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 operating segments, which are generally based on the nature and location of its customers, to be the Americas, Europe, Japan, Asia-Pacific, Retail and FileMaker operations. The Company’s reportable operating segments consist of Americas, Europe, Japan and Retail operations. Other operating segments include Asia Pacific, which encompasses Australia and Asia except for Japan and the Company’s FileMaker, Inc. subsidiary. The Americas, Europe, Japan and Asia Pacific segments exclude activities related to 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 Retail segment operates Apple-owned retail stores in the U.S. and in international markets. Each reportable operating segment provides similar hardware and software products and similar services to the same types of customers. 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, stock-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. Segment assets exclude corporate assets, such as cash, short-term and long-term investments, manufacturing and corporate facilities, 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. Cash payments for capital asset purchases by the Retail segment were $369 million, $389 million and $294 million for 2009, 2008 and 2007, respectively.
The Company has certain retail stores that have been designed and built to serve as high-profile venues to promote brand awareness and serve as vehicles for corporate sales and marketing activities. Because of their unique design elements, locations and size, these stores require substantially more investment than the Company’s more typical retail stores. The Company allocates certain operating expenses associated with its high-profile stores to corporate marketing expense to reflect the estimated Company-wide benefit. The allocation of these operating costs to corporate expense is based on the amount incurred for a high-profile store in excess of that incurred by a more typical Company retail location. The Company had opened a total of 11 high-profile stores as of September 26, 2009. Expenses allocated to corporate marketing resulting from the operations of high-profile stores were $65 million, $53 million and $39 million for 2009, 2008 and 2007, respectively.
Summary information by operating segment for the three years ended September 26, 2009 is as follows (in millions): 2009 2008 2007 Americas: Net sales $ 18,887 $ 16,447 $ 11,907 Operating income $ 6,637 $ 4,874 $ 2,998
Depreciation, amortization and accretion $ 11 $ 9 $ 9
Segment assets (a) $ 1,882 $ 1,678 $ 1,250
Europe:
Net sales $ 11,810 $ 9,233 $ 5,469
Operating income $ 4,296 $ 3,022 $ 1,350
Depreciation, amortization and accretion $ 7 $ 6 $ 6
Segment assets $ 1,352 $ 1,069 $ 586
Japan:
Net sales $ 2,279 $ 1,728 $ 1,084
Operating income $ 961 $ 549 $ 233
Depreciation, amortization and accretion $ 2 $ 2 $ 3
Segment assets $ 483 $ 272 $ 158
Retail:
Net sales $ 6,656 $ 7,292 $ 4,362
Operating income $ 1,677 $ 1,661 $ 876
Depreciation, amortization and accretion (b) $ 146 $ 108 $ 88
Segment assets (b) $ 1,344 $ 1,139 $ 908
Other Segments (c):
Net sales $ 3,273 $ 2,791 $ 1,756
Operating income $ 1,121 $ 775 $ 389
Depreciation, amortization and accretion $ 4 $ 4 $ 3
A reconciliation of the Company’s segment operating income and assets to the consolidated financial statements for the three years ended September 26, 2009 is as follows (in millions):
No single country outside of the U.S. accounted for more than 10% of net sales in 2009, 2008 or 2007. One of the Company’s customers accounted for 11% of net sales in 2009; there was no single customer that accounted for more than 10% of net sales in 2008 or 2007. Net sales and long-lived assets related to the U.S. and international operations for the three years ended September 26, 2009, are as follows (in millions):
(a) The Americas asset figures do not include fixed assets held in the U.S. Such fixed assets are not allocated specifically to the Americas segment and are included in the corporate assets figures below.
(b) Retail segment depreciation and asset figures reflect the cost and related depreciation of its retail stores and related infrastructure. (c) Other Segments include Asia-Pacific and FileMaker.
2009 2008 2007
Segment operating income $ 14,692 $ 10,881 $ 5,846
Other corporate expenses, net (a) (2,242 ) (2,038 ) (1,197 )
Stock-based compensation expense (710 ) (516 ) (242 )
Total operating income $ 11,740 $ 8,327 $ 4,407
Segment assets $ 5,604 $ 4,563 $ 3,151 Corporate assets 41,897 31,608 21,727 Consolidated assets $ 47,501 $ 36,171 $ 24,878
Segment depreciation, amortization and accretion $ 170 $ 129 $ 109
Corporate depreciation, amortization and accretion 564 367 218
Consolidated depreciation, amortization and accretion $ 734 $ 496 $ 327
(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, including certain corporate expenses associated with support of the Retail segment.
2009 2008 2007
Net sales:
U.S. $ 22,325 $ 20,893 $ 14,683
International 20,580 16,598 9,895
Total net sales $ 42,905 $ 37,491 $ 24,578
Long-lived assets: U.S. $ 2,698 $ 2,269 $ 1,752 International 495 410 260
Total long-lived assets $ 3,193 $ 2,679 $ 2,012
Information regarding net sales by product for the three years ended September 26, 2009, is as follows (in millions):