Note H - Segment Information

6 Months Ended

Dec. 31, 2015

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

H. 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 CarnoSyn® trade name, (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, 2004 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 Note A above and in the consolidated financial statements included in our 2015 Annual Report.

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

	Three Months Ended December 31,				Six Months Ended December 31,
	201 5		201 4		201 5		201 4
Net Sales
Private label contract manufacturing	$	21,619	$	16,732	$	37,884	$	34,197
Patent and trademark licensing		5,292		1,458		10,612		2,419
Branded products		—		428		—		697
	$	26,911	$	18,618	$	48,496	$	37,313

	Three Months Ended December 31,						Six Months Ended December 31,
	201 5			201 4			201 5			201 4
Income from Operations
Private label contract manufacturing	$	2,543		$	1,643		$	4,603		$	2,911
Patent and trademark licensing		1,692			833			2,691			1,365
Branded products		—			213			—			244
Income from operations of reportable segments		4,235			2,689			7,294			4,520
Corporate expenses not allocated to segments		(1,500	)		(1,308	)		(2,831	)		(2,570	)
	$	2,735		$	1,381		$	4,463		$	1,950

	December 31, 201 5		June 30, 201 5
Total Assets
Private label contract manufacturing	$	56,236	$	50,313
Patent and trademark licensing		4,610		3,503
Branded products		—		—
	$	60,846	$	53,816

Our private label contract manufacturing products are sold both in the U.S. and in markets outside the U.S., including Europe, Canada, Mexico, Africa, 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 were 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,
	2015		2014		2015		2014
United States	$	12,498	$	9,373	$	25,291	$	19,084
Markets outside the United States		14,413		9,245		23,205		18,229
Total net sales	$	26,911	$	18,618	$	48,496	$	37,313

Products manufactured by NAIE accounted for approximately 71% of net sales in markets outside the U.S. for the three months ended December 31, 2015 and 75% for the three months ended December, 31, 2014. NAIE accounted for 74% of net sales in markets outside the U.S. for the six months ended December 31, 2015 and 71% for the six months ended December 31, 2014. No products manufactured by NAIE were sold in the U.S. during the six months ended December 31, 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, were as follows (in thousands):

	Long-Lived Assets				Total Assets				Capital Expenditures
									Six Months Ended
	December 31, 201 5		June 30, 201 5		December 31, 201 5		June 30, 201 5		December 31, 2015		December 31, 201 4
United States	$	4,899	$	5,525	$	39,620	$	34,988	$	320	$	753
Europe		2,863		2,108		21,226		18,828		1,090		172
	$	7,762	$	7,633	$	60,846	$	53,816	$	1,410	$	925