Accordingly, the Company cannot determine in advance the ultimate effect of new product introductions and transitions. The income statement is a summary of the revenue or sales, expenses and profitability - shown as Net Income, or lack of it. If the Companys supply of components for a new or existing product were delayed or constrained, or if an outsourcing partner delayed shipments of completed products to the Company, the Companys financial condition and operating results could be materially adversely affected. The Company accounts for the trade-in right as a guarantee liability and recognizes arrangement revenue net of the fair value of such right with subsequent changes to the guarantee liability recognized within revenue. Product Support and Services AppleCare ® offers a range of support options for the Companys customers. The Companys products and services may experience quality problems from time to time that can result in decreased sales and operating margin and harm to the Companys reputation.
Management believes that adequate provisions have been made for any 34 adjustments that may result from tax examinations. As of September 28, 2013, approximately 176,000 shares were reserved for future issuance under the Director Plan. The Companys assessment on whether a security is other-than-temporarily impaired could change in the future due to new developments or changes in assumptions related to any particular security. In the market for personal computers and peripherals, the Company faces a significant number of competitors, many of which have broader product lines, lower priced products, and a larger installed 10 customer base. Management determines the appropriate classification of its investments at the time of purchase and reevaluates the classifications at each balance sheet date. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. The Company may enter into forward contracts, option contracts or other instruments to manage this risk and may designate these instruments as cash flow hedges.
In addition, the Company competes for various components with other participants in the markets for mobile communication and media devices and personal computers. The Company regularly reviews its investment portfolio to determine if any security is other-than-temporarily impaired, which would require the Company to record an impairment charge in the period any such determination is made. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. Share-based Compensation The Company recognizes expense related to share-based payment transactions in which it receives employee services in exchange for a equity instruments of the Company or b liabilities that are based on the fair value of the enterprises equity instruments or that may be settled by the issuance of such equity instruments. Gross margins could also be affected by the Companys ability to manage product quality and warranty costs effectively and to stimulate demand for certain of its products. Deferred gains and losses associated with cash flow hedges of foreign currency revenue are recognized as a component of net sales in the same period as the related revenue is recognized, and deferred gains and losses related to cash flow hedges of inventory purchases are recognized as a component of cost of sales in the same period as the related costs are recognized. The Company believes a high-quality buying experience with knowledgeable salespersons who can convey the value of the Companys products and services greatly enhances its ability to attract and retain customers.
Other income and expense also could vary materially from expectations depending on gains or losses realized on the sale or exchange of financial instruments; impairment charges resulting from revaluations of debt and equity securities and other investments; changes in interest rates; increases or decreases in cash balances; volatility in foreign exchange rates; and changes in fair value of derivative instruments. However, the outcome of legal proceedings and claims brought against the Company is subject to significant uncertainty. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use to price the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk. During 2013, the Company repurchased 19. The Company also could be significantly affected by other risks associated with international activities including, but not limited to, economic and labor conditions, increased duties, taxes and other costs and political instability.
The Company regularly files patent applications to protect innovations arising from its research, development and design, and is currently pursuing thousands of patent applications around the world. The Company also has entered into substantial operating lease commitments for retail space. Complying with emerging and changing international requirements may cause the Company to incur substantial costs or require the Company to change its business practices. The Company may also consider additional factors as appropriate, including the impact of other products and services provided to customers, the pricing of competitive alternatives if they exist, product-specific business objectives, and the length of time a particular version of a device has been available. In response to competitive pressures, the Company expects it will continue to take product pricing actions, which would adversely affect gross margins. Price competition has been particularly intense as competitors have aggressively cut prices and lowered product margins. Forward-looking statements can also be identified by words such as future, anticipates, believes, estimates, expects, intends, plans, predicts, will, would, could, can, may, and similar terms.
Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ Do not check if a smaller reporting company Smaller reporting company ¨ Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Act. Foreign and Domestic Operations and Geographic Data During 2013, the Companys domestic and international net sales accounted for 39% and 61%, respectively, of total net sales. The Companys profit margins vary across its products and distribution channels. This growth was driven by the launch of iPad mini and the fourth generation iPad beginning in the first quarter of 2013. The Companys cellular network carriers accounted for 68% and 66% of trade receivables as of September 28, 2013 and September 29, 2012, respectively. In the opinion of management, there was not at least a reasonable possibility the Company may have incurred a material loss, or a material loss in excess of a recorded accrual, with respect to loss contingencies for asserted legal and other claims. The Company believes continual investment in research and development, marketing and advertising is critical to the development and sale of innovative products and technologies.
The Company has appealed the District Courts decision. The Companys stock continues to experience substantial price volatility. The Company must order components for its products and build inventory in advance of product announcements and shipments. Certain stores 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. The Company presents its derivative assets and derivative liabilities at their gross fair values.
Inclusion of the additional week in 2012 increased the Companys overall net sales and operating expenses for the year. To help protect the net investment in a foreign operation from adverse changes in foreign currency exchange rates, the Company may enter into foreign currency forward and option contracts to offset the changes in the carrying amounts of these investments due to fluctuations in foreign currency exchange rates. The Rest of Asia Pacific segment includes Australia and Asian countries, other than those countries included in the Companys other operating segments. Global and regional economic conditions could materially adversely affect the Company. In September 2016, the Company introduced iPhone 7 and 7 Plus, featuring new camera systems, immersive stereo speakers and water and dust resistance. Business Strategy The Company is committed to bringing the best user experience to its customers through its innovative hardware, software and services. The Company may be subject to information technology system failures and network disruptions.
Defects may also occur in components and products the Company purchases from third parties. The Company offers an iPhone Upgrade Program, which is available to customers who purchase a qualifying iPhone in the U. Therefore, the Company remains subject to significant risks of supply shortages and price increases. The Company reviews property, plant and equipment, inventory component prepayments and identifiable intangibles, excluding goodwill and intangible assets with indefinite useful lives, for impairment. Net sales growth during 2015 was partially offset by the effect of weakness in most foreign currencies relative to the U.