Segment Information

9 Months Ended

Mar. 31, 2013

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.

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

	Three Months Ended March 31,				Nine Months Ended March 31,
	2013		2012		2013		2012
Net Sales
Private label contract manufacturing	$	14,505	$	14,943	$	41,773	$	46,586
Patent and trademark licensing		1,009		2,092		3,207		4,146
Branded products		321		387		1,001		1,192
	$	15,835	$	17,422	$	45,981	$	51,924

	Three Months Ended March 31,						Nine Months Ended March 31,
	2013			2012			2013			2012
Income from Operations
Private label contract manufacturing	$	1,353		$	2,028		$	3,924		$	7,133
Patent and trademark licensing		337			857			654			1,659
Branded products		11			12			85			134
Income from operations of reportable segments		1,701			2,897			4,663			8,926
Corporate expenses not allocated to segments		(1,132	)		(1,267	)		(3,338	)		(3,723	)
	$	569		$	1,630		$	1,325		$	5,203

	March 31, 2013		June 30, 2012
Total Assets
Private label contract manufacturing	$	43,797	$	43,975
Patent and trademark licensing		1,009		2,964
Branded products		297		258
	$	45,103	$	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 March 31,				Nine Months Ended March 31,
	2013		2012		2013		2012
United States	$	9,485	$	10,876	$	27,288	$	29,935
Markets outside the United States		6,350		6,546		18,693		21,989
Total net sales	$	15,835	$	17,422	$	45,981	$	51,924

Products manufactured by NAIE accounted for approximately 73% of net sales in markets outside the U.S. for the three months ended March 31, 2013, and 69% for the three months ended March 31, 2012. NAIE accounted for 72% of net sales in markets outside the U.S. for the nine months ended March 31, 2013, and 66% for the nine months ended March 31, 2012. No products manufactured by NAIE were sold in the U.S. during the nine months ended March 31, 2013 and 2012.

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, 2013		June 30, 2012		March 31, 2013		June 30, 2012		March 31, 2013		March 31, 2012
United States	$	9,042	$	10,287	$	31,900	$	33,556	$	635	$	1,336
Europe		2,639		2,391		13,203		13,641		719		423
	$	11,681	$	12,678	$	45,103	$	47,197	$	1,354	$	1,759