Segment Information and Geographic Data

3 Months Ended

Dec. 28, 2013

Segment Information and Geographic Data

Note 11 – 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. The Company’s reportable operating segments consist of the Americas, Europe, Greater China, Japan, Rest of Asia Pacific and Retail operations. The Americas segment includes both North and South America. The Europe segment includes European countries, as well as India, the Middle East and Africa. The Greater China segment includes China, Hong Kong and Taiwan. The Rest of Asia Pacific segment includes Australia and Asian countries, other than those countries included in the Company’s other operating segments. The results of the Company’s geographic segments do not include results of the Retail segment. 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” of the Notes to Consolidated Financial Statements in Part II, Item 8 of the Company’s 2013 Form 10-K.

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 through 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 research and development, corporate marketing expenses, share-based compensation expense, income taxes, various nonrecurring charges, and other separately managed general and administrative costs and certain manufacturing period expenses. The Company does not include intercompany transfers between segments for management reporting purposes.

The following table shows information by operating segment for the three months ended December 28, 2013 and December 29, 2012 (in millions):

	Three Months Ended
	December 28, 2013		December 29, 2012
Americas:
Net sales	$	20,098	$	20,341
Operating income	$	7,266	$	7,349
Europe:
Net sales	$	13,073	$	12,464
Operating income	$	4,576	$	4,409
Greater China:
Net sales	$	8,844	$	6,830
Operating income	$	3,140	$	2,544
Japan:
Net sales	$	4,948	$	4,443
Operating income	$	2,379	$	2,260
Rest of Asia Pacific:
Net sales	$	3,633	$	3,993
Operating income	$	1,329	$	1,335
Retail:
Net sales	$	6,998	$	6,441
Operating income	$	1,744	$	1,557

A reconciliation of the Company’s segment operating income to the condensed consolidated financial statements for the three months ended December 28, 2013 and December 29, 2012 is as follows (in millions):

	Three Months Ended
	December 28, 2013			December 29, 2012
Segment operating income	$	20,434		$	19,454
Share-based compensation expense		(681	)		(545	)
Other corporate expenses, net		(2,290	)		(1,699	)
Total operating income	$	17,463		$	17,210