Segment Information and Geographic Data

12 Months Ended

Sep. 29, 2012

Segment Information and Geographic Data

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. The results of the Americas, Europe, Japan and Asia-Pacific 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 13 countries, including the U.S. Each 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. Prior to 2012, the Company allocated to corporate expenses certain costs associated with its high-profile retail stores that have been designed and built to promote brand awareness and serve as vehicles for corporate sales and marketing activities. Beginning in 2012, the Company no longer allocates these costs to corporate expenses and reclassified $102 million and $75 million of such costs from corporate to Retail segment expenses for 2011 and 2010, respectively. The Company does not include intercompany transfers between segments for management reporting purposes.

Segment assets include receivables and inventories, and for the Retail segment also includes capital assets. Segment assets exclude corporate assets, such as cash and cash equivalents, short-term and long-term marketable securities, vendor non-trade receivables, 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 and therefore are excluded from the geographic segment assets and instead included in corporate assets. Cash payments for capital asset purchases by the Retail segment were $858 million, $612 million and $392 million for 2012, 2011 and 2010, respectively. The Company’s total depreciation and amortization was $3.3 billion, $1.8 billion and $1.0 billion in 2012, 2011 and 2010, respectively, of which $319 million, $273 million and $198 million was related to the Retail segment in the respective years. Depreciation and amortization on segment assets included in the geographic segments was not significant.

The following table shows information by operating segment for 2012, 2011, and 2010 (in millions):

	2012		2011		2010
Americas:
Net sales	$	57,512	$	38,315	$	24,498
Operating income	$	23,733	$	13,538	$	7,590
Europe:
Net sales	$	36,323	$	27,778	$	18,692
Operating income	$	15,015	$	11,528	$	7,524
Japan:
Net sales	$	10,571	$	5,437	$	3,981
Operating income	$	5,915	$	2,481	$	1,846
Asia-Pacific:
Net sales	$	33,274	$	22,592	$	8,256
Operating income	$	14,234	$	9,587	$	3,647
Retail:
Net sales	$	18,828	$	14,127	$	9,798
Operating income	$	4,719	$	3,242	$	2,289

A reconciliation of the Company’s segment operating income to the consolidated financial statements for 2012, 2011, and 2010, is as follows (in millions):

	2012			2011			2010
Segment operating income	$	63,616		$	40,376		$	22,896
Other corporate expenses, net (a)		(6,635	)		(5,418	)		(3,632	)
Share-based compensation expense		(1,740	)		(1,168	)		(879	)
Total operating income	$	55,241		$	33,790		$	18,385

(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.

The following table shows total assets by segment and a reconciliation to the consolidated financial statements as of September 29, 2012 and September 24, 2011 (in millions):

	2012		2011
Segment assets:
Americas	$	5,525	$	2,782
Europe		3,095		1,520
Japan		1,698		637
Asia-Pacific		2,234		1,710
Retail		2,725		2,151
Total segment assets		15,277		8,800
Corporate assets		160,787		107,571
Total assets	$	176,064	$	116,371

The U.S. and China were the only countries that accounted for more than 10% of the Company’s net sales in 2012 and 2011. No single country other than the U.S. accounted for more than 10% of net sales in 2010. There was no single customer that accounted for more than 10% of net sales in 2012, 2011 or 2010. Net sales for 2012, 2011, and 2010 and long-lived assets as of September 29, 2012 and September 24, 2011 are as follows (in millions):

	2012		2011		2010
Net sales:
U.S.	$	60,949	$	41,812	$	28,633
China (a)		22,797		12,472		2,764
Other countries		72,762		53,965		33,828
Total net sales	$	156,508	$	108,249	$	65,225

	2012		2011
Long-lived assets:
U.S.	$	6,012	$	4,375
China (a)		7,314		2,613
Other countries		2,560		1,090
Total long-lived assets	$	15,886	$	8,078

(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 2012, 2011, and 2010, is as follows (in millions):

	2012		2011		2010
Mac desktops (a)(i)	$	6,040	$	6,439	$	6,201
Mac portables (b)(i)		17,181		15,344		11,278
Total Mac net sales		23,221		21,783		17,479
iPod(c)(i)		5,615		7,453		8,274
Other music related products and services (d)		8,534		6,314		4,948
iPhone and related products and services (e)(i)		80,477		47,057		25,179
iPad and related products and services (f)(i)		32,424		20,358		4,958
Peripherals and other hardware (g)		2,778		2,330		1,814
Software, service and other net sales (h)		3,459		2,954		2,573
Total net sales	$	156,508	$	108,249	$	65,225

(a) Includes revenue from iMac, Mac mini and Mac Pro sales.

(b) Includes revenue from MacBook, MacBook Air and MacBook Pro sales.

(c) Includes revenue from iPod sales.

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

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

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

(g) Includes revenue from sales of displays, networking products, and other hardware.

(h) Includes revenue from sales of Apple-branded and third-party Mac software, and services.

(i) Includes amortization of related revenue deferred for non-software services and embedded software upgrade rights.