10-Q

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

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

for the Quarterly Period Ended June 30, 2011

Commission file number 000-23731

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

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

(435) 655-6106
(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 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 ý    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:

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

        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 July 28, 2011, the registrant had 10,305,023 shares of common stock outstanding.

NUTRACEUTICAL INTERNATIONAL CORPORATION

INDEX

Description			Page No.
Part I.	Financial Information			3
	Item 1.	Financial Statements (unaudited)		3
		Condensed Consolidated Balance Sheets—September 30, 2010 and June 30, 2011		3
		Condensed Consolidated Statements of Operations and Comprehensive Income—Three Months And Nine Months Ended June 30, 2010 and 2011		4
		Condensed Consolidated Statements of Cash Flows—Nine Months Ended June 30, 2010 and 2011		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		21
Part II.	Other Information			22
	Item 1.	Legal Proceedings		22
	Item 1A.	Risk Factors		22
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		22
	Item 6.	Exhibits		22

2

PART I—FINANCIAL INFORMATION

Item 1.    Financial Statements

NUTRACEUTICAL INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(dollars in thousands)

			September 30, 2010(1)		June 30, 2011
ASSETS
Current assets
	Cash and cash equivalents		$	3,740	$	3,786
	Accounts receivable, net			10,668		12,950
	Inventories			40,273		39,218
	Prepaid expenses and other current assets			2,107		2,305
	Deferred income taxes			1,506		1,466
		Total current assets		58,294		59,725
Property, plant and equipment, net				61,733		70,486
Goodwill				5,338		7,163
Intangible assets, net				19,671		20,411
Other non-current assets				2,115		2,434
Deferred income taxes, net				9,180		7,774
		Total assets	$	156,331	$	167,993
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
	Short-term debt		$	28,000	$	—
	Accounts payable			10,621		12,254
	Accrued expenses			7,052		6,795
		Total current liabilities		45,673		19,049
Long-term debt				—		27,000
Other non-current liabilities				1,739		1,330
		Total liabilities		47,412		47,379
Stockholders' equity
	Common stock			104		103
	Additional paid-in capital			23,408		22,425
	Retained earnings			85,134		97,578
	Accumulated other comprehensive income			273		508
		Total stockholders' equity		108,919		120,614
		Total liabilities and stockholders' equity	$	156,331	$	167,993

(1)

The condensed consolidated balance sheet as of September 30, 2010 has been prepared using information from the audited financial statements at that date.

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

3

NUTRACEUTICAL INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME

(unaudited)

(dollars in thousands, except per share data)

		Three months ended June 30,					Nine months ended June 30,
		2010			2011		2010			2011
Net sales		$	44,506		$	47,453	$	137,241		$	142,245
Cost of sales			21,523			23,546		65,441			69,462
	Gross profit		22,983			23,907		71,800			72,783
Operating expenses
	Selling, general and administrative		16,381			17,076		49,809			51,323
	Amortization of intangible assets		329			419		941			1,213
Income from operations			6,273			6,412		21,050			20,247
Interest and other (income) expense, net			147			293		403			802
Income before provision for income taxes			6,126			6,119		20,647			19,445
Provision for income taxes			2,332			2,174		7,808			7,001
Net income		$	3,794		$	3,945	$	12,839		$	12,444
Other comprehensive income (loss)
	Foreign currency translation adjustment, net of tax		(221	)		71		(296	)		235
Comprehensive income		$	3,573		$	4,016	$	12,543		$	12,679
Net income per common share
	Basic	$	0.37		$	0.38	$	1.23		$	1.20
	Diluted		0.36			0.38		1.22			1.19
Weighted average common shares outstanding
	Basic		10,386,829			10,302,791		10,420,505			10,350,808
	Dilutive effect of stock options		106,176			62,992		93,568			67,031
	Diluted		10,493,005			10,365,783		10,514,073			10,417,839

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

4

NUTRACEUTICAL INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(dollars in thousands)

				Nine months ended June 30,
				2010			2011
Cash flows from operating activities
Net income				$	12,839		$	12,444
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization				5,440			5,998
	Amortization of deferred financing fees				42			111
	Losses on disposals of property and equipment				—			14
	Deferred income taxes				1,627			1,446
	Changes in assets and liabilities, net of effects of acquisitions
		Accounts receivable, net			1,520			(1,958	)
		Inventories			(8,001	)		2,041
		Prepaid expenses and other current assets			202			(104	)
		Other non-current assets			(1,023	)		261
		Accounts payable			947			1,633
		Accrued expenses			(459	)		(129	)
		Other non-current liabilities			189			(409	)
			Net cash provided by operating activities		13,323			21,348
Cash flows from investing activities
Acquisitions of businesses					(13,145	)		(9,327	)
Purchases of property and equipment					(10,150	)		(9,220	)
			Net cash used in investing activities		(23,295	)		(18,547	)
Cash flows from financing activities
Proceeds from debt					18,500			13,000
Payments on debt					(7,500	)		(14,000	)
Payments of deferred financing fees					—			(878	)
Proceeds from issuances of common stock					511			692
Purchases of common stock for treasury					(2,830	)		(1,933	)
Tax benefit from stock option exercises					87			257
			Net cash provided by (used in) financing activities		8,768			(2,862	)
Effect of exchange rate changes on cash and cash equivalents					(114	)		107
Net increase (decrease) in cash and cash equivalents					(1,318	)		46
Cash and cash equivalents at beginning of period					5,858			3,740
Cash and cash equivalents at end of period				$	4,540		$	3,786

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

5

NUTRACEUTICAL INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(dollars in thousands, except per share data)

1. BASIS OF PRESENTATION

        Nutraceutical International Corporation and its subsidiaries (the "Company") is 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, the Company markets and distributes branded nutritional supplements and other natural products to and through health and natural product distributors and retailers. The Company's core business strategy is to acquire, integrate and operate businesses in the natural products industry that manufacture, market and distribute branded nutritional supplements. The Company believes that the consolidation and integration of these acquired businesses provide ongoing financial synergies through increased scale and market penetration, as well as strengthened customer relationships.

        The Company manufactures and sells nutritional supplements and other natural products under numerous brands including Solaray®, KAL®, Nature's Life®, LifeTime®, Natural Balance®, bioAllers®, Herbs for Kids™, NaturalCare®, Health from the Sun®, Life-flo®, Organix South®, Pioneer® and Monarch Nutraceuticals™.

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

        In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all necessary adjustments, consisting of normal recurring adjustments, to present fairly the consolidated financial position of the Company as of June 30, 2011, the results of its operations for the three and nine months ended June 30, 2010 and 2011 and its cash flows for the nine months ended June 30, 2010 and 2011, 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 nine months ended June 30, 2011 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, 2010, which was filed with the Securities and Exchange Commission on November 23, 2010.

Use of Estimates

        The preparation of these financial statements in conformity with accounting principles generally accepted in the United States of America required management 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, valuation adjustments for slow moving, obsolete and/or damaged inventory and valuation and recoverability of long-lived assets. Actual results may differ from these estimates.

6

NUTRACEUTICAL INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(dollars in thousands, except per share data)

1. BASIS OF PRESENTATION (Continued)

New Accounting Standards

        The Company reviews new accounting standards as they are issued. Although some of these accounting standards may be applicable to the Company, the Company has not identified any new standards that the Company believes merit further discussion, and the Company expects that none would have a significant impact on the Company's consolidated financial statements.

2. ACCOUNTS RECEIVABLE, NET

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

	September 30, 2010			June 30, 2011
Accounts receivable	$	12,769		$	14,844
Less allowances		(2,101	)		(1,894	)
	$	10,668		$	12,950

3. INVENTORIES

        Inventories were comprised of the following:

	September 30, 2010		June 30, 2011
Raw materials	$	14,438	$	15,611
Work-in-process		4,707		5,025
Finished goods		21,128		18,582
	$	40,273	$	39,218

4. ACQUISITIONS

        During the nine months ended June 30, 2011, the Company made four acquisitions of businesses. On October 7, 2010, the Company acquired certain operating assets of TRC Nutritional Labs, Inc. On October 14, 2010, the Company acquired certain operating assets of The Heritage Store, Inc. On February 24, 2011, the Company acquired certain operating assets of SunFeather Natural Soap Company, Inc. On May 26, 2011, the Company acquired certain operating assets of Skin by Ann Webb, LLC.

        The aggregate purchase price of these acquisitions was $9,327 in cash. The Condensed Consolidated Statements of Operations and the Condensed Consolidated Statements of Cash Flows presented herein include the activities of these acquired businesses from their respective dates of acquisition. The expected long-term sales and expense synergies of acquired businesses generally are not realized immediately following acquisition as certain transition and integration matters must be completed.

7

NUTRACEUTICAL INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(dollars in thousands, except per share data)

4. ACQUISITIONS (Continued)

        These acquisitions are in keeping with the Company's business strategy of consolidating the fragmented industry in which it competes and were accounted for using the acquisition method of accounting. Accordingly, the aggregate purchase price was assigned to the assets acquired based on their fair market values at their respective dates of acquisition. The excess of aggregate purchase price over the fair market values of the assets acquired was classified as goodwill. The following reflects the final allocation of the aggregate purchase price for these acquisitions to the aggregate assets acquired:

Current assets	$	1,404
Property, plant and equipment		4,332
Goodwill		1,825
Intangible assets		1,766
	$	9,327

        The acquired intangible assets include trademarks and tradenames totaling $449 that have indefinite lives and are not subject to amortization, as well as trademarks and tradenames totaling $100, customer relationships totaling $1,137 and a non-compete agreement totaling $80, which are being amortized for financial statement purposes over three to six years. The acquired intangible assets of $1,766, as well as goodwill of $1,825, which is not subject to amortization for financial statement purposes, are expected to be deductible for tax purposes over 15 years.

5. GOODWILL AND INTANGIBLE ASSETS

        The change in the carrying amount of goodwill from September 30, 2010 to June 30, 2011 was as follows:

		Goodwill
Balance as of September 30, 2010
	Goodwill	$	45,732
	Accumulated impairment losses		(40,394	)
			5,338
	Goodwill attributable to fiscal 2011 acquisitions		1,825
Balance as of June 30, 2011
	Goodwill		47,557
	Accumulated impairment losses		(40,394	)
		$	7,163

8

NUTRACEUTICAL INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(dollars in thousands, except per share data)

5. GOODWILL AND INTANGIBLE ASSETS (Continued)

        The carrying amounts of intangible assets at September 30, 2010 and June 30, 2011 were as follows:

		September 30, 2010							June 30, 2011
																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
Intangible assets subject to amortization:
	Trademarks/trade names/patents	$	686	$	(466	)	$	220	$	839	$	(522	)	$	317		5
	Customer relationships/distribution rights/ non-compete agreement		7,689		(2,300	)		5,389		9,112		(3,474	)		5,638		6
	Developed software and technology		772		(605	)		167		772		(721	)		51		5
			9,147		(3,371	)		5,776		10,723		(4,717	)		6,006
Intangible assets not subject to amortization:
	Trademarks/trade names/licenses		13,895		—			13,895		14,405		—			14,405
		$	23,042	$	(3,371	)	$	19,671	$	25,128	$	(4,717	)	$	20,411

(1)

Amounts include the impact of foreign currency translation adjustments.

        Estimated future amortization expense related to the June 30, 2011 net carrying amount of $6,006 for intangible assets subject to amortization is as follows:

Year Ending September 30,	Estimated Amortization Expense
2011(1)	$	443
2012		1,609
2013		1,397
2014		1,113
2015		967
Thereafter		477
	$	6,006

(1)

Estimated amortization expense for the year ending September 30, 2011 includes only amortization to be recorded after June 30, 2011.

9

NUTRACEUTICAL INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(dollars in thousands, except per share data)

6. DEBT

        Debt was comprised of the following:

	September 30, 2010		June 30, 2011
Short-term debt—revolving credit facility	$	28,000	$	—
Long-term debt—revolving credit facility		—		27,000
	$	28,000	$	27,000

        The Company's debt is stated at book value which approximated its fair value at September 30, 2010 and June 30, 2011.

        On December 17, 2010, the Company amended and restated its revolving credit facility (the "Restated Credit Agreement"). The Restated Credit Agreement extends the term of the credit facility to December 2015, resets the available credit borrowings to $90,000 with no automatic reductions and provides an accordion feature which can increase the available credit borrowings to $120,000 subject to approval by the lenders and compliance with certain covenants and conditions. The lenders under the Restated Credit Agreement are Rabobank International and Wells Fargo. To date, the Company has not experienced any difficulties in accessing the available funds under the Restated Credit Agreement. Deferred financing fees of $878 related to the Restated Credit Agreement were deferred and are being amortized over the term of the Restated Credit Agreement. The Company's previous revolving credit facility would have matured on September 7, 2011. Therefore, the balance outstanding at September 30, 2010 was classified in current liabilities.

        At June 30, 2011, the Company had outstanding revolving credit borrowings of $27,000 under the Restated Credit Agreement. Borrowings under the Restated Credit Agreement 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 June 30, 2011, the applicable weighted-average interest rate for outstanding borrowings was 2.26%. The Company is also required to pay a quarterly fee of 0.50% on the unused balance under the Restated Credit Agreement. 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 Restated Credit Agreement matures on December 15, 2015, and the Company is required to repay all principal and interest outstanding under the Restated Credit Agreement on such date.

        The Restated Credit Agreement 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 Restated Credit Agreement.

10

NUTRACEUTICAL INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(dollars in thousands, except per share data)

7. SHARE REPURCHASES

        During the three months ended June 30, 2011, the Company did not purchase or retire any shares of common stock. During the nine months ended June 30, 2011, the Company purchased and retired 135,771 shares of common stock for an aggregate price of $1,933. During the three months ended June 30, 2010, the Company did not purchase or retire any shares of common stock. During the nine months ended June 30, 2010, the Company purchased and retired 239,409 shares of common stock for an aggregate price of $2,830. As of June 30, 2011, the Company was permitted to purchase up to 744,021 additional shares under its approved purchase plan. The Company accounts for treasury shares using the cost method.

8. STOCK OPTIONS

        The following table summarizes stock option activity during the nine months ended June 30, 2011:

	Number of Options			Weighted-Average Exercise Price
Options outstanding and exercisable at September 30, 2010		391,688		$	9.64
Exercised		(70,188	)		6.16
Options outstanding and exercisable at June 30, 2011		321,500		$	10.40

        No options to purchase shares of common stock for the three and nine months ended June 30, 2011 and the three months ended June 30, 2010 were excluded from the computation of diluted earnings per share because the exercise prices of all stock options were less than the average share price of the Company's common stock. Options to purchase 95,100 shares of common stock for the nine months ended June 30, 2010 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.

        During the nine months ended June 30, 2011, the Company received proceeds of $432 related to the exercise of stock options. During this same period, the Company recorded a tax benefit of $257 and optionees realized an aggregate pre-tax gain of $667 from these stock option exercises. During the nine months ended June 30, 2010, the Company received proceeds of $127 related to the exercise of stock options. During this same period, the Company recorded a tax benefit of $87 and optionees realized an aggregate pre-tax gain of $226 from these stock option exercises.

9. SEGMENTS

        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.

11

NUTRACEUTICAL INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(dollars in thousands, except per share data)

9. SEGMENTS (Continued)

        Net sales attributed to customers in the United States and foreign countries for the three and nine months ended June 30, 2010 and 2011 were as follows:

	Three months ended June 30,				Nine months ended June 30,
	2010		2011		2010		2011
United States	$	39,715	$	42,032	$	121,673	$	127,126
Foreign countries		4,791		5,421		15,568		15,119
	$	44,506	$	47,453	$	137,241	$	142,245

        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 nine months ended June 30, 2010 and 2011 were as follows:

	Three months ended June 30,				Nine months ended June 30,
	2010		2011		2010		2011
Branded nutritional supplements and other natural products	$	40,580	$	43,917	$	125,488	$	131,057
Other(1)		3,926		3,536		11,753		11,188
	$	44,506	$	47,453	$	137,241	$	142,245

(1)

Net sales for any other product or group of similar products are less than 10% of consolidated net sales.

12

Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

General

        The following discussion and analysis should be read in conjunction with the other sections of 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 provide 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®, KAL®, Nature's Life®, LifeTime®, Natural Balance®, bioAllers®, Herbs for Kids™, NaturalCare®, Health from the Sun®, Life-flo®, Organix South®, Pioneer® and Monarch Nutraceuticals™.

        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 thirty-four 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.

Critical Accounting Policies

        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, valuation adjustments for slow moving, 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—Valuation adjustments are 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 valuation adjustments for slow moving, obsolete and/or damaged inventory may be required, which could have a material impact on the consolidated financial statements.

13

        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 a high degree of judgment 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. Events that could trigger an impairment include changes in general and economic conditions that impact retail and consumer demand, as well as the market price of our common stock. Such events could negatively impact our future operating performance, cash flow and/or stock price and could result in goodwill and/or intangible asset impairment charges which could materially impact our consolidated financial statements. We perform our annual impairment testing as of September 30 each year, which is the last day of our fiscal year.

        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.

        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.

New Accounting Standards

        See Note 1 to the Condensed Consolidated Financial Statements for information regarding new accounting standards.

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Results of Operations

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

		Three Months Ended June 30,						Nine Months Ended June 30,
		2010			2011			2010			2011
Net sales			100.0	%		100.0	%		100.0	%		100.0	%
	Cost of sales		48.4	%		49.6	%		47.7	%		48.8	%
Gross profit			51.6	%		50.4	%		52.3	%		51.2	%
	Selling, general and administrative		36.8	%		36.0	%		36.3	%		36.1	%
	Amortization of intangible assets		0.7	%		0.9	%		0.7	%		0.9	%
Income from operations			14.1	%		13.5	%		15.3	%		14.2	%
	Interest and other (income) expense, net		0.4	%		0.6	%		0.2	%		0.6	%
Income before provision for income taxes			13.7	%		12.9	%		15.1	%		13.6	%
	Provision for income taxes		5.2	%		4.6	%		5.7	%		4.9	%
Net income			8.5	%		8.3	%		9.4	%		8.7	%
EBITDA(1)			18.4	%		17.8	%		19.3	%		18.5	%

(1)

See "—EBITDA."

Comparison of the Three Months Ended June 30, 2011 to the Three Months Ended June 30, 2010

        Net Sales.    Net sales increased by $3.0 million, or 6.6%, to $47.5 million for the three months ended June 30, 2011 ("third quarter of fiscal 2011") from $44.5 million for the three months ended June 30, 2010 ("third quarter of fiscal 2010"). Net sales of branded nutritional supplements and other natural products increased by $3.3 million, or 8.2%, to $43.9 million for the third quarter of fiscal 2011 compared to $40.6 million for the third quarter of fiscal 2010. The increase in net sales of branded nutritional supplements and other natural products was primarily related to the net sales contributions of the fiscal 2010 and fiscal 2011 acquisitions and, to a lesser extent, 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 $3.6 million for the third quarter of fiscal 2011 and $3.9 million for the third quarter of fiscal 2010.

        Gross Profit.    Gross profit increased by $0.9 million, or 4.0%, to $23.9 million for the third quarter of fiscal 2011 from $23.0 million for the third quarter of fiscal 2010. This increase in gross profit was primarily attributable to the increase in net sales. As a percentage of net sales, gross profit decreased to 50.4% for the third quarter of fiscal 2011 from 51.6% for the third quarter of fiscal 2010. This decrease in gross profit percentage was primarily attributable to increased manufacturing overhead costs related to the expansion of our liquid manufacturing operations, partially offset by a decrease in material costs due to vendor price decreases.

        Selling, General and Administrative.    Selling, general and administrative expenses increased by $0.7 million, or 4.2%, to $17.1 million for the third quarter of fiscal 2011 from $16.4 million for the third quarter of fiscal 2010. This increase in selling, general and administrative expenses was primarily attributable to operational and transition costs related to the fiscal 2011 acquisitions. As a percentage of net sales, selling, general and administrative expenses decreased to 36.0% for the third quarter of fiscal 2011 compared to 36.8% for the third quarter of fiscal 2010. 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.

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        Amortization of Intangible Assets.    Amortization of intangible assets was $0.4 million for the third quarter of fiscal 2011 and $0.3 million for the third quarter of fiscal 2010. For each period, amortization expense was primarily related to intangible assets recorded in connection with acquisitions.

        Interest and Other (Income) Expense, Net.    Net interest and other (income) expense was $0.3 million for the third quarter of fiscal 2011 and $0.1 million for the third quarter of fiscal 2010 and primarily consisted of interest expense on indebtedness under our revolving credit facility with the increase being primarily related to an increase in interest rates.

        Provision for Income Taxes.    Our effective tax rate was 35.5% for the third quarter of fiscal 2011 and 38.1% for the third quarter of fiscal 2010. The decrease in the effective tax rate was primarily due to an increase in the domestic production deduction rate. In each period, our effective tax rate was higher than the federal statutory rate primarily due to state taxes.

Comparison of the Nine Months Ended June 30, 2011 to the Nine Months Ended June 30, 2010

        Net Sales.    Net sales increased by $5.0 million, or 3.6%, to $142.2 million for the nine months ended June 30, 2011 from $137.2 million for the nine months ended June 30, 2010. Net sales of branded nutritional supplements and other natural products increased by $5.5 million, or 4.4%, to $131.0 million for the nine months ended June 30, 2011 compared to $125.5 million for the nine months ended June 30, 2010. The increase in net sales of branded nutritional supplements and other natural products was primarily related to the net sales contributions of the fiscal 2010 and fiscal 2011 acquisitions, partially offset by a decrease 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 $11.2 million for the nine months ended June 30, 2011 compared to $11.7 million for the nine months ended June 30, 2010.

        Gross Profit.    Gross profit increased $1.0 million, or 1.4%, to $72.8 million for the nine months ended June 30, 2011 from $71.8 million for the nine months ended June 30, 2010. This increase in gross profit was primarily attributable to the increase in net sales. As a percentage of net sales, gross profit decreased to 51.2% for the nine months ended June 30, 2011 from 52.3% for the nine months ended June 30, 2010. This decrease in gross profit percentage was primarily attributable to increased manufacturing overhead costs related to the expansion of our liquid manufacturing operations, partially offset by a decrease in material costs due to vendor price decreases.

        Selling, General and Administrative.    Selling, general and administrative expenses increased by $1.5 million, or 3.0%, to $51.3 million for the nine months ended June 30, 2011 from $49.8 million for the nine months ended June 30, 2010. This increase in selling, general and administrative expenses was primarily attributable to operational and transition costs related to the fiscal 2011 acquisitions. As a percentage of net sales, selling, general and administrative expenses were 36.1% for the nine months ended June 30, 2011 compared to 36.3% for the nine months ended June 30, 2010.

        Amortization of Intangible Assets.    Amortization of intangibles was $1.2 million for the nine months ended June 30, 2011 and $0.9 million for the nine months ended June 30, 2010. For each period, amortization expense was primarily related to intangible assets recorded in connection with acquisitions.

        Interest and Other (Income) Expense, Net.    Net interest and other (income) expense was $0.8 million for the nine months ended June 30, 2011 and $0.4 million for the nine months ended June 30, 2010 and primarily consisted of interest expense on indebtedness under our revolving credit facility with the increase being primarily related to an increase in interest rates.

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        Provision for Income Taxes.    Our effective tax rate was 36.0% for the nine months ended June 30, 2011 and 37.8% for the nine months ended June 30, 2010. The decrease in the effective tax rate was primarily due to an increase in the domestic production deduction rate. In each period, our effective tax rate was higher than the federal statutory rate primarily due to state taxes.

EBITDA

        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 and amortization. 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, 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:

•

We acknowledge that plant and equipment (while less important in our line of business due to outsourcing alternatives) are necessary to earn revenue based on our current business model.

•

Our use of an EBITDA-based measure of operating performance is not based on any belief about the reasonableness of excluding depreciation and amortization when measuring financial performance.

•

Our use of an EBITDA-based measure is supported by its importance to the following key stakeholders:

•

Analysts—who estimate our projected EBITDA and other EBITDA-based metrics in their independently developed financial models for investors;

•

Creditors—who evaluate our operating performance based on compliance with certain EBITDA-based debt covenants;

•

Investment Bankers—who use EBITDA-based metrics in their written evaluations and comparisons of companies within our industry; and

•

Board of Directors and Executive Management—who use EBITDA-based metrics for evaluating management performance relative to our operating budget and bank covenant compliance, as well as our ability to service debt and raise capital for growth opportunities, including acquisitions, which are a critical component of our stated strategy. Historically, we have recorded a monthly accrual for incentive compensation as a percentage of EBITDA, which has been paid out to executive management, as well as other employees, upon completion of our annual audit.

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

	Three Months Ended June 30,				Nine Months Ended June 30,
	2010		2011		2010		2011
	(dollars in thousands)
Net income	$	3,794	$	3,945	$	12,839	$	12,444
Provision for income taxes		2,332		2,174		7,808		7,001
Interest and other (income) expense, net(1)		147		293		403		802
Depreciation and amortization		1,913		2,023		5,440		5,998
EBITDA	$	8,186	$	8,435	$	26,490	$	26,245

(1)

Includes amortization of deferred financing fees.

        Our EBITDA increased to $8.4 million for the third quarter of fiscal 2011 from $8.2 million for the third quarter of fiscal 2010. EBITDA as a percentage of net sales decreased to 17.8% for the third quarter of fiscal 2011 from 18.4% for the third quarter of fiscal 2010.

        Our EBITDA was $26.2 million for the nine months ended June 30, 2011 and $26.5 million for the nine months ended June 30, 2010. EBITDA as a percentage of net sales decreased to 18.5% for the nine months ended June 30, 2011 from 19.3% for the nine months ended June 30, 2010.

Seasonality

        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.

Liquidity and Capital Resources

        We had working capital of $40.7 million as of June 30, 2011 compared to $12.6 million as of September 30, 2010. This increase in working capital was primarily the result of debt related to our revolving credit facility being classified as a non-current liability at June 30, 2011 as compared to a current liability at September 30, 2010 based on the amendment and restatement of our revolving credit facility on December 17, 2010. The increase in working capital was also the result of an increase in accounts receivable partially offset by a decrease in inventories and an increase in accounts payable.

        Net cash provided by operating activities for the nine months ended June 30, 2011 was $21.3 million compared to $13.3 million for the comparable period in fiscal 2010. This increase in net cash provided by operating activities for the nine months ended June 30, 2011 was primarily attributable to changes in assets and liabilities, net of effects of acquisitions.

        Net cash used in investing activities was $18.5 million for the nine months ended June 30, 2011 compared to $23.3 million for the comparable period in fiscal 2010. Our investing activities during these periods consisted of acquisitions of businesses and capital expenditures. The capital expenditures primarily related to buildings, building improvements related to facility consolidation efforts, distribution and manufacturing equipment and information systems.

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        During the nine months ended June 30, 2011, we acquired four businesses for $9.3 million in cash. On October 7, 2010, we acquired certain operating assets of TRC Nutritional Labs, Inc. On October 14, 2010, we acquired certain operating assets of The Heritage Store, Inc. On February 24, 2011, we acquired certain operating assets of SunFeather Natural Soap Company, Inc. On May 26, 2011, we acquired certain operating assets of Skin by Ann Webb, LLC. During the nine months ended June 30, 2010, we acquired three businesses for $13.1 million in cash. On October 9, 2009, we acquired certain operating assets of Nutritional Specialties, Inc. On December 18, 2009, we acquired certain operating assets of Organix-South, Inc. On April 15, 2010, we acquired certain operating assets of Honey Gardens Apiaries, Inc. and Apitherapy, LLC.

        Net cash used in financing activities was $2.9 million for the nine months ended June 30, 2011 compared to net cash provided by financing activities of $8.8 million for the comparable period in fiscal 2010. During these periods, financing activities primarily related to borrowings and repayments under our revolving credit facility, payments of deferred financing fees, 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 18,534 shares purchased during the nine months ended June 30, 2011. As of June 30, 2011, there were 1,413,367 shares of common stock available for purchase.

        On December 17, 2010, we amended and restated our revolving credit facility (the "Restated Credit Agreement"). The Restated Credit Agreement extends the term of the credit facility to December 2015, resets the available credit borrowings to $90 million with no automatic reductions and provides an accordion feature which can increase the available credit borrowings to $120 million subject to approval by the lenders and compliance with certain covenants and conditions. The lenders under the Restated Credit Agreement are Rabobank International and Wells Fargo. To date, we have not experienced any difficulties in accessing the available funds under the Restated Credit Agreement. Deferred financing fees of $0.9 million related to the Restated Credit Agreement were deferred and are being amortized over the term of the Restated Credit Agreement.

        At June 30, 2011, we had outstanding revolving credit borrowings of $27.0 million under the Restated Credit Agreement. Borrowings under the Restated Credit Agreement are collateralized by substantially all of our assets. At our 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 June 30, 2011, the applicable weighted-average interest rate for outstanding borrowings was 2.26%. We are also required to pay a quarterly fee of 0.50% on the unused balance under the Restated Credit Agreement. 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 Restated Credit Agreement matures on December 15, 2015, and we are required to repay all principal and interest outstanding under the Restated Credit Agreement on such date.

        The Restated Credit Agreement contains restrictive covenants, including limitations on incurring certain other indebtedness and requirements that we maintain certain financial ratios. As of June 30, 2011, 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 Restated Credit Agreement.

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        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.

Contractual Obligations and Other Commitments

        Our significant non-cancelable contractual obligations and other commitments as of June 30, 2011 were as follows:

	Payments Due By Period
Contractual Obligations and Other Commitments	Total		Less Than 1 Year		1 - 3 Years		4 - 5 Years		After 5 Years
	(dollars in thousands)
Revolving credit facility	$	27,000	$	—	$	—	$	27,000	$	—
Interest on revolving credit facility(a)		4,299		963		1,926		1,410		—
Operating leases		4,710		2,638		1,800		264		8
Total	$	36,009	$	3,601	$	3,726	$	28,674	$	8

(a)

Represents estimated interest obligations associated with our outstanding revolving credit facility balance of $27.0 million at June 30, 2011, assuming no principal payments are made before maturity, a weighted-average interest rate of 2.26% and an underutilization fee rate of 0.50%.

Inflation

        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.

Forward-Looking Statements

        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) changes in or new government regulations or increased enforcement of the same, (ii) unavailability of desirable acquisitions or inability to complete them, (iii) increased costs, including from increased raw material or energy prices, (iv) changes in general worldwide economic or political conditions, (v) adverse publicity or negative consumer perception regarding nutritional supplements, (vi) issues with obtaining raw materials of adequate quality or quantity, (vii) litigation and

20

claims, including product liability, intellectual property and other types, (viii) disruptions from or following acquisitions including the loss of customers, (ix) increased competition, (x) slow or negative growth in the nutritional supplement industry or the healthy foods channel, (xi) the loss of key personnel or the inability to manage our operations efficiently, (xii) problems with information management systems, manufacturing efficiencies and operations, (xiii) insurance coverage issues, (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.

Item 3.    Quantitative and Qualitative Disclosures about Market Risk

        At our election, borrowings under the Restated Credit Agreement 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 June 30, 2011, the applicable weighted-average interest rate for borrowings was 2.26% and we had total borrowings outstanding of $27.0 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.

Item 4.    Controls and Procedures

        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.

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PART II—OTHER INFORMATION

Item 1.    Legal Proceedings

        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.

Item 1A.    Risk Factors

        There have been no material changes in our risk factors from those disclosed in our 2010 Annual Report on Form 10-K.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

        We did not sell any unregistered equity securities during the quarterly period ended June 30, 2011.

        Prior to fiscal 2010, our Board of Directors approved a share purchase program authorizing us to buy up to 3,500,000 shares of our common stock. As of June 30, 2011, there were 744,021 shares available for purchase under this program. The shares available for purchase under this program have no expiration date. There were no purchases under this program during the three months ended June 30, 2011.

Item 6.    Exhibits

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.

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SIGNATURE

        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.

NUTRACEUTICAL INTERNATIONAL CORPORATION (Registrant)
Date: July 28, 2011	By:	/s/ CORY J. MCQUEEN Cory J. McQueen Vice President and Chief Financial Officer (Principal Financial and Accounting Officer and Duly Authorized Officer)

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EX-31.1

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Exhibit 31.1

CERTIFICATIONS

I, Frank W. Gay II, certify that:

1.

I have reviewed this report on Form 10-Q of Nutraceutical International Corporation;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.

The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)

designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)

evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)

disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's third fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

5.

The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

a)

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

Date: July 28, 2011 /s/ FRANK W. GAY II
Frank W. Gay II
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)

CERTIFICATIONS

I, Cory J. McQueen, certify that:

1.

I have reviewed this report on Form 10-Q of Nutraceutical International Corporation;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.

The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)

designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)

evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)

disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's third fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

5.

The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

a)

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

Date: July 28, 2011 /s/ CORY J. MCQUEEN
Cory J. McQueen
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

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Exhibit 31.1

CERTIFICATIONS
CERTIFICATIONS

EX-32.1

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Exhibit 32.1

CERTIFICATION PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the quarterly report on Form 10-Q of Nutraceutical International Corporation (the "Company") for the period ended June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Frank W. Gay II, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)

the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ FRANK W. GAY II
Frank W. Gay II
Chairman of the Board and Chief Executive Officer

Date: July 28, 2011

CERTIFICATION PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the quarterly report on Form 10-Q of Nutraceutical International Corporation (the "Company") for the period ended June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Cory J. McQueen, Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)

the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ CORY J. MCQUEEN
Cory J. McQueen
Vice President and Chief Financial Officer

Date: July 28, 2011

        Signed originals of these written statements required by Section 906 have been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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Exhibit 32.1

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands	Jun. 30, 2011	Sep. 30, 2010
Current assets
Cash and cash equivalents	$ 3,786	$ 3,740
Accounts receivable, net	12,950	10,668
Inventories	39,218	40,273
Prepaid expenses and other current assets	2,305	2,107
Deferred income taxes	1,466	1,506
Total current assets	59,725	58,294
Property, plant and equipment, net	70,486	61,733
Goodwill	7,163	5,338
Intangible assets, net	20,411	19,671
Other non-current assets	2,434	2,115
Deferred income taxes, net	7,774	9,180
Total assets	167,993	156,331
Current liabilities
Short-term debt		28,000
Accounts payable	12,254	10,621
Accrued expenses	6,795	7,052
Total current liabilities	19,049	45,673
Long-term debt	27,000
Other non-current liabilities	1,330	1,739
Total liabilities	47,379	47,412
Stockholders' equity
Common stock	103	104
Additional paid-in capital	22,425	23,408
Retained earnings	97,578	85,134
Accumulated other comprehensive income	508	273
Total stockholders' equity	120,614	108,919
Total liabilities and stockholders' equity	$ 167,993	$ 156,331

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SHARE REPURCHASES

9 Months Ended

Jun. 30, 2011

SHARE REPURCHASES

SHARE REPURCHASES

7. SHARE REPURCHASES

        During the three months ended June 30, 2011, the Company did not purchase or retire any shares of common stock. During the nine months ended June 30, 2011, the Company purchased and retired 135,771 shares of common stock for an aggregate price of $1,933. During the three months ended June 30, 2010, the Company did not purchase or retire any shares of common stock. During the nine months ended June 30, 2010, the Company purchased and retired 239,409 shares of common stock for an aggregate price of $2,830. As of June 30, 2011, the Company was permitted to purchase up to 744,021 additional shares under its approved purchase plan. The Company accounts for treasury shares using the cost method.

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STOCK OPTIONS

9 Months Ended

Jun. 30, 2011

STOCK OPTIONS

STOCK OPTIONS

8. STOCK OPTIONS

        The following table summarizes stock option activity during the nine months ended June 30, 2011:

	Number of Options			Weighted-Average Exercise Price
Options outstanding and exercisable at September 30, 2010		391,688		$	9.64
Exercised		(70,188	)		6.16
Options outstanding and exercisable at June 30, 2011		321,500		$	10.40

        No options to purchase shares of common stock for the three and nine months ended June 30, 2011 and the three months ended June 30, 2010 were excluded from the computation of diluted earnings per share because the exercise prices of all stock options were less than the average share price of the Company's common stock. Options to purchase 95,100 shares of common stock for the nine months ended June 30, 2010 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.

        During the nine months ended June 30, 2011, the Company received proceeds of $432 related to the exercise of stock options. During this same period, the Company recorded a tax benefit of $257 and optionees realized an aggregate pre-tax gain of $667 from these stock option exercises. During the nine months ended June 30, 2010, the Company received proceeds of $127 related to the exercise of stock options. During this same period, the Company recorded a tax benefit of $87 and optionees realized an aggregate pre-tax gain of $226 from these stock option exercises.

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SEGMENTS

9 Months Ended

Jun. 30, 2011

SEGMENTS

SEGMENTS

9. SEGMENTS

        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 nine months ended June 30, 2010 and 2011 were as follows:

	Three months ended June 30,				Nine months ended June 30,
	2010		2011		2010		2011
United States	$	39,715	$	42,032	$	121,673	$	127,126
Foreign countries		4,791		5,421		15,568		15,119
	$	44,506	$	47,453	$	137,241	$	142,245

        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 nine months ended June 30, 2010 and 2011 were as follows:

	Three months ended June 30,				Nine months ended June 30,
	2010		2011		2010		2011
Branded nutritional supplements and other natural products	$	40,580	$	43,917	$	125,488	$	131,057
Other(1)		3,926		3,536		11,753		11,188
	$	44,506	$	47,453	$	137,241	$	142,245

(1)

Net sales for any other product or group of similar products are less than 10% of consolidated net sales.

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Document and Entity Information	9 Months Ended
	Jun. 30, 2011	Jul. 28, 2011
Document and Entity Information
Entity Registrant Name	NUTRACEUTICAL INTERNATIONAL CORP
Entity Central Index Key	0001050007
Document Type	10-Q
Document Period End Date	Jun. 30, 2011
Amendment Flag	false
Current Fiscal Year End Date	--09-30
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		10,305,023
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q3

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (USD $) In Thousands, except Share data	3 Months Ended		9 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Net sales	$ 47,453	$ 44,506	$ 142,245	$ 137,241
Cost of sales	23,546	21,523	69,462	65,441
Gross profit	23,907	22,983	72,783	71,800
Operating expenses
Selling, general and administrative	17,076	16,381	51,323	49,809
Amortization of intangible assets	419	329	1,213	941
Income from operations	6,412	6,273	20,247	21,050
Interest and other (income) expense, net	293	147	802	403
Income before provision for income taxes	6,119	6,126	19,445	20,647
Provision for income taxes	2,174	2,332	7,001	7,808
Net income	3,945	3,794	12,444	12,839
Other comprehensive income (loss)
Foreign currency translation adjustment, net of tax	71	(221)	235	(296)
Comprehensive income	$ 4,016	$ 3,573	$ 12,679	$ 12,543
Net income per common share
Basic (in dollars per share)	$ 0.38	$ 0.37	$ 1.20	$ 1.23
Diluted (in dollars per share)	$ 0.38	$ 0.36	$ 1.19	$ 1.22
Weighted average common shares outstanding
Basic (in shares)	10,302,791	10,386,829	10,350,808	10,420,505
Dilutive effect of stock options (in shares)	62,992	106,176	67,031	93,568
Diluted (in shares)	10,365,783	10,493,005	10,417,839	10,514,073

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands	9 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Cash flows from operating activities
Net income	$ 12,444	$ 12,839
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	5,998	5,440
Amortization of deferred financing fees	111	42
Losses on disposals of property and equipment	14
Deferred income taxes	1,446	1,627
Changes in assets and liabilities, net of effects of acquisitions
Accounts receivable, net	(1,958)	1,520
Inventories	2,041	(8,001)
Prepaid expenses and other current assets	(104)	202
Other non-current assets	261	(1,023)
Accounts payable	1,633	947
Accrued expenses	(129)	(459)
Other non-current liabilities	(409)	189
Net cash provided by operating activities	21,348	13,323
Cash flows from investing activities
Acquisitions of businesses	(9,327)	(13,145)
Purchases of property and equipment	(9,220)	(10,150)
Net cash used in investing activities	(18,547)	(23,295)
Cash flows from financing activities
Proceeds from debt	13,000	18,500
Payments on debt	(14,000)	(7,500)
Payments of deferred financing fees	(878)
Proceeds from issuances of common stock	692	511
Purchases of common stock for treasury	(1,933)	(2,830)
Tax benefit from stock option exercises	257	87
Net cash provided by (used in) financing activities	(2,862)	8,768
Effect of exchange rate changes on cash and cash equivalents	107	(114)
Net increase (decrease) in cash and cash equivalents	46	(1,318)
Cash and cash equivalents at beginning of period	3,740	5,858
Cash and cash equivalents at end of period	$ 3,786	$ 4,540

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BASIS OF PRESENTATION

9 Months Ended

Jun. 30, 2011

BASIS OF PRESENTATION

BASIS OF PRESENTATION

1. BASIS OF PRESENTATION

        Nutraceutical International Corporation and its subsidiaries (the "Company") is 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, the Company markets and distributes branded nutritional supplements and other natural products to and through health and natural product distributors and retailers. The Company's core business strategy is to acquire, integrate and operate businesses in the natural products industry that manufacture, market and distribute branded nutritional supplements. The Company believes that the consolidation and integration of these acquired businesses provide ongoing financial synergies through increased scale and market penetration, as well as strengthened customer relationships.

        The Company manufactures and sells nutritional supplements and other natural products under numerous brands including Solaray®, KAL®, Nature's Life®, LifeTime®, Natural Balance®, bioAllers®, Herbs for Kids™, NaturalCare®, Health from the Sun®, Life-flo®, Organix South®, Pioneer® and Monarch Nutraceuticals™.

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

        In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all necessary adjustments, consisting of normal recurring adjustments, to present fairly the consolidated financial position of the Company as of June 30, 2011, the results of its operations for the three and nine months ended June 30, 2010 and 2011 and its cash flows for the nine months ended June 30, 2010 and 2011, 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 nine months ended June 30, 2011 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, 2010, which was filed with the Securities and Exchange Commission on November 23, 2010.

Use of Estimates

        The preparation of these financial statements in conformity with accounting principles generally accepted in the United States of America required management 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, valuation adjustments for slow moving, obsolete and/or damaged inventory and valuation and recoverability of long-lived assets. Actual results may differ from these estimates.

New Accounting Standards

        The Company reviews new accounting standards as they are issued. Although some of these accounting standards may be applicable to the Company, the Company has not identified any new standards that the Company believes merit further discussion, and the Company expects that none would have a significant impact on the Company's consolidated financial statements.

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ACCOUNTS RECEIVABLE, NET

9 Months Ended

Jun. 30, 2011

ACCOUNTS RECEIVABLE, NET

ACCOUNTS RECEIVABLE, NET

2. ACCOUNTS RECEIVABLE, NET

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

	September 30, 2010			June 30, 2011
Accounts receivable	$	12,769		$	14,844
Less allowances		(2,101	)		(1,894	)
	$	10,668		$	12,950

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INVENTORIES

9 Months Ended

Jun. 30, 2011

INVENTORIES

INVENTORIES

3. INVENTORIES

        Inventories were comprised of the following:

	September 30, 2010		June 30, 2011
Raw materials	$	14,438	$	15,611
Work-in-process		4,707		5,025
Finished goods		21,128		18,582
	$	40,273	$	39,218

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ACQUISITIONS

9 Months Ended

Jun. 30, 2011

ACQUISITIONS

ACQUISITIONS

4. ACQUISITIONS

        During the nine months ended June 30, 2011, the Company made four acquisitions of businesses. On October 7, 2010, the Company acquired certain operating assets of TRC Nutritional Labs, Inc. On October 14, 2010, the Company acquired certain operating assets of The Heritage Store, Inc. On February 24, 2011, the Company acquired certain operating assets of SunFeather Natural Soap Company, Inc. On May 26, 2011, the Company acquired certain operating assets of Skin by Ann Webb, LLC.

        The aggregate purchase price of these acquisitions was $9,327 in cash. The Condensed Consolidated Statements of Operations and the Condensed Consolidated Statements of Cash Flows presented herein include the activities of these acquired businesses from their respective dates of acquisition. The expected long-term sales and expense synergies of acquired businesses generally are not realized immediately following acquisition as certain transition and integration matters must be completed.

        These acquisitions are in keeping with the Company's business strategy of consolidating the fragmented industry in which it competes and were accounted for using the acquisition method of accounting. Accordingly, the aggregate purchase price was assigned to the assets acquired based on their fair market values at their respective dates of acquisition. The excess of aggregate purchase price over the fair market values of the assets acquired was classified as goodwill. The following reflects the final allocation of the aggregate purchase price for these acquisitions to the aggregate assets acquired:

Current assets	$	1,404
Property, plant and equipment		4,332
Goodwill		1,825
Intangible assets		1,766
	$	9,327

        The acquired intangible assets include trademarks and tradenames totaling $449 that have indefinite lives and are not subject to amortization, as well as trademarks and tradenames totaling $100, customer relationships totaling $1,137 and a non-compete agreement totaling $80, which are being amortized for financial statement purposes over three to six years. The acquired intangible assets of $1,766, as well as goodwill of $1,825, which is not subject to amortization for financial statement purposes, are expected to be deductible for tax purposes over 15 years.

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GOODWILL AND INTANGIBLE ASSETS

9 Months Ended

Jun. 30, 2011

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS

5. GOODWILL AND INTANGIBLE ASSETS

        The change in the carrying amount of goodwill from September 30, 2010 to June 30, 2011 was as follows:

		Goodwill
Balance as of September 30, 2010
	Goodwill	$	45,732
	Accumulated impairment losses		(40,394	)
			5,338
	Goodwill attributable to fiscal 2011 acquisitions		1,825
Balance as of June 30, 2011
	Goodwill		47,557
	Accumulated impairment losses		(40,394	)
		$	7,163

        The carrying amounts of intangible assets at September 30, 2010 and June 30, 2011 were as follows:

		September 30, 2010							June 30, 2011
																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
Intangible assets subject to amortization:
	Trademarks/trade names/patents	$	686	$	(466	)	$	220	$	839	$	(522	)	$	317		5
	Customer relationships/distribution rights/ non-compete agreement		7,689		(2,300	)		5,389		9,112		(3,474	)		5,638		6
	Developed software and technology		772		(605	)		167		772		(721	)		51		5
			9,147		(3,371	)		5,776		10,723		(4,717	)		6,006
Intangible assets not subject to amortization:
	Trademarks/trade names/licenses		13,895		—			13,895		14,405		—			14,405
		$	23,042	$	(3,371	)	$	19,671	$	25,128	$	(4,717	)	$	20,411

(1)

Amounts include the impact of foreign currency translation adjustments.

        Estimated future amortization expense related to the June 30, 2011 net carrying amount of $6,006 for intangible assets subject to amortization is as follows:

Year Ending September 30,	Estimated Amortization Expense
2011(1)	$	443
2012		1,609
2013		1,397
2014		1,113
2015		967
Thereafter		477
	$	6,006

(1)

Estimated amortization expense for the year ending September 30, 2011 includes only amortization to be recorded after June 30, 2011.

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DEBT

9 Months Ended

Jun. 30, 2011

DEBT

DEBT

6. DEBT

        Debt was comprised of the following:

	September 30, 2010		June 30, 2011
Short-term debt—revolving credit facility	$	28,000	$	—
Long-term debt—revolving credit facility		—		27,000
	$	28,000	$	27,000

        The Company's debt is stated at book value which approximated its fair value at September 30, 2010 and June 30, 2011.

        On December 17, 2010, the Company amended and restated its revolving credit facility (the "Restated Credit Agreement"). The Restated Credit Agreement extends the term of the credit facility to December 2015, resets the available credit borrowings to $90,000 with no automatic reductions and provides an accordion feature which can increase the available credit borrowings to $120,000 subject to approval by the lenders and compliance with certain covenants and conditions. The lenders under the Restated Credit Agreement are Rabobank International and Wells Fargo. To date, the Company has not experienced any difficulties in accessing the available funds under the Restated Credit Agreement. Deferred financing fees of $878 related to the Restated Credit Agreement were deferred and are being amortized over the term of the Restated Credit Agreement. The Company's previous revolving credit facility would have matured on September 7, 2011. Therefore, the balance outstanding at September 30, 2010 was classified in current liabilities.

        At June 30, 2011, the Company had outstanding revolving credit borrowings of $27,000 under the Restated Credit Agreement. Borrowings under the Restated Credit Agreement 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 June 30, 2011, the applicable weighted-average interest rate for outstanding borrowings was 2.26%. The Company is also required to pay a quarterly fee of 0.50% on the unused balance under the Restated Credit Agreement. 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 Restated Credit Agreement matures on December 15, 2015, and the Company is required to repay all principal and interest outstanding under the Restated Credit Agreement on such date.

        The Restated Credit Agreement 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 Restated Credit Agreement.