SEGMENT AND RELATED DISCLOSURES

12 Months Ended

Dec. 31, 2016

Segment and Related Disclosures

Segment and Related Disclosures

13.    SEGMENT AND RELATED DISCLOSURES

The internal reporting structure used by our chief operating decision maker (“CODM”) to assess performance and allocate resources determines the basis for our reportable operating segments.  Our CODM is our Chief Executive Officer, and he evaluates operations and allocates resources based on a measure of operating income.

Our operations are organized under three reporting segments—the SMB segment, which serves primarily small- and medium-sized businesses; the Large Account segment, which serves primarily medium-to-large corporations; and the Public Sector segment, which serves primarily federal, state, and local government and educational institutions.  In addition, the Headquarters/Other group provides services in areas such as finance, human resources, information technology, marketing, and product management.  Most of the operating costs associated with the Headquarters/Other group functions are charged to the operating segments based on their estimated usage of the underlying functions.  We report these charges to the operating segments as “Allocations.”  Certain headquarters costs relating to executive oversight and other fiduciary functions that are not allocated to the operating segments are included under the heading of Headquarters/Other in the tables below.

In May 2016, we acquired Softmart, a global supplier of information technology and software services solutions.  We have included the operating results for Softmart in our SMB and Large Account segments from May 27, 2016, the closing date of the acquisition.  The external sales and operating results of Softmart since the date of acquisition were immaterial to our consolidated results.

In October 2016, we acquired GlobalServe, which has developed a industry-leading tool that simplifies customers’ global IT procurement.  We have included the operating results for GlobalServe in our Large Account segment from October 11, 2016, the closing date of the acquisition.  The external sales and operating results of GlobalServe since the date of acquisition were immaterial to our consolidated results.

Net sales presented below exclude inter-segment product revenues.  Segment information applicable to our reportable operating segments for the years ended December 31, 2016, 2015, and 2014 is shown below:

	Years Ended December 31,
	2016		2015		2014
Net sales:
SMB	$	1,091,182	$	1,040,586	$	1,037,620
Large Account		1,011,990		961,013		850,796
Public Sector		589,420		572,374		574,923
Total net sales	$	2,692,592	$	2,573,973	$	2,463,339
Operating income (loss):
SMB	$	41,596	$	42,855	$	39,608
Large Account		42,504		41,234		39,229
Public Sector		8,561		6,879		3,621
Headquarters/Other		(12,141)		(12,414)		(11,004)
Total operating income		80,520		78,554		71,454
Interest expense		(67)		(87)		(86)
Income before taxes	$	80,453	$	78,467	$	71,368
Selected operating expense:
Depreciation and amortization:
SMB	$	425	$	24	$	5
Large Account		1,784		1,297		1,368
Public Sector		160		156		124
Headquarters/Other		8,084		7,484		6,595
Total depreciation and amortization	$	10,453	$	8,961	$	8,092
Total assets:
SMB	$	240,665	$	207,147
Large Account		361,431		320,633
Public Sector		95,278		73,374
Headquarters/Other		(11,240)		37,920
Total assets	$	686,134	$	639,074

The assets of our operating segments presented above consist primarily of accounts receivable, intercompany receivable, goodwill, and other intangibles.  Goodwill of $66,236 and $7,366 is held by our Large Account and SMB segments, respectively, for the year ended December 31, 2016.  Assets reported under the Headquarters/Other group are managed by corporate headquarters, including cash, inventory, and property and equipment.  Total assets for the Headquarters/Other group are presented net of intercompany balances eliminations of $49,937 and $36,752 for the years ended December 31, 2016 and 2015, respectively.  Our capital expenditures consist largely of IT hardware and software purchased to maintain or upgrade our management information systems.  These systems serve all of our subsidiaries, to varying degrees, and as a result, our CODM does not evaluate capital expenditures on a segment basis.

Substantially, all of our sales in 2016, 2015, and 2014 were made to customers located in the United States.  Shipments to customers located in foreign countries were not more than 2% of total net sales in 2016, 2015, and 2014.  All of our assets at December 31, 2016 and 2015 were located in the United States.  Our primary target customers are SMBs, federal, state, and local government agencies, educational institutions, and medium-to-large corporate accounts.  No single customer accounted for more than 2% of total net sales in 2016, 2015, or 2014.  While no single agency of the federal government comprised more than 2% of total sales, aggregate sales to the federal government were 7.5%,  6.7%, and 6.5% in 2016, 2015, and 2014, respectively.