On August 18, 2009, we entered into, through SNG, a new $80.0 million revolving credit facility (the “New Credit Facility”) with U.S. Bank National Association, as Agent. The New Credit Facility, which replaces our previous $25.0 million credit facility which expired on June 30, 2009, contains customary terms and
conditions, including, among others, financial covenants that may limit our ability to pay dividends on our common stock and certain other restrictions. SNG’s obligations under the New Credit Facility are guaranteed by us and SNG’s domestic subsidiaries and secured by a first priority security interest in all of the capital stock of SNG and its current and future subsidiaries, as well as a first priority security interest in substantially all of our domestic assets. Borrowings
under the New Credit Facility bear interest at floating rates based on U.S. Bank’s prime rate, the Federal Funds rate, or the LIBOR rate. The New Credit Facility, which matures on August 18, 2012, can be used to fund our normal working capital and capital expenditure requirements, with availability to fund certain permitted strategic transactions. We incurred approximately $0.5 million in debt issue costs related to the New Credit Facility, which will be amortized over its three-year
term. In addition, we are obligated to pay certain commitment fees on any unused amounts based on rates ranging from 0.25% to 0.50%. At August 31, 2009, there were no amounts outstanding and $80.0 million was available for borrowing under the New Credit Facility.
We believe that our cash and cash equivalents, 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 or complimentary to our existing business. We could use cash and financing sources discussed herein, or financing sources that subsequently become available, to fund 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, divestiture 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 satisfactory 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 New Credit Facility contains certain customary financial covenants that may limit our ability
to pay dividends on our common stock. We can give no assurance that we will pay dividends in the future.
A summary of our outstanding contractual obligations at August 31, 2009 is as follows (in thousands):
|
Contractual Cash Obligations
(1)
|
|
Total Amounts Committed
|
|
|
Less than
1 Year
|
|
|
1-3
Years
|
|
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3-5
Years
|
|
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More than
5 Years
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|
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|
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|
|
|
|
|
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Operating leases
|
|
$
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8,361
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|
|
$
|
2,374
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|
|
$
|
4,639
|
|
|
$
|
1,348
|
|
|
$
|
—
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(1)
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Unrecognized income tax benefits totaling approximately $229 are excluded since we are unable to estimate the period of settlement, if any.
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(2)
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Purchase obligations consist primarily of open purchase orders for goods and services, including primarily raw materials, packaging and
outsourced contract manufacturing commitments.
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Critical
Accounting Policies and Estimates
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 the valuation of available-for-sale securities, inventories and intangible assets, allowances for doubtful accounts, sales returns and discounts, uncertainties related to certain tax benefits, valuation of deferred tax assets, valuation of liability classified performance awards and recoverability of long-lived assets. Note 1 of Notes to Consolidated Financial Statements contained in our Annual Report on
Form 10-K for the year ended May 31, 2009, filed with the SEC, 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 interim financial statements:
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·
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We provide for inventory valuation adjustments for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand, market conditions and/or liquidation value. For both the fiscal 2010 and 2009 first quarters, inventory valuation
adjustments resulted in a decrease in our gross profit and operating income of approximately $0.1 million. If actual demand and/or market conditions are less favorable than those projected by management, additional inventory write-downs would be required.
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·
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We maintain allowances for doubtful accounts, sales returns and discounts for estimated losses resulting from customer exposures, including among others, product returns, inability to make payments and expected utilization of offered discounts. Changes in our allowances for doubtful accounts, sales returns and discounts resulted in a decrease
in our gross profit and operating income of approximately $0.1 million and $0.5 million, respectively, for the fiscal 2010 and 2009 first quarters. At August 31, 2009 and May 31, 2009, our allowances for doubtful accounts, sales returns and discounts amounted to approximately $2.0 million and $2.3 million, respectively. Actual results may differ from our current estimates, resulting in adjustment of the respective allowance(s).
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·
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We recognize tax benefits relative to certain tax positions in which we may be uncertain as to whether that tax position will ultimately be sustained as filed in our tax return. The recognition or derecognition of these tax benefits is subject to periodic evaluation of the sustainability of the tax position based upon changes in facts, circumstances
or available information. Changes in the recognition of these tax benefits did not significantly impact net income for the fiscal 2010 and 2009 first quarters. At both August 31, 2009 and May 31, 2009, unrecognized tax benefits totaled approximately $0.2 million.
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·
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We currently have deferred tax assets resulting from temporary differences between financial and income tax reporting. These deferred tax assets are subject to periodic recoverability assessments. The realization of these deferred tax assets is primarily dependent on future operating results. At both August 31, 2009 and
May 31, 2009, deferred tax asset valuation allowances were nil; thus, changes in these valuation allowances did not impact net income for the fiscal 2010 and 2009 first quarters.
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·
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We recognize compensation expense for certain liability classified performance awards based on the appropriate change in fair value for the reporting period based on the requisite service completed. The fair value is estimated based on a periodic assessment of the probability that the performance criteria will be achieved. Our periodic
assessment of the probability that the performance criteria will be achieved considers such factors as historical financial results and future financial expectations, including an analysis of sales trends and operating margins; as well as changes in the nutritional supplements industry and competitive environment. For the fiscal 2010 first quarter, we recognized compensation expense related to existing awards of approximately $0.5 million. For the fiscal 2009 first quarter, we did not recognize
any compensation expense related to existing awards. At August 31, 2009, total unrecognized compensation expense, based on the estimated fair value as determined by our assessment of the probability that the performance criteria will be achieved, was approximately $1.3 million. This amount, which is subject to change based on the estimated fair value determined at each future reporting period, is expected to be recognized over the remaining service period.
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·
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We have certain intangible assets, primarily consisting of goodwill, which are tested for impairment at least annually. The determination of whether or not goodwill is impaired involves significant judgment. Changes in strategy or market conditions could significantly impact our judgment and require adjustment to the recorded goodwill
balance.
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Impact
of Inflation
Inflation affects the cost of raw materials, goods and services we use. In recent years, inflation has been modest. We seek to mitigate the adverse effects of inflation primarily through improved productivity, strategic buying initiatives, and cost containment programs. However, the nutritional supplement
industry competitive environment
limits our ability to recover higher costs resulting from inflation by raising prices.
Seasonality
Our business is not inherently seasonal; however, we experience 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.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 may be subject to fluctuations resulting from changes in interest rates. Our current policy does not allow speculation in derivative instruments for profit or execution of derivative instrument contracts for which there is 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. Our New Credit Facility, under which borrowings bear interest at floating rates, had no amounts outstanding at August 31, 2009. Interest income earned on our short-term investments is impacted by changes in interest rates. We do not believe that a hypothetical 10% change in interest rates would have a material
effect on our pretax earnings or cash flows.
ITEM
4T. CONTROLS AND PROCEDURES
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 SEC’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 Exchange Act Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our 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 fiscal quarter
covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective.
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.
Back to top
PART
II. OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
The information set forth in Note 9 to the Notes to Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q is incorporated herein by reference.
ITEM
1A. RISK FACTORS
There have been no material changes to the risk factors previously disclosed by us in Part I, Item 1A of our Annual Report on Form 10-K for the year ended May 31, 2009.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table presents information regarding repurchases of our Class A common stock during the fiscal 2010 first quarter:
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Period
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Total number of
shares purchased
(1)
|
|
Average price
paid per share
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Total number of shares purchased as part of publicly announced plans or programs
|
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Maximum number of shares
that may yet be purchased
under
the plans or programs
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June 1 – June 30
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—
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—
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
July 1 – July 31
|
|
1,695
|
|
$3.91
|
|
—
|
|
—
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|
|
|
|
|
|
|
|
|
|
|
August 1 – August 31
|
|
—
|
|
—
|
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—
|
|
—
|
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|
|
|
|
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Total
|
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1,695
|
|
$3.91
|
|
—
|
|
—
|
|
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(1)
|
Repurchase of these shares was to satisfy employee tax withholding obligations due upon vesting of restricted shares.
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ITEM
3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM
5. OTHER INFORMATION
Not applicable.
ITEM
6. EXHIBITS
|
3.1.
|
Amended and Restated Certificate of Incorporation of Schiff Nutrition International, Inc. (1)
|
|
|
Amended and Restated Bylaws of Weider Nutrition International, Inc. (2)
|
|
4.1.
|
Loan Agreement dated as of August 18, 2009 between Schiff Nutrition Group, Inc. and U.S. Bank National Association.
(3)
|
|
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Form of specimen Class A common stock certificate. (4)
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Sales Agreement dated as of August 31, 2009 between Aker BioMarine Antarctic AS and Schiff Nutrition Group, Inc. (5)
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|
31.1.
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act. (6)
|
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act. (6)
|
|
32.1.
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act. (7)
|
|
1.
|
Previously field in the Company’s Quarterly Report on Form 10-Q filed on January 17, 2006 and incorporated herein by reference.
|
|
|
Previously filed in the Company's Registration Statement on Form S-1 (File No. 333-12929) and incorporated herein by reference.
|
|
3.
|
Previously filed in the Company's Annual Report on Form 10-K filed on August 20, 2009 and incorporated herein by reference.
|
|
|
Previously filed in the Company’s Annual Report on Form 10-K filed on August 29, 2006 and incorporated herein by reference.
|
|
|
Previously filed in the Company’s Current Report on Form 8-K filed on September 4, 2009 and incorporated herein by reference.
|
|
6.
|
Filed herewith.
|
|
|
|
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.
SCHIFF NUTRITION INTERNATIONAL, INC.
|
Date: October 8, 2009
|
By:
|
/s/
Bruce J. Wood
|
|
|
|
|
|
|
|
President, Chief Executive Officer and Director
|
|
Date: October 8, 2009
|
By:
|
/s/
Joseph W. Baty
|
|
|
|
|
|
|
|
Executive Vice President and Chief Financial Officer
|
Schiff Nutrit (NYSE:WNI)
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