Segment Information

12 Months Ended

Dec. 31, 2013

Segment Reporting [Abstract]

Segment Information

8.  Segment Information

Accounting guidance on segments of an enterprise requires companies to report financial and descriptive information about their reportable operating segments, including segment profit or loss, certain specific revenue and expense items, and segment assets, as well as information about the revenues derived from the Company’s products and services, the countries in which the Company earns revenues and holds assets, and major customers. This statement also requires companies that have a single reportable segment to disclose information about products and services, information about geographic areas, and information about major customers. This statement requires the use of the management approach to determine the information to be reported. The management approach is based on the way management organizes the enterprise to assess performance and make operating decisions regarding the allocation of resources. The accounting guidance on segments of an enterprise permits the aggregation, based on specific criteria, of several operating segments into one reportable operating segment. Management has chosen to aggregate its operating segments and report segment information as one reportable segment. A discussion of the factors relied upon and processes undertaken by management in determining that the Company meets the aggregation criteria is provided below, followed by the required disclosure regarding the Company’s single reportable segment.

Management defines operating segments as individual operations that the Chief Operating Decision Maker (“CODM”) (in the Company’s case, the Chief Executive Officer) reviews for the purpose of assessing performance and making operating decisions. When evaluating operating segments, management considers whether:

• The component engages in business activities from which it may earn revenues and incur expenses;

• The operating results of the component are regularly reviewed by the enterprise’s CODM;

• Discrete financial information is available about the component; and

• Other factors are present, such as management structure, presentation of information to the Board of Directors and the nature of the business activity of each component.

Based on the factors referenced above, management has determined that the Company has four operating segments, USSC (referred to by the Company as “Supply”), the first-tier operating subsidiary of USI; Lagasse, ORS Nasco, and MBS Dev. Supply also includes operations in Mexico conducted through a USSC subsidiary, as well as Azerty, which has been consolidated into Supply. O.K.I. Supply Co., which was acquired in 2012, has operations in Canada and Dubai which are immaterial to 2013 financial results.

Management has also concluded that three of the Company’s operating segments (Supply, Lagasse, and ORS Nasco) meet all of the aggregation criteria required by the accounting guidance. Such determination is based on company-wide similarities in (1) the nature of products and/or services provided, (2) customers served, (3) production processes and/or distribution methods used, (4) economic characteristics including gross margins and operating expenses and (5) regulatory environment. MBS Dev does not meet the materiality thresholds for reporting individual segments and has therefore been combined with the other operating segments. Management further believes aggregate presentation provides more useful information to the financial statement user and is, therefore, consistent with the principles and objectives of the FASB-issued accounting guidance.

The following discussion sets forth the required disclosure regarding single reportable segment information:

The Company operates as a single reportable segment as a leading wholesale distributor of business products, with 2013 net sales of $5.1 billion—including foreign operations in Mexico, Canada, and the U.A.E. For the years ended December 31, 2013, 2012 and 2011, the Company’s net sales from these foreign operations totaled $138.2 million, $112.5 million and $111.7 million, respectively. As of December 31, 2013, 2012, and 2011, long-lived assets of the Company’s foreign operations totaled $13.8 million, $13.1 million, and $4.7 million, respectively.

The Company’s product offerings may be divided into the following primary categories: (i) traditional office products, which include writing instruments, paper products, organizers and calendars and various office accessories; (ii) technology products such as computer supplies and peripherals; (iii) office furniture, such as desks, filing and storage solutions, seating and systems furniture, along with a variety of products for niche markets such as education government, healthcare and professional services; (iv) janitorial and breakroom supplies, which includes janitorial and breakroom supplies, foodservice consumables, safety and security items, and paper and packaging supplies; and (v) industrial supplies which includes hand and power tools, safety and security supplies, janitorial equipment and supplies and welding products. In 2013, the Company’s largest two suppliers were Hewlett-Packard Company and Lexmark International, Inc, which represented approximately 24% and 7%, respectively, of its total purchases. No other supplier accounted for more than 5% of the Company’s total purchases.

The Company’s customers include independent office products dealers and contract stationers, office products mega-dealers, office products superstores, computer products resellers, office furniture dealers, mass merchandisers, mail order companies, sanitary supply distributors, drug and grocery store chains, e-commerce dealers and other independent distributors. The Company had one customer, W.B. Mason Co., Inc., which constituted approximately 11% of its 2013 consolidated net sales. No other single customer accounted for more than 10% of the 2013 consolidated net sales. The following table shows net sales by product category for 2013, 2012 and 2011 (in millions):

	Years Ended December 31,
	2013		2012(1)		2011(1)
Technology products	$	1,466,499	$	1,563,757	$	1,626,030
Janitorial and breakroom supplies		1,335,414		1,282,370		1,222,225
Traditional office products		1,310,571		1,366,368		1,360,702
Industrial supplies		517,826		409,266		349,370
Office furniture		312,298		324,668		324,974
Freight revenue		105,567		99,319		88,893
Other		37,118		34,358		33,307
Total net sales	$	5,085,293	$	5,080,106	$	5,005,501

(1) Certain prior period amounts have been reclassified to conform to the current presentation. Such reclassifications include changes between several product categories due to several specific products being reclassified to different categories. These changes did not impact the Consolidated Statements of Income.