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 reporting 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.

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 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 (loss) 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, 2018 and 2017 and as of September 30, 2018 and December 31, 2017 are as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Net Sales
U.S. and Canada	$	133,481	$	154,046	$	263,397	$	295,098
International		37,902		50,141		77,245		87,583
Halloween		65,316		58,226		94,842		93,802
	$	236,699	$	262,413	$	435,484	$	476,483

	Three Months Ended September 30,					Nine Months Ended September 30,
	2018		2017			2018			2017
Income (Loss) from Operations
U.S. and Canada	$	12,029	$	(6,760	)	$	(17,373	)	$	(24,155	)
International		2,919		(735	)		(6,764	)		(3,986	)
Halloween		5,095		(251	)		(3,618	)		(9,437	)
	$	20,043	$	(7,746	)	$	(27,755	)	$	(37,578	)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Depreciation and Amortization Expense
U.S. and Canada	$	4,823	$	5,682	$	10,125	$	13,107
International		1,312		1,811		2,886		3,693
Halloween		428		808		980		1,614
	$	6,563	$	8,301	$	13,991	$	18,414

	September 30, 2018		December 31, 2017
Assets
U.S. and Canada	$	271,100	$	229,505
International		118,781		106,255
Halloween		57,710		34,589
	$	447,591	$	370,349

The following tables present information about the Company by geographic area as of September 30, 2018 and December 31, 2017 and for the three and nine months ended September 30, 2018 and 2017 (in thousands):

	September 30,		December 31,
	2018		2017
Long-lived Assets
China	$	15,867	$	17,194
United States		5,113		5,755
Hong Kong		207		278
	$	21,187	$	23,227

	Three Months Ended				Nine months ended
	September 30,				September 30,
	2018		2017		2018		2017
Net Sales by Customer Area
United States	$	186,497	$	199,064	$	337,543	$	367,694
Europe		25,606		33,640		49,542		56,537
Canada		11,091		11,062		18,663		18,086
Hong Kong		1,182		397		1,709		784
Other		12,323		18,250		28,027		33,382
	$	236,699	$	262,413	$	435,484	$	476,483

Major Customers

Net sales to major customers for the three and nine months ended September 30, 2018 and 2017 were as follows (in thousands, except for percentages):

	Three Months Ended September 30,										Nine months ended September 30,
	2018					2017					2018					2017
	Amount		Percentage of Net Sales			Amount		Percentage of Net Sales			Amount		Percentage of Net Sales			Amount		Percentage of Net Sales
Wal-Mart	$	64,133		27.1	%	$	70,768		27.0	%	$	107,344		24.6	%	$	118,819		24.9	%
Target		50,797		21.5			44,502		17.0			87,641		20.1			77,674		16.3
Toys ‘R’ Us		*		*			22,741		8.7			*		*			49,760		10.4

* Sales to Toys ‘R’ Us in the applicable periods were less than 10% of total sales

At September 30, 2018 and December 31, 2017, the Company’s three largest customers accounted for approximately 46.0% and 60.6%, respectively, of the Company’s gross 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 March 15, 2018, Toys “R” Us (“TRU”) filed a motion to conduct an orderly wind down of its operations in the U.S. and commence store closing sales at all 735 U.S. stores. The total TRU worldwide pre and post-petition gross accounts receivable balance of $20.7 million as of September 30, 2018 has been fully reserved by the Company.

At September 30, 2018 and December 31, 2017, the Company’s TRU consolidated accounts receivable balance represented 8.7% and 26.4%, respectively, of the Company’s gross accounts receivable.