Segment Information

9 Months Ended

Mar. 31, 2012

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       March 31,				Nine Months Ended       March 31,
	2012		2011		2012		2011
Net Sales
Private label contract manufacturing	$	14,943	$	12,224	$	46,586	$	38,758
Patent and trademark licensing		2,092		720		4,146		1,336
Branded products		387		431		1,192		1,390
	$	17,422	$	13,375	$	51,924	$	41,484

	Three Months Ended                     March 31,				Nine  Months Ended                 March 31,
	2012		2011		2012		2011
Income from Operations
Private label contract manufacturing	$	2,028	$	1,182	$	7,133	$	5,074
Patent and trademark licensing		857		71		1,659		152
Branded products		12		85		134		273
Income from operations of reportable segments		2,897		1,338		8,926		5,499
Corporate expenses not allocated to segments		(1,267)		(1,080)		(3,723)		(3,192)
	$	1,630	$	258	$	5,203	$	2,307

	March 31,      2012		June 30,     2011
Total Assets
Private label contract manufacturing	$	41,220	$	40,824
Patent and trademark licensing		3,991		111
Branded products		371		209
	$	45,582	$	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          March 31,				Nine Months Ended       March 31,
	2012		2011		2012		2011
United States	$	10,876	$	8,703	$	29,935	$	26,423
Markets outside the United States		6,546		4,672		21,989		15,061
Total net sales	$	17,422	$	13,375	$	51,924	$	41,484

Products manufactured by NAIE accounted for approximately 69% of net sales in markets outside the U.S. for the three months ended March 31, 2012, and 67% for the three months ended March 31, 2011. NAIE accounted for 66% of net sales in markets outside the U.S. for the nine months ended March 31, 2012, and 63% for the nine months ended March 31, 2011. No products manufactured by NAIE were sold in the U.S. during the nine months ended March 31, 2012 and 2011.

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
									Nine Months Ended
	March 31,     2012		June 30,     2011		March 31,     2012		June 30,     2011		March 31,     2012		March 31,     2011
United States	$	10,277	$	10,835	$	32,987	$	30,210	$	1,336	$	730
Europe		2,536		2,481		12,595		10,934		423		583
	$	12,813	$	13,316	$	45,582	$	41,144	$	1,759	$	1,313