Healthy Living & Nutraceuticals Market Monitor Winter 2016

MOSS ADAMS CAPITAL LLC

Selected Healthy Living & Nutraceuticals Transactions

Healthy Living & Nutraceuticals

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MOSS ADAMS CAPITAL LLC

Contents Industry Update

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Public Stock Performance & Valuations

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M&A Activity & Valuations

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Public Offerings & Capital Raises

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Moss Adams Overview

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Contact Information

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Healthy Living & Nutraceuticals

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Significant Opportunities Ahead for Healthy Living Sector The Healthy Eating Index, an index prepared by IBIS World Reports, has sustained all-time highs throughout 2015, with nearly 7 out of 10 adults being described as “health conscious” and “aware of balanced nutrition.” The level of health conscious consumers at its core is driving continued growth in the Healthy Living and Nutraceuticals product segment. Further, retailers are projected to grow their retail floor space dedicated to natural and organic products by more than 10% over the next two years, leading to more and more space available to Healthy Living manufacturers.

World-Wide, the Vitamins and Nutritional Supplements industry has experienced stagnant growth over the past two years, however there are pockets of developing nations that are experiencing strong growth in the supplements category. These markets include: China (2nd largest market by volume), Thailand (10th largest market by volume), and India (14th largest market by volume), where year-overyear growth in 2015 is in the 7-11% range, vs the US growth rate of 4% over the same time period. Supplement manufacturers should continue to target Asia and the Middle East for increased growth opportunities.

Nutraceutical International, Muscle Pharm and TwinLab Consolidated, three major domestic players in manufacturing branded nutritional supplements, have had challenges over the past couple of years dealing with increased competition and stagnant growth.

Together, these companies have seen their trailing-twelve-month revenues decline from $455 million at yearend 2014 to $449 million at September 30th, 2015 (down 1.4%). More specifically, product recalls, mislabeling claims, and SEC reporting issues have also contributed to stagnant sales of nutritional supplements. Healthy Living companies, in particular Vitamin & Mineral supplement manufacturers, must continue to invest heavily in research and development and release new efficacious products with broad distribution potential. Source: IBIS Industry Analysis, Wunderlich research report, Nutrition Business Journal , bizjournals.com, Moss Adams Capital analysis.

Healthy Living & Nutraceuticals

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Healthy Living Manufacturers Stumble in Second Half of 2015 • In our Healthy Living Manufacturers index, only Boulder Brands saw its enterprise value increase in the six month period from June 2015 to December 2015; all other manufacturers saw their enterprise value, and stock performance, fall due to slowing revenue and EBITDA growth – and in some cases declining EBITDA. • Healthy Living Retailers have continued their slide in 2015, with compressing EBITDA margins and declining NTM growth expectations.

Indexed(1) Stock Price Performance – Last Twelve Months

Market Performance

25%

0%

S&P 500 -2% Manufactuers -16% Retailers & Distributors -21%

-25%

(1) Healthy Living Manufacturers index, and Healthy Living Retailers & Distributors index comprised of companies on page 5 and 6. Source: CapitalIQ.

Healthy Living & Nutraceuticals

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Public Company Valuations: Manufacturers Manufacturers

Company Name Perrigo Company

12/18/15

52 week

Market

Enterprise

Sh. Price

High/Low

Cap

Value

$143.37 $215.73 / $140.40

NTM Est. Growth

TTM Data

($US in millions, except where noted and per share amounts)

EBITDA Sales

EBITDA Margin

EV Multiple TTM

Sales

EBITDA

Sales

TTM

NTM

EBITDA EBITDA

$21,130

$25,982

$4,997

$1,448

29.0%

22.7%

28.1%

5.2x

17.9x

14.0x

Mead Johnson Nutrition

77.50

105.45 / 69.20

15,179

15,697

4,199

1,073

25.6%

(5.1%)

(3.9%)

3.7x

14.6x

15.2x

The WhiteWave Foods Company

38.74

52.53 / 32.37

6,676

8,880

3,750

437

11.6%

12.8%

32.3%

2.4x

20.3x

15.4x

The Hain Celestial Group, Inc.

40.96

70.65 / 38.12

4,175

4,916

2,744

347

12.6%

10.4%

22.3%

1.8x

14.2x

11.6x

Nu Skin Enterprises Inc.

37.96

62.87 / 31.15

2,151

2,087

2,284

342

15.0%

1.2%

4.9%

0.9x

6.1x

5.8x

131.50

176.88 / 96.04

1,650

1,476

914

149

16.3%

8.8%

15.3%

1.6x

9.9x

8.6x

USANA Health Sciences Inc. SunOpta Inc.

6.78

15.05 / 5.98

561

860

1,201

51

4.2%

31.1%

NM

0.7x

16.9x

7.7x

Boulder Brands, Inc.

10.97

11.85 / 6.28

677

944

508

44

8.6%

4.4%

76.9%

1.9x

21.5x

12.2x

Inventure Foods, Inc.

7.02

13.10 / 6.57

136

244

288

13

4.5%

9.3%

58.0%

0.8x

19.0x

12.0x

Nature's Sunshine Products

10.75

15.40 / 10.30

197

155

331

16

4.9%

6.0%

59.8%

0.5x

9.5x

6.0x

Nutraceutical International

26.30

26.67 / 16.28

248

275

216

39

18.0%

3.3%

3.8%

1.3x

7.1x

6.8x

Median Average

$1,650 $4,798

$1,476 $1,201 $5,592 $1,948

$149 $360

12.6% 13.7%

8.8% 10.5%

25.2% 18.6%

1.6x 1.9x

14.6x 14.3x

11.6x 10.5x

Strong NTM EBITDA growth projections. Note: Not meaningful (NM) if EV/Sales is greater than 10x, or EV/EBITDA is greater than 40x. NA if denominator is 0, for percentages and multiples, or if estimates are not available. NTM figures are based on the median estimate of Wall St. analysts. Source: CapitalIQ.

Healthy Living & Nutraceuticals

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Public Company Valuations: Retailers & Distributors Retailers & Distributors

12/18/15

52 week

Market

Enterprise

Sh. Price

High/Low

Cap

Value

$32.86

$57.57 / $28.73

$11,177

Herbalife Ltd.

54.38

61.95 / 27.60

5,035

5,875

Sprouts Farmers Market, Inc.

25.19

38.45 / 16.41

3,838

United Natural Foods, Inc.

40.20

83.91 / 36.11

GNC Holdings Inc.

30.78

The Fresh Market, Inc. Vitamin Shoppe, Inc.

Company Name Whole Foods Market, Inc.

NTM Est. Growth

TTM Data

($US in millions, except where noted and per share amounts)

EBITDA Sales

$10,850 $15,389

EBITDA Margin

EV Multiple TTM

Sales

EBITDA

Sales

TTM

NTM

EBITDA EBITDA

$1,397

9.1%

4.0%

(5.5%)

0.7x

7.8x

8.2x

4,504

700

15.5%

2.0%

4.5%

1.3x

8.4x

8.0x

3,998

3,397

282

8.3%

18.7%

17.3%

1.2x

14.2x

12.1x

2,020

2,508

8,269

306

3.7%

4.0%

5.5%

0.3x

8.2x

7.8x

51.69 / 22.64

2,547

3,791

2,628

477

18.2%

1.6%

(0.1%)

1.4x

7.9x

8.0x

23.48

42.12 / 18.70

1,129

1,124

1,818

193

10.6%

7.8%

4.8%

0.6x

5.8x

5.6x

32.75

48.85 / 26.57

946

952

1,263

140

11.1%

3.8%

1.8%

0.8x

6.8x

6.7x

Median Average

$2,547 $3,813

$3,791 $3,397 $4,157 $5,324

$306 $499

10.6% 10.9%

4.0% 5.1%

4.5% 0.9%

0.8x 0.9x

7.9x 8.4x

8.0x 8.0x

Note: Not meaningful (NM) if EV/Sales is greater than 10x, or EV/EBITDA is greater than 40x. NA if denominator is 0, for percentages and multiples, or if estimates are not available. NTM figures are based on the median estimate of Wall St. analysts. Source: CapitalIQ.

Healthy Living & Nutraceuticals

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Valuation Multiples Retract in Second Half of 2015 • With a majority of the Healthy Living Manufacturer Index companies experiencing declines in their enterprise value in the second half of 2015, EBITDA multiples have come off their mid year highs. EBITDA multiples continue to trade well above the S&P 500, as TTM and NTM growth rates exceed the S&P 500 TTM and NTM growth rates. • Retailers & Distributors Index multiples in the second half of 2015 have now fallen below the trading levels of the S&P 500, principally because of (i) a decline in TTM revenue and EBITDA from Q2 2015 to Q4 2015, and (ii) a decline in NTM EBITDA growth expectations to a level below that of the S&P 500.

Public Market EV / EBITDA Multiples(1)

Next 12 Months: Estimated Sales Growth

25.00x

Market Performance

20.00x Manufacturers

15.00x

15.6x

S&P 500

10.00x

10.5x Retailers &

5.00x

Distributors 8.7x

0.00x

(1)

200-day moving average used, and market-weighted index: ending values will not match page 5 and 6 .Healthy Living Manufacturers index, and Healthy Living Retailers & Distributors index comprised of companies on page 5 and page 6. Source: CapitalIQ.

Healthy Living & Nutraceuticals

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Middle Market M&A Volume Declines in Q4 after Historic Q1-Q3 2015 • Overall, 2015 was a record year for M&A with transaction values totaling $4.7 trillion, according to Thomson Reuters

• EBITDA multiples in middle market transactions in Q4 2015 finished the quarter at 8.3x EBITDA, equal to the 5 year average for this metric and up from Q2 and Q3 2015.

• In Q4 2015, U.S. middle market M&A deal volumes declined 15% from Q3 2015, and declined 26% from Q4 2015.

• Q4 2015 EBITDA margins of reportable transactions surged also remained consistent with the 5 year average for this metric. Reported EBTIDA margins in Q4 2015 were 9%, while the 5 year average for this metric is 8%.

• U.S. middle market M&A activity, measured by deal values, remained consistent with prior quarters at $94 billion of aggregate transaction value closed in Q4. U.S. MIDDLE MARKET M&A 1

U.S. MIDDLE MARKET M&A VALUATIONS 2

1) Middle market M&A includes transactions with undisclosed values, and disclosed values where EV < $500 million. 2) Middle market M&A includes transactions with disclosed EBITDA, where EV < $500 million and EV/EBITDA between 3.0x and 15.0x. Note: transactions with disclosed EBITDA represent $5 million. Source: CapitalIQ

Healthy Living & Nutraceuticals

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Select Private Placements Twinlab Consolidated Holdings (Hauppauge, NY)

October 1st, 2015 2014 Public Offering and Private Placement activity is on pace to exceed 2013 levels.

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Twinlab Consolidated Holdings completed a $37 million private placement on October 1st, 2015, led by the Golisano Foundation, and supplemented by Great Harbor Capital. The private placement was at $.28 per share. Given there are 249 million shares outstanding, the private placement implies a pre-money valuation of $69.7 million, or .94x TTM revenue of $74.5 million.

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Twinlab has struggled recently, operating the business at a loss in both 2014 and 2015; however, 2015 revenues have grown in excess of 2014 revenues, and 2015 revenues are expected to come in at 2013 levels. (25% growth over 2014).

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The Company will be using the proceeds to finance the $37 million acquisition of Organic Holdings, a branded manufacturer of nutritional supplements.

Muscle Pharm Corp. (Denver, CO)

December 7th, 2015

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Muscle Pharm Corporation completed a $6 million private investment in a public equity (PIPE) on December 7th, 2015. The investment was in the form of a note that was issued to the executive chairman of the company.

•

Muscle Pharm has also struggled recently, with revenues declining in both 2014 and 2015., and operating losses exceeding $10 million. While the use of funds was not explicitly disclosed, the executive chairman stated that his loan was to support the company through its SEC investigation and restructuring effort. Note: Middle market Public Offerings and Private Placements includes transactions with $1mm < TV < $1000mm. YTD as of December 16, 2015.

Source: Company press releases, CapitalIQ, Wall Street Journal, Barclay’s equity research report..

Healthy Living & Nutraceuticals

Healthy Living & Nutraceuticals Middle Market Public Offerings & Capital Raises

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Moss Adams at a Glance: Leadership through Experience and Results Leadership through Experience and Results Moss Adams Capital LLC

Moss Adams LLP

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100+ years old – Founded in 1913

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Largest accounting firm headquartered in the western U.S.

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2,200 employees in 27 offices

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Fully integrated accounting, tax, and business advisory firm

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Middle-market specialists

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The Moss Adams Advantage: Discrete, highly leverageable transaction resources and services

Full-service investment banking and strategic advisor services

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Dedicated industry specialists

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Focus on privately owned and family-held companies

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Mergers and acquisitions

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Private debt & equity placements

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Mezzanine capital

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Due Diligence preparation & advisory

International Presence •

Healthy Living & Nutraceuticals

Major market affiliates throughout the U.S. and more than 100 countries around world

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Expert Teams

I N D U S T RY K N OW L E D G E M ATC H E D WITH AN EXPERIENCED TEAM • Senior Level Attention • Commitment to our Clients • Professional Excellence • Objective & Independent Advice • Creating Value for Owners • Global Presence & Capabilities

Premier accounting and financial services advice for middle market healthy living & nutraceutical companies.

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Global Reach Moss Adams is a founding member of Praxity, a global alliance of independent financial firms, giving you access to trusted expertise in over 100 countries and territories around the world. Europe

Austria, Belgium, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Hungary, Ireland, Italy, Jersey, Latvia, Lithuania, Luxembourg, Malta, Monaco, Netherlands, Norway, Poland, Portugal, Romania, Russia, Slovakia, Spain, Sweden, Switzerland, Turkey, United Kingdom , Ukraine

North America United States, Canada

Asia China, Indonesia, Japan, South Korea, Malaysia, Singapore, Taiwan, Thailand, Vietnam

Middle East and Indian Subcontinent India, Israel, Lebanon, Pakistan, United Arab Emirates

Latin America and Caribbean Argentina, Brazil, Cayman islands, Chile, Colombia, Mexico, Puerto Rico, Uruguay, Venezuela

Africa Algeria, Angola, Benin, Botswana, Cameroon, Cape Verde, Djibouti, Egypt, Ghana, Ivory Coast, Lesotho, Madagascar, Mauritius, Morocco, Senegal, South Africa, Tunisia, Zambia

Australasia Australia, New Zealand

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Global M&A Reach Through Local Relationships Local, National and Global Reach Our affiliation with CFxB consists of 150+ Corporate Finance Professionals across the U.S. and in over 25 countries.

more than 25 countries Mazars Canada 1 office

MNP Corporate Finance 10 offices MNP LLP 70 offices

Mazars Europe 140 offices Mazars M&A 20 offices Mazars Asia 25 offices

Moss Adams Capital 3 offices Moss Adams LLP 27 offices Weiser Mazars 6 offices William Buck CAA 6 offices Mazars Middle East 15 offices

BKD Corporate Finance 4 offices BKD LLP 33 offices

Mazars South America 20 offices

Healthy Living & Nutraceuticals

Mazars Africa 40 offices

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Contact Us Contributing Authors: Richard M. Anderson Managing Director (949) 221-4006 [email protected]

James Rothenberger Vice President (206) 302-6777 [email protected]

Moss Adams Capital LLC 999 3rd Avenue Suite 2800 Seattle, WA 98104

2040 Main Street Suite 900 Irvine, CA 92614

Wiley Kitchell Managing Director (206) 302-6780 [email protected]

Robert Miranda Vice President (949) 221- 44021 [email protected]

Bradley Erhart Associate (949) 517-9452 [email protected]

Harman Wales Managing Director (206) 302-6770 [email protected]

Scott Porter Vice President (206) 306-6326 [email protected]

James Parr Analyst (949) 221-4099 [email protected]

Tyler Dale Vice President (949) 221-4030 [email protected]

Andrew Suen Vice President (949) 517-9428 [email protected]

Daniel Seubert Analyst (206) 302-6775 [email protected]

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