Use these links to rapidly review the documentNUTRACEUTICAL INTERNATIONAL CORPORATION INDEX

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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 December 31, 2003

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 is an accelerated filer (as defined in Rule 12b-2 of the Exchange
Act). Yes o    No ý

At
January 29, 2004, the registrant had 11,162,323 shares of common stock outstanding.

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NUTRACEUTICAL INTERNATIONAL CORPORATION        INDEX



|Description
|-----------
|Part I.    
|           
|           
|           
|           
|           
|           
|           
|           
|Part II.   
|           
|           

2

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PART IFINANCIAL INFORMATION

Item 1. Financial Statements

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

|                                     |                                           | September 30,
2003(1)      |        | December 31,
2003 |       
|------------------------------------ | ----------------------------------------- | -------------------------- | ------ | ----------------- | ------
|ASSETS                               |                                           |                            |        |                   |       
|Current assets                       |                                           |                            |        |                   |       
|                                     | Cash                                      |                            | $      | 2,196             |       
|                                     | Accounts receivable, net                  |                            |        | 10,514            |       
|                                     | Inventories, net                          |                            |        | 20,054            |       
|                                     | Prepaid expenses and other current assets |                            |        | 2,040             |       
|                                     | Deferred income taxes                     |                            |        | 1,190             |       
|                                     |                                           |                            |        |                   |       
|                                     |                                           | Total current assets       |        |                   | 35,994
|Property, plant and equipment, net   |                                           |                            | 21,148 |                   |       
|Goodwill                             |                                           |                            | 10,083 |                   |       
|Intangible assets, net               |                                           |                            | 4,386  |                   |       
|Other non-current assets, net        |                                           |                            | 1,007  |                   |       
|Deferred income taxes, net           |                                           |                            | 9,165  |                   |       
|                                     |                                           |                            |        |                   |       
|                                     |                                           | $                          | 81,783 |                   | $     
|                                     |                                           |                            |        |                   |       
|LIABILITIES AND STOCKHOLDERS' EQUITY |                                           |                            |        |                   |       
|Current liabilities                  |                                           |                            |        |                   |       
|                                     | Accounts payable                          |                            | $      | 8,530             |       
|                                     | Accrued expenses                          |                            |        | 5,201             |       
|                                     |                                           |                            |        |                   |       
|                                     |                                           | Total current liabilities  |        |                   | 13,731
|Long-term debt                       |                                           |                            | 12,500 |                   |       
|Other non-current liabilities        |                                           |                            | 450    |                   |       
|                                     |                                           |                            |        |                   |       
|                                     |                                           | Total liabilities          |        |                   | 26,681
|                                     |                                           |                            |        |                   |       
|Stockholders' equity                 |                                           |                            |        |                   |       
|                                     | Common stock                              |                            |        | 113               |       
|                                     | Additional paid-in capital                |                            |        | 39,431            |       
|                                     | Retained earnings                         |                            |        | 16,846            |       
|                                     | Accumulated other comprehensive income    |                            |        | 139               |       
|                                     | Treasury stock                            |                            |        | (1,427            | )     
|                                     |                                           |                            |        |                   |       
|                                     |                                           | Total stockholders' equity |        |                   | 55,102
|                                     |                                           |                            |        |                   |       
|                                     |                                           | $                          | 81,783 |                   | $     
|                                     |                                           |                            |        |                   |       

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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        (unaudited)        (dollars in thousands,
except per share data)

|                                           |                                               | Three months ended December 31,
|------------------------------------------ | --------------------------------------------- | -------------------------------
|
|Net sales                                  |                                               | $                              
|Cost of sales                              |                                               |                                
|                                           |                                               |                                
|                                           | Gross profit                                  |                                
|Operating expenses                         |                                               |                                
|                                           | Selling, general and administrative           |                                
|                                           | Amortization of intangible assets             |                                
|                                           |                                               |                                
|Income from operations                     |                                               |                                
|Interest and other expense, net            |                                               |                                
|                                           |                                               |                                
|Income before provision for income taxes   |                                               |                                
|Provision for income taxes                 |                                               |                                
|                                           |                                               |                                
|Net income                                 |                                               | $                              
|Other comprehensive income                 |                                               |                                
|                                           | Foreign currency translation adjustment       |                                
|                                           |                                               |                                
|Comprehensive income                       |                                               | $                              
|                                           |                                               |                                
|Net income per common share                |                                               |                                
|                                           | Basic                                         |                                
|                                           | Diluted                                       |                                
|Weighted average common shares outstanding |                                               |                                
|                                           | Basic                                         |                                
|                                           | Dilutive effect of stock options and warrants |                                
|                                           |                                               |                                
|                                           | Diluted                                       |                                
|                                           |                                               |                                

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

4

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

|                                                                                 |                                                                     | Three months ended December 31,           |                                          
|-------------------------------------------------------------------------------- | ------------------------------------------------------------------- | ----------------------------------------- | -----------------------------------------
|
|Cash flows from operating activities                                             |                                                                     |                                           |                                          
|Net income                                                                       |                                                                     | $                                         | 2,626                                    
|Adjustments to reconcile net income to net cash provided by operating activities |                                                                     |                                           |                                          
|                                                                                 | Depreciation and amortization                                       |                                           |                                          
|                                                                                 | Amortization of deferred financing fees                             |                                           |                                          
|                                                                                 | Loss on disposals of property and equipment                         |                                           |                                          
|                                                                                 | Deferred income taxes                                               |                                           |                                          
|                                                                                 | Tax benefit from stock option exercises                             |                                           |                                          
|                                                                                 | Changes in assets and liabilities, net of effects from acquisitions |                                           |                                          
|                                                                                 |                                                                     | Accounts receivable, net                  |                                          
|                                                                                 |                                                                     | Inventories, net                          |                                          
|                                                                                 |                                                                     | Prepaid expenses and other current assets |                                          
|                                                                                 |                                                                     | Other non-current assets, net             |                                          
|                                                                                 |                                                                     | Accounts payable                          |                                          
|                                                                                 |                                                                     | Accrued expenses                          |                                          
|                                                                                 |                                                                     |                                           |                                          
|                                                                                 |                                                                     |                                           | Net cash provided by operating activities
|                                                                                 |                                                                     |                                           |                                          
|Cash flows from investing activities                                             |                                                                     |                                           |                                          
|Purchases of property and equipment                                              |                                                                     |                                           | (651                                     
|                                                                                 |                                                                     |                                           |                                          
|                                                                                 |                                                                     |                                           | Net cash used in investing activities    
|                                                                                 |                                                                     |                                           |                                          
|Cash flows from financing activities                                             |                                                                     |                                           |                                          
|Payments on long-term debt                                                       |                                                                     |                                           | (4,000                                   
|Proceeds from issuances of common stock                                          |                                                                     |                                           | 133                                      
|Purchases of common stock for treasury                                           |                                                                     |                                           |                                         
|                                                                                 |                                                                     |                                           |                                          
|                                                                                 |                                                                     |                                           | Net cash used in financing activities    
|                                                                                 |                                                                     |                                           |                                          
|Effect of exchange rate changes on cash                                          |                                                                     |                                           | 4                                        
|                                                                                 |                                                                     |                                           |                                          
|Net increase (decrease) in cash                                                  |                                                                     |                                           | 627                                      
|Cash at beginning of period                                                      |                                                                     |                                           | 1,257                                    
|                                                                                 |                                                                     |                                           |                                          
|Cash at end of period                                                            |                                                                     | $                                         | 1,884                                    
|                                                                                 |                                                                     |                                           |                                          

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 (consisting of normal
recurring accruals) to present fairly the consolidated financial position of Nutraceutical International Corporation and its subsidiaries (the "Company") as of December 31, 2003, the results of
their operations for the three months ended December 31, 2002 and 2003 and their cash flows for the three months ended December 31, 2002 and 2003, in conformity with
accounting principles generally accepted in the United States of America for interim financial information applied on a consistent basis. The results for the three months ended
December 31, 2003 are not necessarily indicative of the results to be expected for the full fiscal year.

Certain
information and footnote disclosures normally included in 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, 2003,
which was filed with the Securities and Exchange Commission on November 25, 2003.

2.     INVENTORIES, NET

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

|                |  | September 30,
2003 |        | December 31,
2003
|--------------- |  | ------------------ | ------ | -----------------
|Raw materials   |  | $                  | 5,619  |                  
|Work-in-process |  |                    | 2,715  |                  
|Finished goods  |  |                    | 11,720 |                  
|                |  |                    |        |                  
|                |  | $                  | 20,054 |                  
|                |  |                    |        |                  

3.     GOODWILL AND INTANGIBLE ASSETS

The change in the carrying amount of goodwill from September 30, 2003 to December 31, 2003 was as follows:

GoodwillBalance as of September 30, 2003

$
10,083Purchase accounting adjustments related to fiscal 2003 acquisitons


(154
)Balance as of December 31, 2003

$
9,929


6

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The
carrying amount of intangible assets at September 30, 2003 and December 31, 2003 was as follows:

|                                               |                                 | September 30, 2003 |       | December 31, 2003 |   |     
|---------------------------------------------- | ------------------------------- | ------------------ | ----- | ----------------- | - | ----
|
|
|Intangible assets subject to amortization:     |                                 |                    |       |                   |   |     
|                                               | Non-compete agreements          |                    | $     | 1,000             |   | $   
|                                               | Trademarks/trade names/patents  |                    |       | 277               |   |     
|                                               |                                 |                    |       |                   |   |     
|                                               |                                 |                    | 1,277 |                   |   | (249
|Intangible assets not subject to amortization: |                                 |                    |       |                   |   |     
|                                               | Trademarks/trade names/licenses |                    |       | 3,358             |   |     
|                                               |                                 |                    |       |                   |   |     
|                                               |                                 | $                  | 4,635 |                   | $ | (249
|                                               |                                 |                    |       |                   |   |     

Estimated
amortization expense related to the net carrying amount of $936 for intangible assets subject to amortization at December 31, 2003 is as follows:

Year Ending September 30,(1)

Estimated
Amortization
Expense2004

$
2792005


3692006


2742007


112008


3$
936


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Aggregate
amortization expense related to intangible assets subject to amortization totaled $0 and $94 for the three months ended December 31, 2002 and 2003, respectively.

4.     CAPITAL STOCK

A reconciliation of basic weighted average common shares (which represent the weighted average number of common shares outstanding without regard to potential
common shares) to diluted weighted average common shares (which include potential common shares in accordance with Statement of Financial Accounting Standards No. 128, Earnings per Share) is
provided on the Company's Condensed Consolidated Statements of Operations and Comprehensive Income.

7

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Stock
options to purchase 193,794 and 436,440 shares of common stock that were outstanding at December 31, 2002 and 2003, respectively, were not included in 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.

5.     SHARE PURCHASE

During fiscal 2000, the Company's Board of Directors approved a share purchase program authorizing the Company to buy up to 1,500,000 shares of its outstanding
common stock. Under this program, the Company purchased 35,800 shares during the three months ended December 31, 2003 at an aggregate price of $398. Total purchases under this share
purchase program from inception to December 31, 2003 were 711,212 shares of common stock at an aggregate price of $3,510.

6.     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 availability and 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 outside the United States were less than 10% of consolidated net sales for the three months ended December 31, 2002 and 2003.

7.     STOCK-BASED COMPENSATION

The Company accounted for its stock-based employee compensation plans using the intrinsic value method prescribed by Accounting Principles Board Opinion
No. 25,Accounting for Stock Issued to Employees. No stock-based employee compensation cost was reflected in net income, as all options granted
under those stock-based employee compensation plans had exercise prices equal to the market values of the underlying common shares on the dates of grant. The following table illustrates the effect on
net income and earnings per share as if the Company had applied the fair value recognition

8

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provisions
of Financial Accounting Standards Board Statement No. 123,Accounting for Stock-Based Compensation, to stock-based employee
compensation.

|                                                                                                                                                |                     | Three months ended December 31, |      
|----------------------------------------------------------------------------------------------------------------------------------------------- | ------------------- | ------------------------------- | -----
|
|Net income, as reported                                                                                                                         |                     | $                               | 2,626
|Add: Stock-based employee compensation expense included in reported net income, net of related tax effects                                      |                     |                                 |     
|Deduct: Total stock-based employee compensation expense determined under the fair value based method for all awards, net of related tax effects |                     |                                 | (60  
|                                                                                                                                                |                     |                                 |      
|Pro forma net income                                                                                                                            |                     | $                               | 2,566
|                                                                                                                                                |                     |                                 |      
|Earnings per share                                                                                                                              |                     |                                 |      
|                                                                                                                                                | Basicas reported   |                                 | $    
|                                                                                                                                                | Basicpro forma     |                                 |      
|                                                                                                                                                | Dilutedas reported |                                 | $    
|                                                                                                                                                | Dilutedpro forma   |                                 |      

9

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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 the response to Part I, Item 1. Financial Statements of this report.

The
Company is an integrated marketer, distributor, retailer and manufacturer of branded nutritional supplements and other natural products sold primarily to and through domestic health
and natural food stores. Internationally, the Company sells its branded products to and through natural product distributors and retailers. The Company was formed with a core business strategy of
acquiring, integrating and operating, from beginning to end, the marketing, distribution, retailing and manufacturing operations of businesses in the natural products industry. The Company believes
that the consolidation and integration of acquired businesses provides ongoing financial synergies through increased scale and market penetration.

The
Company sells its branded products under the trademarksSolaray®, KAL®,Nature's Life®,
NaturalMax®,VegLife®,Premier
One®,Sunny Green®,Natural Sport®, ActiPet®,Action Labs®, Thompson® andFunFresh Foods. The Company also sells branded bulk products and
unbranded custom blends under the trademarksMonarch Nutritional Laboratories andGreat Basin
Botanicals. Under the nameWoodland Publishing, the Company publishes, prints and markets a line of
books and booklets to, among others, book distributors, national retail bookstores and health and natural food stores. The Company's neighborhood natural food markets operate under the trade names The Real Food
Company andThom's Natural Foods and its health food stores
operate under the trade nameArizona Health Foods. The Company also distributes the branded products of certain third parties.

The
Company was 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 its formation, the Company has completed the following acquisitions: Solaray, Inc., Premier One Products, Inc., Makers of
KAL, Inc. and Makers of KAL, B.V., Monarch Nutritional Laboratories, Inc., Action Labs, Inc., NutraForce (Canada) International, Inc., Woodland Publishing, Inc. and
Summit Graphics, Inc., Thompson Nutritionals, Inc., The Real Food Company, Inc., Thom's Natural Foods, M.K. Health Food Distributors, Inc. (dba Nature's Life), and Arizona
Health Foods, Inc. As a result of these acquisitions, internal growth and cost management, management believes that the Company is well positioned to continue to capitalize on the consolidation
the Company believes is occurring in the VMS Industry.

10

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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 December 31, |     
|---------------------------------------- | ----------------------------------- | ------------------------------- | ----
|
|Net sales                                |                                     | 100.0                           | %   
|                                         | Cost of sales                       |                                 | 48.7
|                                         |                                     |                                 |     
|Gross profit                             |                                     | 51.3                            | %   
|                                         | Selling, general and administrative |                                 | 35.9
|                                         | Amortization of intangible assets   |                                 | 0.0 
|                                         |                                     |                                 |     
|Income from operations                   |                                     | 15.4                            | %   
|                                         | Interest and other expense, net     |                                 | 0.7 
|                                         |                                     |                                 |     
|Income before provision for income taxes |                                     | 14.7                            | %   
|                                         | Provision for income taxes          |                                 | 5.6 
|                                         |                                     |                                 |     
|Net income                               |                                     | 9.1                             | %   
|                                         |                                     |                                 |     
|EBITDA (1)                               |                                     | 18.7                            | %   
|                                         |                                     |                                 |     

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Comparison of the Three Months Ended December 31, 2003 to the Three Months Ended December 31, 2002

Net Sales.Net sales increased by $4.3 million, or 14.8%, to $33.2 million for the three months ended
December 31, 2003 ("first quarter of fiscal 2004") from $28.9 million for the three months ended December 31, 2002 ("first quarter of fiscal 2003"). Net sales of branded
products increased by $2.9 million, or 12.0%, to $27.4 million for the first quarter of fiscal 2004 from $24.5 million for the first quarter of fiscal 2003. The increase in net
sales of branded products was primarily related to the integration of the fiscal 2003 third quarter acquisition of the Nature's Life brand into the Company's existing operations. Other net sales
increased by $1.4 million, or 30.5%, to $5.8 million for the first quarter of fiscal 2004 from $4.4 million for the first quarter of fiscal 2003. This increase was primarily the
result of the fiscal 2003 acquisition of Arizona Health Foods, Inc., which was completed during the third quarter of fiscal 2003, partially offset by the temporary closure for remodeling of one
of the Company's neighborhood natural food markets.

Gross Profit.Gross profit increased by $2.2 million, or 14.8%, to $17.0 million for the first quarter of
fiscal 2004 from $14.8 million for the first quarter of fiscal 2003. This increase in gross profit was primarily attributable to the increase in net sales. As a percentage of net sales, gross
profit was 51.3% for both the first quarter of fiscal 2004 and the first quarter of fiscal 2003.

Selling, General and Administrative.Selling, general and administrative expenses increased by $1.2 million, or 11.4%,
to $11.6 million for the first quarter of fiscal 2004 from $10.4 million for the first quarter of fiscal 2003. This increase in selling, general and administrative expenses was primarily
attributable to the fiscal 2003 acquisitions, as well as general labor and cost increases and facility consolidation efforts. As a percentage of net sales, selling, general and administrative expenses
decreased to 34.9% for the first quarter of fiscal 2004 from 35.9% for the first quarter of fiscal 2003. This decrease in selling, general and administrative expenses as a percentage of net sales was
primarily related to the increase in net sales.

11

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Amortization of Intangibles.Amortization of intangibles was $0.1 million for the first quarter of fiscal 2004
compared to $0.0 million for the first quarter of fiscal 2003. Amortization expense for the first quarter of fiscal 2004 was primarily related to intangible assets subject to amortization,
which were recorded in connection with the fiscal 2003 acquisitions.

Interest and Other Expense, Net.Net interest and other expense was $0.2 million for both the first quarter of fiscal
2004 and the first quarter of fiscal 2003 and primarily consisted of interest expense on indebtedness under the Company's revolving credit facility.

Provision for Income Taxes.The Company's effective tax rate was 38.5% for the first quarter of fiscal 2004 compared to 38.0%
for the first quarter of fiscal 2003. This increase in the Company's effective tax rate was primarily due to an increase in the Company's marginal federal income tax rate. In each period, the
Company's effective tax rate was higher than the federal statutory rate primarily due to state tax considerations.

EBITDA

EBITDA (earnings before net interest and other expense, taxes, depreciation and amortization) is a commonly reported standard measure that is used by analysts and
investors in the VMS Industry. Management believes that EBITDA, as presented, represents a useful measure for assessing the performance of the Company's ongoing operating activities, as it reflects
the earnings trends of the Company without the impact of purchase accounting applied in connection with the Company's history of acquisitions, the financing required to consummate such transactions
and other non-recurring items. Targets and trends in EBITDA are used as a performance measure for determining management's bonus compensation and are also used by the Company's creditors
in assessing debt covenant compliance. The Company understands that while EBITDA is frequently used by securities analysts in the evaluation of nutritional supplement companies, it is not necessarily
comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation. EBITDA is not intended as an alternative to cash flows from operating
activities, as a measure of liquidity or as an alternative to net income as an indicator of the Company's
operating performance or any other measure of performance in accordance with generally accepted accounting principles. The following table sets forth a reconciliation of net income to EBITDA for each
period included herein:

|                                   |  | Three months ended December 31,
|---------------------------------- |  | -------------------------------
|
|Net income                         |  | $                              
|Provision for income taxes         |  |                                
|Interest and other expense, net(1) |  |                                
|Depreciation and amortization      |  |                                
|                                   |  |                                
|EBITDA                             |  | $                              
|                                   |  |                                

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The
Company's EBITDA increased to $6.4 million for the first quarter of fiscal 2004 from $5.4 million for the first quarter of fiscal 2003. EBITDA as a percentage of net
sales increased to 19.3% for the first quarter of fiscal 2004 from 18.7% for the first quarter of fiscal 2003.

12

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Seasonality

The Company believes that its business is characterized by minor seasonality. However, sales to any particular customer can vary substantially from one quarter to
the next based on such factors as industry trends, timing of promotional discounts, international economic conditions and acquisition-related activities.

Excluding
the effects of acquisitions, the Company historically has recorded higher branded products sales volume during the second fiscal quarter due to increased interest in
health-related products among consumers following the holiday season.

Liquidity and Capital Resources

The Company had working capital of $21.9 million as of December 31, 2003 compared to $22.3 million as of September 30, 2003. This
decrease in working capital was primarily the result of decreases in cash and accounts receivable and an increase in accrued expenses, partially offset by an increase in inventory and a decrease in
accounts payable.

Net
cash provided by operating activities for the three months ended December 31, 2003 was $4.6 million compared to $5.1 million for the comparable period in
fiscal 2003. The decrease in net cash provided by operating activities for the three months ended December 31, 2003 was primarily attributable to a change in cash provided by
inventories, which was partially offset by an increase in net income and changes in cash provided by accounts receivable and prepaid expenses and other current assets.

Net
cash used in investing activities was $1.3 million for the three months ended December 31, 2003 and $0.7 million for the comparable period in fiscal 2003.
Capital expenditures during these periods related primarily to distribution and manufacturing equipment, building improvements related to facility consolidation efforts and information systems.

Net
cash used in financing activities was $3.8 million for the three months ended December 31, 2003 compared to $3.9 million for the comparable period in
fiscal 2003. During these periods, net cash used in financing activities primarily related to repayments under the Company's revolving credit facility.

The
Company's current revolving credit facility had available credit borrowings of sixty million dollars at December 31, 2003. The available credit borrowings are reduced
quarterly by $1.25 million beginning in March 2004. Borrowings under the revolving credit facility are collateralized by substantially all assets of the Company. At the Company's
election, borrowings bear interest at the applicable Eurodollar Rate plus a variable margin or at a base rate, which is the higher of the Federal Funds Rate plus 0.5% or the Prime Lending Rate, plus a
variable margin. At December 31, 2003, the applicable weighted-average interest rate for borrowings was 2.54%. The Company is also required to pay a variable quarterly fee on the unused balance
under the revolving credit facility. At December 31, 2003, the applicable rate was 0.25%. 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 January 28, 2007, and the Company is required to repay all principal
outstanding under the revolving credit facility on such date. Accordingly, the outstanding principal balance of $9.0 million at December 31, 2003 was classified as long-term
debt.

The
revolving credit facility contains restrictive covenants, including restrictions on incurring other indebtedness, limitations on capital expenditures and requirements that the
Company maintain certain financial ratios. As of December 31, 2003, the Company was in compliance with these restrictive covenants. Upon the occurrence of a default or an event of default, the
lender has various remedies or rights, which may include proceeding against the collateral or requiring the Company to repay all amounts borrowed under the revolving credit facility.

13

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A
key component of the Company's business strategy is to seek to make additional acquisitions, which may require that the Company obtain additional financing, which could include the
occurrence of substantial additional indebtedness. The Company believes that borrowings under its 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 a replacement credit facility, and to make anticipated capital expenditures and fund working capital needs
for fiscal 2004.

The
Company's significant non-cancelable operating lease obligations as of December 31, 2003 are as follows:

Year Ending September 30,(1)

Operating
Leases2004

$
8582005


8412006


4052007


3392008


137Thereafter


240$
2,820


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New Accounting Standards

Based on the Company's review of new accounting standards released during the first quarter ended December 31, 2003, the Company did not identify any
standard requiring adoption that would have a significant impact on its condensed consolidated financial statements for the periods reported.

Inflation

Inflation affects the cost of raw materials, goods and services used by the Company. In recent years, inflation has been modest. The competitive
environment somewhat limits the ability of the Company to recover higher costs resulting from inflation by raising prices. Overall, product prices have generally been stable. The Company seeks to
mitigate the adverse effects of inflation primarily through improved
productivity and cost containment programs. The Company does not believe that inflation has had a material impact on its results of operations for the periods presented, except with respect to
payroll-related costs, insurance premiums and other costs arising from or related to government imposed regulations.

Forward-Looking Statements

The Securities and Exchange Commission ("SEC") encourages companies to disclose forward-looking information so that investors can better understand a company's
future prospects and make informed investment decisions. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limitation,
the words "may," "will," "should," "believes," "anticipates," "plans," "expects," "intends," "estimates" and similar expressions or the negative thereof, or variations thereon, or similarly,
discussions of strategy, although believed to be reasonable are intended to identify forward-looking statements, although not all forward-looking statements contain these words or discussions. There
are a number of important factors that could cause actual events or the Company's actual results to differ materially from those indicated by such forward-looking statements, including, without
limitation, (i) changing domestic and international

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market
and political conditions; (ii) interruption of business or negative impact on sales and earnings due to acts of war, terrorism, bio-terrorism, civil unrest or disruption of
mail service; (iii) changes in laws and regulations, including adverse federal, state or foreign legislation or regulation or adverse determinations or actions by regulators;
(iv) import/export controls with respect to products sold into or purchased from foreign countries, as well as other restrictions on the purchase or sale of the Company's products to or from
such countries; (v) unavailability of or interruption in the supply of utilities, including electricity and telecommunications; (vi) slow or negative growth in the nutritional supplement
industry; (vii) increased product competition; (viii) adverse publicity regarding nutritional supplements; (ix) increased costs, including raw material and labor costs, as well as
increases in the costs of borrowing (or the unavailability of adequate credit); (x) inability of the Company to gain and/or hold market share of its health and natural food store customers and
bulk branded products customers; (xi) loss or retirement of key members of management; (xii) inability of the Company to successfully implement its business strategy or plan or otherwise
manage growth, including the Company's ability to locate and consummate advantageous acquisitions, or otherwise integrate or profitably manage acquired operations, including the ability to retain
customers of existing and acquired operations; (xiii) product development efforts and consumer acceptance of the Company's products; (xiv) absence of clinical trials for many of the
Company's products; (xv) availability and price of raw materials, including increased costs; (xvi) the Company's ability to manufacture its products efficiently; (xvii) the mix of
the Company's products and their related profit margins; (xviii) dependence on distributors and customers; (xix) sales and earnings volatility; (xx) adequacy and availability of
insurance coverage, and any losses or damages sustained by the Company not covered by insurance; (xxi) exposure to and expense of prosecuting, defending and/or resolving and defending claims or
litigation, including but not limited to product liability claims, class action suits, stockholder derivative suits, employment or labor related suits or investigations, patent or trademark
infringement suits and other litigation which may arise from time to time; (xxii) other factors discussed in the Company's filings with the Securities and Exchange Commission or referenced in
its press releases, and (xxiii) other factors beyond the Company's control.

In
addition, any forward-looking statements represent the Company's estimates only as of the day this Form 10-Q was first filed with the SEC and should not be relied
upon as representing the Company's estimates as of any subsequent date. No assurance can be given that the future results covered by such forward-looking statements will be achieved and readers are
cautioned not to place undue reliance on forward-looking statements. While the Company may elect to update forward-looking statements at some point in the future, the Company specifically disclaims
any obligation to do so.

The
SEC maintains an Internet site (http://www.sec.gov) which contains reports, proxy and information statements, and other information regarding the Company. Copies of this
Form 10-Q are available without charge upon request. Please contact the Company to request copies of this Form 10-Q (435-655-6106).

Item 3. Quantitative and Qualitative Disclosures about Market Risk

At the Company's election, borrowings under the Company's 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 December 31, 2003, the applicable weighted-average interest rate for
borrowings was 2.54% and the Company had total borrowings outstanding of $9.0 million. To date, the Company has not obtained interest rate protection with respect to these borrowings.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures.The Company's chief executive officer and its chief financial officer,
after evaluating the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c)) as of a date
within 90 days of the filing date of the quarterly report (the "Evaluation Date"), have concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures were
effective to ensure that material information related to the Company and its consolidated subsidiaries would be made known to them by others within those entities. In designing and evaluating the
disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired
control objectives, and
management necessarily was required to apply its judgment in evaluating and implementing possible disclosure controls and procedures.

Changes in Internal Controls.There have been no significant changes in the Company's internal controls or in other factors
that could significantly affect the Company's internal controls subsequent to the Evaluation Date.

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PART IIOTHER INFORMATION

Item 1. Legal Proceedings

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

The
Company carries insurance coverage in the types and amounts that management considers reasonably adequate to cover the risks it faces in the industry in which it competes. However,
the Company's current liability policy excludes claims related to certain ingredients, including products containing ephedra.

In
the opinion of management, the Company's liability, if any, arising from individual regulatory and legal proceedings in which it is involved is not expected to have a material adverse
effect on the Company's financial position, results of operations or cash flows. However, the aggregate liability of the Company arising from regulatory and legal proceedings related to these matters
could have a material effect on the Company's financial position, results of operations or cash flows. The outcomes of legal matters in which the Company is presently involved are not probable and
reasonably estimable.

Item 6. Exhibits and Reports on Form 8-K





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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: January 29, 2004 |  | By:                                                 

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