Segment Information and Geographic Data

3 Months Ended

Dec. 26, 2015

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 operating 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 and Rest of Asia Pacific. 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 those Asian countries not included in the Company’s other reportable operating segments. Although each reportable operating segment provides similar hardware and software products and similar services, they are 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” of the Notes to Consolidated Financial Statements in Part II, Item 8 of the 2015 Form 10-K.

The Company evaluates the performance of its reportable operating 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 operating 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 operating segment for the three months ended December 26, 2015 and December 27, 2014 (in millions):

	Three Months Ended
	December 26, 2015		December 27, 2014
Americas:
Net sales	$	29,325	$	30,566
Operating income	$	10,018	$	10,701
Europe:
Net sales	$	17,932	$	17,214
Operating income	$	5,779	$	5,882
Greater China:
Net sales	$	18,373	$	16,144
Operating income	$	7,576	$	6,366
Japan:
Net sales	$	4,794	$	5,448
Operating income	$	2,240	$	2,488
Rest of Asia Pacific:
Net sales	$	5,448	$	5,227
Operating income	$	2,032	$	1,849

A reconciliation of the Company’s segment operating income to the Condensed Consolidated Statements of Operations for the three months ended December 26, 2015 and December 27, 2014 (in millions):

	Three Months Ended
	December 26, 2015			December 27, 2014
Segment operating income	$	27,645		$	27,286
Research and development expense		(2,404	)		(1,895	)
Other corporate expenses, net		(1,070	)		(1,145	)
Total operating income	$	24,171		$	24,246