Note 10 – 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. The purchase price was funded from borrowings under the Credit Agreement, as described below, and cash on hand. The sellers were 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 November 30, 2014 are approximately $3.61 million ($2.31 million after tax). Healthy Directions reports 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 three- and five-month periods ended November 30, 2014 is as follows:

HEALTHY DIRECTIONS - IMPACT ON CONSOLIDATED CONDENSED STATEMENT OF INCOME
June 30, 2014 (Acquisition Date) through November 30, 2014
(in thousands, except earnings per share data)
	November 30, 2014
	Three Months		Five Months
	Ended		Ended

Sales revenue, net	$	38,462	$	63,096
Net income	3,091		3,156

Earnings per share:
Basic	$	0.11	$	0.11
Diluted	$	0.11	$	0.11

Net income for the five months ended November 30, 2014 includes after tax acquisition-related expenses of $2.31 million.

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. Accordingly, 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 November 30,				Nine Months Ended November 30,
	2014		2013		2014		2013

Sales revenue, net	$	435,674	$	417,042	$	1,120,519	$	1,115,313
Net income	55,377		38,318		94,064		77,660

Earnings per share:
Basic	$	1.95	$	1.20	$	3.29	$	2.43
Diluted	$	1.92	$	1.18	$	3.24	$	2.40