SEGMENT AND RELATED DISCLOSURES

6 Months Ended

Jun. 30, 2017

Segment and Related Disclosures

Segment and Related Disclosures

Note 4–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 reportable 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 governmental 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.  The second quarter 2016 results for the SMB and Large Account have been revised to reflect the segment methodology used in our 2016 10-K. Under this revise reporting, Softmart’s operating results that were formerly included in the SMB segment are now allocated between the SMB and Large Account segments.  We have included the operating results of Softmart in our SMB and Large Account segments.   

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

Segment information applicable to our reportable operating segments for the three and six months ended June 30, 2017 and 2016 is shown below:

	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2017		2016		2017		2016
Net sales:
SMB	$	296,420	$	270,962	$	570,053	$	532,208
Large Account		302,077		269,482		554,995		469,591
Public Sector		151,295		135,721		295,338		246,760
Total net sales	$	749,792	$	676,165	$	1,420,386	$	1,248,559
Operating income (loss):
SMB	$	11,280	$	10,794	$	19,887	$	22,115
Large Account		14,331		12,166		23,388		19,356
Public Sector		(11)		1,112		(2,624)		962
Headquarters/Other		(3,160)		(3,062)		(6,759)		(6,259)
Total operating income		22,440		21,010		33,892		36,174
Interest income (expense)		9		(12)		28		(26)
Income before taxes	$	22,449	$	20,998	$	33,920	$	36,148
Selected operating expense:
Depreciation and amortization:
SMB	$	149	$	59	$	303	$	68
Large Account		548		366		1,142		672
Public Sector		42		41		81		81
Headquarters/Other		2,116		1,922		4,184		3,982
Total depreciation and amortization	$	2,855	$	2,388	$	5,710	$	4,803
Total assets:
SMB					$	243,312
Large Account						377,992
Public Sector						70,938
Headquarters/Other						21,087
Total assets					$	713,329

The assets of our three operating segments presented above consist primarily of accounts receivable, intercompany receivable, goodwill, and other intangibles.  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 balance eliminations of $25,756 as of June 30, 2017.  Our capital expenditures consist largely of IT hardware and software purchased to maintain or upgrade our management information systems.  These information systems serve all of our segments, to varying degrees, and accordingly, our CODM does not evaluate capital expenditures on a segment basis.