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SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, 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 March 31, 2009

Commission file number 000-23731

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

Delaware(State of incorporation)

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

84060(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
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 (check one):

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 April 30, 2009, the registrant had 10,894,546 shares of common stock outstanding.



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NUTRACEUTICAL INTERNATIONAL CORPORATION        INDEX



Description

Page No.Part I.

Financial Information

3Item 1.

Financial Statements (unaudited)

3Condensed Consolidated Balance SheetsSeptember 30, 2008 and March 31,
2009

3Condensed Consolidated Statements of Operations and Comprehensive Income/(Loss)Three
Months and Six Months Ended March 31, 2008 and 2009

4Condensed Consolidated Statements of Cash FlowsSix Months Ended March 31, 2008 and
2009

5Notes to Condensed Consolidated Financial Statements

6Item 2.

Management's Discussion and Analysis of Financial Condition and
Results of Operations

14Item 3.

Quantitative and Qualitative Disclosures about Market
Risk

24Item 4.

Controls and Procedures

25Part II.

Other Information

26Item 1.

Legal Proceedings

26Item 1A.

Risk Factors

26Item 2.

Unregistered Sales of Equity Securities and Use of
Proceeds

26Item 4.

Submission of Matters to a Vote of Security Holders

26Item 6.

Exhibits

27


2

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Table of Contents

PART IFINANCIAL INFORMATION



Item 1.    Financial Statements



NUTRACEUTICAL INTERNATIONAL CORPORATION        CONDENSED CONSOLIDATED BALANCE SHEETS        (unaudited)        (dollars in thousands)

September 30,
2008(1)

March 31,
2009ASSETSCurrent assetsCash and cash equivalents

$
5,189

$
5,245Accounts receivable, net


11,963


11,316Inventories, net


33,812


30,629Prepaid expenses and other current assets


2,982


2,149Deferred income taxes


1,631


1,715Total current assets


55,577


51,054Property, plant and equipment, net


52,356


55,790Goodwill (Note 4)


37,632


332Intangible assets, net


13,153


12,579Other non-current assets, net


514


1,092Deferred income taxes, net


2,432


12,198Total assets

$
161,664

$
133,045LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilitiesAccounts payable

$
12,333

$
10,383Accrued expenses


6,906


5,804Total current liabilities


19,239


16,187Long-term debt


28,000


22,500Other non-current liabilities


965


1,276Total liabilities


48,204


39,963Stockholders' equityCommon stock


108


109Additional paid-in capital


30,213


30,514Retained earnings


82,788


62,541Accumulated other comprehensive income/(loss)


351


(82
)Total stockholders' equity


113,460


93,082Total liabilities and stockholders' equity

$
161,664

$
133,045


---

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

3

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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 31,2008

2009

2008

2009Net sales

$
44,446

$
41,957

$
85,532

$
81,586Cost of sales


19,930


19,517


38,703


37,714Gross profit


24,516


22,440


46,829


43,872Operating expensesSelling, general and administrative


16,978


15,713


33,606


31,486Amortization of intangible assets


170


158


337


317Impairment of goodwill (Note 4)





37,519





37,519Income/(loss) from operations


7,368


(30,950
)

12,886


(25,450
)Interest and other (income)/expense, net


405


264


785


774Income/(loss) before provision/(benefit) for income taxes


6,963


(31,214
)

12,101


(26,224
)Provision/(benefit) for income taxes


2,611


(7,855
)

4,538


(5,977
)Net income/(loss)

$
4,352

$
(23,359
)
$
7,563

$
(20,247
)Other comprehensive income/(loss)Foreign currency translation adjustment, net of tax


440


343


411


(433
)Comprehensive income/(loss)

$
4,792

$
(23,016
)
$
7,974

$
(20,680
)Net income/(loss) per common shareBasic

$
0.39

$
(2.15
)
$
0.68

$
(1.86
)Diluted


0.39


(2.15
)

0.67


(1.86
)Weighted average common shares outstandingBasic


11,039,703


10,870,769


11,081,978


10,859,876Dilutive effect of stock options


136,648





141,472


Diluted


11,176,351


10,870,769


11,223,450


10,859,876


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

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NUTRACEUTICAL INTERNATIONAL CORPORATION        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS        (unaudited)        (dollars in thousands)

Six months ended
March 31,2008

2009Cash flows from operating activitiesNet income/(loss)

$
7,563

$
(20,247
)Adjustments to reconcile net income/(loss) to net cash provided by operating activities:Depreciation and amortization


2,742


3,276Amortization of deferred financing fees


28


28Impairment of goodwill





37,519Losses on disposals of property and equipment


3


2Deferred income taxes


879


(9,850
)Changes in assets and liabilities, net of effects of acquisitionsAccounts receivable, net


(3,296
)

687Inventories, net


(333
)

2,883Prepaid expenses and other current assets


865


831Other non-current assets, net


(390
)

(306
)Accounts payable


1,675


(1,950
)Accrued expenses


(378
)

(1,382
)Other non-current liabilities


12


311Net cash provided by operating activities


9,370


11,802Cash flows from investing activitiesAcquisitions of businesses, net of cash acquired


(5,869
)

Purchases of property and equipment


(10,039
)

(6,395
)Net cash used in investing activities


(15,908
)

(6,395
)Cash flows from financing activitiesProceeds from long-term debt


10,000


3,000Payments on long-term debt


(2,500
)

(8,500
)Proceeds from issuances of common stock


209


266Purchases of common stock for treasury


(2,120
)

Tax benefit from stock option exercises


12


36Net cash provided by/(used in) financing activities


5,601


(5,198
)Effect of exchange rate changes on cash


69


(153
)Net increase/(decrease) in cash


(868
)

56Cash at beginning of period


4,605


5,189Cash at end of period

$
3,737

$
5,245


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

5

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NUTRACEUTICAL INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(dollars in thousands, except per share data)

1. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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, 2009, the results of their operations for the three and six months ended
March 31, 2008 and 2009 and their cash flows for the six months ended March 31, 2008 and 2009, 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, 2009 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, 2008, which was filed with the Securities and Exchange Commission on November 20, 2008.

2. ACCOUNTS RECEIVABLE, NET

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

September 30,
2008

March 31,
2009Accounts receivable

$
14,120

$
13,456Less allowances


(2,157
)

(2,140
)$
11,963

$
11,316


3. INVENTORIES, NET

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

September 30,
2008

March 31,
2009Raw materials

$
12,941

$
13,391Work-in-process


6,760


4,603Finished goods


15,947


14,62135,648


32,615Less reserves


(1,836
)

(1,986
)$
33,812

$
30,629


6

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NUTRACEUTICAL INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(dollars in thousands, except per share data)

4. GOODWILL AND INTANGIBLE ASSETS

In accordance with Statement of Financial Accounting Standards No. 142,Goodwill and Other Intangible Assets("SFAS 142"),
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 the Company to
believe that value is impaired. The Company performs its annual impairment testing as of September 30 each year, which is the last day of the Company's fiscal year. Amortizable intangible
assets are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.

Under
SFAS 142, a two step process is used to test for goodwill impairment. The first step is to determine if there is an indication of impairment by comparing the estimated fair
value of each reporting unit to its carrying value, including existing goodwill. Goodwill is considered impaired if the carrying value of a reporting unit exceeds the estimated fair value. Upon an
indication of impairment, a second step is performed to measure the amount of the impairment by comparing the implied fair value of the reporting unit's goodwill with its carrying value.

Primarily
as a result of the ongoing U.S. and global economic recession and the related turmoil in the equity markets, there has been a significant and prolonged decrease in the
Company's stock price and related market capitalization over the past six months. The ongoing economic recession also has negatively impacted the Company during this period, both domestically and
internationally. Based on these factors, the Company determined that an interim goodwill impairment analysis was necessary and performed this goodwill impairment analysis on each of its reporting
units during the second quarter of fiscal 2009. Reporting unit fair values were determined using an equal weighting of the income approach, which estimates fair value based on expected future
discounted cash flows, and the market approach, which estimates fair value based on comparable market prices. The income approach included assumptions for, among others, forecasted revenues, gross
profit margins, operating profit margins, working capital cash flow and long-term discount rates, all of which required significant judgments by management. Long-term discount
rates used in the estimation of reporting unit fair values were determined based on the expected weighted average cost of capital for each reporting unit. Long-term discount rates have increased since
the Company's last annual impairment test (in the fourth quarter of fiscal 2008) due to increased risk premiums and significant tightening of the credit markets. Based on the valuation
findings, the Company determined that it had an indication of goodwill impairment related to its branded reporting unit and its natural food markets reporting unit in accordance with the first step of
the goodwill impairment test described in SFAS 142.

The
Company then performed the second step of the impairment test under SFAS 142 to measure the amount of the non-cash impairment charge which was determined to be
$37,519 ($27,288 after tax, or $2.51 per diluted share for the three and six months ended March 31, 2009). Of this total non-cash impairment charge, $35,412 related to the Company's
branded reporting unit and $2,107 related to the Company's natural food markets reporting unit. The charge related to the Company's branded reporting unit represented the entire carrying value of its
goodwill. The Company's natural food markets reporting unit had a remaining goodwill carrying value of $332 and represented the only reporting unit with a remaining goodwill carrying value at
March 31, 2009. The non-cash impairment charge had no impact on the Company's compliance with debt covenants, cash flows or available liquidity.

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NUTRACEUTICAL INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(dollars in thousands, except per share data)

4. GOODWILL AND INTANGIBLE ASSETS (Continued)

The
change in the carrying amount of goodwill from September 30, 2008 to March 31, 2009 was as follows:

GoodwillBalance as of September 30, 2008

$
37,632Goodwill impairment


(37,519
)Purchase accounting adjustments related to prior acquisitions


262Foreign currency translation adjustment


(43
)Balance as of March 31, 2009

$
332


Prior
to the interim assessment of goodwill impairment performed during the second quarter of fiscal 2009, the Company also assessed its non-amortizable intangible assets in
accordance with SFAS 142 and performed recoverability testing of its long-lived assets in accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets, and determined there was no additional impairment.

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NUTRACEUTICAL INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(dollars in thousands, except per share data)

4. GOODWILL AND INTANGIBLE ASSETS (Continued)

The
carrying amounts of intangible assets at September 30, 2008 and March 31, 2009 were as follows:

September 30, 2008

March 31, 2009Weighted-
Average
Amortization
Period (Years)Gross
Carrying
Amount(1)

Accumulated
Amortization(1)

Net
Carrying
Amount

Gross
Carrying
Amount(1)

Accumulated
Amortization(1)

Net
Carrying
AmountIntangible assets subject to amortization:Trademarks/trade names/patents

$
481

$
(367
)
$
114

$
511

$
(388
)
$
123


5Customer relationships/distribution rights


3,100


(672
)

2,428


2,831


(828
)

2,003


7Developed software and technology


772


(296
)

476


772


(373
)

399


54,353


(1,335
)

3,018


4,114


(1,589
)

2,525Intangible assets not subject to amortization:Trademarks/trade names/licenses


10,135





10,135


10,054





10,054$
14,488

$
(1,335
)
$
13,153

$
14,168

$
(1,589
)
$
12,579


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NUTRACEUTICAL INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(dollars in thousands, except per share data)

4. GOODWILL AND INTANGIBLE ASSETS (Continued)

Estimated
future amortization expense related to the March 31, 2009 net carrying amount of $2,525 for intangible assets subject to amortization is as follows:

Year Ending September 30,

Estimated
Amortization
Expense2009(1)

$
3202010


6342011


6232012


4622013


302Thereafter


184$
2,525






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.

5. FAIR VALUE OF FINANCIAL INSTRUMENTS

In September 2006, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard No. 157,Fair Value
Measurements("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands
disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in prior accounting pronouncements.
In November 2007, the FASB decided to postpone for one year the effective date of SFAS 157 for assets and liabilities measured at fair value on a non-recurring basis. The Company
adopted SFAS 157 as of October 1, 2008 for assets and liabilities measured at fair value on a recurring basis. The adoption of this standard did not have a material impact on the
Company's consolidated financial statements. The Company will adopt SFAS 157 for assets and liabilities measured at fair value on a non-recurring basis as of October 1, 2009.

On
a quarterly basis, the Company measures at fair value certain financial assets and liabilities, including cash equivalents and an interest rate swap. SFAS 157 specifies 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

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NUTRACEUTICAL INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(dollars in thousands, except per share data)

5. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

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 and liabilities at March 31, 2009 was determined using the following levels of inputs:

Fair Value Measurements
as of March 31, 2009Total

Level 1

Level 2

Level 3Assets:Cash equivalentsmoney market fund

$
1,119


1,119





Liabilities:Accrued expensesinterest rate swap

$
149





149





The
fair value of the money market fund, classified as Level 1, was obtained from a quoted market price. The fair value of the interest rate swap, classified as Level 2,
was derived based on the notional amount of the interest rate swap and observable market inputs including time to maturity, interest rates and credit spreads.

The
Company adopted Statement of Financial Accounting Standard No. 161,Disclosures about Derivative Instruments and Hedging Activitiesan
amendment of SFAS No. 133("SFAS 161"), as of January 1, 2009. The Company has one derivative financial instrument, an interest rate swap, to manage its
exposure to interest rate risks. The Company does not use derivatives for trading or speculative purposes and is not a party to leveraged derivatives.

6. SHARE REPURCHASES

During the three and six months ended March 31, 2009, the Company did not purchase or retire any shares of common stock. During the three months ended March 31, 2008, the
Company purchased 97,495 shares of common stock for an aggregate price of $1,262, which shares were held in treasury until being retired on March 31, 2008. During the six months ended
March 31, 2008, the Company purchased and retired 165,226 shares of common stock for an aggregate price of $2,120. As of
March 31, 2009, the Company was permitted to purchase up to 563,915 additional shares under its approved purchase plan. The Company accounts for treasury shares using the cost method.

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NUTRACEUTICAL INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(dollars in thousands, except per share data)

7. STOCK OPTIONS

The following table summarizes stock option activity during the six months ended March 31, 2009:

Number of
Options

Weighted-Average
Exercise
PriceOptions outstanding and exercisable at September 30, 2008


563,517

$
8.30Exercised


(40,600
)

4.08Expired


(30,000
)

10.18Options outstanding and exercisable at March 31, 2009


492,917

$
8.53


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. Options to purchase 52,500 and 107,933 shares of common stock for the three and six months ended March 31, 2008, 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.

During
the six months ended March 31, 2009, the Company received proceeds of $166 related to the exercise of stock options. During this same period the Company recorded a tax
benefit of $36 and optionees realized an aggregate pre-tax gain of $93 from these stock option exercises. During the six months ended March 31, 2008, the Company received proceeds
of $150 related to the exercise of stock options, the Company recorded a tax benefit of $12 related to these option exercises and optionees realized an aggregate pre-tax gain of $33 from
these stock option exercises.

8. OPERATING 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 six months ended March 31, 2008 and 2009 were as follows:

Three months ended
March 31,

Six months ended
March 31,2008

2009

2008

2009United States

$
38,943

$
37,971

$
74,809

$
73,253Foreign countries


5,503


3,986


10,723


8,333$
44,446

$
41,957

$
85,532

$
81,586


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NUTRACEUTICAL INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(dollars in thousands, except per share data)

8. OPERATING SEGMENTS (Continued)

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, 2008 and 2009 were as follows:

Three months ended
March 31,

Six months ended
March 31,2008

2009

2008

2009Branded nutritional supplements and other natural products

$
39,993

$
37,906

$
76,812

$
73,411Other(1)


4,453


4,051


8,720


8,175$
44,446

$
41,957

$
85,532

$
81,586


---

9. INCOME TAXES

During the three months ended March 31, 2009, the Company recorded a non-cash
goodwill impairment charge of $37,519 of which $10,997 related to non-tax-deductible goodwill and reduced the Company's effective tax rate from 37.7% to (25.2%) and (22.8%) for
the three and six months ended March 31, 2009, respectively. As a result of this goodwill impairment charge, the Company recognized a deferred tax benefit of $10,231 due to the
impairment of $26,522 of tax-deductible goodwill. As of March 31, 2009, the Company had a remaining goodwill balance of $332, all of which is tax deductible. The Company's effective
tax rate was 37.5% for the three and six months ended March 31, 2008.

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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 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, from beginning to end, the manufacturing, marketing and distribution of branded nutritional supplement businesses in the natural products
industry. 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
sell branded nutritional supplements and other natural products under the trademarksSolaray®, VegLife®,KAL®,Nature's
Life®,Sunny Green®,Action Labs®, Natural Balance®, NaturalMax®, bioAllers®,Herbs for Kids,Natra-Bio®,NaturalCare®, Zand®,Health from the Sun®, Life-flo®,Larenim®,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 BioSciences, Monarch Nutraceuticals andGreat
Basin Botanicals. Under the nameWoodland 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 namesThe Real Food Company, Thom's Natural Foods andCornucopia Community Market. We also own health food
stores, which operate under the trade namesFresh Vitamins andGranola's.

We
were formed in 1993 by senior management and Bain Capital, Inc. 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-five 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, 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

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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 in accordance with Statement of Financial Accounting Standards No. 144,Accounting for
the Impairment or Disposal of Long-Lived Assets("SFAS 144"). We review property, plant and equipment 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Statement of Financial Accounting Standards No. 141,Business
Combinations, and Statement of Financial Accounting Standards No. 142,Goodwill and Other Intangible Assets("SFAS 142"), 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. Under SFAS 142, 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. Amortizable intangible assets are reviewed for impairment when events
or changes in circumstances indicate the carrying value may not be recoverable.

Under
SFAS 142, a two step process is used to test for goodwill impairment. The first step is to determine if there is an indication of impairment by comparing the estimated fair
value of each reporting unit to its carrying value, including existing goodwill. Goodwill is considered impaired if the carrying value of a reporting unit exceeds the estimated fair value. Upon an
indication of impairment, a second step is performed to measure the amount of the impairment by comparing the implied fair value of the reporting unit's goodwill with its carrying value.

Primarily
as a result of the ongoing U.S. and global economic recession and the related turmoil in the equity markets, there has been a significant and prolonged decrease in our stock
price and related market capitalization over the past six months. The ongoing economic recession also has negatively impacted us during this period, both domestically and internationally. Based
on these factors, we determined that an interim goodwill impairment analysis was necessary and performed this goodwill impairment analysis on each of our reporting units during the second quarter of
fiscal 2009. Reporting unit fair values were determined using an equal weighting of the income approach, which estimates fair value based on expected future discounted cash flows, and the
market approach, which estimates fair value based on comparable market prices. The income approach included assumptions for, among others, forecasted revenues, gross profit margins, operating profit
margins, working capital cash flow and long-term discount rates, all of which require significant judgments by management. Long-term discount rates used in the estimation of
reporting unit fair values were determined based on the expected weighted average cost of capital for each reporting unit. Long-term discount rates have increased since our last annual impairment test
(in the fourth quarter of fiscal 2008) due to increased risk premiums and significant tightening of the credit markets. Based on the valuation findings, we

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determined
that we had an indication of goodwill impairment related to our branded reporting unit and our natural food markets reporting unit in accordance with the first step of the goodwill
impairment test described in SFAS 142.

We
then performed the second step of the impairment test under SFAS 142 to measure the amount of the non-cash impairment charge which was determined to be
$37.5 million ($27.3 million after tax, or $2.51 per diluted share for the three months and six months ended March 31, 2009). Of this total non-cash impairment charge,
$35.4 million related to our branded reporting unit and $2.1 million related to our natural food markets reporting unit. The charge related to our branded reporting unit represented the
entire carrying value of its goodwill. Our natural food markets reporting unit had a remaining goodwill carrying value of $0.3 million and represented the only reporting unit with a remaining
goodwill carrying value at March 31, 2009. The non-cash impairment charge had no impact on our compliance with debt covenants, cash flows or available liquidity.

Prior
to the interim assessment of goodwill impairment performed during the second quarter of fiscal 2009, the Company also assessed its non-amortizable intangible assets in
accordance with SFAS 142 and performed recoverability testing of its long-lived assets in accordance with SFAS 144 and determined there was no additional impairment.

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 in accordance with Staff Accounting Bulletin No. 104, Revenue Recognition, which states that revenue should be
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.

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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 March 31,

Six Months
Ended March 31,2008

2009

2008

2009Net sales


100.0
%

100.0
%

100.0
%

100.0
%Cost of sales


44.8
%

46.5
%

45.2
%

46.2
%Gross profit


55.2
%

53.5
%

54.8
%

53.8
%Selling, general and administrative


38.2
%

37.5
%

39.3
%

38.6
%Amortization of intangible assets


0.4
%

0.4
%

0.4
%

0.4
%Impairment of goodwill



%

89.4
%


%

46.0
%Income/(loss) from operations


16.6
%

(73.8
)%

15.1
%

(31.2
)%Interest and other (income)/expense, net


0.9
%

0.6
%

1.0
%

0.9
%Income/(loss) before provision/(benefit) for income taxes


15.7
%

(74.4
)%

14.1
%

(32.1
)%Provision/(benefit) for income taxes


5.9
%

(18.7
)%

5.3
%

(7.3
)%Net income/(loss)


9.8
%

(55.7
)%

8.8
%

(24.8
)%Adjusted EBITDA(1)


19.8
%

19.6
%

18.3
%

18.8
%


---

Comparison of the Three Months Ended March 31, 2009 to the Three Months Ended March 31, 2008

Net Sales.Net sales decreased by $2.4 million, or 5.6%, to $42.0 million for the three months ended March 31, 2009
("second
quarter of fiscal 2009") from $44.4 million for the three months ended March 31, 2008 ("second quarter of fiscal 2008"). Net sales of branded nutritional supplements and other natural
products decreased by $2.1 million, or 5.2%, to $37.9 million for the second quarter of fiscal 2009 compared to $40.0 million for the second quarter of fiscal 2008. The decrease
in net sales of branded nutritional supplements and other natural products was primarily related to a decrease in sales volume of branded products to many customers due in large part to the continuing
U.S. and global economic recession. This decrease in net sales volume was partially offset by a $1.8 million increase in net sales related to price changes as well as the net sales contribution
of theHealth from the Sun® brand acquired during the second quarter of fiscal 2008. Other net sales remained relatively flat at
$4.1 million for the second quarter of fiscal 2009 compared to $4.4 million for the second quarter of fiscal 2008.

Gross Profit.Gross profit decreased by $2.1 million, or 8.5%, to $22.4 million for the second quarter of fiscal 2009 from
$24.5 million for the second quarter of fiscal 2008. This decrease in gross profit was primarily attributable to the decrease in net sales. As a percentage of net sales, gross profit decreased
to 53.5% for the second quarter of fiscal 2009 from 55.2% for the second quarter of fiscal 2008. This decrease in gross profit percentage was primarily attributable to increased material costs as a
percentage of net sales.

Selling, General and Administrative.Selling, general and administrative expenses decreased by $1.3 million, or 7.5%, to
$15.7 million
for the second quarter of fiscal 2009 from $17.0 million for the second quarter of fiscal 2008. As a percentage of net sales, selling, general and administrative expenses decreased to 37.5% for
the second quarter of fiscal 2009 compared to 38.2% for the second quarter of fiscal 2008. This decrease in selling, general and administrative expenses was primarily attributable to a

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reduction
in operational and transitional costs related to businesses acquired in fiscal 2007 and fiscal 2008 as well as year-over-year cost improvements in many areas.

Amortization of Intangibles.Amortization of intangibles was $0.2 million for the second quarter of fiscal 2009 and 2008. For each
period,
amortization expense was primarily related to intangible assets recorded in connection with acquisitions.

Impairment of Goodwill.Primarily as a result of the ongoing U.S. and global economic recession and the related turmoil in the equity
markets, there
has been a significant and prolonged decrease in our stock price and related market capitalization over the past six months. The ongoing economic recession also has negatively impacted us during this
period, both domestically and internationally. Based on these factors, we determined that an interim goodwill impairment analysis was necessary under SFAS 142 and performed this goodwill
impairment analysis on each of our reporting units during the second quarter of fiscal 2009. Based on the valuation findings, we determined that we had an indication of goodwill impairment
related to our branded reporting unit and our natural food markets reporting unit in accordance with the first step of the goodwill impairment test described in SFAS 142.

We
then performed the second step of the impairment test under SFAS 142 to measure the amount of the non-cash impairment charge which was determined to be
$37.5 million ($27.3 million after tax, or $2.51 per diluted share for the three months ended March 31, 2009). Of this total non-cash impairment charge,
$35.4 million related to our branded reporting unit and $2.1 million related to our natural food markets reporting unit. The charge related to our branded reporting unit represented the
entire carrying value of its goodwill. Our natural food markets reporting unit had a remaining goodwill carrying value of $0.3 million and represented the only reporting unit with a remaining
carrying value at March 31, 2009. The non-cash impairment charge had no impact on our compliance with debt covenants, cash flows or available liquidity.

Interest and Other (Income)/Expense, Net.Net interest and other (income)/expense was $0.3 million for the second quarter of
fiscal 2009 and
$0.4 million for the second quarter of fiscal 2008 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 (25.2%) for the second quarter of fiscal 2009 and 37.5% for the
second
quarter of fiscal 2008. 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%). As a result of this goodwill impairment charge, we recognized a deferred tax
benefit of $10.2 million due to the impairment of $26.5 million of tax-deductible goodwill.

Comparison of the Six Months Ended March 31, 2009 to the Six Months Ended March 31, 2008

Net Sales.Net sales decreased by $3.9 million, or 4.6%, to $81.6 million for the six months ended March 31, 2009 from
$85.5 million for the six months ended March 31, 2008. Net sales of branded nutritional supplements and other natural products decreased by $3.4 million, or 4.4%, to
$73.4 million for the six months ended March 31, 2009 compared to $76.8 million for the six months ended March 31, 2008. The decrease in net sales of branded nutritional
supplements and other natural products was primarily related to a decrease in sales volume of branded products to many customers due in large part to the continuing U.S. and global economic recession.
This decrease in net sales volume was partially offset by a $3.1 million increase in net sales related to price changes as well as the net sales contributions of the businesses acquired during
fiscal 2008. Other net sales were $8.2 million for the six months ended March 31, 2009 compared to $8.7 million for the six months ended March 31, 2008.

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Gross Profit.Gross profit decreased by $2.9 million, or 6.3%, to $43.9 million for the six months ended March 31, 2009
from
$46.8 million for the six months ended March 31, 2008. This decrease in gross profit was primarily attributable to the decrease in net sales. As a percentage of net sales, gross profit
decreased to 53.8% for the six months ended March 31, 2009 from 54.8% for the six months ended March 31, 2008. This decrease in gross profit percentage was primarily attributable to
increased material costs as a percentage of net sales.

Selling, General and Administrative.Selling, general and administrative expenses decreased by $2.1 million, or 6.3%, to
$31.5 million
for the six months ended March 31, 2009 from $33.6 million for the six months ended March 31, 2008. As a percentage of net sales, selling, general and administrative expenses
decreased to 38.6% for the six months ended March 31, 2009 compared to 39.3% for the six months ended March 31, 2008. This decrease in selling, general and administrative expenses was
primarily attributable to a reduction in operational and transitional costs related to businesses acquired in fiscal 2007 and fiscal 2008 as well as year-over-year cost
improvements in many areas.

Amortization of Intangibles.Amortization of intangibles was $0.3 million for the six months ended March 31, 2009 and 2008.
For each
period, amortization expense was primarily related to intangible assets recorded in connection with acquisitions.

Impairment of Goodwill.Primarily as a result of the ongoing U.S. and global economic recession and the related turmoil in the equity
markets, there
has been a significant and prolonged decrease in our stock price and related market capitalization over the past six months. The ongoing economic recession also has negatively impacted us
during this period, both domestically and internationally. Based on these factors, we determined that an interim goodwill impairment analysis was necessary under SFAS 142 and performed this
goodwill impairment analysis on each of our reporting units during the second quarter of fiscal 2009. Based on the valuation findings, we determined that we had an indication of goodwill
impairment related to our branded reporting unit and our natural food markets reporting unit in accordance with the first step of the goodwill impairment test described in SFAS 142.

We
then performed the second step of the impairment test under SFAS 142 to measure the amount of the non-cash impairment charge which was determined to be
$37.5 million ($27.3 million after tax, or $2.51 per diluted share for the six months ended March 31, 2009). Of this total non-cash impairment charge,
$35.4 million related to our branded reporting unit and $2.1 million related to our natural food markets reporting unit. The charge related to our branded reporting unit represented the
entire carrying value of its goodwill. Our natural food markets reporting unit had a remaining goodwill carrying value of $0.3 million and represented the only reporting unit with a remaining
carrying value at March 31, 2009. The non-cash impairment charge had no impact on our compliance with debt covenants, cash flows or available liquidity.

Interest and Other (Income)/Expense, Net.Net interest and other (income)/expense was $0.8 million for the six months ended
March 31,
2009 and 2008 and primarily consisted of interest expense on indebtedness under our revolving credit facility.

Provision/(Benefit) for Income Taxes.Our effective tax rate was (22.8%) for the six months ended March 31, 2009 and 37.5%
for the
six months ended March 31, 2008. 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%). As a result of this goodwill impairment charge, we
recognized a deferred tax benefit of $10.2 million due to the impairment of $26.5 million of tax-deductible goodwill.

Adjusted EBITDA

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

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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 31,2008

2009

2008

2009(dollars in thousands)Net income/(loss)

$
4,352

$
(23,359
)
$
7,563

$
(20,247
)Provision/(benefit) for income taxes


2,611


(7,855
)

4,538


(5,977
)Interest and other (income)/expense, net(1)


405


264


785


774Depreciation and amortization


1,430


1,642


2,742


3,276Impairment of goodwill(2)





37,519





37,519Adjusted EBITDA

$
8,798

$
8,211

$
15,628

$
15,345


---

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Our Adjusted EBITDA decreased to $8.2 million for the second quarter of fiscal 2009 from $8.8 million for the second quarter of fiscal 2008.
Adjusted EBITDA as a percentage of net sales decreased to 19.6% for the second quarter of fiscal 2009 from 19.8% for the second quarter of fiscal 2008.

Our
Adjusted EBITDA decreased to $15.3 million for the six months ended March 31, 2009 from $15.6 million for the six months ended March 31, 2008. Adjusted
EBITDA as a percentage of net sales increased to 18.8% for the six months ended March 31, 2009 from 18.3% for the six months ended March 31, 2008.

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 thru March) due to increased interest in health-related products among consumers following the holiday season.

Liquidity and Capital Resources

We had working capital of $34.9 million as of March 31, 2009 compared to $36.3 million as of September 30,
2008. This decrease in working capital was primarily the result of decreases in accounts receivable, inventory and prepaids and other current assets partially offset by decreases in accounts payable
and accrued expenses.

Net
cash provided by operating activities for the six months ended March 31, 2009 was $11.8 million compared to $9.4 million for the comparable period in fiscal
2008. This increase in net cash provided by operating activities for the six months ended March 31, 2009 was primarily attributable to changes in assets and liabilities, net of effects of
acquisitions.

Net
cash used in investing activities was $6.4 million for the six months ended March 31, 2009 compared to $15.9 million for the comparable period in fiscal 2008.
Our investing activities during these periods consisted of acquisitions of businesses and capital expenditures related primarily to building improvements related to facility consolidation efforts,
distribution and manufacturing equipment and information systems.

During
the six months ended March 31, 2008, we acquired two businesses for $5.9 million in cash. On December 12, 2007, we acquired certain assets of Dowd and
Rogers, Inc. for $0.1 million in cash and on March 20, 2008, we acquired selected assets of Arkopharma, LLC for $5.8 million in cash. We did not acquire any
businesses during the six months ended March 31, 2009.

Net
cash used in financing activities was $5.2 million for the six months ended March 31, 2009 compared to net cash provided by financing activities of $5.6 million
for the comparable period in fiscal 2008. 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 12,553 shares purchased
during the six months ended March 31, 2009. As of March 31, 2009, there were 1,474,404 shares of common stock available for purchase.

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Our
current revolving credit facility has available credit borrowings of $60.0 million with no automatic reductions and provides an accordion feature which 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, 2009, we had outstanding revolving credit borrowings of $22.5 million. Borrowings under the revolving credit facility are collateralized by certain 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, 2009, the applicable weighted-average interest rate for outstanding borrowings was 2.54%, exclusive of any
interest rate swap agreements. We are also required to pay a variable quarterly fee on the unused balance under the revolving credit facility. At March 31, 2009, 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 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, 2009, 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.

On
August 10, 2008, we entered into a one-year interest rate swap agreement covering $15.0 million of our outstanding revolving credit borrowings. The interest
rate swap has a fixed interest rate of 3.17% plus a variable margin of 1.00% at March 31, 2009 for an all-in rate of 4.17%. This interest rate swap was not designated as a hedge in
accordance with Statement of Financial Accounting Standards No. 133,Accounting for Derivative Instruments and Hedging Activities("SFAS 133"). For the six months ended March 31, 2009, the interest rate swap had an unfavorable change in fair value of $149 thousand, which was included as a component of
interest and other (income)/expense in the Condensed Consolidated Statements of Operations and Comprehensive Income/(Loss).

We
adopted Statement of Financial Accounting Standard No. 161,Disclosures about Derivative Instruments and Hedging Activitiesan amendment of
SFAS No. 133("SFAS 161"), as of January 1, 2009. We have one derivative financial instrument, an interest rate swap, to manage our exposure to interest
rate risks. We do not use derivatives for trading or speculative purposes and we are not a party to leveraged derivatives.

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 on 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.

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.

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Our
significant non-cancelable contractual obligations as of March 31, 2009 were as follows:

Payments Due By PeriodContractual Obligations

Total

Less Than
1 Year

1-3
Years

4-5
Years

After
5 Years(dollars in thousands)Revolving credit facility

$
22,500

$


$
22,500

$


$
Interest on revolving credit facility(a)


1,754


764


990





Operating leases


6,924


3,213


3,267


394


50Total

$
31,178

$
3,977

$
26,757

$
394

$
50


---

New Accounting Standards

In September 2006, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard No. 157, Fair Value
Measurements("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in
prior accounting standards. In November 2007, the FASB decided to postpone for one year the effective date of SFAS 157 for assets and liabilities measured at fair value on a
non-recurring basis. SFAS 157 was effective for us as of October 1, 2008 for assets and liabilities measured at fair value on a recurring basis. Our adoption of
SFAS 157 did not have a material impact on our consolidated financial statements. SFAS 157 is effective for us as of October 1, 2009 for assets and liabilities measured at fair
value on a non-recurring basis and we are currently evaluating the impact this may have on our consolidated financial statements.

In
February 2007, the FASB issued Statement of Financial Accounting Standard No. 159,The Fair Value Option for Financial Assets and Financial
LiabilitiesIncluding an amendment of FASB Statement No. 115("SFAS 159"). SFAS 159 permits entities to choose to measure many financial
instruments and certain other items at fair value. SFAS 159 was effective for us as of October 1, 2008, however, we did not elect to apply the fair value option to any financial
instruments or other items upon adoption or during the six months ended March 31, 2009. As a result, the adoption of SFAS 159 did not have a material impact on our consolidated financial
statements.

In
December 2007, the FASB issued Statement of Financial Accounting Standard No. 141 (Revised 2007),Business Combinations("SFAS 141(R)"). SFAS 141(R) addresses fair value accounting and the related disclosure for assets and liabilities acquired in a business combination. SFAS 141(R) is effective for
our 2010 fiscal year. We are currently evaluating the impact this standard may have on our consolidated financial statements.

In
December 2007, the FASB issued Statement of Financial Accounting Standard No. 160,Noncontrolling Interests in Consolidated Financial
Statements("SFAS 160"). SFAS 160 changes the accounting and reporting for the noncontrolling interests in a subsidiary in consolidated financial statements.
SFAS 160 recharacterizes minority interests as noncontrolling interests and requires noncontrolling interests to be classified as a component of shareholders' equity. SFAS 160 is
effective for us as of October 1, 2009 and requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. We do not expect the adoption of
SFAS 160 to have a material impact on our consolidated financial statements.

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In
April 2008, the FASB issued Staff Position No. 142-3,Determination of the Useful Life of Intangible Assets("FSP
142-3"). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible
asset under SFAS 142. FSP 142-3 is effective for us as of October 1, 2009. Early adoption is prohibited. We are currently evaluating the impact FSP 142-3 may have
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

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. Although these statements are
believed to be reasonable, they are inherently uncertain. These statements involve known and unknown risks, uncertainties and other factors that may
cause our actual results, level of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by
these statements. We undertake no obligation to update forward-looking statements to reflect events or circumstances occurring after the date this Form 10-Q was first filed with the
SEC. 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) interruption of business or negative impact on sales and earnings due to acts of God, acts of war, terrorism, bio-terrorism or civil
unrest, (iii) adverse publicity or negative consumer perception regarding nutritional supplements, (iv) changes in government regulations, (v) product liability claims and
litigation, (vi) insurance coverage issues, (vii) increased competition or costs, (viii) intellectual property rights of other parties, (ix) the loss of key personnel,
(x) disruptions from acquisitions, (xi) issues with obtaining raw materials of adequate quality or quantity, (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) litigation generally, and (xvi) other factors indicated from time to time in our SEC reports, copies of which are available upon request from our investor relations group or which
may be obtained at the SEC's website (www.sec.gov).

Item 3.    Quantitative and Qualitative Disclosures about Market Risk

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, 2009, the applicable

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weighted-average
interest rate for borrowings was 2.54%, exclusive of any interest rate swap agreements, and we had total borrowings outstanding of $22.5 million.

On
August 10, 2008, we entered into a one-year interest rate swap agreement covering $15.0 million of our outstanding revolving credit borrowings. The interest
rate swap has an all-in fixed interest rate of 4.17% and was not designated as a hedge in accordance with SFAS 133. For the six months ended March 31, 2009, the interest rate
swap had an unfavorable change in fair value of $149 thousand, which was included as a component of interest and other (income)/expense in the Condensed Consolidated Statements of Operations
and Comprehensive Income/(Loss).

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. However, our current liability
policy excludes claims related to certain ingredients, including products containing kava.

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 2008 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 period covered by this Form 10-Q for the Quarterly
Period Ended March 31, 2009.

Under
our share purchase program which was initially approved on June 22, 2000, we are authorized to buy up to 2,500,000 shares of our common stock, of which 563,915 shares may
yet be purchased as of March 31, 2009. The shares available for purchase under this program have no expiration date. There were no purchases under this program during the three months ended
March 31, 2009.

Item 4.    Submission of Matters to a Vote of Security Holders

The Annual Meeting of Stockholders of the Company was held on January 29, 2009, at which meeting the stockholders voted to elect
two individuals to serve as Class II 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, 2009.

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

Nominee

For

Against/
Withheld

AbstainMichael D. Burke


9,692,810


112,979


1,046,739James D. Stice


9,607,525


198,264


1,046,739


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



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

For

Against/
Withheld

AbstainRatification of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm


9,688,224


113,526


1,050,778


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: April 30, 2009

By:

/s/ CORY J. MCQUEEN Cory J. McQueen Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)


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