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 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 2008 and the first nine months of fiscal 2009, 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. Furthermore, we are continuing efforts to increase distribution of our joint care products in international markets. During the latter part of fiscal 2008, we introduced MegaRed®, an omega-3 krill oil product, into Costco. During the first nine months of fiscal 2009, we continued the introduction of MegaRed into certain other retail accounts, and in the latter part of our fiscal 2009 third quarter, we initiated a national marketing campaign to support its growth.

Our gross profit and operating margins for the first nine months of fiscal 2009 were impacted by incremental private label business awarded in the latter part of fiscal 2008. The incremental business coupled with increased volume from existing business resulted in a significant change in sales mix for the first nine months of fiscal 2009, compared to the first nine months of fiscal 2008. The significant increase in lower-margin private label sales coupled with higher raw material costs resulted in overall lower gross profit and operating margins for the first nine months of fiscal 2009, as compared to the first nine months of fiscal 2008.

We believe fiscal 2009 fourth quarter net sales, as compared to fiscal 2008 fourth quarter net sales, may be relatively flat to modestly negative. Gross profit and operating margins for the fiscal 2009 fourth quarter, as compared to the fiscal 2008 fourth quarter, will continue to be negatively impacted by a higher mix of lower-margin private label sales and higher raw material costs.

Our operating results for fiscal 2008 were impacted by the declaration of a special cash dividend in July 2007. In connection with the declaration of the special dividend, our Board of Directors approved certain 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. As a result, we recognized a non-cash compensation expense, and a corresponding increase in additional paid-in capital, of approximately $0.6 million and $4.3 million, respectively, during the three and nine month periods ended February 29, 2008.

On December 12, 2008, the Compensation Committee of our Board of Directors, pursuant to the Company's 2004 Incentive Award Plan, as amended, 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 approximately $5.5 million, 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.

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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.

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, we determined that the fair value of the Performance Awards was zero at February 28, 2009. Thus, for the three and nine month periods ended February 28, 2009, we did not recognize any compensation expense.

Also, on December 12, 2008, the Compensation Committee of our Board of Directors granted 240,500 restricted stock units (the "New Units") to certain employees not participating in the Performance Awards program. Each New Unit represents the right to receive one share of the Company's Class A common stock upon vesting. The aggregate value of the New Units at the grant date was approximately $1.3 million, which will be expensed over the vesting (service) period. The New 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 New Units. For the three and nine month periods ended February 28, 2009, we recognized approximately $0.1 million in compensation expense.

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 February 28, 2009
Compared to Three MonthsEnded February 29, 2008

The following tables show comparative results for selected items as reported and
as a percentage of net sales for the three months ended, (dollars in
thousands):

                               February 28, 2009          February 29, 2008

Net sales                    $   49,872       100.0 %   $   46,208       100.0 %
Cost of goods sold               32,563        65.3         25,794        55.8

Gross profit                     17,309        34.7         20,414        44.2
Operating expenses:
Selling and marketing             8,227        16.5          8,612        18.6
General and administrative        2,828         5.7          4,812        10.5
Research and development          1,043         2.1            847         1.8

Total operating expenses         12,098        24.3         14,271        30.9

Income from operations            5,211        10.4          6,143        13.3
Other income, net                   117         0.2            424         0.9
Income tax expense               (1,712 )      (3.4 )       (2,524 )      (5.5 )

Net income                   $    3,616         7.2 %   $    4,043         8.7 %

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Net Sales. Net sales increased approximately 7.9% to $49.9 million for the fiscal 2009 third quarter, from $46.2 million for the fiscal 2008 third quarter, primarily due to a significant increase in private label sales, partially offset by a decrease in branded sales.

Aggregate branded net sales decreased approximately 8.0% to $34.7 million for the fiscal 2009 third quarter, from $37.7 million for the fiscal 2008 third quarter, primarily due to a decrease in joint care category sales volume, partially offset by an increase in MegaRed new product sales. The decrease in joint care category sales was primarily due to intense competitive pressures, including private label, reduction of customer inventory levels and challenging economic conditions. Move Free net sales were $19.5 million and $20.9 million, respectively, for the fiscal 2009 and 2008 third quarters.

Private label sales increased approximately 78.0% to $15.2 million for the fiscal 2009 third quarter, from $8.5 million for the fiscal 2008 third quarter, primarily due to incremental business awarded in the latter part of fiscal 2008 coupled with an increase in customer promotional activity on existing business.

Gross Profit. Gross profit decreased approximately 15.2% to $17.3 million for the fiscal 2009 third quarter, from $20.4 million for the fiscal 2008 third quarter. Gross profit, as a percentage of net sales, decreased to 34.7% for the fiscal 2009 third quarter, from 44.2% for the fiscal 2008 third quarter. These changes reflect the significant increase in private label sales volume resulting in a much higher mix of lower-margin private label sales. Increases in raw material costs also negatively impacted the fiscal 2009 third quarter, and will continue to negatively impact gross profit for the fiscal 2009 fourth quarter.

Operating Expenses. Operating expenses decreased approximately 15.2% to $12.1 million for the fiscal 2009 third quarter, from $14.3 million for the fiscal 2008 third quarter. Operating expenses, as a percentage of net sales, were 24.3% and 30.9%, respectively, for the fiscal 2009 and 2008 third quarters. The decrease in operating expenses resulted primarily from a significant decrease in general and administrative expenses.

Selling and marketing expenses, including sales, marketing, advertising, freight and other costs, decreased to approximately $8.2 million for the fiscal 2009 third quarter, from $8.6 million for the fiscal 2008 third quarter, primarily due to a decrease in personnel related costs, including primarily management related annual and long-term incentive program costs.

General and administrative expenses decreased to approximately $2.8 million for the fiscal 2009 third quarter, from approximately $4.8 million for the fiscal 2008 third quarter, primarily resulting from reductions in personnel related costs, including management related annual and long-term incentive program costs. General and administrative expenses for the fiscal 2008 third quarter include approximately $0.7 million in stock based compensation expense associated with the previous long-term management incentive plan. In addition, approximately $0.5 million in incremental compensation expense for the special dividend was recognized in the prior year quarter. The compensation expense represents a non-cash charge for dividend equivalent rights received by holders (employees and directors) of certain equity awards, including stock options and restricted stock units.

Research and development costs increased to approximately $1.0 million for the fiscal 2009 third quarter, from $0.8 million for the fiscal 2008 third quarter, primarily resulting from an increase in personnel related costs and expenses associated with product testing.

Other Income/Expense. Other income, net, was $0.1 million for the fiscal 2009 third quarter, compared to $0.4 million for the fiscal 2008 third quarter. The decrease was primarily due to a reduction in interest income resulting from lower yields on investments.

Income Tax Expense. Income tax expense was $1.7 million for the fiscal 2009 third quarter, compared to $2.5 million for the fiscal 2008 third quarter, primarily resulting from a decrease in pre-tax income, coupled with a reduction in our effective tax rate to 32.1% for the fiscal 2009 third quarter, from 38.4% for the fiscal 2008 third quarter. The decrease in the effective tax rate primarily resulted from an increase in certain tax credits.

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Results of Operations (unaudited)
Nine Months Ended February 28, 2009
Compared to Nine Months Ended February 29, 2008

The following tables show comparative results for selected items as reported and
as a percentage of net sales for the nine months ended, (dollars in thousands):

                                  February 28, 2009          February 29, 2008

Net sales                       $  144,955       100.0 %   $  126,470       100.0 %
Cost of goods sold                  92,165        63.6         73,074        57.8

Gross profit                        52,790        36.4         53,396        42.2
Operating expenses:
Selling and marketing               24,772        17.1         22,104        17.4
General and administrative          10,176         7.0         16,052        12.7
Research and development             3,150         2.2          3,149         2.5
Reimbursement of import costs            -           -            (31 )         -

Total operating expenses            38,098        26.3         41,274        32.6

Income from operations              14,692        10.1         12,122         9.6
Other income, net                      656         0.4          1,623         1.3
Income tax expense                  (5,571 )      (3.8 )       (5,251 )      (4.2 )

Net income                      $    9,777         6.7 %   $    8,494         6.7 %

Net Sales. Net sales increased approximately 14.6% to $145.0 million for the nine months ended February 28, 2009, from $126.5 million for the nine months ended February 29, 2008, primarily due to a significant increase in private label sales.

Aggregate branded net sales remained relatively constant at $101.3 million and $102.1 million, respectively, for the nine months ended February 28, 2009 and February 29, 2008. A modest increase in sales volume of approximately $1.6 million, or 1.1%, was offset by an increase in sales promotional incentives classified as sales price reductions and an increase in actual and potential product returns. Classification of promotional costs as a sales reduction is required when the promotion effectively represents a price reduction. The increase in branded sales volume was primarily attributable to the introduction of our MegaRed new product, substantially offset by a decrease in overall joint care category sales volume. The decrease in joint care category sales was primarily due to intense competitive pressures, including private label, reduction of customer inventory levels and challenging economic conditions. Move Free net sales were $56.2 million and $60.6 million, respectively, for the nine months ended February 28, 2009 and February 29, 2008.

Private label sales increased approximately 79.5% to $43.7 million for the nine months ended February 28, 2009, from $24.3 million for the nine months ended February 29, 2008, primarily due to incremental business awarded in the latter part of fiscal 2008 coupled with an increase in customer promotional activity on existing business.

Gross Profit. Gross profit remained relatively constant at $52.8 million and $53.4 million, respectively, for the nine months ended February 28, 2009 and February 29, 2008. However, gross profit, as a percentage of net sales, decreased to 36.4% for the nine months ended February 28, 2009, from 42.2% for the nine months ended February 29, 2008. The decrease reflects the significant increase in private label sales volume resulting in a much higher mix of lower-margin private label sales, coupled with an increase in raw material costs.

Operating Expenses. Operating expenses decreased approximately 7.7% to $38.1 million for the nine months ended February 28, 2009, from $41.3 million for the nine months ended February 29, 2008. Operating expenses, as a percentage of net sales, were 26.3% and 32.6%, respectively, for the nine months ended February 28, 2009 and February 29, 2008. The decrease in operating expenses resulted primarily from a significant decrease in general and administrative expenses.

Selling and marketing expenses, including sales, marketing, advertising, freight and other costs, increased to approximately $24.8 million for the nine months ended February 28, 2009, from $22.1 million for the nine months ended February 29, 2008, primarily due to an increase in variable selling expenses, including freight costs, resulting from the increase in sales volume; as well as incremental advertising and other promotional expenses in support of the introduction of our new MegaRed product. These increases were partially offset by reductions in personnel related costs, including primarily management related annual and long-term incentive program costs. In addition, selling and marketing expense for the nine months ended February 29, 2008 includes the recognition of approximately $0.4 million in incremental compensation expense for the special dividend. The compensation expense represents a non-cash charge for dividend equivalent rights received by holders (employees and directors) of certain equity awards, including stock options and restricted stock units.

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General and administrative expenses decreased to approximately $10.2 million for the nine months ended February 28, 2009, from approximately $16.1 million for the nine months ended February 29, 2008, primarily resulting from a reduction in personnel related costs, including management related annual and long-term incentive program costs. General and administrative expenses for the nine months ended February 29, 2008 include approximately $2.1 million in stock-based compensation expense associated with the previous long-term management incentive plan. In addition, approximately $3.9 million in incremental compensation expense for the special dividend was recognized in the nine month period ended February 29, 2008.

Research and development costs remained constant at approximately $3.1 million for the nine months ended February 28, 2009 and February 29, 2008.

Other Income/Expense. Other income, net, was $0.7 million for the nine months ended February 28, 2009, compared to $1.6 million for the nine months ended February 29, 2008. The decrease was primarily due to a reduction in interest income resulting from a decrease in cash and available-for-sale securities reflecting the impact of the fiscal 2008 first quarter special dividend, which was funded from cash and liquidation of available-for-sale securities. The decrease also reflects a lower yield on investments.

Income Tax Expense. Income tax expense was $5.6 million for the nine months ended February 28, 2009, compared to $5.3 million for the nine months ended February 29, 2008. The increase primarily resulted from an increase in pre-tax income, substantially offset by a decrease in our effective tax rate. The effective tax rate decreased to 36.3% for the nine months ended February 28, 2009, from 38.2% for the nine months ended February 29, 2008, primarily resulting from an increase in certain tax credits.

Liquidity and Capital Resources

Working capital increased approximately $8.8 million to $90.3 million at February 28, 2009, from $81.5 million at May 31, 2008, primarily due to positive financial results. An approximate $6.0 million increase in cash and cash equivalents and available-for-sale securities reflects, among other factors, the impact of year-to-date earnings; partially offset by an increase in inventories partially funded by an increase in accounts payable, the payment of approximately $1.0 million in dividends resulting from the vesting of certain restricted stock units, and the payment of approximately $1.5 million in individual income taxes resulting from withholding and effectively reacquiring shares of Class A common stock issued in exchange for fully vested restricted stock units and stock options exercised. Inventories increased approximately $4.5 million, which reflects increases in raw material quantities and costs including the impact of incremental private label business. The increase in prepaid expenses and short-term debt was primarily due to the renewal of certain insurance policies at September 1, 2008 and the short-term financing of the corresponding annual insurance premiums. Accrued expenses decreased approximately $2.3 million primarily due to decreases in accrued management annual incentive costs.

As a result of current negative liquidity and uncertainty in financial credit markets, we have continued to liquidate our investments in ARS and other variable rate debt securities. Proceeds from the sale of these available-for-sale securities were invested in money market accounts, certificates of deposit, United States Treasury Bills and high-quality commercial paper. At February 28, 2009, we held approximately $5.9 million in available-for-sale securities including approximately $1.0 million in ARS, which are generally fully insured, highly rated municipal or state agency issued securities. Although we have experienced failed auctions with each of these ARS, and will therefore not be able to access our funds invested in these ARS until future auctions of these investments are successful, the securities are called by the issuer or the securities mature; 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 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 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. Our obligations under the Credit Facility are secured by a first priority security interest on all of the capital stock of SNG. If our total coverage ratio exceeds a certain limit, our obligations will also be secured by a first priority security interest in all of our domestic assets. In the event we exceed certain other ratio limits, we will be subject to a borrowing base and will be able to borrow up to a lesser of $25.0 million or the sum of (i) 85% of eligible accounts receivable and (ii) 65% of eligible inventory. Borrowings under the Credit Facility bear interest at floating rates based on the KeyBank National Association prime rate or the Federal Funds effective rate. The Credit Facility can be used to fund our normal working capital and capital expenditure requirements, with availability to fund certain permitted strategic transactions. At February 28, 2009, there were no amounts outstanding and $25.0 million was available for borrowing under the 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 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.

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A summary of our outstanding contractual obligations at February 28, 2009 is as follows (in thousands):

                                  Total Amounts      Less than         1-3           3-5          More than
Contractual Cash Obligations(1)     Committed         1 Year          Years         Years          5 Years

Operating leases                  $       9,528     $     2,382     $   4,642     $   2,504     $           -
Purchase obligations(2)                   8,820           8,820             -             -                 -
Debt obligations                            194             194             -             -                 -

Total obligations                 $      18,542     $    11,396     $   4,642     $   2,504     $           -

. . .