Segment Information

6 Months Ended

Dec. 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 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 2012 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,
	2012		2011		2012		2011
Net Sales
Private label contract manufacturing	$	12,524	$	15,038	$	27,268	$	31,644
Patent and trademark licensing		824		720		2,198		2,054
Branded products		338		403		680		804
	$	13,686	$	16,161	$	30,146	$	34,502

	Three Months Ended     December 31,				Six Months Ended     December 31,
	2012		2011		2012		2011
(Loss) Income from Operations
Private label contract manufacturing	$	624	$	2,123	$	2,570	$	5,106
Patent and trademark licensing		171		189		318		802
Branded products		40		72		74		120
Income from operations of reportable segments		835		2,384		2,962		6,028
Corporate expenses not allocated to segments		(1,108)		(1,158)		(2,206)		(2,455)
	$	(273)	$	1,226	$	756	$	3,573

	December 31,   2012		June 30, 2012
Total Assets
Private label contract manufacturing		$ 43,741	$	43,975
Patent and trademark licensing		470		2,964
Branded products		370		258
		$  44,581	$	47,197

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 December 31,				Six Months Ended December  31,
	2012		2011		2012		2011
United States	$	8,173	$	8,869	$	17,804	$	19,059
Markets outside the United States		5,513		7,292		12,342		15,443
Total net sales	$	13,686	$	16,161	$	30,146	$	34,502

Products manufactured by NAIE accounted for approximately 74% of net sales in markets outside the U.S. for the three months ended December 31, 2012, and 67% for the three months ended December 31, 2011. NAIE accounted for 71% of net sales in markets outside the U.S. for the six months ended December 31, 2012, and 65% for the six months ended December 31, 2011. No products manufactured by NAIE were sold in the U.S. during the six months ended December 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
									Six Months Ended
	December 31, 2012		June 30, 2012		December 31, 2012		June 30, 2012		December 31, 2012		December 31, 2011
United States	$	9,428	$	10,287	$	30,807	$	33,556	$	417	$	813
Europe		2,748		2,391		13,774		13,641		715		150
	$	12,176	$	12,678	$	44,581	$	47,197	$	1,132	$	963