Note 9 – Acquisitions

On June 30, 2014, we completed the acquisition of Healthy Directions, LLC and its subsidiaries (“Healthy Directions”), a leader in the premium branded vitamin, mineral and supplement market for a total cash purchase price of $195.94 million, subject to certain future adjustments. The purchase price was funded from borrowings under the Credit Agreement, as described below, and cash on hand. The sellers are certain funds controlled by American Securities, LLC and ACI Capital Co., LLC. Significant assets acquired include inventory, property and equipment, customer relationships, brand assets, and goodwill. Acquisition-related expenses incurred through August 31, 2014 are approximately $3.61 million. Healthy Directions will report its operations as the Nutritional Supplements segment.

The following schedule presents the acquisition date fair value of the net assets of Healthy Directions. These balances are preliminary and may be subject to additional adjustment.

HEALTHY DIRECTIONS - NET ASSETS RECORDED UPON ACQUISITION AT JUNE 30, 2014
*(in thousands)*

Assets:
Receivables	$	257
Inventory	6,226
Prepaid expenses and other current assets	1,875
Property and equipment	5,962
Goodwill	95,308
Brand assets - indefinite	65,500
Customer relationships - definite	43,800
Subtotal - assets	218,928

Liabilities:
Accounts payable	6,479
Accrued expenses	13,964
Other long-term liabilities	2,542
Subtotal - liabilities	22,985

Net assets recorded	$	195,943

The fair values of the intangible assets acquired were estimated by applying income and market approaches. These fair value measurements were based on significant inputs that are not observable in the market and, therefore, represent Level 3 measurements. Key assumptions included various discount rates based upon a 14.6 percent weighted average cost of capital, a royalty rate of 5 percent used in the determination of brand assets and a customer attrition rate of 14 percent per year used in the determination of customer relationship values. The goodwill recognized is expected to be deductible for income tax purposes.

The impact of the Healthy Directions acquisition on the Company’s consolidated condensed statements of income from the acquisition date through the two month period ended August 31, 2014 is as follows:

HEALTHY DIRECTIONS - IMPACT ON CONSOLIDATED CONDENSED STATEMENT OF INCOME

June 30, 2014 (Acquisition Date) through August 31, 2014

(in thousands, except earnings per share data)

	Two Months Ended
	August 31, 2014

Sales revenue, net	$	24,634
Net income	69

Earnings per share:
Basic	$	0.00
Diluted	$	0.00

The following supplemental pro forma information presents the Company’s financial results as if the Healthy Directions acquisition had occurred as of the beginning of the fiscal periods presented. This supplemental pro forma information has been prepared for comparative purposes and would not necessarily indicate what may have occurred if the acquisition had been completed on March 1, 2013, and this information is not intended to be indicative of future results.

HEALTHY DIRECTIONS - PRO FORMA IMPACT ON CONSOLIDATED CONDENSED STATEMENTS OF INCOME

As if the Acquisition Had Been Completed at the Beginning of March 1, 2013

(in thousands, except earnings per share data)

Three Months Ended August 31,

Six Months Ended August 31,

2014

2013

2014

2013

Sales revenue, net

333,100

355,722

684,845

698,272

Net income

19,444

25,637

38,687

39,342

Earnings per share:

Basic

0.69

0.80

1.35

1.23

Diluted

0.68

0.79

1.33

1.22