QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

NUTRACEUTICAL INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)

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 ý NO o

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 Rule 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 o NO o

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 the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act:

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO ý

At April 29, 2010, the registrant had 10,384,185 shares of common stock outstanding.

NUTRACEUTICAL INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(dollars in thousands)

				September 30, 2009(1)		March 31, 2010

			ASSETS
Current assets
	Cash and cash equivalents			$	5,858	$	6,609
	Accounts receivable, net				11,539		13,436
	Inventories, net				29,238		36,192
	Prepaid expenses and other current assets				2,344		1,724
	Deferred income taxes				1,603		1,612

		Total current assets			50,582		59,573
Property, plant and equipment, net					55,584		61,455
Goodwill					1,177		4,738
Intangible assets, net					14,452		18,613
Other non-current assets, net					1,094		2,611
Deferred income taxes, net					11,071		10,048

		Total assets		$	133,960	$	157,038

	LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
	Accounts payable			$	11,248	$	15,117
	Accrued expenses				6,890		6,981

		Total current liabilities			18,138		22,098
Long-term debt					18,500		30,500
Other non-current liabilities					1,684		2,198

		Total liabilities			38,322		54,796

Stockholders' equity
	Common stock				106		104
	Additional paid-in capital				26,458		24,094
	Retained earnings				68,751		77,796
	Accumulated other comprehensive income				323		248

		Total stockholders' equity			95,638		102,242

		Total liabilities and stockholders' equity		$	133,960	$	157,038

The accompanying notes are an integral part of these condensed consolidated financial statements.

NUTRACEUTICAL INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)

(unaudited)

(dollars in thousands, except per share data)

		Three months ended March 31,						Six months ended March 31,

		2009			2010			2009			2010
Net sales		$	41,957		$	47,896		$	81,586		$	92,735
Cost of sales			19,517			22,553			37,714			43,918

	Gross profit		22,440			25,343			43,872			48,817
Operating expenses
	Selling, general and administrative		15,713			16,679			31,486			33,428
	Amortization of intangible assets		158			314			317			612
	Impairment of goodwill		37,519			—			37,519			—

Income (loss) from operations			(30,950	)		8,350			(25,450	)		14,777
Interest and other (income) expense, net			264			147			774			256

Income (loss) before provision (benefit) for income taxes			(31,214	)		8,203			(26,224	)		14,521
Provision (benefit) for income taxes			(7,855	)		3,102			(5,977	)		5,476

Net income (loss)		$	(23,359	)	$	5,101		$	(20,247	)	$	9,045
Other comprehensive income (loss)
	Foreign currency translation adjustment, net of tax		343			(77	)		(433	)		(75	)

Comprehensive income (loss)		$	(23,016	)	$	5,024		$	(20,680	)	$	8,970

Net income (loss) per common share
	Basic	$	(2.15	)	$	0.49		$	(1.86	)	$	0.87
	Diluted		(2.15	)		0.49			(1.86	)		0.86
Weighted average common shares outstanding
	Basic		10,870,769			10,385,927			10,859,876			10,437,342
	Dilutive effect of stock options		—			92,759			—			87,265

	Diluted		10,870,769			10,478,686			10,859,876			10,524,607

The accompanying notes are an integral part of these condensed consolidated financial statements.

NUTRACEUTICAL INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(dollars in thousands)

				Six months ended March 31,

				2009			2010
Cash flows from operating activities
Net income (loss)				$	(20,247	)	$	9,045
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization				3,276			3,527
	Amortization of deferred financing fees				28			28
	Impairment of goodwill				37,519			—
	Losses on disposals of property and equipment				2			—
	Deferred income taxes				(9,850	)		1,014
	Changes in assets and liabilities, net of effects of acquisitions
		Accounts receivable, net			687			(566	)
		Inventories, net			2,883			(5,654	)
		Prepaid expenses and other current assets			831			713
		Other non-current assets, net			(306	)		(1,508	)
		Accounts payable			(1,950	)		3,869
		Accrued expenses			(1,382	)		(9	)
		Other non-current liabilities			311			514

			Net cash provided by operating activities		11,802			10,973

Cash flows from investing activities
Acquisitions of businesses, net of cash acquired					—			(11,608	)
Purchases of property and equipment					(6,395	)		(8,206	)

			Net cash used in investing activities		(6,395	)		(19,814	)

Cash flows from financing activities
Proceeds from long-term debt					3,000			17,500
Payments on long-term debt					(8,500	)		(5,500	)
Proceeds from issuances of common stock					266			421
Purchases of common stock for treasury					—			(2,830	)
Tax benefit from stock option exercises					36			43

			Net cash provided by (used in) financing activities		(5,198	)		9,634

Effect of exchange rate changes on cash and cash equivalents					(153	)		(42	)

Net increase in cash and cash equivalents					56			751
Cash and cash equivalents at beginning of period					5,189			5,858

Cash and cash equivalents at end of period				$	5,245		$	6,609

The accompanying notes are an integral part of these condensed consolidated financial statements.

NUTRACEUTICAL INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(dollars in thousands, except per share data)

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all necessary adjustments to present fairly the consolidated financial position of Nutraceutical International Corporation and its subsidiaries (the "Company") as of March 31, 2010, the results of their operations for the three and six months ended March 31, 2009 and 2010 and their cash flows for the six months ended March 31, 2009 and 2010, in conformity with accounting principles generally accepted in the United States of America for interim financial information applied on a consistent basis. Results for the three and six months ended March 31, 2010 are not necessarily indicative of the results to be expected for the full fiscal year.

Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. Accordingly, these financial statements should be read in conjunction with the Company's Form 10-K for the Fiscal Year Ended September 30, 2009, which was filed with the Securities and Exchange Commission on December 10, 2009.

Accounts receivable, net of allowances for sales returns and doubtful accounts, consisted of the following:

Inventories, net of reserves for slow moving, obsolete and/or damaged inventory, were comprised of the following:

The change in the carrying amount of goodwill from September 30, 2009 to March 31, 2010 was as follows:

		Goodwill

Balance as of September 30, 2009
	Goodwill	$	41,571
	Accumulated impairment losses		(40,394	)

			1,177
	Goodwill attributable to fiscal 2010 acquisitions		3,561

Balance as of March 31, 2010
	Goodwill		45,132
	Accumulated impairment losses		(40,394	)

		$	4,738

The carrying amounts of intangible assets at September 30, 2009 and March 31, 2010 were as follows:

		September 30, 2009							March 31, 2010

		September 30, 2009							March 31, 2010							Weighted- Average Amortization Period (Years)
		Gross Carrying Amount(1)		Accumulated Amortization(1)			Net Carrying Amount		Gross Carrying Amount(1)		Accumulated Amortization(1)			Net Carrying Amount		Weighted- Average Amortization Period (Years)
Intangible assets subject to amortization:
	Trademarks/trade names/patents	$	516	$	(411	)	$	105	$	548	$	(434	)	$	114		5
	Customer relationships/distribution rights		4,251		(1,223	)		3,028		6,402		(1,707	)		4,695		6
	Developed software and technology		772		(450	)		322		772		(528	)		244		5

			5,539		(2,084	)		3,455		7,722		(2,669	)		5,053
Intangible assets not subject to amortization:
	Trademarks/trade names/licenses		10,997		—			10,997		13,560		—			13,560

		$	16,536	$	(2,084	)	$	14,452	$	21,282	$	(2,669	)	$	18,613

Estimated future amortization expense related to the March 31, 2010 net carrying amount of $5,053 for intangible assets subject to amortization is as follows:

During the three months ended March 31, 2009, the Company recorded a non-cash goodwill impairment charge of $37,519 ($27,288 after tax, or $2.51 per diluted share for the three and six months ended March 31, 2009) related to the Company's branded and natural food markets reporting units. The ongoing uncertainty in general and economic conditions may continue to impact retail and consumer demand, as well as the market price of the Company's common stock, and could negatively impact the Company's future operating performance, cash flow and/or stock price and could result in additional goodwill and/or intangible asset impairment charges being recorded in future periods which could materially impact the Company's consolidated financial statements. The valuation of goodwill and intangible assets is subject to a high degree of judgment and complexity.

In September 2006, the Financial Accounting Standards Board issued authoritative guidance which is included in Accounting Standards Codification 820, "Fair Value Measurements and Disclosures". This guidance defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. The guidance does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in prior accounting pronouncements. On October 1, 2008, the Company adopted the provisions of this guidance for assets and liabilities measured at fair value on a recurring basis. On October 1, 2009, the Company adopted the provisions of this guidance for assets and liabilities measured at fair value on a non-recurring basis. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.

On a quarterly basis, the Company measures at fair value certain financial assets, including cash equivalents, using a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's own assumptions. The following fair value hierarchy prioritizes the inputs into three broad levels:

This hierarchy requires the Company to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. The fair value of the Company's financial assets at March 31, 2010 was determined using the following level of input:

The fair value of the money market fund, classified as Level 1, was obtained from a quoted market price.

The Company's debt is stated at book value which approximated its fair value at September 30, 2009 and March 31, 2010.

The Company's current revolving credit facility has available credit borrowings of $60,000 with no automatic reductions and provides an accordion feature that can increase the available credit borrowings to $90,000, subject to approval by the lenders and compliance with certain covenants and conditions. The lenders under the revolving credit facility are Rabobank International and Wells Fargo. To date, the Company has not experienced any difficulties in accessing the available funds under the revolving credit facility.

At March 31, 2010, the Company had outstanding revolving credit borrowings of $30,500. Borrowings under the revolving credit facility are collateralized by substantially all assets of the Company. At the Company's election, borrowings bear interest at the applicable Eurodollar Rate plus a variable margin or at a base rate, which is the higher of the Federal Funds Rate plus 0.5% or the Prime Lending Rate, plus a variable margin. At March 31, 2010, the applicable weighted-average interest rate for outstanding borrowings was 1.28%. The Company is also required to pay a variable quarterly fee on the unused balance under the revolving credit facility. At March 31, 2010, the applicable rate was 0.20%. Accrued interest on Eurodollar Rate borrowings is payable based on elected intervals of one, two or three months. Accrued interest on base rate borrowings is payable quarterly. The revolving credit facility matures on September 7, 2011, and the Company is required to repay all principal and interest outstanding under the revolving credit facility on such date.

The revolving credit facility contains restrictive covenants, including limitations on incurring other indebtedness and requirements that the Company maintain certain financial ratios. Upon the occurrence of a default, the lender has various remedies or rights, which may include proceeding against the collateral or requiring the Company to repay all amounts outstanding under the revolving credit facility.

During the three months ended March 31, 2010, the Company purchased and retired 50,100 shares of common stock for an aggregate price of $605. During the six months ended March 31, 2010, the Company purchased and retired 239,409 shares of common stock for an aggregate price of $2,830. During the three and six months ended March 31, 2009, the Company did not purchase or retire any shares of common stock. As of March 31, 2010, the Company was permitted to purchase up to 967,731 additional shares under its approved purchase plan. The Company accounts for treasury shares using the cost method.

The following table summarizes stock option activity during the six months ended March 31, 2010:

Options to purchase 52,500 and 142,650 shares of common stock for the three and six months ended March 31, 2010, respectively, were excluded from the computation of diluted earnings per share because the exercise prices of these stock options were greater than the average share price of the Company's common stock and, therefore, the effect would have been antidilutive. Options to purchase shares of common stock were excluded from the computation of diluted earnings per share for the three and six months ended March 31, 2009 because the Company recognized a net loss.

During the six months ended March 31, 2010, the Company received proceeds of $55 related to the exercise of stock options. During this same period, the Company recorded a tax benefit of $43 and optionees realized an aggregate pre-tax gain of $112 from these stock option exercises. During the six months ended March 31, 2009, the Company received proceeds of $166 from the exercise of stock options, the Company recorded a tax benefit of $36 related to these option exercises and optionees realized an aggregate pre-tax gain of $93 from these stock option exercises.

Segment identification and selection is consistent with the management structure used by the Company to evaluate performance and make decisions regarding resource allocation, as well as the materiality of financial results consistent with that structure. Based on the Company's management structure and method of internal reporting, the Company has one operating segment. The Company does not review operating results on a disaggregated basis; rather, management reviews operating results on an aggregate basis.

Net sales attributed to customers in the United States and foreign countries for the three and six months ended March 31, 2009 and 2010 were as follows:

Certain net sales attributed to customers in the United States are sold to customers who in turn may sell such products to customers in foreign countries while certain net sales attributed to customers in foreign countries are sold to customers who in turn may sell such products to customers in the United States.

The Company's net sales by product group for the three and six months ended March 31, 2009 and 2010 were as follows:

On April 15, 2010, the Company acquired substantially all of the operating assets of Honey Gardens Apiaries, Inc. and Apitherapy, LLC for approximately $1,550 in cash. The primary assets acquired included accounts receivable, inventory, fixed assets, trademarks/tradenames, customer relationships and goodwill. As of the date of these financial statements, the Company is determining the fair value of the acquired assets and the related allocation of the purchase price.

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 this report on Form 10-Q, including Part I, Item 1.

We are an integrated manufacturer, marketer, distributor and retailer of branded nutritional supplements and other natural products sold primarily to and through domestic health and natural food stores. Internationally, we market and distribute branded nutritional supplements and other natural products to and through health and natural product distributors and retailers. Our core business strategy is to acquire, integrate and operate businesses in the natural products industry that manufacture, market and distribute branded nutritional supplements. We believe that the consolidation and integration of these acquired businesses provides ongoing financial synergies through increased scale and market penetration, as well as strengthened customer relationships.

We manufacture and sell nutritional supplements and other natural products under numerous brands including Solaray®, VegLife®, KAL®, Nature's Life®, LifeTime®, Sunny Green®, Action Labs®, Natural Balance®, NaturalMax®, bioAllers®, Herbs for Kids™, Natra-Bio®, NaturalCare®, Zand®, Health from the Sun®, Life-flo®, Larenim®, TheraNeem®, TheraVeda®, Living Flower Essences®, Pioneer®, Thompson®, Natural Sport®, Supplement Training Systems®, Premier One®, Montana Big Sky™, ActiPet®, FunFresh Foods™, Dowd & Rogers™, CompliMed®, AllVia™, Oakmont Labs®, Healthway®, Body Gold®, Sayge®, Monarch Nutraceuticals™ and Great Basin Botanicals™. Under the name Woodland Publishing™, we publish, print and market a line of books and booklets to, among others, book distributors, national retail bookstores and health and natural food stores. We also distribute branded products of certain third parties.

We own neighborhood natural food markets, which operate under the trade names The Real Food Company™, Thom's Natural Foods™ and Cornucopia Community Market™. We also own health food stores, which operate under the trade names Fresh Vitamins™ and Granola's™.

We were formed in 1993 to effect a consolidation strategy in the fragmented vitamin, mineral, herbal and other nutritional supplements industry (the "VMS Industry"). Since our formation, we have completed twenty-eight acquisitions of assets or stock. As a result of acquisitions, internal growth and cost management, we believe that we are well positioned to continue to capitalize on acquisition opportunities that arise in the VMS Industry.

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America required us to make estimates and assumptions that affected the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of net sales and expenses during the reported periods. Significant estimates included values and lives assigned to acquired intangible assets, reserves for customer returns and allowances, uncollectible accounts receivable, slow moving and obsolete and/or damaged inventory and valuation and recoverability of long-lived assets. Actual results may differ from these estimates. Our critical accounting policies include the following:

Accounts Receivable—Provision is made for estimated bad debts based on periodic analysis of individual customer balances, including an evaluation of days sales outstanding, payment history, recent payment trends and perceived credit worthiness. If general economic conditions and/or customer financial condition were to change, additional provisions for bad debts may be required, which could have a material impact on the consolidated financial statements.

Inventories—Provision is made for slow moving, obsolete and/or damaged inventory based on periodic analysis of individual inventory items, including an evaluation of historical usage and/or movement, age, expiration date and general condition. If market demand and/or consumer preferences are less favorable than historical trends or future expectations, additional provisions for slow moving, obsolete and/or damaged inventory may be required, which could have a material impact on the consolidated financial statements.

Property, Plant and Equipment—Depreciation and amortization expense is impacted by our judgments regarding the estimated useful lives of assets placed in service. If the actual lives of assets are significantly less than expected, depreciation and amortization expense would be accelerated, which could have a material impact on the consolidated financial statements.

We evaluate the recoverability of our property, plant and equipment which are reviewed for possible impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. We measure recoverability of the asset by comparison of its carrying amount to the future undiscounted cash flows we expect the asset to generate. If we consider the asset to be impaired, we measure the amount of any impairment as the difference between the carrying amount and the fair value of the impaired asset.

Goodwill and Intangible Assets—Goodwill and intangible assets require estimates and judgments in determining the initial recognition and measurement of goodwill and intangible assets, including factors and assumptions used in determining fair values and useful lives. Intangible assets with finite useful lives are amortized, while intangible assets with indefinite useful lives are not amortized. Amortizable intangible assets are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill and non-amortizable intangible assets are tested annually for impairment and are tested for impairment between annual tests if an event occurs that would cause us to believe that value is impaired. We perform our annual impairment testing as of September 30 each year, which is the last day of our fiscal year.

During the three months ended March 31, 2009, we recorded a non-cash goodwill impairment charge of $37.5 million ($27.3 million after tax, or $2.51 per diluted share for the three and six months ended March 31, 2009) related to our branded and natural food markets reporting units. The ongoing uncertainty in general and economic conditions may continue to impact retail and consumer demand, as well as the market price of our common stock, and could negatively impact our future operating performance, cash flow and/or stock price and could result in additional goodwill and/or intangible asset impairment charges being recorded in future periods which could materially impact our consolidated financial statements. The valuation of goodwill and intangible assets is subject to a high degree of judgment and complexity.

Revenue Recognition—Revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the product has been shipped and the customer takes ownership and assumes the risk of loss; (3) the selling price is fixed or determinable; and (4) collection of the resulting receivable is reasonably assured. We believe that these criteria are satisfied upon shipment from our facilities or, in the case of our neighborhood natural food markets and health food stores, at the point of sale within these stores. Revenue is reduced by provisions for estimated returns and allowances, which are based on historical averages that have not varied significantly for the periods presented, as well as specific known claims, if any. No other significant deductions from revenue must be estimated at the point in time that revenue is recognized.

Other than our previous discussion of goodwill impairment, our estimates and judgments related to our critical accounting policies, including factors and assumptions considered in making these estimates and judgments, did not vary significantly for the periods presented and had no material impact on the consolidated financial statements as reported.

The following table sets forth certain consolidated statements of operations data as a percentage of net sales for the periods indicated:

		Three Months Ended March 31,						Six Months Ended March 31,

		2009			2010			2009			2010
Net sales			100.0	%		100.0	%		100.0	%		100.0	%
	Cost of sales		46.5	%		47.1	%		46.2	%		47.4	%

Gross profit			53.5	%		52.9	%		53.8	%		52.6	%
	Selling, general and administrative		37.5	%		34.8	%		38.6	%		36.0	%
	Amortization of intangible assets		0.4	%		0.7	%		0.4	%		0.7	%
	Impairment of goodwill		89.4	%		—	%		46.0	%		—	%

Income (loss) from operations			(73.8	)%		17.4	%		(31.2	)%		15.9	%
	Interest and other (income) expense, net		0.6	%		0.3	%		0.9	%		0.2	%

Income (loss) before provision (benefit) for income taxes			(74.4	)%		17.1	%		(32.1	)%		15.7	%
	Provision (benefit) for income taxes		(18.7	)%		6.5	%		(7.3	)%		5.9	%

Net income (loss)			(55.7	)%		10.6	%		(24.8	)%		9.8	%

Adjusted EBITDA(1)			19.6	%		21.1	%		18.8	%		19.7	%

Comparison of the Three Months Ended March 31, 2010 to the Three Months Ended March 31, 2009

Net Sales. Net sales increased by $5.9 million, or 14.2%, to $47.9 million for the three months ended March 31, 2010 ("second quarter of fiscal 2010") from $42.0 million for the three months ended March 31, 2009 ("second quarter of fiscal 2009"). Net sales of branded nutritional supplements and other natural products increased by $6.1 million, or 16.0%, to $44.0 million for the second quarter of fiscal 2010 compared to $37.9 million for the second quarter of fiscal 2009. The increase in net sales of branded nutritional supplements and other natural products was primarily related to the net sales contributions of the two fiscal 2010 acquisitions and the fiscal 2009 acquisition, as well as an increase in sales volume of branded products to certain customers. The impact on net sales of branded products attributable to price changes was not material. Other net sales remained relatively flat at $3.9 million for the second quarter of fiscal 2010 compared to $4.1 million for the second quarter of fiscal 2009.

Gross Profit. Gross profit increased by $2.9 million, or 12.9%, to $25.3 million for the second quarter of fiscal 2010 from $22.4 million for the second quarter of fiscal 2009. This increase in gross profit was primarily attributable to the increase in net sales. As a percentage of net sales, gross profit decreased to 52.9% for the second quarter of fiscal 2010 from 53.5% for the second quarter of fiscal 2009. This decrease in gross profit percentage was primarily attributable to increased material costs, which were primarily due to vendor price increases, and, to a lesser extent, changes in sales mix.

Selling, General and Administrative. Selling, general and administrative expenses increased by $1.0 million, or 6.1%, to $16.7 million for the second quarter of fiscal 2010 from $15.7 million for the second quarter of fiscal 2009. This increase in selling, general and administrative expenses was primarily attributable to operational and transition costs related to the fiscal 2009 and the fiscal 2010 acquisitions. As a percentage of net sales, selling, general and administrative expenses decreased to 34.8% for the second quarter of fiscal 2010 compared to 37.5% for the second quarter of fiscal 2009. This decrease in selling, general and administrative expenses as a percentage of net sales was primarily attributable to the increase in net sales, which allowed us to better leverage our cost structure as well as year-over-year cost improvements in certain selling, general and administrative expense areas.

Amortization of Intangible Assets. Amortization of intangible assets was $0.3 million for the second quarter of fiscal 2010 and $0.2 million for the second quarter of fiscal 2009. For each period, amortization expense was primarily related to intangible assets recorded in connection with acquisitions.

Impairment of Goodwill. During the second quarter of fiscal 2009, we recorded a non-cash goodwill impairment charge of $37.5 million ($27.3 million after tax, or $2.51 per diluted share) related to our branded and natural food markets reporting units.

Interest and Other (Income) Expense, Net. Net interest and other (income) expense was $0.1 million for the second quarter of fiscal 2010 and $0.3 million for the second quarter of fiscal 2009 and primarily consisted of interest expense on indebtedness under our revolving credit facility with the decrease being primarily related to a reduction in interest rates.

Provision (Benefit) for Income Taxes. Our effective tax rate was 37.8% for the second quarter of fiscal 2010 and (25.2%) for the second quarter of fiscal 2009. During the second quarter of fiscal 2009, we recorded a non-cash goodwill impairment charge of $37.5 million of which $11.0 million related to non-tax-deductible goodwill and reduced our effective tax rate from 37.7% to (25.2%).

Comparison of the Six Months Ended March 31, 2010 to the Six Months Ended March 31, 2009

Net Sales. Net sales increased by $11.1 million, or 13.7%, to $92.7 million for the six months ended March 31, 2010 from $81.6 million for the six months ended March 31, 2009. Net sales of branded nutritional supplements and other natural products increased by $11.5 million, or 15.7%, to $84.9 million for the six months ended March 31, 2010 compared to $73.4 million for the six months ended March 31, 2009. The increase in net sales of branded nutritional supplements and other natural products was primarily related to the net sales contributions of the two fiscal 2010 acquisitions and the fiscal 2009 acquisition, as well as an increase in sales volume of branded products to certain customers. The impact on net sales of branded products attributable to price changes was not material. Other net sales were $7.8 million for the six months ended March 31, 2010 compared to $8.2 million for the six months ended March 31, 2009.

Gross Profit. Gross profit increased by $4.9 million, or 11.3%, to $48.8 million for the six months ended March 31, 2010 from $43.9 million for the six months ended March 31, 2009. This increase in gross profit was primarily attributable to the increase in net sales. As a percentage of net sales, gross profit decreased to 52.6% for the six months ended March 31, 2010 from 53.8% for the six months ended March 31, 2009. This decrease in gross profit percentage was primarily attributable to increased material costs, which were primarily due to vendor price increases, and, to a lesser extent, changes in sales mix.

Selling, General and Administrative. Selling, general and administrative expenses increased by $1.9 million, or 6.2%, to $33.4 million for the six months ended March 31, 2010 from $31.5 million for the six months ended March 31, 2009. This increase in selling, general and administrative expenses was primarily attributable to operational and transition costs related to the fiscal 2009 and the fiscal 2010 acquisitions. As a percentage of net sales, selling, general and administrative expenses decreased to 36.0% for the six months ended March 31, 2010 compared to 38.6% for the six months ended March 31, 2009. This decrease in selling, general and administrative expenses as a percentage of net sales was primarily attributable to the increase in net sales, which allowed us to better leverage our cost structure as well as year-over-year cost improvements in certain selling, general and administrative expense areas.

Amortization of Intangibles. Amortization of intangibles was $0.6 million for the six months ended March 31, 2010 and $0.3 million for the six months ended March 31, 2009. For each period, amortization expense was primarily related to intangible assets recorded in connection with acquisitions.

Impairment of Goodwill. During the six months ended March 31, 2009, we recorded a $37.5 million ($27.3 million after tax, or $2.51 per diluted share) non-cash goodwill impairment charge related to our branded and natural food markets reporting units.

Interest and Other (Income) Expense, Net. Net interest and other (income) expense was $0.3 million for the six months ended March 31, 2010 and $0.8 million for the six months ended March 31, 2009 and primarily consisted of interest expense on indebtedness under our revolving credit facility with the decrease being primarily related to a reduction in interest rates.

Provision (Benefit) for Income Taxes. Our effective tax rate was 37.7% for the six months ended March 31, 2010 and (22.8%) for the six months ended March 31, 2009. During the six months ended March 31, 2009, we recorded a non-cash goodwill impairment charge of $37.5 million of which $11.0 million related to non-tax-deductible goodwill and reduced our effective tax rate from 37.7% to (22.8%).

Adjusted EBITDA (a non-GAAP measure) is defined in our debt covenants and performance measures as earnings before net interest and other (income) expense, taxes, depreciation, amortization and goodwill and intangible asset impairment. Adjusted EBITDA has some inherent limitations in measuring operating performance due to the exclusion of certain financial elements such as depreciation and amortization and is not necessarily comparable to other similarly-titled captions of other companies due to potential inconsistencies in the method of calculation. Furthermore, Adjusted EBITDA is not intended to be a substitute for cash flows from operating activities, as a measure of liquidity, or an alternative to net income in determining our operating performance in accordance with generally accepted accounting principles. Our use of an EBITDA-based metric should be considered within the following context:

The following table sets forth a reconciliation of net income (loss) to Adjusted EBITDA for each period included herein:

	Three Months Ended March 31,					Six Months Ended March 31,

	2009			2010		2009			2010
	(dollars in thousands)
Net income (loss)	$	(23,359	)	$	5,101	$	(20,247	)	$	9,045
Provision (benefit) for income taxes		(7,855	)		3,102		(5,977	)		5,476
Interest and other (income) expense, net(1)		264			147		774			256
Depreciation and amortization		1,642			1,767		3,276			3,527
Impairment of goodwill(2)		37,519			—		37,519			—

Adjusted EBITDA	$	8,211		$	10,117	$	15,345		$	18,304

Our Adjusted EBITDA increased to $10.1 million for the second quarter of fiscal 2010 from $8.2 million for the second quarter of fiscal 2009. Adjusted EBITDA as a percentage of net sales increased to 21.1% for the second quarter of fiscal 2010 from 19.6% for the second quarter of fiscal 2009.

Our Adjusted EBITDA increased to $18.3 million for the six months ended March 31, 2010 from $15.3 million for the six months ended March 31, 2009. Adjusted EBITDA as a percentage of net sales increased to 19.7% for the six months ended March 31, 2010 from 18.8% for the six months ended March 31, 2009.

We believe that our business is characterized by minor seasonality. However, sales to any particular customer or sales of any particular product can vary substantially from one quarter to the next based on such factors as industry trends, timing of promotional discounts, domestic and international economic conditions and acquisition-related activities. Excluding the effect of acquisitions, we have historically recorded higher branded products sales volume during the second fiscal quarter (January through March) due to increased interest in health-related products among consumers following the holiday season.

We had working capital of $37.5 million as of March 31, 2010 compared to $32.4 million as of September 30, 2009. This increase in working capital was primarily the result of increases in cash, accounts receivable and inventories partially offset by a decrease in prepaid expenses and other current assets and an increase in accounts payable.

Net cash provided by operating activities for the six months ended March 31, 2010 was $11.0 million compared to $11.8 million for the comparable period in fiscal 2009. This decrease in net cash provided by operating activities for the six months ended March 31, 2010 was primarily attributable to changes in assets and liabilities, net of effects of acquisitions.

Net cash used in investing activities was $19.8 million for the six months ended March 31, 2010 compared to $6.4 million for the comparable period in fiscal 2009. Our investing activities during these

periods consisted of acquisitions of businesses and capital expenditures primarily related to building improvements related to facility consolidation efforts, distribution and manufacturing equipment and information systems. Also, on December 11, 2009, we purchased a facility for $2.8 million in cash to expand our Rapid Response Center in Ogden, Utah. This facility is adjacent to our existing facilities and will provide us approximately 105,000 square feet of additional gross building space located on 5.4 acres.

During the six months ended March 31, 2010, we acquired two businesses for $11.6 million in cash. On October 9, 2009, we acquired selected assets of Nutritional Specialties, Inc. for $8.6 million in cash and on December 18, 2009, we acquired selected assets of Organix-South, Inc. for $3.0 million in cash. We did not acquire any businesses during the six months ended March 31, 2009.

Net cash provided by financing activities was $9.6 million for the six months ended March 31, 2010 compared to net cash used in financing activities of $5.2 million for the comparable period in fiscal 2009. During these periods, financing activities primarily related to borrowings and repayments under our revolving credit facility, purchases of common stock for treasury and proceeds from the issuance of common stock related to stock option exercises and the direct stock purchase plan.

In October 2007, we registered a direct stock purchase plan with the Securities and Exchange Commission. The purpose of this direct stock purchase plan is to provide a convenient way for existing stockholders, as well as new investors, to purchase shares of our common stock. A total of 1,500,000 shares of our common stock were registered under the plan with 29,681 shares purchased during the six months ended March 31, 2010. As of March 31, 2010, there were 1,434,295 shares of common stock available for purchase.

Our current revolving credit facility has available credit borrowings of $60.0 million with no automatic reductions and provides an accordion feature that can increase the available credit borrowings to $90.0 million, subject to approval by the lenders and compliance with certain covenants and conditions.

At March 31, 2010, we had outstanding revolving credit borrowings of $30.5 million. Borrowings under the revolving credit facility are collateralized by substantially all of our assets. At our election, borrowings under the revolving credit facility bear interest at the applicable Eurodollar Rate plus a variable margin or at a base rate, which is the higher of the Federal Funds Rate plus 0.5% or the Prime Lending Rate, plus a variable margin. At March 31, 2010, the applicable weighted-average interest rate for outstanding borrowings was 1.28%. We are also required to pay a variable quarterly fee on the unused balance under the revolving credit facility. At March 31, 2010, the applicable rate was 0.20%. Accrued interest on Eurodollar Rate borrowings is payable based on elected intervals of one, two or three months. Accrued interest on base rate borrowings is payable quarterly. The revolving credit facility matures on September 7, 2011, and we are required to repay all principal and interest outstanding under the revolving credit facility on such date.

The revolving credit facility contains restrictive covenants, including limitations on incurring certain other indebtedness and requirements that we maintain certain financial ratios. As of March 31, 2010, we were in compliance with the restrictive covenants. Upon the occurrence of a default, the lender has various remedies or rights, which may include proceeding against the collateral or requiring us to repay all amounts outstanding under the revolving credit facility.

In the current volatile credit market, there is risk that any lenders, even those with strong balance sheets and sound lending practices, could fail or refuse to honor their legal commitments and obligations under existing credit commitments, including but not limited to: extending credit up to the maximum permitted by a credit facility, allowing access to additional credit features and otherwise accessing capital and/or honoring loan commitments. The lenders under our credit facility are Rabobank International and Wells Fargo. If our lenders failed to honor their legal commitments under our credit facility, it could be difficult in this environment to replace our credit facility on similar terms. To date, we have not experienced any difficulties in accessing the available funds under our credit facility.

A key component of our business strategy is to seek to make additional acquisitions, which may require that we obtain additional financing, which could include the incurrence of substantial additional indebtedness or the issuance of additional stock. We believe that borrowings under our current revolving credit facility or a replacement credit facility, together with cash flows from operations, will be sufficient to make required payments under the current credit facility or any such replacement facility, and to make anticipated capital expenditures and fund working capital needs for the next twelve months.

Our significant non-cancelable contractual obligations as of March 31, 2010 were as follows:

In September 2006, the Financial Accounting Standards Board ("FASB") issued authoritative guidance which is included in Accounting Standards Codification ("ASC") 820, "Fair Value Measurements and Disclosures". This guidance defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. The guidance does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in prior accounting pronouncements. We adopted the provisions of this guidance as of October 1, 2008 for assets and liabilities measured at fair value on a recurring basis. On October 1, 2009, we adopted the provisions of this guidance for assets and liabilities measured at fair value on a non-recurring basis. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In December 2007, the FASB issued authoritative guidance included in ASC 805, "Business Combinations", which addresses fair value accounting and the related disclosure for assets and liabilities acquired in a business combination and generally requires acquisition-related costs to be expensed as incurred. This guidance was effective for us as of October 1, 2009 and did not have a material impact on the two acquisitions completed in the first quarter of fiscal 2010 but may have an impact on future acquisitions depending on the nature of the acquisition.

In December 2007, the FASB issued authoritative guidance included in ASC 810, "Consolidation", which changes the accounting and reporting for the noncontrolling interests in a subsidiary in consolidated financial statements. The guidance recharacterizes minority interests as noncontrolling interests and requires noncontrolling interests to be classified as a component of stockholders' equity. This guidance was effective for us as of October 1, 2009 and did not have a material impact on our consolidated financial statements.

In April 2008, the FASB issued authoritative guidance included in ASC 350, "Intangibles—Goodwill and Other", which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. This guidance

was effective for us as of October 1, 2009 and did not have a material impact on our consolidated financial statements.

We periodically review new accounting standards that are issued from time to time. Although some of these accounting standards may be applicable to us, we have not identified any other new standards that we believe merit further discussion, and we expect that none would have a significant impact on our consolidated financial statements.

Inflation affects the cost of raw materials, goods and services used by us. In recent years, inflation has been modest. The competitive environment somewhat limits our ability to recover higher costs resulting from inflation by raising prices. We seek to mitigate the adverse effects of inflation primarily through improved productivity and cost containment programs. We do not believe that inflation has had a material impact on our results of operations for the periods presented, except with respect to increased costs in manufacturing, packaging and distribution resulting from increased fuel and other petrochemical costs, as well as payroll-related costs, insurance premiums and other costs arising from or related to government imposed regulations.

This Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to our financial condition, results of operations and business. These forward-looking statements can be identified by the use of terms such as "believe," "expects," "plan," "intend," "may," "will," "should," "can," or "anticipates," or the negative thereof, or variations thereon, or comparable terminology, or by discussions of strategy. These statements involve known and unknown risks, uncertainties and other factors that may cause industry trends or our actual results to be materially different from any future results expressed or implied by these statements. Important factors that may cause our results to differ from these forward-looking statements include, but are not limited to: (i) slow or negative growth in the nutritional supplement industry or the healthy foods channel, (ii) adverse publicity or negative consumer perception regarding nutritional supplements, (iii) unavailability of desirable acquisitions or inability to complete them, (iv) changes in or new government regulations or increased enforcement of the same, (v) litigation and claims, including product liability, intellectual property and other types, (vi) insurance coverage issues, (vii) increased competition, (viii) increased costs, including from increased energy prices, (ix) the loss of key personnel or the inability to manage our operations efficiently, (x) disruptions from acquisitions including the loss of customers, (xi) issues with obtaining raw materials of adequate quality or quantity, or increases in the cost, (xii) problems with information management systems, manufacturing efficiencies and operations, (xiii) changes in general worldwide economic or political conditions, (xiv) the volatility of the stock market generally and of our stock specifically, (xv) increases in the cost of borrowings or unavailability of additional debt or equity capital, or both, or fluctuations in foreign currencies, and (xvi) interruption of business or negative impact on sales and earnings due to acts of God, acts of war, terrorism, bio-terrorism, civil unrest and other factors outside of our control.

We undertake no obligation to update or revise publicly any forward-looking statements to reflect new information, events or circumstances occurring after the date of this Form 10-Q.

At our election, borrowings under our revolving credit facility bear interest at the applicable Eurodollar Rate plus a variable margin or at a base rate, which is the higher of the Federal Funds Rate plus 0.5% or the Prime Lending Rate, plus a variable margin. At March 31, 2010, the applicable

weighted-average interest rate for borrowings was 1.28% and we had total borrowings outstanding of $30.5 million.

With respect to our international operations, we are subject to currency fluctuations; however, we do not believe that these fluctuations would have a material adverse impact on our financial position because the majority of our net sales to foreign countries are transacted in U.S. dollars. Net sales to foreign countries not transacted in U.S. dollars include sales to customers in Norway, Sweden, the U.K., the Netherlands and Japan. To date, we have not hedged any of our potential foreign currency exposures.

Evaluation of Disclosure 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 Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow for timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and we are required to apply our judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision of and with the participation of our management, including our principal executive and principal financial officers, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our principal executive and principal financial officers have concluded that our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

As discussed in our other filings, we are subject to regulation by a number of federal, state and foreign agencies and are involved in various legal matters arising in the normal course of business.

We carry insurance coverage in the types and amounts that we consider reasonably adequate to cover the risks we face in the industry in which we compete.

In our opinion, the outcomes of individual regulatory and legal matters in which we are presently involved are not probable and no estimate can be made of the range of potential gains or losses. While incapable of estimation, in the opinion of management, the individual regulatory and legal matters in which we are involved are not expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows.

There have been no material changes in our risk factors from those disclosed in our 2009 Annual Report on Form 10-K.

We did not sell any unregistered equity securities during the period covered by this Form 10-Q for the Quarterly Period Ended March 31, 2010.

Prior to fiscal 2009, our Board of Directors approved a share purchase program authorizing us to buy up to 2,500,000 shares of our common stock. During the year ended September 30, 2009, our Board of Directors approved the addition of 1,000,000 shares to our previously approved share purchase program. As of March 31, 2010, there are 967,731 shares available for purchase under this program. The shares available for purchase under this program have no expiration date. Purchases under this program during the three months ended March 31, 2010 occurred in January as follows:

The Annual Meeting of Stockholders of the Company was held on February 18, 2010, at which meeting the stockholders voted to elect two individuals to serve as Class III Directors and to ratify the appointment of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm for the fiscal year ending September 30, 2010.

The nominees for election as Class III Directors of the Company are listed below. The results were as follows:

The names of other Directors of the Company whose term of office continued after the meeting are as follows:

Other matters voted upon at the meeting and the results of those votes were as follows:

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.


Delaware (State of incorporation)		87-0515089 (IRS Employer Identification No.)
1400 Kearns Boulevard, 2^nd Floor, Park City, Utah (Address of principal executive office)		84060 (Zip code)


Large accelerated filer o		Accelerated filer ý		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Description

Part I.	Financial Information		3
	Item 1.	Financial Statements (unaudited)	3
		Condensed Consolidated Balance Sheets—September 30, 2009 and March 31, 2010	3
		Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)—Three Months and Six Months Ended March 31, 2009 and 2010	4
		Condensed Consolidated Statements of Cash Flows—Six Months Ended March 31, 2009 and 2010	5
		Notes to Condensed Consolidated Financial Statements	6
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	13
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	21
	Item 4.	Controls and Procedures	22
Part II.	Other Information		23
	Item 1.	Legal Proceedings	23
	Item 1A.	Risk Factors	23
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
	Item 4.	Submission of Matters to a Vote of Security Holders	23
	Item 6.	Exhibits	24

	September 30, 2009			March 31, 2010

Raw materials	$	12,608		$	14,614
Work-in-process		4,847			6,107
Finished goods		13,705			17,545

		31,160			38,266
Less reserves		(1,922	)		(2,074	)

	$	29,238		$	36,192

Year Ending September 30,	Estimated Amortization Expense

2010(1)	$	624
2011		1,239
2012		1,072
2013		875
2014		638
Thereafter		605

	$	5,053

	September 30, 2009			March 31, 2010

Accounts receivable	$	13,718		$	15,668
Less allowances		(2,179	)		(2,232	)

	$	11,539		$	13,436

	Fair Value Measurements as of March 31, 2010

	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents—money market fund	$	1,312		1,312		—		—

			Weighted-Average Exercise Price

Options outstanding and exercisable at September 30, 2009	457,917		$	8.85
Exercised	(12,729	)		4.33

Options outstanding and exercisable at March 31, 2010	445,188		$	8.98

	Payments Due By Period

Contractual Obligations	Total		Less Than 1 Year		1-3 Years		4-5 Years		After 5 Years
	(dollars in thousands)
Revolving credit facility	$	30,500	$	—	$	30,500	$	—	$	—
Interest on revolving credit facility(a)		695		478		217		—		—
Operating leases		5,085		3,203		1,659		185		38

Total	$	36,280	$	3,681	$	32,376	$	185	$	38

Nominee

Frank W. Gay II	7,928,194	96,248	2,396,910
Gregory M. Benson	7,944,738	79,704	2,396,910

		For			Against/ Withheld			Abstain

Ratification of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm			8,924,872			460,416			1,036,064


31.1		Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


	NUTRACEUTICAL INTERNATIONAL CORPORATION (Registrant)
Date: April 29, 2010	By:	/s/ CORY J. MCQUEEN Cory J. McQueen Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

Period		Total Number of Shares Purchased			Average Price Paid Per Share			Total Number of Shares Purchased as Part of Publicly Announced Plan			Maximum Number of Shares that May Yet Be Purchased Under the Plan

1/1/10 to 1/31/10			50,100		$	12.08			50,100			967,731