1050007--12/10/2009--NUTRACEUTICAL_INTERNATIONAL

related topics

{product, liability, claim}

{capital, credit, financial}

{customer, product, revenue}

{acquisition, growth, future}

{personnel, key, retain}

{product, market, service}

{financial, litigation, operation}

{system, service, information}

{competitive, industry, competition}

{control, financial, internal}

{tax, income, asset}

{property, intellectual, protect}

{stock, price, share}

{cost, regulation, environmental}

{condition, economic, financial}

Regulatory, Product Liability and Insurance Risks Our products are subject to government regulation, both in the United States and abroad, which could increase our costs significantly and limit or prevent the sale of our products. If we experience product recalls, we may incur significant and unexpected costs, and our business reputation could be adversely affected. We may experience product liability claims and litigation to prosecute such claims, and although we maintain product liability insurance, which we believe to be adequate for our needs, there can be no assurance that our insurance coverage will be adequate or that we will be able to maintain adequate insurance coverage. Our success is linked to the size and growth rate of the vitamin, mineral and supplement market and an adverse change in the size or growth rate of that market could have a material adverse effect on us. Because a substantial majority of our sales are to or through health food stores, we are dependent to a large degree upon the success of this channel as well as the success of specific retailers in the channel. We are highly dependent upon consumers' perception of the safety and quality of our products as well as similar products distributed by other companies in our industry, and adverse publicity and negative public perception regarding particular ingredients or products or our industry in general could limit our ability to increase revenue and grow our business. We face intense competition from competitors that are larger, more established and that possess greater resources than we do, and if we are unable to compete effectively, we may be unable to maintain sufficient market share to sustain profitability. The nutritional supplement industry increasingly relies on intellectual property rights and although we seek to ensure that we do not infringe the intellectual property rights of others, there can be no assurance that third parties will not assert intellectual property infringement claims against us, which claims may result in substantial costs and diversion of management and other resources and could have a material adverse effect on our business, financial condition, and operating results. We may be affected adversely by increased utility and fuel costs. Adverse economic conditions may harm our business. Business Strategy and Operational Risks If we are unable to retain key personnel, our ability to manage our business effectively and continue our growth could be negatively impacted. As a part of our business strategy, we have made and expect to continue to make acquisitions that could disrupt our operations and harm our operating results. Because we depend on outside suppliers with whom we do not have long-term agreements for raw materials, we may be unable to obtain adequate supplies of raw materials for our products at favorable prices or at all, which could result in product shortages and back orders for our products, with a resulting loss of net sales and profitability. Our success is dependent on the accuracy, reliability, and proper use of sophisticated and dependable information processing systems and management information technology and any interruption in these systems could have a material adverse effect on our business, financial condition, and results of operations. Because we manufacture approximately 75% of our products, we are dependent upon the uninterrupted and efficient operation of our manufacturing facilities, which are subject to power failures, the breakdown, failure, or substandard performance of equipment, the improper installation or operation of equipment, natural or other disasters, and the need to comply with the requirements or directives of government agencies, including the FDA. We are party to a number of lawsuits that arise in the ordinary course of business and may become party to others in the future. If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud, which could harm our business reputation and cause our stock price to decline. If our goodwill or amortizable intangible assets become impaired we may be required to record a significant charge to earnings. We are dependent upon our lenders for financing to execute our business strategy and meet our liquidity needs and the lack of adequate financing could negatively impact our business. The market price for our common stock may be particularly volatile, and our stockholders may be unable to resell their shares at a profit.

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1050007--12/10/2009--NUTRACEUTICAL_INTERNATIONAL_CORP