Quarterly Report (10-q)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

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

for the Quarterly Period Ended December 31, 2015

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, 2^nd Floor, Park City, Utah (Address of principal executive offices)		84060 (Zip code)

(435) 655-6106
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ý NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ý NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act:


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

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

At January 26, 2016, the registrant had 9,418,419 shares of common stock outstanding.

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NUTRACEUTICAL INTERNATIONAL CORPORATION

INDEX

Description

Part I.	Financial Information		3
	Item 1.	Financial Statements (unaudited)	3
		Condensed Consolidated Balance Sheets—December 31, 2015 and September 30, 2015	3
		Condensed Consolidated Statements of Comprehensive Income—Three Months Ended December 31, 2015 and 2014	4
		Condensed Consolidated Statements of Cash Flows—Three Months Ended December 31, 2015 and 2014	5
		Notes to Condensed Consolidated Financial Statements	6
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	15
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
	Item 4.	Controls and Procedures	22
Part II.	Other Information		24
	Item 1.	Legal Proceedings	24
	Item 1A.	Risk Factors	24
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
	Item 6.	Exhibits	25

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

NUTRACEUTICAL INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(dollars in thousands)

	December 31, 2015			September 30, 2015(1)

ASSETS
Current assets:
Cash	$	5,344		$	4,615
Accounts receivable, net		18,365			16,798
Inventories		61,843			59,440
Prepaid expenses and other current assets		3,899			4,195
Deferred income taxes		1,176			1,167

Total current assets		90,627			86,215
Property, plant and equipment, net		77,908			77,645
Goodwill		30,925			24,384
Intangible assets, net		24,651			17,605
Deferred income taxes		3,473			4,932
Other non-current assets		1,632			1,668

Total assets	$	229,216		$	212,449

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	13,211		$	14,023
Accrued expenses		4,452			6,505

Total current liabilities		17,663			20,528
Long-term debt		48,000			31,500
Other non-current liabilities		178			174

Total liabilities		65,841			52,202

Stockholders' equity:
Common stock		95			95
Additional paid-in capital		5,879			6,961
Retained earnings		157,859			153,618
Accumulated other comprehensive income		(458	)		(379	)
Treasury stock		—			(48	)

Total stockholders' equity		163,375			160,247

Total liabilities and stockholders' equity	$	229,216		$	212,449

(1): The condensed consolidated balance sheet as of September 30, 2015 has been prepared using information from the audited financial statements at that date.

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

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NUTRACEUTICAL INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

(dollars in thousands, except per share data)

	Three months ended December 31,

	2015			2014
Net sales	$	55,959		$	53,044
Cost of sales		27,851			27,189

Gross profit		28,108			25,855
Operating expenses
Selling, general and administrative		20,342			19,554
Amortization of intangible assets		981			732

Income from operations		6,785			5,569
Interest and other expense, net		274			297

Income before provision for income taxes		6,511			5,272
Provision for income taxes		2,270			1,921

Net income	$	4,241		$	3,351
Other comprehensive loss:
Foreign currency translation adjustment, net of tax		(79	)		(221	)

Comprehensive income	$	4,162		$	3,130

Net income per common share
Basic	$	0.45		$	0.35
Diluted		0.45			0.35
Weighted average common shares outstanding
Basic		9,459,470			9,653,113
Dilutive effect of stock options		—			6,894

Diluted		9,459,470			9,660,007

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

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NUTRACEUTICAL INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(dollars in thousands)

	Three months ended December 31,

	2015			2014
Cash flows from operating activities:
Net income	$	4,241		$	3,351
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,482			3,239
Amortization of deferred financing fees		31			36
Losses on disposals of property, plant and equipment		—			1
Deferred income taxes		1,450			(75	)
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable, net		(365	)		47
Inventories		(146	)		907
Prepaid expenses and other current assets		658			(11	)
Other non-current assets		(2	)		60
Accounts payable		(853	)		(2,817	)
Accrued expenses		(1,558	)		(1,735	)
Other non-current liabilities		4			4

Net cash provided by operating activities		6,942			3,007

Cash flows from investing activities:
Purchases of property, plant and equipment		(2,079	)		(2,634	)
Acquisitions of businesses		(19,026	)		(81	)

Net cash used in investing activities		(21,105	)		(2,715	)

Cash flows from financing activities:
Proceeds from debt		20,000			1,000
Payments on debt		(3,500	)		(2,000	)
Payments of deferred financing fees		—			(420	)
Proceeds from issuances of common stock		14			25
Purchases of common stock for treasury		(1,604	)		(1,074	)

Net cash provided by (used in) financing activities		14,910			(2,469	)

Effect of exchange rate changes on cash		(18	)		(132	)

Net increase (decrease) in cash		729			(2,309	)
Cash at beginning of period		4,615			6,232

Cash at end of period	$	5,344		$	3,923

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

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NUTRACEUTICAL INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(dollars in thousands, except per share data)

1. BASIS OF PRESENTATION

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

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

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

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all necessary adjustments, consisting of normal recurring adjustments, to state fairly the consolidated financial position of the Company as of December 31, 2015, the results of its operations for the three months ended December 31, 2015 and 2014 and its cash flows for the three months ended December 31, 2015 and 2014, in conformity with accounting principles generally accepted in the United States of America ("US GAAP") for interim financial information applied on a consistent basis. Results for the three months ended December 31, 2015 are not necessarily indicative of the results to be expected for the full fiscal year.

Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with US GAAP 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, 2015, which was filed with the Securities and Exchange Commission on November 19, 2015.

Use of Estimates

The preparation of these financial statements in conformity with US GAAP required management to make estimates and assumptions that affected the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of net sales and expenses during the reported periods. Significant estimates included values and lives assigned to acquired intangible assets, reserves for customer returns and allowances, uncollectible accounts receivable, valuation adjustments for slow-moving, obsolete and/or damaged inventory and valuation and recoverability of long-lived assets. Actual results may differ from these estimates.

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NUTRACEUTICAL INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(dollars in thousands, except per share data)

1. BASIS OF PRESENTATION (Continued)

New Accounting Standards

In November 2015, the Financial Accounting Standards Board ("FASB") issued authoritative guidance, which is included in Accounting Standards Codification ("ASC") 740, "Income Taxes." This guidance simplifies the presentation of deferred income taxes and requires that deferred tax assets and liabilities be classified as noncurrent in the classified statement of financial position. This guidance is effective for the Company as of October 1, 2017 and is not expected to have a material impact on the consolidated financial statements as the guidance only changes the classification of deferred income taxes.

In September 2015, the FASB issued authoritative guidance, which is included in ASC 805, "Business Combinations." This guidance simplifies the accounting for measurement-period adjustments and is effective for the Company as of October 1, 2016. The Company is currently evaluating the impact this standard may have on its consolidated financial statements.

In July 2015, the FASB issued authoritative guidance, which is included in ASC 330, "Inventory." This guidance simplifies the accounting for measuring inventory at the lower of cost and net realizable value and is effective for the Company as of October 1, 2017. The Company is currently evaluating the impact this standard may have on its consolidated financial statements.

In May 2014, the FASB issued authoritative guidance, which is included in ASC 606, "Revenue from Contracts with Customers." This guidance provides a single, comprehensive revenue recognition model for all contracts with customers and requires that a company recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In July 2015, the FASB delayed the effective date of this guidance by one year. As a result, this guidance is effective for the Company as of October 1, 2018 and shall be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is currently evaluating the impact this standard may have on its consolidated financial statements.

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

2. ACCOUNTS RECEIVABLE

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

	December 31, 2015			September 30, 2015

Accounts receivable	$	19,417		$	17,882
Less allowances		(1,052	)		(1,084	)

	$	18,365		$	16,798

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NUTRACEUTICAL INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(dollars in thousands, except per share data)

3. INVENTORIES

Inventories were comprised of the following:

	December 31, 2015		September 30, 2015

Raw materials	$	26,137	$	23,106
Work-in-process		10,299		9,755
Finished goods		25,407		26,579

	$	61,843	$	59,440

4. ACQUISITIONS

During the three months ended December 31, 2015, the Company made one acquisition of a business. On October 6, 2015, the Company acquired certain operating assets of Dynamic Health Laboratories, Inc. ("Dynamic Health"), a manufacturer of primarily organic and natural liquid nutritional products, for $19,026 in cash.

During the three months ended December 31, 2014, the Company made one acquisition of a business. On November 18, 2014, the Company acquired certain operating assets of Agape Health Products for $81 in cash.

The Condensed Consolidated Statements of Comprehensive Income and the Condensed Consolidated Statements of Cash Flows presented herein include the activities of these acquired businesses from their respective dates of acquisition. Since the date of acquisition, net sales of $3,858 and gross profit of $1,527 for Dynamic Health were included in the Condensed Consolidated Statements of Comprehensive Income for the three months ended December 31, 2015. The Company tracks selling, general and administrative expenses on a consolidated basis, not on a brand-by-brand basis. As a result, the disclosure of any results after gross profit is impracticable. The expected long-term sales and expense synergies of acquired businesses generally are not realized immediately following acquisition, as certain transition and integration matters must be completed.

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

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NUTRACEUTICAL INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(dollars in thousands, except per share data)

4. ACQUISITIONS (Continued)

aggregate purchase price for the fiscal 2016 acquisition and the final allocation of the aggregate purchase price for the fiscal 2015 acquisition to the aggregate assets acquired:

	Fiscal 2016 Acquisition		Fiscal 2015 Acquisition

Aggregate assets acquired:
Current assets	$	3,821	$	41
Property, plant and equipment		644		—
Goodwill		6,541		—
Intangible assets		8,020		40

	$	19,026	$	81

The fiscal 2016 and fiscal 2015 acquired intangible assets totaling $8,020 and $40, respectively, related to trademarks, tradenames and customer relationships, and are being amortized over periods of six to fifteen years for financial statement purposes. The fiscal 2016 and fiscal 2015 acquired intangible assets are expected to be deductible for tax purposes over fifteen years. Goodwill, which is not subject to amortization for financial statement purposes, of $6,541 for fiscal 2016, is expected to be deductible for tax purposes over fifteen years.

The results of Dynamic Health have been included in the consolidated financial statements from the date of acquisition (October 6, 2015). The following table provides unaudited pro forma information for the three months ended December 31, 2014, as if the acquisition of Dynamic Health had been completed on October 1, 2014. Pro forma information was not provided for the three months ended December 31, 2015 as the acquisition was completed near the beginning of this period and the pro forma results are not materially different than actual results. The information has been provided for illustrative purposes only and is not necessarily indicative of the actual results that would have been achieved by the Company for the period presented or that will be achieved in the future. The pro forma information has been adjusted to give effect to items directly attributable to the Dynamic Health acquisition. These adjustments include acquisition costs, amortization expense associated with acquired intangible assets, interest expense associated with borrowings on the Company's revolving credit facility to fund the acquisition, application of the Company's depreciable lives policy for property, plant and equipment, elimination of intercompany transactions and any consequential tax effects.

	Three Months Ended December 31, 2014

Net sales	$	57,621
Net income	$	3,419

This information has not been adjusted to reflect any changes in the operations of the business subsequent to acquisition. Changes in the operations of the acquired business may include, but are not limited to, discontinuation of certain customers and/or products, application of the Company's pricing and credit policies, integration of systems and personnel, changes in manufacturing processes, relocation of facilities, potential cost synergies and changes in marketing and sales programs. Due to these changes, future results could be materially different than the pro forma information provided.

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NUTRACEUTICAL INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(dollars in thousands, except per share data)

5. GOODWILL AND INTANGIBLE ASSETS

The change in the carrying amount of goodwill from September 30, 2015 to December 31, 2015 was as follows:

	Goodwill		Accumulated Impairment			Net

Balance as of October 1, 2015	$	64,778	$	(40,394	)	$	24,384
Goodwill attributable to fiscal 2016 acquisition		6,541		—			6,541

Balance as of December 31, 2015		71,319		(40,394	)		30,925

The carrying amounts of intangible assets at December 31, 2015 and September 30, 2015 were as follows:

	December 31, 2015							September 30, 2015							Weighted- Average Amortization Period (Years)

	Gross Carrying Amount(1)		Accumulated Amortization(1)			Net Carrying Amount		Gross Carrying Amount(1)		Accumulated Amortization(1)			Net Carrying Amount		Weighted- Average Amortization Period (Years)
Intangible assets subject to amortization:
Trademarks/tradenames/licenses	$	13,555	$	(2,277	)	$	11,278	$	12,470	$	(1,966	)	$	10,504		11
Customer relationships/non-compete agreements		23,815		(10,442	)		13,373		16,836		(9,773	)		7,063		7
Developed software and technology		772		(772	)		—		772		(772	)		—		5

		38,142		(13,491	)		24,651		30,078		(12,511	)		17,567
Intangible assets not subject to amortization:
Trademarks/tradenames/licenses		—		—			—		38		—			38

	$	38,142	$	(13,491	)	$	24,651	$	30,116	$	(12,511	)	$	17,605

(1): Amounts include the impact of foreign currency translation adjustments.

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NUTRACEUTICAL INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(dollars in thousands, except per share data)

5. GOODWILL AND INTANGIBLE ASSETS (Continued)

Estimated future amortization expense related to the December 31, 2015 net carrying amount of $24,651 for intangible assets subject to amortization is as follows:

Year Ending September 30,	Estimated Amortization Expense

2016(1)	$	2,898
2017		3,506
2018		3,315
2019		2,888
2020		2,799
Thereafter		9,245

	$	24,651

(1): Estimated amortization expense for the year ending September 30, 2016 includes only amortization to be recorded after December 31, 2015.

General and economic conditions may impact retail and consumer demand, as well as the market price of the Company's common stock, and could negatively impact the Company's future operating performance, cash flow and/or stock price and could result in goodwill and/or intangible asset impairment charges being recorded in future periods. Also, the Company periodically reviews its brands to achieve marketing, sales and operational synergies. These reviews could result in brands being consolidated or discontinued and could result in intangible asset impairment charges being recorded in future periods. Goodwill and/or intangible asset impairment charges could materially impact the Company's consolidated financial statements. The valuation of goodwill and intangible assets is subject to a high degree of judgment, uncertainty and complexity.

6. DEBT

Debt was comprised of the following:

	December 31, 2015		September 30, 2015

Long-term debt—revolving credit facility	$	48,000	$	31,500

The carrying value of the Company's debt approximates fair value at December 31, 2015 and September 30, 2015. Estimated fair values for debt have been determined based on borrowing rates currently available to the Company for bank loans with similar terms and maturities and are classified as Level 2 (significant observable inputs other than quoted prices) in the FASB's fair value hierarchy.

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NUTRACEUTICAL INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(dollars in thousands, except per share data)

6. DEBT (Continued)

the lenders and compliance with certain covenants and conditions. The lenders under the Credit Agreement continue to be Rabobank International and Wells Fargo. To date, the Company has not experienced any difficulties in accessing the available funds under the Credit Agreement. Deferred financing fees of $420 related to the Credit Agreement are being amortized over the term of the Credit Agreement.

At December 31, 2015, the Company had outstanding revolving credit borrowings of $48,000 under the Credit Agreement. Borrowings under the Credit Agreement are collateralized by substantially all assets of the Company. At the Company's election, borrowings bear interest at the applicable Eurodollar Rate plus a variable margin or at a Base Rate plus a variable margin. Base Rate is the higher of: (i) the Prime Lending Rate, (ii) the Federal Funds Rate plus 0.5% or (iii) the one-month Eurodollar Rate multiplied by the Statutory Reserve Rate plus 1.0% (capitalized terms are defined in the Credit Agreement, a copy of which was filed with the Securities and Exchange Commission on November 5, 2014). At December 31, 2015, the applicable weighted-average interest rate for outstanding borrowings was 1.66%. The Company is also required to pay a variable quarterly fee on the unused balance under the Credit Agreement. At December 31, 2015, 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 Credit Agreement matures on November 4, 2019, and the Company is required to repay all principal and interest outstanding under the Credit Agreement on such date.

The Credit Agreement contains restrictive covenants, including limitations on incurring other indebtedness and requirements that the Company maintain certain financial ratios. As of December 31, 2015, the Company was in compliance with the restrictive covenants. Upon the occurrence of a default, the lender has various remedies or rights, which may include proceeding against the collateral or requiring the Company to repay all amounts outstanding under the Credit Agreement.

7. SHARE PURCHASES

During the three months ended December 31, 2015 and 2014, the Company purchased 65,411 and 48,562 shares of common stock for an aggregate price of $1,604 and $1,074, respectively. All of these shares of common stock held in treasury were retired prior to December 31 in the respective quarter of purchase. As of December 31, 2015, the Company was permitted to purchase up to 415,850 additional shares under its approved purchase plan, with no expiration date or restrictions. The Company accounts for treasury shares using the cost method.

8. STOCK OPTIONS AND OTHER EQUITY AWARDS

As of December 31, 2015, the Company had no outstanding options to purchase shares of common stock, as all previously issued options were exercised or expired prior to September 30, 2015. There were no stock options exercised during the three months ended December 31, 2014.

No options to purchase shares of common stock for the three months ended December 31, 2014 were excluded from the computation of diluted earnings per share because none of the stock options were anti-dilutive.

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NUTRACEUTICAL INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(dollars in thousands, except per share data)

8. STOCK OPTIONS AND OTHER EQUITY AWARDS (Continued)

On January 28, 2013, stockholders approved the Nutraceutical International Corporation 2013 Long-Term Equity Incentive Plan (the "2013 Plan") and the reservation of 800,000 shares of the Company's common stock for issuance under the 2013 Plan. Equity awards available under the 2013 Plan include stock options, stock appreciation rights and stock awards. In conjunction with the Company's fiscal 2015 and fiscal 2014 incentive compensation (bonus) payments, 22,664 and 24,827 shares of the Company's common stock were issued, respectively. These non-cash stock awards were granted on December 11, 2015 and December 11, 2014 at an aggregate fair value of $556 and $504, respectively, with fair value being determined by the closing price of the Company's common stock on the grant date. These stock awards were registered, unrestricted and fully vested on the grant date. As of December 31, 2015, 720,721 shares of the Company's common stock were available for issuance under the 2013 Plan.

9. SEGMENTS

Segment identification and selection is consistent with the management structure used by the Company's chief operating decision maker 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's chief operating decision maker does not review operating results on a disaggregated basis; rather, the chief operating decision maker reviews operating results on an aggregate basis.

Net sales attributed to customers in the United States and foreign countries for the three months ended December 31, 2015 and 2014 were as follows:

	Three Months Ended December 31,

	2015		2014
United States	$	50,050	$	46,725
Foreign countries		5,909		6,319

	$	55,959	$	53,044

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

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NUTRACEUTICAL INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(dollars in thousands, except per share data)

9. SEGMENTS (Continued)

The Company's net sales by product group for the three months ended December 31, 2015 and 2014 were as follows:

	Three Months Ended December 31,

	2015		2014
Branded nutritional supplements and other natural products	$	50,499	$	47,088
Other(1)		5,460		5,956

	$	55,959	$	53,044

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

In October 2015, the Company made a decision to classify certain net sales in the other product group that were previously included in the branded nutritional supplements and other natural products group. As a result of this decision, the other product group net sales amount for the three months ended December 31, 2014 has been increased by $789 from the prior year's presentation.

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

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

We manufacture and sell nutritional supplements and other natural products under numerous brands, including Solaray®, KAL®, Dynamic Health™, Nature's Life®, LifeTime®, Natural Balance®, NaturalCare®, Health from the Sun®, Pioneer®, Nutra BioGenesis™, Life-flo®, Organix South®, Heritage Store® and Monarch Nutraceuticals™.

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

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

Critical Accounting Policies

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

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

Inventories—Valuation adjustments are made for slow-moving, obsolete and/or damaged inventory based on a periodic analysis of individual inventory items, including an evaluation of historical usage and/or movement, age, expiration date and general condition. If market demand and/or consumer preferences are less favorable than historical trends or future expectations, additional valuation

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

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

We evaluate the recoverability of property, plant and equipment whenever events or circumstances indicate that the carrying amount of an asset group may not be recoverable. We measure recoverability of an asset group by comparison of its carrying amount to the future undiscounted cash flows the asset group is expected to generate. If an asset group is considered to be impaired, the difference between the carrying amount and the fair value of the impaired asset group is recognized as an impairment charge.

Goodwill and Intangible Assets—Goodwill and intangible assets require estimates and judgments in determining the initial recognition and measurement, including factors and assumptions used in determining fair values and useful lives. Intangible assets with finite useful lives are amortized and are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is tested annually for impairment and when events or changes in circumstances indicate the carrying value may not be recoverable. We perform our annual impairment testing as of September 30 each year, which is the last day of our fiscal year.

A two-step process is used to test for goodwill impairment. The first step is to determine if there is an indication of impairment by comparing the estimated fair value of each reporting unit to its carrying value, including existing goodwill. Reporting unit fair values are estimated using market data as well as other factors. Goodwill is considered impaired if the carrying value of a reporting unit exceeds the estimated fair value. Upon an indication of impairment, a second step is performed to measure the amount of the impairment by comparing the implied fair value of the reporting unit's goodwill with its carrying value.

Amortizable intangible assets are reviewed for recoverability by comparing an asset group's carrying amount to the future undiscounted cash flows the asset group is expected to generate. If an asset group is considered to be impaired, the difference between the carrying amount and the fair value of the impaired asset group is recorded.

General and economic conditions may impact retail and consumer demand, as well as the market price of our common stock, and could negatively impact our future operating performance, cash flow and/or stock price and could result in goodwill and/or intangible asset impairment charges being recorded in future periods. Also, we periodically review our brands to achieve marketing, sales and operational synergies. These reviews could result in brands being consolidated or discontinued and could result in intangible asset impairment charges being recorded in future periods. Such goodwill and/or intangible asset impairment charges could materially impact our consolidated financial statements. The valuation of goodwill and intangible assets is subject to a high degree of judgment, uncertainty and complexity.

Revenue Recognition—Revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the product has been shipped and the customer takes ownership and assumes the risk of loss; (3) the selling price is fixed or determinable; and (4) collection of the resulting receivable is reasonably assured. We believe that these criteria are satisfied upon shipment from our facilities or, in the case of our neighborhood natural food markets and health food stores, at the point of sale within these stores. Revenue is reduced by provisions for estimated customer returns and allowances, which are based on historical averages that have not varied significantly for the periods

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presented, as well as specific known claims, if any. No other significant deductions from revenue must be estimated at the point in time that revenue is recognized.

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

New Accounting Standards

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

Results of Operations

The following table sets forth certain Consolidated Statements of Comprehensive Income data as a percentage of net sales for the periods indicated:

	Three Months Ended December 31,

	2015			2014
Net sales		100.0	%		100.0	%
Cost of sales		49.8	%		51.3	%

Gross profit		50.2	%		48.7	%
Selling, general and administrative		36.4	%		36.9	%
Amortization of intangible assets		1.8	%		1.4	%

Income from operations		12.0	%		10.4	%
Interest and other expense, net		0.4	%		0.5	%

Income before provision for income taxes		11.6	%		9.9	%
Provision for income taxes		4.0	%		3.6	%

Net income		7.6	%		6.3	%

Adjusted EBITDA(1)		18.3	%		16.6	%

(1): See "—Adjusted EBITDA."

Comparison of the Three Months Ended December 31, 2015 to the Three Months Ended December 31, 2014

Net Sales. Net sales increased by $3.0 million, or 5.5%, to $56.0 million for the three months ended December 31, 2015 (the "first quarter of fiscal 2016") from $53.0 million for the three months ended December 31, 2014 (the "first quarter of fiscal 2015"). Net sales of branded nutritional supplements and other natural products increased by $3.5 million, or 7.2%, to $50.5 million for the first quarter of fiscal 2016, compared to $47.0 million for the first quarter of fiscal 2015. The increase in net sales of branded nutritional supplements and other natural products was primarily related to the net sales contributions of the fiscal 2015 and fiscal 2016 acquisitions and, to a lesser extent, price increases of $1.6 million, partially offset by a decrease in sales volume of branded products to certain customers. Other net sales were $5.5 million for the first quarter of fiscal 2016 and $6.0 million for the first quarter of fiscal 2015.

Gross Profit. Gross profit increased by $2.2 million, or 8.7%, to $28.1 million for the first quarter of fiscal 2016 from $25.9 million for the first quarter of fiscal 2015. As a percentage of net sales, gross profit increased to 50.2% for the first quarter of fiscal 2016 from 48.7% for the first quarter of fiscal

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2015. This increase in gross profit was primarily related to the increase in net sales and, to a lesser extent, a decrease in certain manufacturing overhead costs.

Selling, General and Administrative. Selling, general and administrative expenses increased by $0.7 million, or 4.0%, to $20.3 million for the first quarter of fiscal 2016 from $19.6 million for the first quarter of fiscal 2015. This increase in selling, general and administrative expenses was primarily attributable to operational and transition costs related to the fiscal 2015 and fiscal 2016 acquisitions. As a percentage of net sales, selling, general and administrative expenses were 36.4% for the first quarter of fiscal 2016 and 36.9% for the first quarter of fiscal 2015.

Amortization of Intangible Assets. Amortization of intangible assets was $1.0 million for first quarter of fiscal 2016 and $0.7 million for the first quarter of fiscal 2015. 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 $0.3 million for both the first quarter of fiscal 2016 and fiscal 2015 and primarily consisted of interest expense on indebtedness under our revolving credit facility.

Provision for Income Taxes. Our effective tax rate was 34.9% for the first quarter of fiscal 2016 and 36.4% for the first quarter of fiscal 2015. The decrease in the effective tax rate was primarily related to the federal reinstatement of the credit for increasing research activities.

Adjusted EBITDA

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

•

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

•

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

•

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

•: Analysts—who estimate our projected Adjusted EBITDA and other EBITDA-based metrics in their independently-developed financial models for investors;
•: Creditors—who evaluate our operating performance based on compliance with certain EBITDA-based debt covenants;
•: Investment Bankers—who use EBITDA-based metrics in their written evaluations and comparisons of companies within our industry; and
•: Board of Directors and Executive Management—who use EBITDA-based metrics for evaluating management performance relative to our operating budget and bank covenant compliance, as well as our ability to service debt and raise capital for growth opportunities,

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including acquisitions, which are a critical component of our stated strategy. Generally, we have recorded a monthly accrual for incentive compensation as a percentage of Adjusted EBITDA, which has been paid out to executive management, as well as other employees, upon completion of our annual audit.

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

	Three Months Ended December 31,

	2015		2014
	(dollars in thousands)
Net income	$	4,241	$	3,351
Provision for income taxes		2,270		1,921
Interest and other expense, net(1)		274		297
Depreciation and amortization		3,482		3,239

Adjusted EBITDA	$	10,267	$	8,808

(1): Includes amortization of deferred financing fees.

Our Adjusted EBITDA increased to $10.3 million for the first quarter of fiscal 2016 from $8.8 million for the first quarter of fiscal 2015. Adjusted EBITDA as a percentage of net sales increased to 18.3% for the first quarter of fiscal 2016 from 16.6% for the first quarter of fiscal 2015.

Seasonality

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

Liquidity and Capital Resources

We had working capital of $73.0 million as of December 31, 2015, compared to $65.7 million as of September 30, 2015. The increase in working capital was primarily the result of increases in accounts receivable and inventories and a decrease in accrued expenses.

Net cash provided by operating activities for the three months ended December 31, 2015 was $6.9 million, compared to $3.0 million for the comparable period in fiscal 2015. This increase in net cash provided by operating activities for the three months ended December 31, 2015 was primarily attributable to an increase in net income as well as changes in operating assets and liabilities.

Net cash used in investing activities was $21.1 million for the three months ended December 31, 2015, compared to $2.7 million for the comparable period in fiscal 2015. Our investing activities consisted of acquisitions of businesses and capital expenditures. The capital expenditures primarily related to buildings, building improvements, distribution and manufacturing equipment and information systems.

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During the three months ended December 31, 2015, we made one acquisition of a business. On October 6, 2015, we acquired certain operating assets of Dynamic Health Laboratories, Inc., a manufacturer of primarily organic and natural liquid nutritional products, for $19.0 million in cash.

During the three months ended December 31, 2014, we made one acquisition of a business. On November 18, 2014, we acquired certain operating assets of Agape Health Products for $0.1 million in cash.

Net cash provided by financing activities was $14.9 million for the three months ended December 31, 2015 and net cash used in financing activities was $2.5 million for the comparable period in fiscal 2015. During these periods, financing activities primarily related to borrowings and repayments under our revolving credit facility, payments of deferred financing fees, purchases of common stock for treasury and proceeds from the issuance of common stock related to the direct stock purchase plan. During the three months ended December 31, 2015, net borrowings under our revolving credit facility were $16.5 million and primarily related to the acquisition of certain operating assets of Dynamic Health Laboratories, Inc.

In October 2007, we registered a direct stock purchase plan with the Securities and Exchange Commission. The purpose of this direct stock purchase plan is to provide a convenient way for existing stockholders, as well as new investors, to purchase shares of our common stock. A total of 1,500,000 shares of our common stock were registered under the plan, with 606 shares purchased during the three months ended December 31, 2015. As of December 31, 2015, there were 1,376,838 shares of common stock available for purchase.

On November 4, 2014, we amended our revolving credit facility (the "Credit Agreement"). The Credit Agreement extends the term of the credit facility to November 2019, increases the available credit borrowings to $100.0 million with no automatic reductions and provides an accordion feature that can increase the available credit borrowings to $130.0 million, subject to approval by the lenders and compliance with certain covenants and conditions. The lenders under the Credit Agreement continue to be Rabobank International and Wells Fargo. To date, we have not experienced any difficulties in accessing the available funds under the Credit Agreement. Deferred financing fees of $0.4 million related to the Credit Agreement are being amortized over the term of the Credit Agreement.

At December 31, 2015, we had outstanding revolving credit borrowings of $48.0 million under the Credit Agreement. Borrowings under the Credit Agreement are collateralized by substantially all of our assets. At our election, borrowings bear interest at the applicable Eurodollar Rate plus a variable margin or at a Base Rate plus a variable margin. Base Rate is the higher of: (i) the Prime Lending Rate, (ii) the Federal Funds Rate plus 0.5% or (iii) the one-month Eurodollar Rate multiplied by the Statutory Reserve Rate plus 1.0% (capitalized terms are defined in the Credit Agreement, a copy of which was filed with the Securities and Exchange Commission on November 5, 2014). At December 31, 2015, the applicable weighted-average interest rate for outstanding borrowings was 1.66%. We are also required to pay a quarterly fee on the unused balance under the Credit Agreement. At December 31, 2015, 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 Credit Agreement matures on November 4, 2019, and we are required to repay all principal and interest outstanding under the Credit Agreement on such date.

The Credit Agreement contains restrictive covenants, including limitations on incurring certain other indebtedness and requirements that we maintain certain financial ratios. As of December 31, 2015, we were in compliance with the restrictive covenants. Upon the occurrence of a default, the lender has various remedies or rights, which may include proceeding against the collateral or requiring us to repay all amounts outstanding under the Credit Agreement.

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

Contractual Obligations and Other Commitments

Our significant non-cancelable contractual obligations and other commitments as of December 31, 2015 were as follows:

	Payments Due By Period

Contractual Obligations and Other Commitments	Total		Less Than 1 Year		1 - 3 Years		4 - 5 Years		After 5 Years
	(dollars in thousands)
Revolving credit facility	$	48,000	$	—	$	—	$	48,000	$	—
Interest on revolving credit facility(a)		3,676		956		1,911		809		—
Operating leases		6,600		3,972		2,014		564		50

Total	$	58,276	$	4,928	$	3,925	$	49,373	$	50

(a): Represents estimated interest obligations associated with our outstanding revolving credit facility balance of $48.0 million at December 31, 2015, assuming no principal payments are made before maturity, a weighted-average interest rate of 1.66% and an underutilization fee rate of 0.25%.

Off-Balance Sheet Arrangements

Our operating lease commitments are disclosed in the Contractual Obligations and Other Commitments table above. As of December 31, 2015, we had no other off-balance sheet arrangements that have had, or are reasonably likely to have, a material effect on our consolidated financial statements.

Inflation

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

Forward-Looking Statements

This Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to our financial condition, results of operations and business. These forward-looking statements can be identified by the use of terms such as "believe," "expects," "plan," "intend," "may," "will," "should," "can," or "anticipates," or the negative thereof, or variations thereon, or comparable terminology, or by discussions of strategy. These statements involve known and unknown risks, uncertainties and other factors that may cause industry trends or our actual results to be materially different from any future results expressed or implied by these statements.

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Important factors that may cause our results to differ from these forward-looking statements include, but are not limited to: (i) changes in or new government regulations or increased enforcement of the same including adverse determinations by regulators; (ii) unavailability of desirable acquisitions, inability to complete them or inability to integrate them; (iii) increased costs, including from increased raw material or energy prices; (iv) changes in general worldwide economic or political conditions; (v) adverse publicity or negative consumer perception regarding nutritional supplements; (vi) issues with obtaining raw materials of adequate quality or quantity; (vii) litigation and claims, including product liability, intellectual property and other types; (viii) disruptions from or following acquisitions including the loss of customers; (ix) increased competition; (x) slow or negative growth in the nutritional supplement industry or the healthy foods channel; (xi) the loss of key personnel or the inability to manage our operations efficiently; (xii) problems with information management systems, manufacturing efficiencies and operations, including system interruptions and security/cybersecurity breaches; (xiii) insurance coverage issues; (xiv) the volatility of the stock market generally and of our stock specifically; (xv) increases in the cost of borrowings or unavailability of additional debt or equity capital, or both, or fluctuations in foreign currencies; and (xvi) interruption of business or negative impact on sales and earnings due to acts of God, acts of war, terrorism, bio-terrorism, civil unrest and other factors outside of our control.

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk

At our election, borrowings bear interest at the applicable Eurodollar Rate plus a variable margin or at a Base Rate plus a variable margin. Base Rate is the higher of: (i) the Prime Lending Rate, (ii) the Federal Funds Rate plus 0.5% or (iii) the one-month Eurodollar Rate multiplied by the Statutory Reserve Rate plus 1.0%. At December 31, 2015, the applicable weighted-average interest rate for borrowings was 1.66% and we had total borrowings outstanding of $48.0 million. A hypothetical 100 basis point change in interest rates would not have had a material impact on our reported net income or cash flows for the three months ended December 31, 2015 and 2014.

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

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow for timely decisions regarding required disclosure.

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

As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision of and with the participation of our management, including our principal executive and principal financial

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officers, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2015. Based on the foregoing, our principal executive and principal financial officers have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2015.

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

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

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

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

In the opinion of management, the losses related to individual regulatory and legal matters in which we are presently involved are not probable and no estimate can be made of the range of potential gains or losses. While incapable of estimation, in the opinion of management, none of the regulatory and legal matters in which we are involved are individually expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows. However, our aggregate liability arising from regulatory and legal proceedings related to these matters or future matters could have a material effect on our financial position, results of operations or cash flows.

Item 1A. Risk Factors

There have been no material changes in our risk factors from those disclosed in our 2015 Annual Report on Form 10-K.

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

We did not sell any unregistered equity securities during the quarterly period ended December 31, 2015.

Prior to fiscal 2016, our Board of Directors approved a share purchase program authorizing us to buy up to 4,500,000 shares of our common stock. As of December 31, 2015, there were 415,850 shares available for purchase under this program. The shares available for purchase under this program have no expiration date. Purchases under this program during the three months ended December 31, 2015 occurred in October, November and December as follows:

Period		Average Price Paid Per Share

October 1 - 31, 2015	22,000	$	23.74	22,000
November 1 - 30, 2015	20,000		24.56	20,000
December 1 - 31, 2015	23,411		25.25	23,411

	65,411		24.53	65,411	415,850

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Item 6. Exhibits


	31.1		Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1		Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	101.INS		XBRL Instance Document(1)
	101.SCH		XBRL Taxonomy Extension Schema Document(1)
	101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document(1)
	101.DEF		XBRL Taxonomy Extension Definition Linkbase Document(1)
	101.LAB		XBRL Taxonomy Extension Labels Linkbase Document(1)
	101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document(1)

(1): Filed herewith.

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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 28, 2016	By:	/s/ CORY J. MCQUEEN Cory J. McQueen Vice President and Chief Financial Officer (Principal Financial and Accounting Officer and Duly Authorized Officer)

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Exhibit 31.1

CERTIFICATIONS

I, Frank W. Gay II, certify that:

1.

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

2.

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

3.

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

4.

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

a): designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b): designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c): evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d): disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

5.

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

a): all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and
b): any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.


Date: January 28, 2016		/s/ FRANK W. GAY II Frank W. Gay II Chairman of the Board and Chief Executive Officer (Principal Executive Officer)

CERTIFICATIONS

I, Cory J. McQueen, certify that:

1.

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

2.

3.

4.

a): designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b): designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c): evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d): disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

5.

a): all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and
b): any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.


Date: January 28, 2016		/s/ CORY J. MCQUEEN Cory J. McQueen Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

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Exhibit 31.1

CERTIFICATIONS
CERTIFICATIONS

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Exhibit 32.1

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

In connection with the quarterly report on Form 10-Q of Nutraceutical International Corporation ("Nutraceutical") for the period ended December 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Frank W. Gay II, Chairman of the Board and Chief Executive Officer of Nutraceutical, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1): the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2): the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Nutraceutical.


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

Date: January 28, 2016

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

In connection with the quarterly report on Form 10-Q of Nutraceutical International Corporation ("Nutraceutical") for the period ended December 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Cory J. McQueen, Vice President and Chief Financial Officer of Nutraceutical, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1): the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2): the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Nutraceutical.


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

Date: January 28, 2016

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

QuickLinks

Exhibit 32.1

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

Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Dec. 31, 2015	Jan. 26, 2016
Document and Entity Information
Entity Registrant Name	NUTRACEUTICAL INTERNATIONAL CORP
Entity Central Index Key	0001050007
Document Type	10-Q
Document Period End Date	Dec. 31, 2015
Amendment Flag	false
Current Fiscal Year End Date	--09-30
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		9,418,419
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2015	Sep. 30, 2015
Current assets:
Cash	$ 5,344	$ 4,615
Accounts receivable, net	18,365	16,798
Inventories	61,843	59,440
Prepaid expenses and other current assets	3,899	4,195
Deferred income taxes	1,176	1,167
Total current assets	90,627	86,215
Property, plant and equipment, net	77,908	77,645
Goodwill	30,925	24,384
Intangible assets, net	24,651	17,605
Deferred income taxes	3,473	4,932
Other non-current assets	1,632	1,668
Total assets	229,216	212,449
Current liabilities:
Accounts payable	13,211	14,023
Accrued expenses	4,452	6,505
Total current liabilities	17,663	20,528
Long-term debt	48,000	31,500
Other non-current liabilities	178	174
Total liabilities	65,841	52,202
Stockholders' equity:
Common stock	95	95
Additional paid-in capital	5,879	6,961
Retained earnings	157,859	153,618
Accumulated other comprehensive income	(458)	(379)
Treasury stock		(48)
Total stockholders' equity	163,375	160,247
Total liabilities and stockholders' equity	$ 229,216	$ 212,449

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net sales	$ 55,959	$ 53,044
Cost of sales	27,851	27,189
Gross profit	28,108	25,855
Operating expenses:
Selling, general and administrative	20,342	19,554
Amortization of intangible assets	981	732
Income from operations	6,785	5,569
Interest and other expense, net	274	297
Income before provision for income taxes	6,511	5,272
Provision for income taxes	2,270	1,921
Net income	4,241	3,351
Other comprehensive loss:
Foreign currency translation adjustment, net of tax	(79)	(221)
Comprehensive income	$ 4,162	$ 3,130
Net income per common share:
Basic (in dollars per share)	$ 0.45	$ 0.35
Diluted (in dollars per share)	$ 0.45	$ 0.35
Weighted average common shares outstanding:
Basic (in shares)	9,459,470	9,653,113
Dilutive effect of stock options (in shares)		6,894
Diluted (in shares)	9,459,470	9,660,007

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Cash flows from operating activities:
Net income	$ 4,241	$ 3,351
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,482	3,239
Amortization of deferred financing fees	31	36
Losses on disposals of property, plant and equipment		1
Deferred income taxes	1,450	(75)
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable, net	(365)	47
Inventories	(146)	907
Prepaid expenses and other current assets	658	(11)
Other non-current assets	(2)	60
Accounts payable	(853)	(2,817)
Accrued expenses	(1,558)	(1,735)
Other non-current liabilities	4	4
Net cash provided by operating activities	6,942	3,007
Cash flows from investing activities:
Purchases of property, plant and equipment	(2,079)	(2,634)
Acquisitions of businesses	(19,026)	(81)
Net cash used in investing activities	(21,105)	(2,715)
Cash flows from financing activities:
Proceeds from debt	20,000	1,000
Payments on debt	(3,500)	(2,000)
Payments of deferred financing fees		(420)
Proceeds from issuances of common stock	14	25
Purchases of common stock for treasury	(1,604)	(1,074)
Net cash provided by (used in) financing activities	14,910	(2,469)
Effect of exchange rate changes on cash	(18)	(132)
Net increase (decrease) in cash	729	(2,309)
Cash at beginning of period	4,615	6,232
Cash at end of period	$ 5,344	$ 3,923

BASIS OF PRESENTATION	3 Months Ended
BASIS OF PRESENTATION	Dec. 31, 2015
Description of Business
Basis Of Presentation	1. BASIS OF PRESENTATION Nutraceutical International Corporation and its subsidiaries (the "Company") is an integrated manufacturer, marketer, distributor and retailer of branded nutritional supplements and other natural products sold primarily to and through domestic health and natural food stores. Internationally, the Company markets and distributes branded nutritional supplements and other natural products to and through health and natural product distributors and retailers. The Company's core business strategy is to acquire, integrate and operate businesses in the natural products industry that manufacture, market and distribute branded nutritional supplements. The Company believes that the consolidation and integration of these acquired businesses provide ongoing financial synergies through increased scale and market penetration, as well as strengthened customer relationships. The Company manufactures and sells nutritional supplements and other natural products under numerous brands, including Solaray®, KAL®, Dynamic Health™, Nature's Life®, LifeTime®, Natural Balance®, NaturalCare®, Health from the Sun®, Pioneer®, Nutra BioGenesis™, Life-flo®, Organix South®, Heritage Store® and Monarch Nutraceuticals™. The Company owns neighborhood natural food markets, which operate under the trade names The Real Food Company™, Thom's Natural Foods™, Cornucopia Community Market™ and Granola's™. The Company also owns health food stores, which operate under various trade names, including Fresh Vitamins™ and Peachtree Natural Foods®. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all necessary adjustments, consisting of normal recurring adjustments, to state fairly the consolidated financial position of the Company as of December 31, 2015, the results of its operations for the three months ended December 31, 2015 and 2014 and its cash flows for the three months ended December 31, 2015 and 2014, in conformity with accounting principles generally accepted in the United States of America ("US GAAP") for interim financial information applied on a consistent basis. Results for the three months ended December 31, 2015 are not necessarily indicative of the results to be expected for the full fiscal year. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with US GAAP 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, 2015, which was filed with the Securities and Exchange Commission on November 19, 2015. Use of Estimates The preparation of these financial statements in conformity with US GAAP required management to make estimates and assumptions that affected the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of net sales and expenses during the reported periods. Significant estimates included values and lives assigned to acquired intangible assets, reserves for customer returns and allowances, uncollectible accounts receivable, valuation adjustments for slow-moving, obsolete and/or damaged inventory and valuation and recoverability of long-lived assets. Actual results may differ from these estimates. New Accounting Standards In November 2015, the Financial Accounting Standards Board ("FASB") issued authoritative guidance, which is included in Accounting Standards Codification ("ASC") 740, "Income Taxes." This guidance simplifies the presentation of deferred income taxes and requires that deferred tax assets and liabilities be classified as noncurrent in the classified statement of financial position. This guidance is effective for the Company as of October 1, 2017 and is not expected to have a material impact on the consolidated financial statements as the guidance only changes the classification of deferred income taxes. In September 2015, the FASB issued authoritative guidance, which is included in ASC 805, "Business Combinations." This guidance simplifies the accounting for measurement-period adjustments and is effective for the Company as of October 1, 2016. The Company is currently evaluating the impact this standard may have on its consolidated financial statements. In July 2015, the FASB issued authoritative guidance, which is included in ASC 330, "Inventory." This guidance simplifies the accounting for measuring inventory at the lower of cost and net realizable value and is effective for the Company as of October 1, 2017. The Company is currently evaluating the impact this standard may have on its consolidated financial statements. In May 2014, the FASB issued authoritative guidance, which is included in ASC 606, "Revenue from Contracts with Customers." This guidance provides a single, comprehensive revenue recognition model for all contracts with customers and requires that a company recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In July 2015, the FASB delayed the effective date of this guidance by one year. As a result, this guidance is effective for the Company as of October 1, 2018 and shall be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is currently evaluating the impact this standard may have on its consolidated financial statements. The Company periodically reviews new accounting standards that are issued. Although some of these accounting standards may be applicable to the Company, the Company has not identified any other new standards that it believes merit further discussion, and the Company expects that none would have a significant impact on its consolidated financial statements.

ACCOUNTS RECEIVABLE

3 Months Ended

Dec. 31, 2015

ACCOUNTS RECEIVABLE

Accounts Receivable

2. ACCOUNTS RECEIVABLE

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

	December 31, 2015		September 30, 2015
Accounts receivable	$	19,417	$	17,882
Less allowances		(1,052)		(1,084)
	$	18,365	$	16,798

INVENTORIES

3 Months Ended

Dec. 31, 2015

INVENTORIES

Inventories

3. INVENTORIES

Inventories were comprised of the following:

	December 31, 2015		September 30, 2015
Raw materials	$	26,137	$	23,106
Work-in-process		10,299		9,755
Finished goods		25,407		26,579
	$	61,843	$	59,440

ACQUISITIONS

3 Months Ended

Dec. 31, 2015

ACQUISITIONS.

ACQUISITIONS

4. ACQUISITIONS

	Fiscal 2016 Acquisition		Fiscal 2015 Acquisition
Aggregate assets acquired:
Current assets	$	3,821	$	41
Property, plant and equipment		644		—
Goodwill		6,541		—
Intangible assets		8,020		40
	$	19,026	$	81

	Three Months Ended December 31, 2014
Net sales	$	57,621
Net income	$	3,419

GOODWILL AND INTANGIBLE ASSETS

3 Months Ended

Dec. 31, 2015

Goodwill and Intangible Assets

Goodwill and Intangible Assets

5. GOODWILL AND INTANGIBLE ASSETS

The change in the carrying amount of goodwill from September 30, 2015 to December 31, 2015 was as follows:

	Goodwill		Accumulated Impairment		Net
Balance as of October 1, 2015	$	64,778	$	(40,394)	$	24,384
Goodwill attributable to fiscal 2016 acquisition		6,541		—		6,541
Balance as of December 31, 2015		71,319		(40,394)		30,925

The carrying amounts of intangible assets at December 31, 2015 and September 30, 2015 were as follows:

	December 31, 2015							September 30, 2015							Weighted- Average Amortization Period (Years)
	Gross Carrying Amount(1)		Accumulated Amortization(1)			Net Carrying Amount		Gross Carrying Amount(1)		Accumulated Amortization(1)			Net Carrying Amount		Weighted- Average Amortization Period (Years)
Intangible assets subject to amortization:
Trademarks/tradenames/licenses	$	13,555	$	(2,277	)	$	11,278	$	12,470	$	(1,966	)	$	10,504		11
Customer relationships/non-compete agreements		23,815		(10,442	)		13,373		16,836		(9,773	)		7,063		7
Developed software and technology		772		(772	)		—		772		(772	)		—		5
		38,142		(13,491	)		24,651		30,078		(12,511	)		17,567
Intangible assets not subject to amortization:
Trademarks/tradenames/licenses		—		—			—		38		—			38
	$	38,142	$	(13,491)		$	24,651	$	30,116	$	(12,511)		$	17,605


(1)	Amounts include the impact of foreign currency translation adjustments.

Estimated future amortization expense related to the December 31, 2015 net carrying amount of $24,651 for intangible assets subject to amortization is as follows:

Year Ending September 30,	Estimated Amortization Expense
2016(1)	$	2,898
2017		3,506
2018		3,315
2019		2,888
2020		2,799
Thereafter		9,245
	$	24,651


(1)	Estimated amortization expense for the year ending September 30, 2016 includes only amortization to be recorded after December 31, 2015.

DEBT

3 Months Ended

Dec. 31, 2015

DEBT

Debt

6. DEBT

Debt was comprised of the following:

		December 31, 2015			September 30, 2015
Long-term debt—revolving credit facility		$	48,000		$	31500

On November 4, 2014, the Company amended its revolving credit facility (the "Credit Agreement"). The Credit Agreement extends the term of the credit facility to November 2019, increases the available credit borrowings to $100,000 with no automatic reductions and provides an accordion feature that can increase the available credit borrowings to $130,000, subject to approval by the lenders and compliance with certain covenants and conditions. The lenders under the Credit Agreement continue to be Rabobank International and Wells Fargo. To date, the Company has not experienced any difficulties in accessing the available funds under the Credit Agreement. Deferred financing fees of $420 related to the Credit Agreement are being amortized over the term of the Credit Agreement.

SHARE PURCHASES	3 Months Ended
SHARE PURCHASES	Dec. 31, 2015
SHARE PURCHASES
SHARE PURCHASES	7. SHARE PURCHASES During the three months ended December 31, 2015 and 2014, the Company purchased 65,411 and 48,562 shares of common stock for an aggregate price of $1,604 and $1,074, respectively. All of these shares of common stock held in treasury were retired prior to December 31 in the respective quarter of purchase. As of December 31, 2015, the Company was permitted to purchase up to 415,850 additional shares under its approved purchase plan, with no expiration date or restrictions. The Company accounts for treasury shares using the cost method.

STOCK OPTIONS AND OTHER EQUITY AWARDS	3 Months Ended
STOCK OPTIONS AND OTHER EQUITY AWARDS	Dec. 31, 2015
STOCK OPTIONS AND OTHER EQUITY AWARDS
Stock Options and Other Equity awards	8. STOCK OPTIONS AND OTHER EQUITY AWARDS As of December 31, 2015, the Company had no outstanding options to purchase shares of common stock, as all previously issued options were exercised or expired prior to September 30, 2015. There were no stock options exercised during the three months ended December 31, 2014. No options to purchase shares of common stock for the three months ended December 31, 2014 were excluded from the computation of diluted earnings per share because none of the stock options were anti-dilutive. On January 28, 2013, stockholders approved the Nutraceutical International Corporation 2013 Long-Term Equity Incentive Plan (the "2013 Plan") and the reservation of 800,000 shares of the Company's common stock for issuance under the 2013 Plan. Equity awards available under the 2013 Plan include stock options, stock appreciation rights and stock awards. In conjunction with the Company's fiscal 2015 and fiscal 2014 incentive compensation (bonus) payments, 22,664 and 24,827 shares of the Company's common stock were issued, respectively. These non-cash stock awards were granted on December 11, 2015 and December 11, 2014 at an aggregate fair value of $556 and $504, respectively, with fair value being determined by the closing price of the Company's common stock on the grant date. These stock awards were registered, unrestricted and fully vested on the grant date. As of December 31, 2015, 720,721 shares of the Company's common stock were available for issuance under the 2013 Plan.

SEGMENTS

3 Months Ended

Dec. 31, 2015

Segments

Segments

9. SEGMENTS

Net sales attributed to customers in the United States and foreign countries for the three months ended December 31, 2015 and 2014 were as follows:

	Three Months Ended December 31,
	2015		2014
United States	$	50,050	$	46,725
Foreign countries		5,909		6,319

	$	55,959	$	53,044

The Company's net sales by product group for the three months ended December 31, 2015 and 2014 were as follows:

	Three Months Ended December 31,
	2015		2014
Branded nutritional supplements and other natural products	$	50,499	$	47,088
Other(1)		5,460		5,956

	$	55,959	$	53,044


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

ACCOUNTS RECEIVABLE (Tables)

3 Months Ended

Dec. 31, 2015

ACCOUNTS RECEIVABLE

Schedule of accounts receivable, net of allowances for sales returns and doubtful accounts

	December 31, 2015		September 30, 2015
Accounts receivable	$	19,417	$	17,882
Less allowances		(1,052)		(1,084)
	$	18,365	$	16,798

INVENTORIES (Tables)

3 Months Ended

Dec. 31, 2015

INVENTORIES

Schedule of inventories

	December 31, 2015		September 30, 2015
Raw materials	$	26,137	$	23,106
Work-in-process		10,299		9,755
Finished goods		25,407		26,579

	$	61,843	$	59,440

ACQUISITIONS (Tables)

3 Months Ended

Dec. 31, 2015

Schedule of preliminary allocation of the aggregate purchase price for the acquisitions to the aggregate assets acquired

	Fiscal 2016 Acquisition		Fiscal 2015 Acquisition
Aggregate assets acquired:
Current assets	$	3,821	$	41
Property, plant and equipment		644		—
Goodwill		6,541		—
Intangible assets		8,020		40

	$	19,026	$	81

Dynamic Health Laboratories Inc.

Schedule of unaudited pro forma information

	Three Months Ended December 31, 2014
Net sales	$	57,621
Net income	$	3,419

GOODWILL AND INTANGIBLE ASSETS (Tables)

3 Months Ended

Dec. 31, 2015

Goodwill and Intangible Assets

Schedule of changes in the carrying amount of goodwill

	Goodwill		Accumulated Impairment		Net
Balance as of October 1, 2015	$	64,778	$	(40,394)	$	24,384
Goodwill attributable to fiscal 2016 acquisition		6,541		—		6,541

Balance as of December 31, 2015		71,319		(40,394)		30,925

Schedule of carrying amounts of intangible assets

	December 31, 2015							September 30, 2015							Weighted- Average Amortization Period (Years)
	Gross Carrying Amount(1)		Accumulated Amortization(1)			Net Carrying Amount		Gross Carrying Amount(1)		Accumulated Amortization(1)			Net Carrying Amount		Weighted- Average Amortization Period (Years)
Intangible assets subject to amortization:
Trademarks/tradenames/licenses	$	13,555	$	(2,277	)	$	11,278	$	12,470	$	(1,966	)	$	10,504		11
Customer relationships/non-compete agreements		23,815		(10,442	)		13,373		16,836		(9,773	)		7,063		7
Developed software and technology		772		(772	)		—		772		(772	)		—		5

		38,142		(13,491	)		24,651		30,078		(12,511	)		17,567
Intangible assets not subject to amortization:
Trademarks/tradenames/licenses		—		—			—		38		—			38

	$	38,142	$	(13,491	)	$	24,651	$	30,116	$	(12,511	)	$	17,605


(1)	Amounts include the impact of foreign currency translation adjustments.

Schedule of estimated amortization expense related to intangible assets subject to amortization

Year Ending September 30,	Estimated Amortization Expense
2016(1)	$	2,898
2017		3,506
2018		3,315
2019		2,888
2020		2,799
Thereafter		9,245

	$	24,651


(1)	Estimated amortization expense for the year ending September 30, 2016 includes only amortization to be recorded after December 31, 2015.

DEBT (Tables)

3 Months Ended

Dec. 31, 2015

DEBT

Schedule of debt

	December 31, 2015		September 30, 2015
Long-term debt—revolving credit facility	$	48,000	$	31,500

SEGMENTS (Tables)

3 Months Ended

Dec. 31, 2015

Segments

Schedule of net sales attributed to customers in the United States and foreign countries

	Three Months Ended December 31,
	2015		2014
United States	$	50,050	$	46,725
Foreign countries		5,909		6,319

	$	55,959	$	53,044

Schedule of net sales by product group

	Three Months Ended December 31,
	2015		2014
Branded nutritional supplements and other natural products	$	50,499	$	47,088
Other(1)		5,460		5,956

	$	55,959	$	53,044


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

ACCOUNTS RECEIVABLE (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Sep. 30, 2015
ACCOUNTS RECEIVABLE
Accounts receivable	$ 19,417	$ 17,882
Less allowances	(1,052)	(1,084)
Accounts receivable, net	$ 18,365	$ 16,798

INVENTORIES (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Sep. 30, 2015
INVENTORIES
Raw materials	$ 26,137	$ 23,106
Work-in-process	10,299	9,755
Finished goods	25,407	26,579
Inventories	$ 61,843	$ 59,440

ACQUISITIONS (Details) $ in Thousands	3 Months Ended
ACQUISITIONS (Details) $ in Thousands	Dec. 31, 2015 USD ($) item	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($) item	Sep. 30, 2015 USD ($)
ACQUISITIONS
Number of business acquisitions \| item	1		1
Net sales	$ 55,959		$ 53,044
Gross profit	28,108		25,855
Aggregate assets acquired:
Goodwill	$ 30,925	$ 30,925		$ 24,384
Minimum
Aggregate assets acquired:
Amortization period	6 years
Maximum
Aggregate assets acquired:
Amortization period	15 years
Acquisitions
ACQUISITIONS
Aggregate purchase price in cash	$ 19,026		81
Aggregate assets acquired:
Current assets	3,821	3,821	41
Property, plant and equipment	644	644
Goodwill	6,541	6,541
Intangible assets	8,020	8,020	40
Aggregate purchase price	19,026	19,026	81
Acquired intangible assets expected to be deductible for tax purposes	$ 8,020	8,020	$ 40
Expected period for deduction of acquired intangible assets for tax purposes	15 years		15 years
Goodwill expected to be deductible for tax purposes	$ 6,541	6,541
Expected period for deduction of acquired goodwill for tax purposes	15 years
Dynamic Health Laboratories Inc.
ACQUISITIONS
Net sales		3,858
Gross profit		$ 1,527
Unaudited pro forma information
Net sales			$ 57,621
Net income			$ 3,419

GOODWILL AND INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2015	Sep. 30, 2015
GOODWILL
Goodwill	$ 71,319	$ 64,778
Accumulated Impairment	(40,394)	(40,394)
Goodwill attributable to fiscal 2016 acquisitions	6,541
Carrying amount of goodwill	30,925	24,384
Intangible assets subject to amortization:
Gross Carrying Amount	38,142	30,078
Accumulated Amortization	(13,491)	(12,511)
Net Carrying Amount	24,651	17,567
Total intangible assets
Gross Carrying Amount	38,142	30,116
Net Carrying Amount	24,651	17,605
Estimated future amortization expense related to intangible assets
2016	2,898
2017	3,506
2018	3,315
2019	2,888
2020	2,799
Thereafter	9,245
Net Carrying Amount	$ 24,651	17,567
Trademarks/tradenames/licenses
Intangible assets subject to amortization:
Weighted-Average Amortization Period
Intangible assets not subject to amortization:
Carrying Amount		38
Trademarks/tradenames/patents
Intangible assets subject to amortization:
Gross Carrying Amount	$ 13,555	12,470
Accumulated Amortization	(2,277)	(1,966)
Net Carrying Amount	$ 11,278	10,504
Weighted-Average Amortization Period	11 years
Estimated future amortization expense related to intangible assets
Net Carrying Amount	$ 11,278	10,504
Customer relationships/ non-compete agreements
Intangible assets subject to amortization:
Gross Carrying Amount	23,815	16,836
Accumulated Amortization	(10,442)	(9,773)
Net Carrying Amount	$ 13,373	7,063
Weighted-Average Amortization Period	7 years
Estimated future amortization expense related to intangible assets
Net Carrying Amount	$ 13,373	7,063
Developed software and technology
Intangible assets subject to amortization:
Gross Carrying Amount	772	772
Accumulated Amortization	$ (772)	$ (772)
Weighted-Average Amortization Period	5 years

DEBT (Details) - USD ($) $ in Thousands	3 Months Ended
DEBT (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Sep. 30, 2015	Nov. 04, 2014
DEBT
Long-term debt-revolving credit facility	$ 48,000	$ 31,500
Statutory Reserve Rate
DEBT
Reference rate	one-month Eurodollar Rate
Margin over reference rate (as a percent)	1.00%
Restated Credit Agreement
DEBT
Available credit borrowings			$ 100,000
Deferred financing cost			420
Outstanding revolving credit borrowings	$ 48,000
Weighted-average interest rate (as a percent)	1.66%
Quarterly fee on the unused balance (as a percent)	0.25%
Restated Credit Agreement \| Federal Funds Rate
DEBT
Reference rate	Federal Funds Rate
Margin over reference rate (as a percent)	0.50%
Restated Credit Agreement \| Eurodollar Rate
DEBT
Reference rate	Eurodollar Rate
Interval for payment of accrued interest under option one	1 month
Interval for payment of accrued interest under option two	2 months
Interval for payment of accrued interest under option three	3 months
Restated Credit Agreement \| Prime Lending Rate
DEBT
Reference rate	Prime Lending Rate
Credit Agreement, accordion feature
DEBT
Available credit borrowings			$ 130,000

SHARE PURCHASES (Details) - USD ($) $ in Thousands	3 Months Ended
SHARE PURCHASES (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Share purchases
Additional number of shares authorized to be repurchased	415,850
Common Stock
Share purchases
Shares of common stock purchased	65,411	48,562
Aggregate price at which shares of common stock purchased (in dollars)	$ 1,604	$ 1,074

STOCK OPTIONS AND OTHER EQUITY AWARDS (Details) - Stock options	3 Months Ended
	Dec. 31, 2015 shares
Number of Options
Exercised (in shares)	0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]
Options outstanding	0

STOCK OPTIONS AND OTHER EQUITY AWARDS (Details 2)	3 Months Ended
STOCK OPTIONS AND OTHER EQUITY AWARDS (Details 2)	Dec. 31, 2014 shares
Stock options
Antidilutive securities
Options to purchase shares of common stock excluded from the computation of diluted earnings per share (in shares)	0

STOCK OPTIONS AND OTHER EQUITY AWARDS (Details 3) - 2013 Plan - USD ($) $ in Thousands			12 Months Ended
	Dec. 11, 2015	Dec. 11, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2015	Jan. 28, 2013
STOCK OPTIONS AND OTHER EQUITY AWARDS
Shares of common stock reserved for issuance						800,000
Equity compensation payments (in shares)			22,664	24,827
Equity compensation payments	$ 556	$ 504
Shares of common stock available for issuance					720,721

SEGMENTS (Details) $ in Thousands	3 Months Ended
SEGMENTS (Details) $ in Thousands	Dec. 31, 2015 USD ($) segment	Dec. 31, 2014 USD ($)
Segments
Number of operating segments \| segment	1
SEGMENTS
Net sales	$ 55,959	$ 53,044
Branded nutritional supplements and other natural products
SEGMENTS
Net sales	50,499	47,088
Other
SEGMENTS
Net sales	5,460	5,956
Increase in product group net sales from prior year due to classify certain net sales		789
United States
SEGMENTS
Net sales	50,050	46,725
Foreign countries
SEGMENTS
Net sales	$ 5,909	$ 6,319

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