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. As initially reported in our third quarter results for 2016, the operating results of Softmart were included in the SMB segment. This segment allocation was revised in our results for the year as reported in our 2016 10-K. Under this revised reporting, the operating results of Softmart that were initially included in the SMB segment are now allocated between the SMB and Large Account segments and continue to be allocated between these two segments.

In October 2016, we acquired GlobalServe. 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 nine months ended September 30, 2017 and 2016 is shown below:


	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2017		2016		2017		2016
Net sales:
SMB	$	290,569	$	281,915	$	860,622	$	814,123
Large Account		268,022		254,273		823,017		723,864
Public Sector		170,639		172,297		465,977		419,057
Total net sales	$	729,230	$	708,485	$	2,149,616	$	1,957,044
Operating income (loss):
SMB	$	9,543	$	9,989	$	29,430	$	32,104
Large Account		12,389		11,832		35,777		31,188
Public Sector		2,793		3,593		169		4,555
Headquarters/Other		(2,986)		(2,969)		(9,745)		(9,228)
Total operating income		21,739		22,445		55,631		58,619
Interest income (expense)		(8)		(27)		20		(53)
Income before taxes	$	21,731	$	22,418	$	55,651	$	58,566
Selected operating expense:
Depreciation and amortization:
SMB	$	145	$	184	$	448	$	252
Large Account		519		466		1,661		1,138
Public Sector		45		40		126		121
Headquarters/Other		2,226		2,011		6,410		5,993
Total depreciation and amortization	$	2,935	$	2,701	$	8,645	$	7,504
Total assets:
SMB					$	241,030
Large Account						376,001
Public Sector						69,162
Headquarters/Other						5,689
Total assets					$	691,882

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 $16,728 as of September 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.