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 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, and kids’ indoor and outdoor furniture, 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 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 as of December 31, 2017 and 2018 and for the three years in the period ended December 31, 2018 are as follows (in thousands):



	Year Ended December 31,
	2016		2017		2018
Net Sales
U.S. and Canada	$	478,595	$	406,411	$	364,313
International	131,229		107,231		101,873
Halloween	96,779		99,469		101,624
	$	706,603	$	613,111	$	567,810



	Year Ended December 31,
	2016			2017			2018
Income (Loss) from Operations
U.S. and Canada	$	17,434		$	(35,720	)	$	(11,693	)
International	4,360			(13,184		)	(8,706		)
Halloween	(4,688		)	(15,254		)	(11,774		)
	$	17,106		$	(64,158	)	$	(32,173	)



	Year Ended December 31,
	2016		2017		2018
Depreciation and Amortization Expense
U.S. and Canada	$	16,817	$	15,286	$	12,553
International	4,549		4,079		3,449
Halloween	1,578		1,638		1,079
	$	22,944	$	21,003	$	17,081



	December 31,
	2017		2018
Assets
U.S. and Canada	$	229,505	$	223,877
International	106,255		108,669
Halloween	34,589		10,295
	$	370,349	$	342,841

Net revenues are categorized based upon location of the customer, while long-lived assets are categorized based upon the location of the Company’s assets. Tools, dies and molds represent a substantial portion of the long-lived assets included in the United States with a net book value of $17.0 million in 2017 and $15.8 million in 2018 and substantially all of these assets are located in China. The following tables present information about the Company by geographic area as of December 31, 2017 and 2018 and for each of the three years in the period ended December 31, 2018 (in thousands):



	December 31,
	2017		2018
Long-lived Assets
China	$	17,194	$	15,825
United States	5,755		4,920
Hong Kong	278		157
	$	23,227	$	20,902



	Year Ended December 31,
	2016		2017		2018
Net Sales by Customer Area
United States	$	544,096	$	479,133	$	439,979
Europe	92,811		71,094		69,647
Canada	26,947		21,882		21,923
Hong Kong	2,012		1,064		1,952
Other	40,737		39,938		34,309
	$	706,603	$	613,111	$	567,810

Major Customers

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



	2016				2017				2018
	Amount		Percentage of Net Sales		Amount		Percentage of Net Sales		Amount		Percentage of Net Sales
Wal-Mart	$	186,894	26.5	%	$	156,436	25.5	%	$	143,587	25.3	%
Target	110,233		15.6		108,799		17.8		122,141		21.5
Toys "R" Us	90,568		12.8		69,508		11.3		*		*
	$	387,695	54.9	%	$	334,743	54.6	%	$	265,728	46.8	%

* Sales to Toys "R" Us in the applicable periods were less than 10% of total net sales.

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

As of December 31, 2017 and 2018, the Company’s three largest customers accounted for approximately 60.6% and 61.4%, 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. For the years ended December 31, 2017 and 2018, the Company recorded bad debt expense of $11.8 million and $9.6 million, respectively, primarily due to the bankruptcy and liquidation of Toys "R" Us.