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 Retail segment operates Apple retail stores in 13 countries, including the U.S. 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.”
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.
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 $495 million, $858 million and $612 million for 2013, 2012 and 2011, respectively. The Company’s total depreciation and amortization was $6.8 billion, $3.3 billion and $1.8 billion in 2013, 2012 and 2011, respectively, of which $382 million, $319 million and $273 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 2013, 2012 and 2011 (in millions):
| 2013 | 2012 | 2011 | ||||||||||
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Americas: |
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Net sales |
$ | 62,739 | $ | 57,512 | $ | 38,315 | ||||||
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Operating income |
$ | 22,817 | $ | 23,414 | $ | 13,111 | ||||||
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Europe: |
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Net sales |
$ | 37,883 | $ | 36,323 | $ | 27,778 | ||||||
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Operating income |
$ | 13,025 | $ | 14,869 | $ | 11,209 | ||||||
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Greater China: |
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Net sales |
$ | 25,417 | $ | 22,533 | $ | 12,690 | ||||||
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Operating income |
$ | 8,541 | $ | 9,843 | $ | 5,246 | ||||||
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Japan: |
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Net sales |
$ | 13,462 | $ | 10,571 | $ | 5,437 | ||||||
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Operating income |
$ | 6,819 | $ | 5,861 | $ | 2,415 | ||||||
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Rest of Asia Pacific: |
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Net sales |
$ | 11,181 | $ | 10,741 | $ | 9,902 | ||||||
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Operating income |
$ | 3,753 | $ | 4,253 | $ | 4,004 | ||||||
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Retail: |
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Net sales |
$ | 20,228 | $ | 18,828 | $ | 14,127 | ||||||
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Operating income |
$ | 4,025 | $ | 4,613 | $ | 3,075 | ||||||
A reconciliation of the Company’s segment operating income to the consolidated financial statements for 2013, 2012 and 2011, is as follows (in millions):
| 2013 | 2012 | 2011 | ||||||||||
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Segment operating income |
$ | 58,980 | $ | 62,853 | $ | 39,060 | ||||||
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Other corporate expenses, net |
(7,728 | ) | (5,872 | ) | (4,102 | ) | ||||||
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Share-based compensation expense |
(2,253 | ) | (1,740 | ) | (1,168 | ) | ||||||
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Total operating income |
$ | 48,999 | $ | 55,241 | $ | 33,790 | ||||||
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The following table shows total assets by segment and a reconciliation to the consolidated financial statements as of September 28, 2013 and September 29, 2012 (in millions):
| 2013 | 2012 | |||||||
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Segment assets: |
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Americas |
$ | 5,653 | $ | 5,525 | ||||
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Europe |
3,134 | 3,095 | ||||||
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Greater China |
2,943 | 1,321 | ||||||
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Japan |
2,932 | 1,698 | ||||||
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Rest of Asia-Pacific |
923 | 913 | ||||||
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Retail |
3,329 | 2,725 | ||||||
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Total segment assets |
18,914 | 15,277 | ||||||
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Corporate assets |
188,086 | 160,787 | ||||||
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Total assets |
$ | 207,000 | $ | 176,064 | ||||
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The U.S. and China were the only countries that accounted for more than 10% of the Company’s net sales in 2013, 2012 and 2011. There was no single customer that accounted for more than 10% of net sales in 2013, 2012 or 2011. Net sales for 2013, 2012 and 2011 and long-lived assets as of September 28, 2013 and September 29, 2012 are as follows (in millions):
| 2013 | 2012 | 2011 | ||||||||||
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Net sales: |
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U.S. |
$ | 66,197 | $ | 60,949 | $ | 41,812 | ||||||
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China (a) |
25,946 | 22,797 | 12,472 | |||||||||
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Other countries |
78,767 | 72,762 | 53,965 | |||||||||
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Total net sales |
$ | 170,910 | $ | 156,508 | $ | 108,249 | ||||||
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| 2013 | 2012 | |||||||||||
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Long-lived assets: |
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U.S. |
$ | 7,399 | $ | 6,012 | ||||||||
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China (a) |
7,403 | 7,314 | ||||||||||
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Other countries |
2,786 | 2,560 | ||||||||||
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Total long-lived assets |
$ | 17,588 | $ | 15,886 | ||||||||
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| (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 2013, 2012 and 2011, is as follows (in millions):
| 2013 | 2012 | 2011 | ||||||||||
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Net Sales by Product: |
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iPhone (a) |
$ | 91,279 | $ | 78,692 | $ | 45,998 | ||||||
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iPad (a) |
31,980 | 30,945 | 19,168 | |||||||||
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Mac (a) |
21,483 | 23,221 | 21,783 | |||||||||
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iPod (a) |
4,411 | 5,615 | 7,453 | |||||||||
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iTunes, Software and Services (b) |
16,051 | 12,890 | 9,373 | |||||||||
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Accessories (c) |
5,706 | 5,145 | 4,474 | |||||||||
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Total net sales |
$ | 170,910 | $ | 156,508 | $ | 108,249 | ||||||
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| (a) |
Includes deferrals and amortization of related non-software services and software upgrade rights. |
| (b) |
Includes revenue from sales on the iTunes Store, the App Store, the Mac App Store, and the iBooks Store, and revenue from sales of AppleCare, licensing and other services. |
| (c) |
Includes sales of hardware peripherals and Apple-branded and third-party accessories for iPhone, iPad, Mac and iPod. |