Note 8 – Segment Information and Geographic Data

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. Accordingly, the Company determined its reportable operating segments, which are generally based on the nature and location of its customers, to be the Americas, Europe, Japan, Asia-Pacific and Retail operations. The results of the Americas, Europe, Japan and Asia-Pacific reportable segments do not include results of the Retail segment. The Americas segment includes both North and South America. The Europe segment includes European countries, as well as the Middle East and Africa. The Asia-Pacific segment includes Australia and Asian countries, other than Japan. The Retail segment operates Apple retail stores in 11 countries. Each reportable operating segment provides similar hardware and software products and similar services. 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 operating segments based on net sales and operating income. Net sales for geographic segments are generally based on the location of customers, while Retail segment net sales are based on sales from the Company’s retail stores. 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 operating segments. Costs excluded from segment operating income include various corporate expenses, such as manufacturing costs and variances not included in standard costs, research and development, corporate marketing expenses, share-based compensation expense, 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. Segment assets exclude corporate assets, such as cash and cash equivalents, short-term and long-term marketable securities, other long-term investments, manufacturing and corporate facilities, product tooling and manufacturing process equipment, miscellaneous corporate infrastructure, goodwill and other acquired intangible assets. Except for the Retail segment, capital asset purchases for long-lived assets are not reported to management by segment. Cash payments for capital asset purchases by the Retail segment were $612 million, $392 million and $369 million for 2011, 2010 and 2009, respectively.

The Company has certain retail stores that have been designed and built to serve as high-profile venues to promote brand awareness and serve as vehicles for corporate sales and marketing activities. Because of their unique design elements, locations and size, these stores require substantially more investment than the Company’s more typical retail stores. The Company allocates certain operating expenses associated with its high-profile stores to corporate expense to reflect the estimated Company-wide benefit. The allocation of these operating costs to corporate expense is based on the amount incurred for a high-profile store in excess of that incurred by a more typical Company retail location. The Company had opened a total of 19 high-profile stores as of September 24, 2011. Amounts allocated to corporate expense resulting from the operations of high-profile stores were $102 million, $75 million and $65 million for 2011, 2010 and 2009, respectively.

Summary information by operating segment for the three years ended September 24, 2011 is as follows (in millions):


	2011		2010		2009
Americas:
Net sales	$	38,315	$	24,498	$	18,981
Operating income	$	13,538	$	7,590	$	6,658
Depreciation, amortization and accretion	$	15	$	12	$	12
Segment assets (a)	$	3,807	$	2,809	$	1,896

Europe:
Net sales	$	27,778	$	18,692	$	11,810
Operating income	$	11,528	$	7,524	$	4,296
Depreciation, amortization and accretion	$	9	$	9	$	7
Segment assets	$	2,985	$	1,926	$	1,352

Japan:
Net sales	$	5,437	$	3,981	$	2,279
Operating income	$	2,481	$	1,846	$	961
Depreciation, amortization and accretion	$	3	$	3	$	2
Segment assets	$	804	$	991	$	483

Asia-Pacific:
Net sales	$	22,592	$	8,256	$	3,179
Operating income	$	9,587	$	3,647	$	1,100
Depreciation, amortization and accretion	$	3	$	3	$	3
Segment assets	$	1,913	$	1,622	$	529

Retail:
Net sales	$	14,127	$	9,798	$	6,656
Operating income	$	3,344	$	2,364	$	1,677
Depreciation, amortization and accretion (b)	$	223	$	163	$	146
Segment assets (b)	$	2,940	$	1,829	$	1,344

(a)	The Americas asset figures do not include fixed assets held in the U.S. Such fixed assets are not allocated specifically to the Americas segment and are included in the corporate and Retail assets figures below.

(b)	Retail segment depreciation and asset figures reflect the cost and related depreciation of its retail stores and related infrastructure.

A reconciliation of the Company’s segment operating income and assets to the consolidated financial statements for the three years ended September 24, 2011 is as follows (in millions):


	2011			2010			2009
Segment operating income	$	40,478		$	22,971		$	14,692
Other corporate expenses, net (a)		(5,520	)		(3,707	)		(2,242	)
Share-based compensation expense		(1,168	)		(879	)		(710	)

Total operating income	$	33,790		$	18,385		$	11,740


Segment assets	$	12,449		$	9,177		$	5,604
Corporate assets		103,922			66,006			41,897

Consolidated assets	$	116,371		$	75,183		$	47,501


Segment depreciation, amortization and accretion	$	253		$	190		$	170
Corporate depreciation, amortization and accretion		1,561			837			564

Consolidated depreciation, amortization and accretion	$	1,814		$	1,027		$	734

(a)

Other corporate expenses include research and development, corporate marketing expenses, manufacturing costs and variances not included in standard costs, and other separately managed general and administrative expenses, including certain corporate expenses associated with support of the Retail segment.

The U.S. and China were the only countries that accounted for more than 10% of Company’s net sales in 2011. No single country other than the U.S. accounted for more than 10% of net sales in 2010 or 2009. There was no single customer that accounted for more than 10% of net sales in 2011 or 2010. One of the Company’s customers accounted for 11% of net sales in 2009. Net sales for the three years ended September 24, 2011 and long-lived assets as of September 24, 2011, September 25, 2010 and September 26, 2009 are as follows (in millions):


	2011		2010		2009
Net sales:
U.S.	$	41,812	$	28,633	$	22,325
China (a)		12,472		2,764		769
Other countries		53,965		33,828		19,811

Total net sales	$	108,249	$	65,225	$	42,905


Long-lived assets:
U.S.	$	4,375	$	3,096	$	2,348
China (a)		2,613		1,245		365
Other countries		1,090		661		480

Total long-lived assets	$	8,078	$	5,002	$	3,193

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

Information regarding net sales by product for the three years ended September 24, 2011, is as follows (in millions):


	2011		2010		2009
Desktops (a)	$	6,439	$	6,201	$	4,324
Portables (b)		15,344		11,278		9,535

Total Mac net sales		21,783		17,479		13,859

iPod		7,453		8,274		8,091
Other music related products and services (c)		6,314		4,948		4,036
iPhone and related products and services (d)		47,057		25,179		13,033
iPad and related products and services (e)		20,358		4,958		0
Peripherals and other hardware (f)		2,330		1,814		1,475
Software, service and other net sales (g)		2,954		2,573		2,411

Total net sales	$	108,249	$	65,225	$	42,905

(a)	Includes iMac, Mac mini, Mac Pro and Xserve product lines.

(b)	Includes MacBook, MacBook Air and MacBook Pro product lines.

(c)	Includes sales from the iTunes Store, App Store, and iBookstore in addition to sales of iPod services and Apple-branded and third-party iPod accessories.

(d)	Includes revenue recognized from iPhone sales, carrier agreements, services, and Apple-branded and third-party iPhone accessories.

(e)	Includes revenue recognized from iPad sales, services and Apple-branded and third-party iPad accessories.

(f)	Includes sales of displays, wireless connectivity and networking solutions, and other hardware accessories.

(g)	Includes sales from the Mac App Store in addition to sales of other Apple-branded and third-party Mac software and Mac and Internet services.