Note M - Segment Information

12 Months Ended

Jun. 30, 2015

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

M. Segment Information

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 direct raw material sales and 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.

Due to the steady decline in sales of our Pathway to

Healing

®

product line over the prior several years, we decided to discontinue the product line. Pursuant to the license agreements between NAI and each of Dr. Reginald Cherry and the Cherry Ministries Inc. dated as of September 1, 2014 as amended (the License Agreements). Dr. Cherry and Cherry Ministries licensed to NAI the name, likeness, style, persona and other attributes of Dr. Cherry in connection with the sale of nutritional products that were marketed by NAI under its Pathway to Healing brand. Pursuant to the License Agreements, NAI was permitted to terminate the License Agreements by written notice at any time. We notified Dr. Cherry and Cherry Ministries of our decision to discontinue the product line and the termination of the related license agreement was effective as of September 15, 2014. All termination activities related to the Pathway to Healing® product line were substantially completed by December 31, 2014. We did not change the financial presentation in this report to reflect the branded products segment as “Discontinued Operations” as the wind down of this product line did not meet the criteria for discontinued operations presentation as prescribed by applicable accounting regulations (ASC 205-20).

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 the summary of significant accounting policies in Note A.

Our operating results by business segment for the years ended June 30 were as follows (in thousands):

	2015		2014
Net Sales
Private-label contract manufacturing	$	69,670	$	67,339
Patent and trademark licensing		9,140		5,444
Branded products		698		1,159
	$	79,508	$	73,942

	2015			2014
Operating Income
Private-label contract manufacturing	$	5,172		$	5,559
Patent and trademark licensing		3,811			2,281
Branded products		248			(235	)
Income from operations of reportable segments		9,231			7,605
Corporate expenses not allocated to segments		(5,072	)		(4,828	)
	$	4,159		$	2,777

	2015		2014
Total Assets
Private-label contract manufacturing	$	50,313	$	50,424
Patent and trademark licensing		3,503		1,632
Branded products		—		202
	$	53,816	$	52,258

Our private-label contract manufacturing products are sold both in the U.S. and in markets outside the U.S., including Europe, Canada, Mexico, Australia, South Africa 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, for the two years ended June 30 were as follows (in thousands):

	2015		2014
United States	$	43,671	$	38,729
Markets outside the United States		35,837		35,213
Total net sales	$	79,508	$	73,942

Products manufactured by NAIE accounted for 74% of net sales in markets outside the U.S. in fiscal 2015 and 57% in fiscal 2014. No products manufactured by NAIE were sold in the U.S. during the fiscal years ended June 30, 2015 and 2014.

Assets and capital expenditures by geographic region, based on the location of the company or subsidiary at which they were located or made, for the two years ended June 30 were as follows (in thousands):

201 5	Long-Lived Assets		Total Assets		Capital Expenditures
United States	$	5,525	$	34,988	$	1,071
Europe		2,108		18,828		637
	$	7,633	$	53,816	$	1,708

2014	Long-Lived Assets		Total Assets		Capital Expenditures
United States	$	6,648	$	36,618	$	2,297
Europe		2,163		15,640		382
	$	8,811	$	52,258	$	2,679