Segment Information

6 Months Ended

Dec. 31, 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 the provision of private label contract manufacturing services to 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 December 31,				Six Months Ended December 31,
	2011		2010		2011		2010
Net Sales
Private label contract manufacturing	$	15,038	$	13,987	$	31,644	$	26,533
Patent and trademark licensing		720		301		2,054		617
Branded products		403		466		804		959
	$	16,161	$	14,754	$	34,502	$	28,109

	Three Months Ended December 31,				Six Months Ended December 31,
	2011		2010		2011		2010
Income from Operations
Private label contract manufacturing	$	2,123	$	2,030	$	5,106	$	3,892
Patent and trademark licensing		189		(3)		802		81
Branded products		72		91		120		189
Income from operations of reportable segments		2,384		2,118		6,028		4,162
Corporate expenses not allocated to segments		(1,158)		(1,004)		(2,455)		(2,113)
	$	1,226	$	1,114	$	3,573	$	2,049

	December 31,     2011		June 30,     2011
Total Assets
Private label contract manufacturing	$	41,417	$	40,824
Patent and trademark licensing		3,533		111
Branded products		312		209
	$	45,262	$	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				Six Months Ended
	December 31,				December 31,
	2011		2010		2011		2010
United States	$	8,869	$	9,232	$	19,059	$	17,720
Markets outside the United States		7,292		5,522		15,443		10,389
Total net sales	$	16,161	$	14,754	$	34,502	$	28,109

Products manufactured by NAIE accounted for approximately 67% of net sales in markets outside the U.S. for the three months ended December 31, 2011, and 59% for the three months ended December 31, 2010. NAIE accounted for 65% of net sales in markets outside the U.S. for the six months ended December 31, 2011, and 61% for the six months ended December 31, 2010. No products manufactured by NAIE were sold in the U.S. during the six months ended December 31, 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):

	Long-Lived Assets				Total Assets				Capital Expenditures
									Six Months Ended
	December 31,     2011		June 30,     2011		December 31,     2011		June 30,     2011		December 31,     2011		December 31,     2010
United States	$	10,336	$	10,835	$	32,391	$	30,210	$	813	$	546
Europe		2,578		2,481		12,871		10,934		150		506
	$	12,914	$	13,316	$	45,262	$	41,144	$	963	$	1,052