Use these links to rapidly review the documentNUTRACEUTICAL INTERNATIONAL CORPORATION INDEX



SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549

FORM 10-Q

|ý                                             | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|--------------------------------------------- | ---------------------------------------------------------------------------------------
|For the quarterly period ended March 31, 2005

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

At April 28, 2005, the registrant had 11,596,689 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,
2004(1)      |        | March 31,
2005
|------------------------------------ | ----------------------------------------- | -------------------------- | ------ | --------------
|ASSETS                               |                                           |                            |        |               
|Current assets                       |                                           |                            |        |               
|                                     | Cash                                      |                            | $      | 2,134         
|                                     | Accounts receivable, net                  |                            |        | 10,567        
|                                     | Inventories, net                          |                            |        | 24,058        
|                                     | Prepaid expenses and other current assets |                            |        | 3,372         
|                                     | Deferred income taxes                     |                            |        | 1,118         
|                                     |                                           |                            |        |               
|                                     |                                           | Total current assets       |        |               
|Property, plant and equipment, net   |                                           |                            | 22,657 |               
|Goodwill                             |                                           |                            | 14,108 |               
|Intangible assets, net               |                                           |                            | 7,055  |               
|Other non-current assets, net        |                                           |                            | 796    |               
|Deferred income taxes, net           |                                           |                            | 7,522  |               
|                                     |                                           |                            |        |               
|                                     |                                           | $                          | 93,387 |               
|                                     |                                           |                            |        |               
|LIABILITIES AND STOCKHOLDERS' EQUITY |                                           |                            |        |               
|Current liabilities                  |                                           |                            |        |               
|                                     | Accounts payable                          |                            | $      | 9,844         
|                                     | Accrued expenses                          |                            |        | 4,950         
|                                     |                                           |                            |        |               
|                                     |                                           | Total current liabilities  |        |               
|Long-term debt                       |                                           |                            | 6,500  |               
|Other non-current liabilities        |                                           |                            | 494    |               
|                                     |                                           |                            |        |               
|                                     |                                           | Total liabilities          |        |               
|                                     |                                           |                            |        |               
|Stockholders' equity                 |                                           |                            |        |               
|                                     | Common stock                              |                            |        | 119           
|                                     | Additional paid-in capital                |                            |        | 45,530        
|                                     | Retained earnings                         |                            |        | 30,380        
|                                     | Accumulated other comprehensive income    |                            |        | 173           
|                                     | Treasury stock                            |                            |        | (4,603        
|                                     |                                           |                            |        |               
|                                     |                                           | Total stockholders' equity |        |               
|                                     |                                           |                            |        |               
|                                     |                                           | $                          | 93,387 |               
|                                     |                                           |                            |        |               

---

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 March 31, |        | Six months ended March 31,
|------------------------------------------ | --------------------------------------------------- | ---------------------------- | ------ | --------------------------
|
|Net sales                                  |                                                     | $                            | 37,640 |                           
|Cost of sales                              |                                                     |                              | 17,630 |                           
|                                           |                                                     |                              |        |                           
|                                           | Gross profit                                        |                              |        | 20,010                    
|Operating expenses                         |                                                     |                              |        |                           
|                                           | Selling, general and administrative                 |                              |        | 12,874                    
|                                           | Amortization of intangible assets                   |                              |        | 94                        
|                                           |                                                     |                              |        |                           
|Income from operations                     |                                                     |                              | 7,042  |                           
|Interest and other expense, net            |                                                     |                              | 276    |                           
|                                           |                                                     |                              |        |                           
|Income before provision for income taxes   |                                                     |                              | 6,766  |                           
|Provision for income taxes                 |                                                     |                              | 2,605  |                           
|                                           |                                                     |                              |        |                           
|Net income                                 |                                                     | $                            | 4,161  |                           
|Other comprehensive income                 |                                                     |                              |        |                           
|                                           | Foreign currency translation adjustment, net of tax |                              |        | 4                         
|                                           |                                                     |                              |        |                           
|Comprehensive income                       |                                                     | $                            | 4,165  |                           
|                                           |                                                     |                              |        |                           
|Net income per common share                |                                                     |                              |        |                           
|                                           | Basic                                               |                              | $      | 0.37                      
|                                           | Diluted                                             |                              |        | 0.35                      
|Weighted average common shares outstanding |                                                     |                              |        |                           
|                                           | Basic                                               |                              |        | 11,202,874                
|                                           | Dilutive effect of stock options and warrants       |                              |        | 535,635                   
|                                           |                                                     |                              |        |                           
|                                           | Diluted                                             |                              |        | 11,738,509                
|                                           |                                                     |                              |        |                           

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)

|                                                                                 |                                                                   | Six months ended March 31,                |                                                    
|-------------------------------------------------------------------------------- | ----------------------------------------------------------------- | ----------------------------------------- | ---------------------------------------------------
|
|Cash flows from operating activities                                             |                                                                   |                                           |                                                    
|Net income                                                                       |                                                                   | $                                         | 7,329                                              
|Adjustments to reconcile net income to net cash provided by operating activities |                                                                   |                                           |                                                    
|                                                                                 | Depreciation and amortization                                     |                                           |                                                    
|                                                                                 | Amortization of deferred financing fees                           |                                           |                                                    
|                                                                                 | Losses on disposals of property and equipment                     |                                           |                                                    
|                                                                                 | Deferred income taxes                                             |                                           |                                                    
|                                                                                 | Tax benefit from stock option exercises                           |                                           |                                                    
|                                                                                 | Changes in assets and liabilities, net of effects of acquisitions |                                           |                                                    
|                                                                                 |                                                                   | Accounts receivable, net                  |                                                    
|                                                                                 |                                                                   | Inventories, net                          |                                                    
|                                                                                 |                                                                   | Prepaid expenses and other current assets |                                                    
|                                                                                 |                                                                   | Other non-current assets, net             |                                                    
|                                                                                 |                                                                   | Accounts payable                          |                                                    
|                                                                                 |                                                                   | Accrued expenses                          |                                                    
|                                                                                 |                                                                   | Other non-current liabilities             |                                                    
|                                                                                 |                                                                   |                                           |                                                    
|                                                                                 |                                                                   |                                           | Net cash provided by operating activities          
|                                                                                 |                                                                   |                                           |                                                    
|Cash flows from investing activities                                             |                                                                   |                                           |                                                    
|Acquisitions of businesses, net of cash acquired                                 |                                                                   |                                           |                                                   
|Purchases of property and equipment                                              |                                                                   |                                           | (2,898                                             
|                                                                                 |                                                                   |                                           |                                                    
|                                                                                 |                                                                   |                                           | Net cash used in investing activities              
|                                                                                 |                                                                   |                                           |                                                    
|Cash flows from financing activities                                             |                                                                   |                                           |                                                    
|Payments on other non-current liabilities                                        |                                                                   |                                           | (225                                               
|Proceeds from long-term debt                                                     |                                                                   |                                           | 1,500                                              
|Payments on long-term debt                                                       |                                                                   |                                           | (8,000                                             
|Proceeds from issuances of common stock                                          |                                                                   |                                           | 1,086                                              
|Purchases of common stock for treasury                                           |                                                                   |                                           | (425                                               
|                                                                                 |                                                                   |                                           |                                                    
|                                                                                 |                                                                   |                                           | Net cash provided by (used in) financing activities
|                                                                                 |                                                                   |                                           |                                                    
|Effect of exchange rate changes on cash                                          |                                                                   |                                           | 5                                                  
|                                                                                 |                                                                   |                                           |                                                    
|Net increase (decrease) in cash                                                  |                                                                   |                                           | (141                                               
|Cash at beginning of period                                                      |                                                                   |                                           | 2,196                                              
|                                                                                 |                                                                   |                                           |                                                    
|Cash at end of period                                                            |                                                                   | $                                         | 2,055                                              
|                                                                                 |                                                                   |                                           |                                                    

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 March 31, 2005, the results of
their operations for the three months and six months ended March 31, 2004 and 2005 and their cash flows for the six months ended March 31, 2004 and 2005, 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 and six months ended March 31,
2005 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, 2004,
which was filed with the Securities and Exchange Commission on December 3, 2004.

2.     CASH

As of March 31, 2005, the Company's cash balance included $1,654 held by the Company's captive insurance subsidiary, American Nutritional Casualty
Insurance, Inc., which is restricted to use by this subsidiary.

3.     ACCOUNTS RECEIVABLE, NET

Accounts receivable, net of allowances for sales returns and doubtful accounts, were as follows:

September 30,
2004

March 31,
2005Accounts receivable

$
12,300

$
12,921Less allowances


(1,733
)

(1,778
)$
10,567

$
11,143


4.     INVENTORIES, NET

Inventories, net of reserves for slow moving, obsolete and/or damaged inventory, were as follows:

September 30,
2004

March 31,
2005Raw materials

$
7,477

$
9,215Work-in-process


6,162


6,450Finished goods


12,290


11,07625,929


26,741Less reserves


(1,871
)

(2,194
)$
24,058

$
24,547


6

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5.     ACQUISITIONS

On March 4, 2005, the Company acquired thePioneer® brand of nutritional supplements, which are
sold in health and natural food stores, by purchasing 100% of the stock of Pioneer Nutritional Formulas, Inc. for approximately $4,016 in cash. This acquisition is in keeping with the Company's
business strategy of consolidating the fragmented industry in which it competes.

This
acquisition was accounted for using the purchase method of accounting. Accordingly, the aggregate purchase price was assigned to the assets acquired and liabilities assumed based on
their estimated fair market values at the date of acquisition. The excess of aggregate purchase price over the fair market values of the assets acquired and liabilities assumed was classified as
goodwill. The Company's Condensed Consolidated Statements of Operations and Comprehensive Income presented herein include the activities of this acquired business from the date of acquisition. The
following reflects the allocation of the aggregate purchase price for this acquisition to the aggregate assets acquired and liabilities assumed:

Current assets

$
600Property, plant and equipment


319Goodwill


3,001Intangible assets


300Current liabilities


(20
)Non-current deferred income taxes


(184
)$
4,016


The
acquired intangible assets represent trademarks and tradenames, which have indefinite lives and are not subject to amortization.

6.     GOODWILL AND INTANGIBLE ASSETS

The change in the carrying amount of goodwill from September 30, 2004 to March 31, 2005 was as follows:

GoodwillBalance as of September 30, 2004

$
14,108Goodwill attributable to fiscal 2005 first quarter acquisition


1,368Goodwill attributable to fiscal 2005 second quarter acquisition


3,001Balance as of March 31, 2005

$
18,477


7

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The
carrying amounts of intangible assets at September 30, 2004 and March 31, 2005 were as follows:

|                                               |                                 | September 30, 2004 |       | March 31, 2005 |   |     
|---------------------------------------------- | ------------------------------- | ------------------ | ----- | -------------- | - | ----
|
|
|Intangible assets subject to amortization:     |                                 |                    |       |                |   |     
|                                               | Non-compete agreements          |                    | $     | 1,000          |   | $   
|                                               | Trademarks/trade names/patents  |                    |       | 300            |   |     
|                                               |                                 |                    |       |                |   |     
|                                               |                                 |                    | 1,300 |                |   | (623
|Intangible assets not subject to amortization: |                                 |                    |       |                |   |     
|                                               | Trademarks/trade names/licenses |                    |       | 6,378          |   |     
|                                               |                                 |                    |       |                |   |     
|                                               |                                 | $                  | 7,678 |                | $ | (623
|                                               |                                 |                    |       |                |   |     

Estimated
future amortization expense related to the net carrying amount of $507 for intangible assets subject to amortization at March 31, 2005 is as follows:

Year Ending September 30,

Estimated
Amortization
Expense(1)2005

$
1882006


2822007


192008


102009


7Thereafter


1$
507


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7.     CAPITAL STOCK

Stock options to purchase 155,965 and 140,915 shares of common stock that were outstanding at March 31, 2004 and 2005, 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. All warrants outstanding at March 31, 2004 were included in the computation of diluted earnings per share. No warrants were outstanding at March 31, 2005.

8

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8.     SHARE PURCHASES

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 common stock of
the Company. Under this program, the Company purchased 28,495 shares during the three months ended March 31, 2005 for an aggregate price of $437. Total purchases under this stock purchase
program from inception to March 31, 2005 were 915,922 shares of common stock for an aggregate price of $6,387. During this time period, the Company also repurchased and cancelled 690,446
warrants related to the Company's common stock for an aggregate purchase price of $1,726. In addition, 55,848 warrants related to the Company's common stock were surrendered and retired in connection
with certain exercises.

On
March 31, 2005, the Company retired 453,483 shares of its common stock, which were held in treasury, with an aggregate value of $5,507.

9.     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 outside the United States were less than 10% of consolidated net sales for the three months and six months ended March 31, 2004 and 2005.

10.   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 for the three months and
six months ended March 31, 2004 and 2005, 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 provisions of Statement of
Financial

9

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Accounting
Standards No. 123,Accounting for Stock-Based Compensation, to stock-based employee compensation.

|                                                                                                                                                |                     | Three months ended March 31, |       | Six months ended March 31, |  
|----------------------------------------------------------------------------------------------------------------------------------------------- | ------------------- | ---------------------------- | ----- | -------------------------- | -
|
|Net income, as reported                                                                                                                         |                     | $                            | 4,161 |                            | $
|Deduct: Total stock-based employee compensation expense determined under the fair value based method for all awards, net of related tax effects |                     |                              | (157  | )                          |  
|                                                                                                                                                |                     |                              |       |                            |  
|Pro forma net income                                                                                                                            |                     | $                            | 4,004 |                            | $
|                                                                                                                                                |                     |                              |       |                            |  
|Earnings per share                                                                                                                              |                     |                              |       |                            |  
|                                                                                                                                                | Basicas reported   |                              | $     | 0.37                       |  
|                                                                                                                                                | Dilutedas reported |                              |       | 0.35                       |  
|                                                                                                                                                | Basicpro forma     |                              | $     | 0.36                       |  
|                                                                                                                                                | Dilutedpro forma   |                              |       | 0.34                       |  

In
December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123R,Share-Based
Payment("SFAS 123R"). SFAS 123R requires companies to expense the value of employee stock options and similar awards. SFAS 123R is effective for annual
financial statements beginning after June 15, 2005 and will apply to all outstanding and unvested share-based payments at the time of adoption. The Company is currently evaluating the impact
SFAS 123R will have on its consolidated financial statements and will adopt such standard as required.

10

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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.

Nutraceutical
International Corporation (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 health and natural product distributors and retailers. The
Company's core business strategy is to acquire, integrate and operate, 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, as well as
strengthened customer relationships.

The
Company sells its branded products under the trademarksSolaray®, KAL®,Nature's Life®,Natural
Balance®,NaturalMax®,VegLife®, Premier One®,Sunny Green®,Natural
Sport®,FunFresh Foods,ActiPet®, Action Labs®,Thompson®,Montana Big
Sky,Body Gold® andPioneer®. The Company
also sells branded bulk products and custom blends under the trademarkMonarch Nutritional Laboratories. Under the name Woodland 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 namesThe Real Food
Company,Thom's Natural Foods andCornucopia Community
Market and its health food stores operate under the trade namesArizona Health Foods, Granola's andPilgrim's Natureway. 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), Arizona
Health Foods, Inc., Natural Balance, Inc., Montana Naturals, Inc., Cornucopia Community Market, Inc., Pilgrim's Natureway LLC and Pioneer Nutritional Formulas, 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.

11

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Results of Operations

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

|                                         |                                     | Three months ended March 31, |      | Six months ended March 31, |     
|---------------------------------------- | ----------------------------------- | ---------------------------- | ---- | -------------------------- | ----
|
|Net sales                                |                                     | 100.0                        | %    | 100.0                      | %   
|                                         | Cost of sales                       |                              | 46.8 | %                          | 48.7
|                                         |                                     |                              |      |                            |     
|Gross profit                             |                                     | 53.2                         | %    | 51.3                       | %   
|                                         | Selling, general and administrative |                              | 34.2 | %                          | 35.8
|                                         | Amortization of intangible assets   |                              | 0.3  | %                          | 0.3 
|                                         |                                     |                              |      |                            |     
|Income from operations                   |                                     | 18.7                         | %    | 15.2                       | %   
|                                         | Interest and other expense, net     |                              | 0.7  | %                          | 0.6 
|                                         |                                     |                              |      |                            |     
|Income before provision for income taxes |                                     | 18.0                         | %    | 14.6                       | %   
|                                         | Provision for income taxes          |                              | 6.9  | %                          | 5.6 
|                                         |                                     |                              |      |                            |     
|Net income                               |                                     | 11.1                         | %    | 9.0                        | %   
|                                         |                                     |                              |      |                            |     
|EBITDA(1)                                |                                     | 21.6                         | %    | 18.0                       | %   
|                                         |                                     |                              |      |                            |     

---

Comparison of the Three Months Ended March 31, 2005 to the Three Months Ended March 31, 2004

Net Sales.Net sales increased by $1.2 million, or 3.2%, to $38.8 million for the three months ended
March 31, 2005 ("second quarter of fiscal 2005") from $37.6 million for the three months ended March 31, 2004 ("second quarter of fiscal 2004"). Net sales of branded products
increased by $0.2 million, or 0.5%, to $31.8 million for the second quarter of fiscal 2005 from $31.6 million for the second quarter of fiscal 2004. The increase in net sales of
branded products was related to the integration of the fiscal 2004 third quarter acquisitions of theNatural Balance® and Montana Big Sky brands,
as well as the March 2005 acquisition of the Pioneer® brand, partially offset by a softness in sales in certain brands and customers within health and natural food stores. Net sales of
other products increased by $1.0 million, or 17.6%, to $7.0 million for the second quarter of fiscal 2005 from $6.0 million for the second quarter of fiscal 2004. This increase
was related to the integration of the fiscal 2004 acquisition of Cornucopia Community Market, Inc. and the fiscal 2005 acquisition of Pilgrim's Natureway LLC, partially offset by a softness in
comparable store sales, which the Company believes is primarily related to decreased low-carb consumer interest and demand.

Gross Profit.Gross profit decreased by $0.1 million, or 0.5%, to $19.9 million for the second quarter of
fiscal 2005 from $20.0 million for the second quarter of fiscal 2004. As a percentage of net sales, gross profit was 51.3% for the second quarter of fiscal 2005 and 53.2% for the second quarter
of fiscal 2004. This decrease in gross profit as a percentage of net sales was primarily attributable to increased material cost as a percentage of net sales, as well as a change in sales mix to lower
margin non-branded products, including retail and bulk.

Selling, General and Administrative.Selling, general and administrative expenses increased by $1.0 million, or 8.1%,
to $13.9 million for the second quarter of fiscal 2005 from $12.9 million for the second quarter of fiscal 2004. As a percentage of net sales, selling, general and administrative
expenses increased to 35.8% for the second quarter of fiscal 2005 from 34.2% for the second quarter of fiscal 2004. This increase in selling, general and administrative expenses was primarily
attributable to the timing of acquisition and integration-related expenses, including technology and employee transition,

12

---



for
the fiscal 2004 acquisitions of theNatural Balance® andMontana Big Sky
brands and Cornucopia Community Market, Inc., as well as the fiscal 2005 acquisitions of Pilgrim's Natureway LLC and thePioneer®
brand. Additionally, increased costs associated with litigation and corporate governance impacted the Company in the second quarter of fiscal 2005.

Amortization of Intangibles.Amortization of intangibles was $0.1 million for the second quarter of fiscal 2005 and
2004. For each period, amortization expense was primarily related to intangible assets recorded in connection with acquisitions.

Interest and Other Expense, Net.Net interest and other expense was $0.2 million for the second quarter of fiscal 2005
and $0.3 million for the second quarter of fiscal 2004 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 both the second quarter of fiscal 2005 and for the
second quarter of fiscal 2004. In each period, the Company's effective tax rate was higher than the federal statutory rate primarily due to state taxes.

Comparison of the Six Months Ended March 31, 2005 to the Six Months Ended March 31, 2004

Net Sales.Net sales increased by $3.3 million, or 4.7%, to $74.1 million for the six months ended
March 31, 2005 from $70.8 million for the six months ended March 31, 2004. Net sales of branded products increased by $1.8 million, or 3.1%, to $60.9 million for the
six months ended March 31, 2005 from $59.1 million for the six months ended March 31, 2004. The increase in net sales of branded products was related to the integration of the
fiscal 2004 third quarter acquisitions of theNatural Balance® andMontana Big
Sky brands, as well as the March 2005 acquisition of thePioneer® brand, partially offset by a
softness in sales in certain brands and customers within health and natural food stores. Net sales of other products increased by $1.5 million, or 12.7%, to $13.2 million for the six
months ended March 31, 2005 from $11.7 million for
the six months ended March 31, 2004. This increase was related to the integration of the fiscal 2004 acquisition of Cornucopia Community Market, Inc. and the fiscal 2005 acquisition of
Pilgrim's Natureway LLC partially offset by a softness in comparable store sales, which the Company believes is primarily related to decreased low-carb consumer interest and demand.

Gross Profit.Gross profit increased by $1.3 million, or 3.5%, to $38.3 million for the six months ended
March 31, 2005 from $37.0 million for the six months ended March 31, 2004. This increase in gross profit was primarily attributable to the increase in net sales. As a percentage
of net sales, gross profit was 51.7% for the six months ended March 31, 2005 and 52.3% for the six months ended March 31, 2004. This decrease in gross profit as a percentage of net sales
was primarily attributable to increased material cost as a percentage of net sales, as well as a change in sales mix to lower margin non-branded products, including retail and bulk.

Selling, General and Administrative.Selling, general and administrative expenses increased by $3.1 million, or 12.6%,
to $27.5 million for the six months ended March 31, 2005 from $24.4 million for the six months ended March 31, 2004. As a percentage of net sales, selling, general and
administrative expenses increased to 37.1% for the six months ended March 31, 2005 from 34.5% for the six months ended March 31, 2004. This increase in selling, general and
administrative expenses was primarily attributable to the timing of acquisition and integration-related expenses, including technology and employee transition, for the fiscal 2004 acquisitions of the Natural
Balance® andMontana Big Sky brands and Cornucopia Community
Market, Inc., as well as the fiscal 2005 acquisition of Pilgrim's Natureway LLC and thePioneer® brand. Additionally, increased costs
associated with litigation and corporate governance impacted the Company during the six months ended March 31, 2005.

13

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Amortization of Intangibles.Amortization of intangibles was $0.2 million for the six months ended March 31,
2005 and 2004. For each period, amortization expense was primarily related to intangible assets recorded in connection with acquisitions.

Interest and Other Expense, Net.Net interest and other expense was $0.4 million for the six months ended
March 31, 2005 and $0.5 million for the six months ended March 31, 2004 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 both the six months ended March 31, 2005
and for the six months ended March 31, 2004. In each period, the Company's effective tax rate was higher than the federal statutory rate primarily due to state taxes.

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. Targets and trends in EBITDA are used as a measure for determining management's performance compensation and are also used by the Company's creditors in assessing
debt covenant compliance. The Company understands that while EBITDA is used by 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 March 31, |       | Six months ended March 31,
|---------------------------------- |  | ---------------------------- | ----- | --------------------------
|
|Net income                         |  | $                            | 4,161 |                           
|Provision for income taxes         |  |                              | 2,605 |                           
|Interest and other expense, net(1) |  |                              | 276   |                           
|Depreciation and amortization      |  |                              | 1,074 |                           
|                                   |  |                              |       |                           
|EBITDA                             |  | $                            | 8,116 |                           
|                                   |  |                              |       |                           

---

The
Company's EBITDA decreased to $7.0 million for the second quarter of fiscal 2005 from $8.1 million for the second quarter of fiscal 2004. EBITDA as a percentage of net
sales decreased to 18.0% for the second quarter of fiscal 2005 from 21.6% for the second quarter of fiscal 2004. This decrease in EBITDA was primarily related to increases in selling, general and
administrative expenses (see"Results of Operations").

The
Company's EBITDA decreased to $12.8 million for the six months ended March 31, 2005 from $14.5 million for the six months ended March 31, 2004. EBITDA as
a percentage of net sales decreased to 17.3% for the six months ended March 31, 2005 from 20.5% for the six months ended March 31, 2004. This decrease in EBITDA was primarily related to
increases in selling, general and administrative expenses (see"Results of Operations").

14

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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 $29.2 million as of March 31, 2005 compared to $26.5 million as of September 30, 2004. This
increase in working capital was primarily the result of increases in cash, accounts receivable and inventories and decreases in accounts payable and accrued expenses, partially offset by a decrease in
prepaid expenses and other current assets.

Net
cash provided by operating activities for the six months ended March 31, 2005 was $9.7 million compared to $8.8 million for the comparable period in fiscal 2004.
The increase in net cash provided by operating activities for the six months ended March 31, 2005 was primarily attributable to the change in cash provided by accounts receivable, inventories,
prepaid expenses and other current assets and accrued expenses, partially offset by decreases in net income and the tax benefit from stock option exercises, as well as the change in cash used for
accounts payable.

Net
cash used in investing activities was $8.0 million for the six months ended March 31, 2005 and $2.9 million for the comparable period in fiscal 2004. The
Company's investing activities consisted primarily of acquisitions of businesses during the six months ended March 31, 2005 and capital expenditures. Capital expenditures during these periods
related primarily to distribution and manufacturing equipment, building improvements related to facility consolidation efforts and information systems, including retail technology. The Company intends
to finance anticipated capital expenditures through internally generated cash flow and, if necessary, through funds provided under its revolving credit facility.

Net
cash provided by (used in) financing activities was $0.2 million for the six months ended March 31, 2005 compared to $(6.1) million for the comparable period in fiscal
2004. During these periods, financing activities primarily related to borrowings and repayments under the Company's revolving credit facility, purchases of common stock for treasury and proceeds from
the issuance of common stock.

The
Company's current revolving credit facility had available credit borrowings of $53.75 million at March 31, 2005. The available credit borrowings are reduced quarterly
by $1.25 million with the next reduction occurring in June 2005. Borrowings under the revolving credit facility are collateralized by substantially all assets of the Company. At the
Company's election, borrowings bear interest at the applicable Eurodollar Rate plus a variable margin or at a base rate, which is the higher of the Federal Funds Rate plus 0.5% or the Prime Lending
Rate, plus a variable margin. At March 31, 2005, the applicable weighted-average interest rate for borrowings was 4.30%. The Company is also required to pay a variable quarterly fee on the
unused balance under the revolving credit facility. At March 31, 2005, 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.

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 March 31, 2005, the Company was in compliance with these restrictive covenants.

15

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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
outstanding under the revolving credit facility.

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
incurrence 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 2005.

The
Company's significant non-cancelable operating lease obligations as of March 31, 2005 were as follows:

Year Ending September 30,

Operating
Leases(1)2005

$
9782006


1,2012007


1,0232008


4142009


161Thereafter


150$
3,927


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New Accounting Standards

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123R, Share-Based Payment("SFAS 123R"). SFAS 123R requires companies to expense the value of employee stock options and similar awards.
SFAS 123R is effective for annual financial statements beginning after June 15, 2005 and will apply to all outstanding and unvested share-based payments at the time of adoption. The
Company is currently evaluating the impact SFAS 123R will have on its consolidated financial statements and will adopt such standard as required.

Based
on the Company's review of other new accounting standards released during the quarter ended March 31, 2005, the Company did not identify any standard requiring adoption that
would have a significant impact on its 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. 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.

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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. Information contained in this Form 10-Q contains certain 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. 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 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) slow or negative growth in the nutritional supplement industry;
(iv) changes in laws and regulations, including adverse federal, state or foreign legislation or regulation or adverse determinations or actions by regulators; (v) 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;
(vi) unavailability of or interruption in the supply of utilities, including electricity and telecommunications; (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) adequacy and availability of insurance coverage, and any losses or damages sustained by the
Company not covered by insurance; (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) absence of clinical trials for many of the Company's products; (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) inability of the Company's retail stores to attain or maintain profitability; (xxiii) other factors discussed in the Company's
filings with the Securities and Exchange Commission or referenced in its press releases, and (xxiv) 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.

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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 March 31, 2005, the applicable weighted-average interest rate for
borrowings was 4.30% and the Company had total borrowings outstanding of $7.0 million. To date, the Company has not obtained interest rate protection with respect to these borrowings.

With
respect to its international operations, the Company is subject to currency fluctuations; however, the Company does not believe that these fluctuations would have a material adverse
impact on the Company's financial position. To date, the Company has not hedged any of its potential foreign currency exposures.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures.The Company's chief executive officer and chief financial officer evaluated
the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period
covered by this report. Based on this evaluation, the chief executive officer and chief financial officer concluded that the Company's disclosure controls and procedures were effective to provide
reasonable assurance that material information related to the Company and its consolidated subsidiaries would be made known to them by others within those entities, particularly during the period in
which this report was prepared.

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, not absolute, assurances 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 were no significant changes in the Company's internal controls over financial reporting
that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.

18

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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. In the opinion of management, the outcomes of legal matters in which the Company is presently
involved are not probable and reasonably estimable.

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

The Annual Meeting of Stockholders of the Company was held on February 14, 2005, at which meeting the stockholders voted to elect two individuals to serve
as Class I Directors of the Company and to
ratify the appointment of PricewaterhouseCoopers LLP as the Company's independent auditors for the fiscal year ending September 30, 2005.

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

Nominee

For

Against/
Withheld

Abstain

Non-VotingJ. Kimo Esplin

10,757,351

441,794



305,060Jeffrey A. Hinrichs

8,497,510

2,701,635



305,060


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



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

For

Against/
Withheld

Abstain

Non-VotingRatification of PricewaterhouseCoopers LLP as the Company's independent auditors

11,000,323

196,722

2,100

305,060


19

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Item 6. Exhibits and Reports on Form 8-K



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 28, 2005 |  | By:                                                 

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