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

9 Months Ended

Sep. 30, 2013

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

Note 2 — 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 of products. 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 treats and related products.

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

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 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 for the three and nine months ended September 30, 2012 and 2013 and as of December 31, 2012 and September 30, 2013 are as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2013		2012		2013
Net Sales
Traditional Toys and Electronics	$	171,156	$	156,874	$	285,197	$	243,881
Role Play, Novelty and Seasonal Toys		143,335		154,020		248,058		251,314
	$	314,491	$	310,894	$	533,255	$	495,195

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2013		2012		2013
Operating Income (loss)
Traditional Toys and Electronics	$	19,019	$	19,506	$	5,913	$	(22,162	)
Role Play, Novelty and Seasonal Toys		18,277		20,147		12,080		(6,318	)
	$	37,296	$	39,653	$	17,993	$	(28,480	)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2013		2012		2013
Depreciation and Amortization Expense
Traditional Toys and Electronics	$	7,108	$	4,954	$	11,994	$	9,951
Role Play, Novelty and Seasonal Toys		5,051		4,360		7,130		6,951
	$	12,159	$	9,314	$	19,124	$	16,902

	December 31,		September 30,
	2012		2013
Assets
Traditional Toys and Electronics	$	309,940	$	296,025
Role Play, Novelty and Seasonal Toys		244,885		261,069
	$	554,825	$	557,094

The following tables present information about the Company by geographic area as of December 31, 2012 and September 30, 2013 and for the three and nine months ended September 30, 2012 and 2013 (in thousands):

	December 31, 2012		September 30, 2013
Long-lived Assets
China	$	10,793	$	8,323
United States		3,762		2,796
Hong Kong		1,271		975
	$	15,826	$	12,094

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2013		2012		2013
Net Sales by Customer Area
United States	$	243,986	$	252,988	$	423,698	$	400,688
Europe		35,042		24,814		50,480		42,340
Canada		16,149		16,988		24,540		21,972
Hong Kong		385		2,799		1,490		5,456
Other		18,929		13,305		33,047		24,739
	$	314,491	$	310,894	$	533,255	$	495,195

Major Customers

Net sales to major customers for the three and nine months ended September 30, 2012 and 2013 were as follows (in thousands, except for percentages):

	Three Months Ended September 30,										Nine Months Ended September 30,
	2012					2013					2012					2013
	Amount		Percentage of Net Sales			Amount		Percentage of Net Sales			Amount		Percentage of Net Sales			Amount		Percentage of Net Sales
Wal-Mart	$	62,514		19.9	%	$	74,759		24.1	%	$	94,807		17.8	%	$	108,990		22.0	%
Target		45,857		14.6			42,162		13.6			79,105		14.8			65,676		13.3
Toys ‘R’ Us		36,765		11.7			29,475		9.5			58,072		10.9			46,958		9.5
	$	145,136		46.2	%	$	146,396		47.2	%	$	231,984		43.5	%	$	221,624		44.8	%

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

At December 31, 2012 and September 30, 2013, the Company’s three largest customers accounted for approximately 42.1% and 44.1%, 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.