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.