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Business Segments, Geographic Data, and Sales by Major Customers | 9 Months Ended
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Sep. 30, 2017
Business Segments, Geographic Data, and Sales by Major Customers | Note 2 — Business Segments, Geographic Data, and Sales by Major Customers The Company is a worldwide producer and marketer of children’s toys and other consumer products, principally engaged in the design, development, production, marketing and distribution of its diverse portfolio of products. The Company has aligned its operating segments into three segments that reflect the management and operation of the business. The Company’s segments are (i) U.S. and Canada, (ii) International, and (iii) Halloween. The U.S. and Canada segment includes action figures, vehicles, play sets, plush products, dolls, electronic products, construction toys, infant and pre-school toys, role play and everyday costume play, foot to floor ride-on vehicles, wagons, novelty toys, seasonal and outdoor products, kids’ indoor and outdoor furniture, and related products, primarily within the United States and Canada. Within the International segment, the Company markets and sells its toy products in markets outside of the U.S. and Canada, primarily in the European, Asia Pacific, and Latin and South American regions. Within the Halloween segment, the Company markets and sells Halloween costumes and accessories and everyday costume play products, primarily in the U.S. and Canada. Segment performance is measured at the operating income level. All sales are made to external customers and general corporate expenses have been attributed to the various segments based upon relative sales volumes. Segment assets are primarily comprised of accounts receivable and inventories, net of applicable reserves and allowances, goodwill and other assets. Certain assets which are not tracked by operating segment and/or that benefit multiple operating segments have been allocated on the same basis. Results are not necessarily those which would be achieved if each segment was an unaffiliated business enterprise. Information by segment and a reconciliation to reported amounts for the three and nine months ended September 30, 2017 and 2016 and as of September 30, 2017 and December 31, 2016 are as follows (in thousands):
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2017 |  |  | 2016 |  |  | 2017 |  |  | 2016 |
Net Sales |  |  |  |  |  |  |  |  |  |  |  |
U.S. and Canada |  | $ | 154,046 |  |  | $ | 188,381 |  |  | $ | 295,098 |  |  | $ | 350,320 |
International |  |  | 50,141 |  |  |  | 57,333 |  |  |  | 87,583 |  |  |  | 97,454 |
Halloween |  |  | 58,226 |  |  |  | 57,077 |  |  |  | 93,802 |  |  |  | 91,803 |
|  | $ | 262,413 |  |  | $ | 302,791 |  |  | $ | 476,483 |  |  | $ | 539,577 |
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2017 |  |  | 2016 |  |  | 2017 |  |  | 2016 |
Income (Loss) from Operations |  |  |  |  |  |  |  |  |  |  |  |
U.S. and Canada |  | $ | (6,760 | ) |  | $ | 24,865 |  |  | $ | (24,155 | ) |  | $ | 16,966 |
International |  |  | (735 | ) |  |  | 6,876 |  |  |  | (3,986 | ) |  |  | 4,371 |
Halloween |  |  | (251 | ) |  |  | 2,672 |  |  |  | (9,437 | ) |  |  | (1,840 | )
|  | $ | (7,746 | ) |  | $ | 34,413 |  |  | $ | (37,578 | ) |  | $ | 19,497 |
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2017 |  |  | 2016 |  |  | 2017 |  |  | 2016 |
Depreciation and Amortization Expense |  |  |  |  |  |  |  |  |  |  |  |
U.S. and Canada |  | $ | 5,682 |  |  | $ | 5,787 |  |  | $ | 13,107 |  |  | $ | 12,097 |
International |  |  | 1,811 |  |  |  | 1,800 |  |  |  | 3,693 |  |  |  | 3,354 |
Halloween |  |  | 808 |  |  |  | 619 |  |  |  | 1,614 |  |  |  | 1,447 |
|  | $ | 8,301 |  |  | $ | 8,206 |  |  | $ | 18,414 |  |  | $ | 16,898 |
|  | September 30, 2017 |  |  | December 31, 2016 |
Assets |  |  |  |  |  |
U.S. and Canada |  | $ | 154,117 |  |  | $ | 286,512 |
International |  |  | 242,057 |  |  |  | 138,497 |
Halloween |  |  | 57,088 |  |  |  | 39,294 |
|  | $ | 453,262 |  |  | $ | 464,303 |
The following tables present information about the Company by geographic area as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016 (in thousands):
|  | September 30, 2017 |  |  | December 31, 2016 |
Long-lived Assets |  |  |  |  |  |
China |  | $ | 14,148 |  |  | $ | 15,710 |
United States |  |  | 6,067 |  |  |  | 6,587 |
Hong Kong |  |  | 411 |  |  |  | 544 |
|  | $ | 20,626 |  |  | $ | 22,841 |
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2017 |  |  | 2016 |  |  | 2017 |  |  | 2016 |
Net Sales by Customer Area |  |  |  |  |  |  |  |  |  |  |  |
United States |  | $ | 199,064 |  |  | $ | 229,850 |  |  | $ | 367,694 |  |  | $ | 416,034 |
Europe |  |  | 33,640 |  |  |  | 43,446 |  |  |  | 56,537 |  |  |  | 67,611 |
Canada |  |  | 11,062 |  |  |  | 12,709 |  |  |  | 18,086 |  |  |  | 22,412 |
Hong Kong |  |  | 397 |  |  |  | 1,184 |  |  |  | 784 |  |  |  | 1,861 |
Other |  |  | 18,250 |  |  |  | 15,602 |  |  |  | 33,382 |  |  |  | 31,659 |
|  | $ | 262,413 |  |  | $ | 302,791 |  |  | $ | 476,483 |  |  | $ | 539,577 |
Major Customers Net sales to major customers for the three and nine months ended September 30, 2017 and 2016 were as follows (in thousands, except for percentages):
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2017 |  |  | 2016 |  |  | 2017 |  |  | 2016 |
|  | Amount |  |  | Percentage of Net Sales |  |  | Amount |  |  | Percentage of Net Sales |  |  | Amount |  |  | Percentage of Net Sales |  |  | Amount |  |  | Percentage of Net Sales |
Wal-Mart |  | $ | 66,138 |  |  |  | 25.2 | % |  | $ | 72,996 |  |  |  | 24.1 | % |  | $ | 108,781 |  |  |  | 22.8 | % |  | $ | 139,806 |  |  |  | 25.9 | %
Target |  |  | 44,295 |  |  |  | 16.9 |  |  |  | 50,008 |  |  |  | 16.5 |  |  |  | 77,476 |  |  |  | 16.3 |  |  |  | 76,948 |  |  |  | 14.3 |
Toys 'R' Us |  |  | 15,290 |  |  |  | 5.8 |  |  |  | 19,624 |  |  |  | 6.5 |  |  |  | 34,021 |  |  |  | 7.1 |  |  |  | 38,088 |  |  |  | 7.0 |
|  | $ | 125,723 |  |  |  | 47.9 | % |  | $ | 142,628 |  |  |  | 47.1 | % |  | $ | 220,278 |  |  |  | 46.2 | % |  | $ | 254,842 |  |  |  | 47.2 | %
At September 30, 2017 and December 31, 2016, the Company’s three largest customers accounted for approximately 42.6% and 35.8%, respectively, of net accounts receivable. The concentration of the Company’s business with a relatively small number of customers may expose the Company to material adverse effects if one or more of its large customers were to experience financial difficulty. The Company performs ongoing credit evaluations of its top customers and maintains an allowance for potential credit losses. On September 18, 2017, Toys “R” Us, Inc. announced that certain of its U.S. subsidiaries and its Canadian subsidiary voluntarily filed for relief under Chapter 11 of the Bankruptcy Code in the U.S. and that its Canadian subsidiary also began parallel proceedings under the Companies’ Creditors Arrangement Act (“CCAA”) in Canada. On September 25, 2017, Toys “R” Us, Inc. announced that it had closed on $3.1 billion of debtor-in-possession financing to support its ongoing liquidity needs. While the Company believes there was an impact to sales in the quarter due to the uncertainty caused by the filing, it is not able to estimate an amount. The Company has resumed shipping to Toys “R” Us for the 2017 holiday season and continues to monitor the Toys “R” Us bankruptcy reorganization progress and its overall credit exposure to this customer.

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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