v2.4.1.9
Segment Information and Geographic Data
 3 Months Ended
Dec. 27, 2014
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. As the Company continues to expand its business, management believes collaboration across its online, retail and indirect channels is integral to better serving its customers and optimizing its financial results. In the first quarter of 2015, management began reporting business performance and making decisions primarily on a geographic basis, including the results of its retail stores in each respective geographic segment. Accordingly, to align with the way the business is currently managed, the Company’s reportable operating segments now consist of the Americas, Europe, Greater China, Japan and Rest of Asia Pacific. Retail is no longer reported as a separate reportable operating segment. 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. 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 2014 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 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. In the first quarter of 2015, the Company also began allocating certain costs to its operating segments that were previously included in other corporate expenses, including certain share-based compensation costs. 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 R&D, corporate marketing expenses, certain 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.

 

The following table shows information by operating segment for the three months ended December 27, 2014 and December 28, 2013 (in millions):

 

                                                 
     Three Months Ended  
     December 27,
2014		      December 28,
2013		  

Americas:

      

Net sales

    $ 30,566       $ 24,789   

Operating income

    $ 10,701       $ 8,069   
     

Europe:

      

Net sales

    $ 17,214       $ 14,335   

Operating income

    $ 5,882       $ 4,623   

Greater China:

      

Net sales

    $ 16,144       $ 9,496   

Operating income

    $ 6,366       $ 3,247   
     

Japan:

      

Net sales

    $ 5,448       $ 5,045   

Operating income

    $ 2,488       $ 2,330   

Rest of Asia Pacific:

      

Net sales

    $ 5,227       $ 3,929   

Operating income

    $ 1,849       $ 1,368   

A reconciliation of the Company’s segment operating income to the Condensed Consolidated Statements of Operations for the three months ended December 27, 2014 and December 28, 2013 is as follows (in millions):

 

                                                 
     Three Months Ended  
     December 27,
2014		     December 28,
2013		  

Segment operating income

    $ 27,286      $ 19,637   

Research and development expense

      (1,895 )      (1,330 ) 

Other corporate expenses, net

      (1,145 )      (844 ) 
  

 

 

    

 

 

  

Total operating income

    $ 24,246      $ 17,463