Business Segments, Geographic Data, Sales by Product Group and Major Customers

12 Months Ended

Dec. 31, 2012

Business Segments, Geographic Data, Sales by Product Group and Major Customers

Note 3—Business Segments, Geographic Data, Sales by Product Group and 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. In 2010, the Company re-aligned its products into two new categories to better reflect the business.  The Company’s reportable segments are Traditional Toys and Electronics and Role Play, Novelty and Seasonal Toys, each of which includes worldwide sales.

 The Traditional Toys and Electronics segment includes action figures, vehicles, playsets, plush products, dolls, accessories, electronic products, construction toys, infant and pre-school toys, foot to floor ride-on vehicles, wagons and pet products and related products.

 The Role Play, Novelty and Seasonal segment includes role play and dress-up products, novelty toys, seasonal and outdoor products, indoor and outdoor kids’ furniture and Halloween and everyday costume play.

 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 sales volumes. Segment assets are comprised of accounts receivable and inventories, net of applicable reserves and allowances, goodwill, molds and tooling and other assets.

 Results are not necessarily those that would be achieved were each segment an unaffiliated business enterprise. Information by segment and a reconciliation to reported amounts as of December 31, 2011 and 2012 and for the three years in the period ended December 31, 2012 are as follows (in thousands):

	Years Ended December 31,
	2010		2011		2012
Net Sales
Traditional Toys and Electronics	$	358,356	$	348,852	$	363,681
Role Play, Novelty and Seasonal Toys		388,912		328,899		303,081
	$	747,268	$	677,751	$	666,762

	Years Ended December 31,
	2010		2011			2012
Operating Income (Loss)
Traditional Toys and Electronics	$	18,078	$	(3,974	)	$	(12,263	)
Role Play, Novelty and Seasonal Toys		32,119		5,254			(959	)
	$	50,197	$	1,280		$	(13,222	)

	Years Ended December 31,
	2010		2011		2012
Depreciation and Amortization Expense
Traditional Toys and Electronics	$	17,058	$	15,212	$	13,941
Role Play, Novelty and Seasonal Toys		8,134		7,253		7,588
	$	25,192	$	22,465	$	21,529

	December 31,
	2011		2012
Assets
Traditional Toys and Electronics	$	269,411	$	309,940
Role Play, Novelty and Seasonal Toys		345,823		244,885
	$	615,234	$	554,825

 Information regarding the Company’s operations in different geographical areas is presented below on the basis the Company uses to manage its business.  Net revenues are categorized based upon location of the customer, while long-lived assets are categorized based upon the Company’s ownership.  Tools, dyes and molds represent a substantial portion of the long-lived assets included in the United States with a net book value of $10.4 million in 2011 and $10.8 million in 2012 and substantially all of these assets are located in China.  The following table’s present information about the Company by geographic area as of December 31, 2011 and 2012 and for the three years ended December 31, 2012 (in thousands):

	December 31,
	2011		2012
Long-lived Assets
China	$	10,378	$	10,793
United States		4,896		3,762
Hong Kong		912		1,271
	$	16,186	$	15,826

	Years Ended December 31,
	2010		2011		2012
Net Sales by Geographic Area
United States	$	633,900	$	569,233	$	534,714
Europe		46,965		43,225		60,870
Canada		32,927		29,538		28,077
Hong Kong		7,319		2,898		1,713
Other		26,157		32,857		41,388
	$	747,268	$	677,751	$	666,762

Major Customers

 Net sales to major customers were as follows (in thousands, except for percentages):

	2010					2011					2012
			Percentage of					Percentage of					Percentage of
	Amount		Net Sales			Amount		Net Sales			Amount		Net Sales
Wal-Mart	$	171,515		23.0	%	$	166,928		24.6	%	$	120,610		18.1	%
Target		115,416		15.5			131,781		19.4			107,873		16.2
Toys ‘R’ Us		111,180		14.9			85,087		12.6			83,688		12.5
	$	398,111		53.4	%	$	383,796		56.6	%	$	312,171		46.8	%

 No other customer accounted for more than 10% of the Company’s total net sales.

 At December 31, 2011 and 2012, the Company’s three largest customers accounted for approximately 41.3% and 42.1%, 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.