Segment Information and Geographic Data

12 Months Ended

Sep. 28, 2019

The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company’s reportable segments.

The Company manages its business primarily on a geographic basis. The Company’s reportable segments consist of the Americas, Europe, Greater China, Japan and Rest of Asia Pacific. Americas includes both North and South America. Europe includes European countries, as well as India, the Middle East and Africa. Greater China includes China, Hong Kong and Taiwan. Rest of Asia Pacific includes Australia and those Asian countries not included in the Company’s other reportable segments. Although the reportable segments provide similar hardware and software products and similar services, each one is managed separately to better align with the location of the Company’s customers and distribution partners and the unique market dynamics of each geographic region. The accounting policies of the various segments are the same as those described in Note 1, “Summary of Significant Accounting Policies.”

The Company evaluates the performance of its reportable segments based on net sales and operating income. Net sales for geographic segments are generally based on the location of customers and sales through the Company’s retail stores located in those geographic locations. Operating income for each segment includes net sales to third parties, related cost of sales and operating expenses directly attributable to the segment. Advertising expenses are generally included in the geographic segment in which the expenditures are incurred. Operating income for each segment excludes other income and expense and certain expenses managed outside the reportable segments. Costs excluded from segment operating income include various corporate expenses such as research and development, corporate marketing expenses, certain share-based compensation expenses, income taxes, various nonrecurring charges and other separately managed general and administrative costs. The Company does not include intercompany transfers between segments for management reporting purposes.

The following table shows information by reportable segment for 2019, 2018 and 2017 (in millions):



	2019		2018		2017
Americas:
Net sales	$	116,914	$	112,093	$	96,600
Operating income	$	35,099	$	34,864	$	30,684

Europe:
Net sales	$	60,288	$	62,420	$	54,938
Operating income	$	19,195	$	19,955	$	16,514

Greater China:
Net sales	$	43,678	$	51,942	$	44,764
Operating income	$	16,232	$	19,742	$	17,032

Japan:
Net sales	$	21,506	$	21,733	$	17,733
Operating income	$	9,369	$	9,500	$	8,097

Rest of Asia Pacific:
Net sales	$	17,788	$	17,407	$	15,199
Operating income	$	6,055	$	6,181	$	5,304

A reconciliation of the Company’s segment operating income to the Consolidated Statements of Operations for 2019, 2018 and 2017 is as follows (in millions):



	2019			2018			2017
Segment operating income	$	85,950		$	90,242		$	77,631
Research and development expense	(16,217		)	(14,236		)	(11,581		)
Other corporate expenses, net	(5,803		)	(5,108		)	(4,706		)
Total operating income	$	63,930		$	70,898		$	61,344

The U.S. and China were the only countries that accounted for more than 10% of the Company’s net sales in 2019, 2018 and 2017. There was no single customer that accounted for more than 10% of net sales in 2019, 2018 and 2017. Net sales for 2019, 2018 and 2017 and long-lived assets as of September 28, 2019 and September 29, 2018 were as follows (in millions):



	2019		2018		2017
Net sales:
U.S.	$	102,266	$	98,061	$	84,339
China⁽¹⁾	43,678		51,942		44,764
Other countries	114,230		115,592		100,131
Total net sales	$	260,174	$	265,595	$	229,234



	2019		2018
Long-lived assets:
U.S.	$	24,711	$	23,963
China ⁽¹⁾	9,064		13,268
Other countries	3,603		4,073
Total long-lived assets	$	37,378	$	41,304

(1)

China includes Hong Kong and Taiwan. Long-lived assets located in China consist primarily of product tooling and manufacturing process equipment and assets related to retail stores and related infrastructure.