Segment Information

3 Months Ended

Sep. 30, 2011

Segment Information

G. Segment Information

As a result of our efforts to commercialize our patent and trademark estate and the increased level of income we have recently received from such efforts, beginning with the first quarter of fiscal 2012, our business consists of three segments for financial reporting purposes. The three segments are identified as (i) private label contract manufacturing, which primarily relates to private label contract manufacturing services for companies that market and distribute nutritional supplements and other health care products, (ii) patent and trademark licensing, which primarily includes royalty income from our license and supply agreements associated with the sale and use of beta-alanine under our CarnosSyn^® trade name, and (iii) branded products, which relates to the marketing and distribution of our branded nutritional supplements and consists primarily of the products sold under our Pathway to Healing^® product line.

We evaluate performance based on a number of factors. The primary performance measures for each segment are net sales and income or loss from operations before corporate allocations. Operating income or loss for each segment does not include corporate general and administrative expenses, interest expense and other miscellaneous income and expense items. Corporate general and administrative expenses include, but are not limited to: human resources, corporate legal, finance, information technology, and other corporate level related expenses, which are not allocated to any segment. The accounting policies of our segments are the same as those described in Note A above and in the consolidated financial statements included in our 2011 Annual Report other than the change in the number of segments.

Our operating results by business segment were as follows (in thousands):

	Three Months Ended September 30,
	2011		2010
Net Sales
Private label contract manufacturing	$	16,606	$	12,547
Patent and trademark licensing		1,334		316
Branded products		401		492
	$	18,341	$	13,355

	Three Months Ended September 30,
	2011			2010
Income from Operations
Private label contract manufacturing	$	2,982		$	1,862
Patent and trademark licensing		614			84
Branded products		48			97
Income from operations of reportable segments		3,644			2,043
Corporate expenses not allocated to segments		(1,297	)		(1,108	)
	$	2,347		$	935

	September 30, 2011		June 30, 2011
Total Assets
Private label contract manufacturing	$	43,797	$	40,824
Patent and trademark licensing		1,334		111
Branded products		343		209
	$	45,474	$	41,144

Our private label contract manufacturing products are sold both in the U.S. and in markets outside the U.S., including Europe, Australia and Asia. Our primary market outside the U.S. is Europe. Our patent and trademark licensing activities are primarily based in the U.S. and our branded products are only sold in the U.S.

Net sales by geographic region, based on the customers’ location, were as follows (in thousands):

	Three Months Ended     September  30,
	2011		2010
United States	$	10,190	$	8,488
Markets outside the United States		8,151		4,867
Total net sales	$	18,341	$	13,355

Products manufactured by NAIE accounted for 63% of net sales in markets outside the U.S. for the three months ended September 30, 2011, and 64% for the three months ended September 30, 2010. No products manufactured by NAIE were sold in the U.S during the three months ended September 30, 2011 and 2010.

Assets and capital expenditures by geographic region, based on the location of the company or subsidiary at which they were located or made, were as follows (in thousands):

									Capital Expenditures
	Long-Lived Assets				Total Assets				Three Months Ended
	September 30, 2011		June 30, 2011		September 30, 2011		June 30, 2011		September 30, 2011		September 30, 2010
United States	$	10,467	$	10,835	$	33,132	$	30,210	$	327	$	353
Europe		2,425		2,481		12,342		10,934	$	93		(36	)(1)
	$	12,892	$	13,316	$	45,474	$	41,144	$	420	$	317

(1) The European capital expenditure amount for the three months ended September 30, 2010 includes $20,000 of gross capital expenditures offset by a $56,000 Cantonal financial investment support grant.