intangible assets such as patents , customer-related intangible assets and other intangible assets with finite useful lives are amortized on a straight-line basis over their estimated economic lives .
the weighted-average useful lives approximate the following: .

customer relationships       | 25 | years
---------------------------- | -- | -----
trademarks                   | 25 | years
completed technology/patents | 10 | years
other                        | 25 | years

recoverability of intangible assets with finite useful lives is assessed in the same manner as property , plant and equipment as described above .
income taxes : for purposes of the company 2019s consolidated financial statements for periods prior to the spin-off , income tax expense has been recorded as if the company filed tax returns on a stand-alone basis separate from ingersoll rand .
this separate return methodology applies the accounting guidance for income taxes to the stand-alone financial statements as if the company was a stand-alone enterprise for the periods prior to the spin-off .
therefore , cash tax payments and items of current and deferred taxes may not be reflective of the company 2019s actual tax balances prior to or subsequent to the spin-off .
cash paid for income taxes , net of refunds for the twelve months ended december 31 , 2016 and 2015 was $ 10.4 million and $ 80.6 million , respectively .
the 2016 net cash income taxes paid includes a refund of $ 46.2 million received from the canadian tax authorities .
the income tax accounts reflected in the consolidated balance sheet as of december 31 , 2016 and 2015 include income taxes payable and deferred taxes allocated to the company at the time of the spin-off .
the calculation of the company 2019s income taxes involves considerable judgment and the use of both estimates and allocations .
deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities , applying enacted tax rates expected to be in effect for the year in which the differences are expected to reverse .
the company recognizes future tax benefits , such as net operating losses and tax credits , to the extent that realizing these benefits is considered in its judgment to be more likely than not .
the company regularly reviews the recoverability of its deferred tax assets considering its historic profitability , projected future taxable income , timing of the reversals of existing temporary differences and the feasibility of its tax planning strategies .
where appropriate , the company records a valuation allowance with respect to a future tax benefit .
product warranties : standard product warranty accruals are recorded at the time of sale and are estimated based upon product warranty terms and historical experience .
the company assesses the adequacy of its liabilities and will make adjustments as necessary based on known or anticipated warranty claims , or as new information becomes available .
revenue recognition : revenue is recognized and earned when all of the following criteria are satisfied : ( a ) persuasive evidence of a sales arrangement exists ; ( b ) the price is fixed or determinable ; ( c ) collectability is reasonably assured ; and ( d ) delivery has occurred or service has been rendered .
delivery generally occurs when the title and the risks and rewards of ownership have transferred to the customer .
both the persuasive evidence of a sales arrangement and fixed or determinable price criteria are deemed to be satisfied upon receipt of an executed and legally binding sales agreement or contract that clearly defines the terms and conditions of the transaction including the respective obligations of the parties .
if the defined terms and conditions allow variability in all or a component of the price , revenue is not recognized until such time that the price becomes fixed or determinable .
at the point of sale , the company validates the existence of an enforceable claim that requires payment within a reasonable amount of time and assesses the collectability of that claim .
if collectability is not deemed to be reasonably assured , then revenue recognition is deferred until such time that collectability becomes probable or cash is received .
delivery is not considered to have occurred until the customer has taken title and assumed the risks and rewards of ownership .
service and installation revenue are recognized when earned .
in some instances , customer acceptance provisions are included in sales arrangements to give the buyer the ability to ensure the delivered product or service meets the criteria established in the order .
in these instances , revenue recognition is deferred until the acceptance terms specified in the arrangement are fulfilled through customer acceptance or a demonstration that established criteria have been satisfied .
if uncertainty exists about customer acceptance , revenue is not recognized until acceptance has occurred .
the company offers various sales incentive programs to our customers , dealers , and distributors .
sales incentive programs do not preclude revenue recognition , but do require an accrual for the company 2019s best estimate of expected activity .
examples of the sales incentives that are accrued for as a contra receivable and sales deduction at the point of sale include , but are not limited to , discounts ( i.e .
net 30 type ) , coupons , and rebates where the customer does not have to provide any additional requirements to receive the discount .
sales returns and customer disputes involving a question of quantity or price are also accounted for as a


stock price performance the following graph shows a comparison of the cumulative total return on our common stock , the standard & poor 2019s 500 index and the standard & poor 2019s retail index .
the graph assumes that the value of an investment in our common stock and in each such index was $ 100 on december 31 , 2011 , and that any dividends have been reinvested .
the comparison in the graph below is based solely on historical data and is not intended to forecast the possible future performance of our common stock .
comparison of cumulative total return among advance auto parts , inc. , s&p 500 index and s&p retail index company/index december 31 , december 29 , december 28 , january 3 , january 2 , december 31 .

company/index      | december 31 2011 | december 29 2012 | december 28 2013 | january 3 2015 | january 2 2016 | december 31 2016
------------------ | ---------------- | ---------------- | ---------------- | -------------- | -------------- | ----------------
advance auto parts | $ 100.00         | $ 102.87         | $ 158.46         | $ 228.88       | $ 217.49       | $ 244.64
s&p 500 index      | 100.00           | 114.07           | 152.98           | 174.56         | 177.01         | 198.18
s&p retail index   | 100.00           | 122.23           | 178.55           | 196.06         | 245.31         | 256.69


management 2019s discussion and analysis 132 jpmorgan chase & co./2010 annual report unpaid principal balance due to negative amortization of option arms was $ 24 million and $ 78 million at december 31 , 2010 and 2009 , respectively .
the firm estimates the following balances of option arm loans will experience a recast that results in a payment increase : $ 72 million in 2011 , $ 241 million in 2012 and $ 784 million in 2013 .
the firm did not originate option arms and new originations of option arms were discontinued by washington mutual prior to the date of jpmorgan chase 2019s acquisition of its banking operations .
subprime mortgages at december 31 , 2010 were $ 11.3 billion , compared with $ 12.5 billion at december 31 , 2009 .
the decrease was due to paydowns and charge-offs on delinquent loans , partially offset by the addition of loans as a result of the adoption of the accounting guidance related to vies .
late-stage delinquencies remained elevated but continued to improve , albeit at a slower rate during the second half of the year , while early-stage delinquencies stabilized at an elevated level during this period .
nonaccrual loans improved largely as a result of the improvement in late-stage delinquencies .
charge-offs reflected modest improvement .
auto : auto loans at december 31 , 2010 , were $ 48.4 billion , compared with $ 46.0 billion at december 31 , 2009 .
delinquent and nonaccrual loans have decreased .
in addition , net charge-offs have declined 52% ( 52 % ) from the prior year .
provision expense de- creased due to favorable loss severity as a result of a strong used- car market nationwide and reduced loss frequency due to the tightening of underwriting criteria in earlier periods .
the auto loan portfolio reflected a high concentration of prime quality credits .
business banking : business banking loans at december 31 , 2010 , were $ 16.8 billion , compared with $ 17.0 billion at december 31 , 2009 .
the decrease was primarily a result of run-off of the washington mutual portfolio and charge-offs on delinquent loans .
these loans primarily include loans which are highly collateralized , often with personal loan guarantees .
nonaccrual loans continued to remain elevated .
after having increased during the first half of 2010 , nonaccrual loans as of december 31 , 2010 , declined to year-end 2009 levels .
student and other : student and other loans at december 31 , 2010 , including loans held-for-sale , were $ 15.3 billion , compared with $ 16.4 billion at december 31 , 2009 .
other loans primarily include other secured and unsecured consumer loans .
delinquencies reflected some stabilization in the second half of 2010 , but remained elevated .
charge-offs during 2010 remained relatively flat with 2009 levels reflecting the impact of elevated unemployment levels .
purchased credit-impaired loans : pci loans at december 31 , 2010 , were $ 72.8 billion compared with $ 81.2 billion at december 31 , 2009 .
this portfolio represents loans acquired in the washing- ton mutual transaction that were recorded at fair value at the time of acquisition .
that fair value included an estimate of credit losses expected to be realized over the remaining lives of the loans , and therefore no allowance for loan losses was recorded for these loans as of the acquisition date .
the firm regularly updates the amount of principal and interest cash flows expected to be collected for these loans .
probable decreases in expected loan principal cash flows would trigger the recognition of impairment through the provision for loan losses .
probable and significant increases in expected cash flows ( e.g. , decreased principal credit losses , the net benefit of modifications ) would first reverse any previously recorded allowance for loan losses , with any remaining increase in the expected cash flows recognized prospectively in interest income over the remaining estimated lives of the underlying loans .
during 2010 , management concluded as part of the firm 2019s regular assessment of the pci pools that it was probable that higher expected principal credit losses would result in a decrease in expected cash flows .
accordingly , the firm recognized an aggregate $ 3.4 billion impairment related to the home equity , prime mortgage , option arm and subprime mortgage pci portfolios .
as a result of this impairment , the firm 2019s allowance for loan losses for the home equity , prime mortgage , option arm and subprime mortgage pci portfolios was $ 1.6 billion , $ 1.8 billion , $ 1.5 billion and $ 98 million , respectively , at december 31 , 2010 , compared with an allowance for loan losses of $ 1.1 billion and $ 491 million for the prime mortgage and option arm pci portfolios , respectively , at december 31 , 2009 .
approximately 39% ( 39 % ) of the option arm borrowers were delinquent , 5% ( 5 % ) were making interest-only or negatively amortizing payments , and 56% ( 56 % ) were making amortizing payments .
approximately 50% ( 50 % ) of current borrowers are subject to risk of payment shock due to future payment recast ; substantially all of the remaining loans have been modified to a fixed rate fully amortizing loan .
the cumulative amount of unpaid interest added to the unpaid principal balance of the option arm pci pool was $ 1.4 billion and $ 1.9 billion at de- cember 31 , 2010 and 2009 , respectively .
the firm estimates the following balances of option arm pci loans will experience a recast that results in a payment increase : $ 1.2 billion in 2011 , $ 2.7 billion in 2012 and $ 508 million in 2013 .
the following table provides a summary of lifetime loss estimates included in both the nonaccretable difference and the allowance for loan losses .
principal charge-offs will not be recorded on these pools until the nonaccretable difference has been fully depleted .
lifetime loss estimates ( a ) ltd liquidation losses ( b ) .

december 31 ( in millions ) | lifetime loss estimates ( a ) 2010 | lifetime loss estimates ( a ) 2009 | lifetime loss estimates ( a ) 2010 | 2009
--------------------------- | ---------------------------------- | ---------------------------------- | ---------------------------------- | ------
option arms                 | $ 11588                            | $ 10650                            | $ 4860                             | $ 1744
home equity                 | 14698                              | 13138                              | 8810                               | 6060
prime mortgage              | 4870                               | 4240                               | 1495                               | 794
subprime mortgage           | 3732                               | 3842                               | 1250                               | 796
total                       | $ 34888                            | $ 31870                            | $ 16415                            | $ 9394

( a ) includes the original nonaccretable difference established in purchase accounting of $ 30.5 billion for principal losses only .
the remaining nonaccretable difference for principal losses only was $ 14.1 billion and $ 21.1 billion at december 31 , 2010 and 2009 , respectively .
all probable increases in principal losses and foregone interest subsequent to the purchase date are reflected in the allowance for loan losses .
( b ) life-to-date ( 201cltd 201d ) liquidation losses represent realization of loss upon loan resolution.


corporate/other corporate/other includes global staff functions ( includes finance , risk , human resources , legal and compliance ) and other corporate expense , global operations and technology ( o&t ) , residual corporate treasury and corporate items .
at december 31 , 2009 , this segment had approximately $ 230 billion of assets , consisting primarily of the company 2019s liquidity portfolio , including $ 110 billion of cash and cash equivalents. .

in millions of dollars                                             | 2009               | 2008             | 2007
------------------------------------------------------------------ | ------------------ | ---------------- | ----------------
net interest revenue                                               | $ -1663 ( 1663 )   | $ -2680 ( 2680 ) | $ -2008 ( 2008 )
non-interest revenue                                               | -8893 ( 8893 )     | 422              | -302 ( 302 )
total revenues net of interest expense                             | $ -10556 ( 10556 ) | $ -2258 ( 2258 ) | $ -2310 ( 2310 )
total operating expenses                                           | $ 1420             | $ 510            | $ 1813
provisions for loan losses and for benefits and claims             | -1 ( 1 )           | 1                | -3 ( 3 )
( loss ) from continuing operations before taxes                   | $ -11975 ( 11975 ) | $ -2769 ( 2769 ) | $ -4120 ( 4120 )
income taxes ( benefits )                                          | -4369 ( 4369 )     | -587 ( 587 )     | -1446 ( 1446 )
( loss ) from continuing operations                                | $ -7606 ( 7606 )   | $ -2182 ( 2182 ) | $ -2674 ( 2674 )
income ( loss ) from discontinued operations net of taxes          | -445 ( 445 )       | 4002             | 708
net income ( loss ) before attribution of noncontrolling interests | $ -8051 ( 8051 )   | $ 1820           | $ -1966 ( 1966 )
net income attributable to noncontrolling interests                | 2014               | 2014             | 2
net income ( loss )                                                | $ -8051 ( 8051 )   | $ 1820           | $ -1968 ( 1968 )

2009 vs .
2008 revenues , net of interest expense declined , primarily due to the pretax loss on debt extinguishment related to the repayment of the $ 20 billion of tarp trust preferred securities and the pretax loss in connection with the exit from the loss-sharing agreement with the u.s .
government .
revenues also declined , due to the absence of the 2008 sale of citigroup global services limited recorded in o&t .
this was partially offset by a pretax gain related to the exchange offers , revenues and higher intersegment eliminations .
operating expenses increased , primarily due to intersegment eliminations and increases in compensation , partially offset by lower repositioning reserves .
2008 vs .
2007 revenues , net of interest expense increased primarily due to the gain in 2007 on the sale of certain corporate-owned assets and higher intersegment eliminations , partially offset by improved treasury hedging activities .
operating expenses declined , primarily due to lower restructuring charges in 2008 as well as reductions in incentive compensation and benefits expense.


during 2009 , the company extended the contractual life of 4 million fully vested share options held by 6 employees .
as a result of that modification , the company recognized additional compensation expense of $ 1 million for the year ended december 31 , 2009 .
restricted stock units ( 201crsus 201d ) performance-based rsus .
the company grants performance-based rsus to the company 2019s executive officers and certain employees once per year .
the company may also grant performance-based rsus to certain new employees or to employees who assume positions of increasing responsibility at the time those events occur .
the number of performance-based rsus that ultimately vest is dependent on one or both of the following as per the terms of the specific award agreement : the achievement of 1 ) internal profitability targets ( performance condition ) and 2 ) market performance targets measured by the comparison of the company 2019s stock performance versus a defined peer group ( market condition ) .
the performance-based rsus generally cliff-vest during the company 2019s quarter-end september 30 black-out period three years from the date of grant .
the ultimate number of shares of the company 2019s series a common stock issued will range from zero to stretch , with stretch defined individually under each award , net of personal income taxes withheld .
the market condition is factored into the estimated fair value per unit and compensation expense for each award will be based on the probability of achieving internal profitability targets , as applicable , and recognized on a straight-line basis over the term of the respective grant , less estimated forfeitures .
for performance-based rsus granted without a performance condition , compensation expense is based on the fair value per unit recognized on a straight-line basis over the term of the grant , less estimated forfeitures .
in april 2007 , the company granted performance-based rsus to certain employees that vest annually in equal tranches beginning october 1 , 2008 through october 1 , 2011 and include a market condition .
the performance- based rsus awarded include a catch-up provision that provides for an additional year of vesting of previously unvested amounts , subject to certain maximums .
compensation expense is based on the fair value per unit recognized on a straight-line basis over the term of the grant , less estimated forfeitures .
a summary of changes in performance-based rsus outstanding is as follows : number of weighted average fair value ( in thousands ) ( in $ ) .

                              | number of units ( in thousands ) | weighted average fair value ( in $ )
----------------------------- | -------------------------------- | ------------------------------------
nonvested at december 31 2008 | 1188                             | 19.65
granted                       | 420                              | 38.16
vested                        | -79 ( 79 )                       | 21.30
forfeited                     | -114 ( 114 )                     | 17.28
nonvested at december 31 2009 | 1415                             | 25.24

the fair value of shares vested for performance-based rsus during the years ended december 31 , 2009 and 2008 was $ 2 million and $ 3 million , respectively .
there were no vestings that occurred during the year ended december 31 , 2007 .
fair value for the company 2019s performance-based rsus was estimated at the grant date using a monte carlo simulation approach .
monte carlo simulation was utilized to randomly generate future stock returns for the company and each company in the defined peer group for each grant based on company-specific dividend yields , volatilities and stock return correlations .
these returns were used to calculate future performance-based rsu vesting percentages and the simulated values of the vested performance-based rsus were then discounted to present value using a risk-free rate , yielding the expected value of these performance-based rsus .
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note 10 2013 debt our long-term debt consisted of the following ( in millions ) : .

                                                                            | 2015           | 2014
--------------------------------------------------------------------------- | -------------- | ------------
notes with rates from 1.85% ( 1.85 % ) to 3.80% ( 3.80 % ) due 2016 to 2045 | $ 8150         | $ 1400
notes with rates from 4.07% ( 4.07 % ) to 5.72% ( 5.72 % ) due 2019 to 2046 | 6089           | 3589
notes with rates from 6.15% ( 6.15 % ) to 9.13% ( 9.13 % ) due 2016 to 2036 | 1941           | 1941
other debt                                                                  | 116            | 111
total long-term debt                                                        | 16296          | 7041
less : unamortized discounts and deferred financing costs                   | -1035 ( 1035 ) | -899 ( 899 )
total long-term debt net                                                    | $ 15261        | $ 6142

revolving credit facilities on october 9 , 2015 , we entered into a new $ 2.5 billion revolving credit facility ( the 5-year facility ) with various banks and concurrently terminated our existing $ 1.5 billion revolving credit facility , which was scheduled to expire in august 2019 .
the 5-year facility , which expires on october 9 , 2020 , is available for general corporate purposes .
the undrawn portion of the 5-year facility is also available to serve as a backup facility for the issuance of commercial paper .
we may request and the banks may grant , at their discretion , an increase in the borrowing capacity under the 5-year facility of up to an additional $ 500 million .
there were no borrowings outstanding under the 5-year facility as of and during the year ended december 31 , in contemplation of our acquisition of sikorsky , on october 9 , 2015 , we also entered into a 364-day revolving credit facility ( the 364-day facility , and together with the 5-year facility , the facilities ) with various banks that provided $ 7.0 billion of funding for general corporate purposes , including the acquisition of sikorsky .
concurrent with the consummation of the sikorsky acquisition , we borrowed $ 6.0 billion under the 364-day facility .
on november 23 , 2015 , we repaid all outstanding borrowings under the 364-day facility with proceeds received from an issuance of new debt ( see below ) and terminated any remaining commitments of the lenders under the 364-day facility .
borrowings under the facilities bear interest at rates based , at our option , on a eurodollar rate or a base rate , as defined in the facilities 2019 agreements .
each bank 2019s obligation to make loans under the 5-year facility is subject to , among other things , our compliance with various representations , warranties , and covenants , including covenants limiting our ability and certain of our subsidiaries 2019 ability to encumber assets and a covenant not to exceed a maximum leverage ratio , as defined in the five-year facility agreement .
as of december 31 , 2015 , we were in compliance with all covenants contained in the 5-year facility agreement , as well as in our debt agreements .
long-term debt on november 23 , 2015 , we issued $ 7.0 billion of notes ( the november 2015 notes ) in a registered public offering .
we received net proceeds of $ 6.9 billion from the offering , after deducting discounts and debt issuance costs , which are being amortized as interest expense over the life of the debt .
the november 2015 notes consist of : 2022 $ 750 million maturing in 2018 with a fixed interest rate of 1.85% ( 1.85 % ) ( the 2018 notes ) ; 2022 $ 1.25 billion maturing in 2020 with a fixed interest rate of 2.50% ( 2.50 % ) ( the 2020 notes ) ; 2022 $ 500 million maturing in 2023 with a fixed interest rate of 3.10% ( 3.10 % ) the 2023 notes ) ; 2022 $ 2.0 billion maturing in 2026 with a fixed interest rate of 3.55% ( 3.55 % ) ( the 2026 notes ) ; 2022 $ 500 million maturing in 2036 with a fixed interest rate of 4.50% ( 4.50 % ) ( the 2036 notes ) ; and 2022 $ 2.0 billion maturing in 2046 with a fixed interest rate of 4.70% ( 4.70 % ) ( the 2046 notes ) .
we may , at our option , redeem some or all of the november 2015 notes and unpaid interest at any time by paying the principal amount of notes being redeemed plus any make-whole premium and accrued and unpaid interest to the date of redemption .
interest is payable on the 2018 notes and the 2020 notes on may 23 and november 23 of each year , beginning on may 23 , 2016 ; on the 2023 notes and the 2026 notes on january 15 and july 15 of each year , beginning on july 15 , 2016 ; and on the 2036 notes and the 2046 notes on may 15 and november 15 of each year , beginning on may 15 , 2016 .
the november 2015 notes rank equally in right of payment with all of our existing unsecured and unsubordinated indebtedness .
the proceeds of the november 2015 notes were used to repay $ 6.0 billion of borrowings under our 364-day facility and for general corporate purposes.


15 .
debt the tables below summarize our outstanding debt at 30 september 2016 and 2015 : total debt .

30 september                      | 2016     | 2015
--------------------------------- | -------- | --------
short-term borrowings             | $ 935.8  | $ 1494.3
current portion of long-term debt | 371.3    | 435.6
long-term debt                    | 4918.1   | 3949.1
total debt                        | $ 6225.2 | $ 5879.0
short-term borrowings             |          |
30 september                      | 2016     | 2015
bank obligations                  | $ 133.1  | $ 234.3
commercial paper                  | 802.7    | 1260.0
total short-term borrowings       | $ 935.8  | $ 1494.3

the weighted average interest rate of short-term borrowings outstanding at 30 september 2016 and 2015 was 1.1% ( 1.1 % ) and .8% ( .8 % ) , respectively .
cash paid for interest , net of amounts capitalized , was $ 121.1 in 2016 , $ 97.5 in 2015 , and $ 132.4 in 2014.


stock performance graph the line graph that follows compares the cumulative total stockholder return on our common stock with the cumulative total return of the dow jones u.s .
technology index* and the standard & poor 2019s s&p 500* index for the five years ended december 28 , 2013 .
the graph and table assume that $ 100 was invested on december 26 , 2008 ( the last day of trading for the fiscal year ended december 27 , 2008 ) in each of our common stock , the dow jones u.s .
technology index , and the s&p 500 index , and that all dividends were reinvested .
cumulative total stockholder returns for our common stock , the dow jones u.s .
technology index , and the s&p 500 index are based on our fiscal year .
comparison of five-year cumulative return for intel , the dow jones u.s .
technology index* , and the s&p 500* index .

                                 | 2008  | 2009  | 2010  | 2011  | 2012  | 2013
-------------------------------- | ----- | ----- | ----- | ----- | ----- | -----
intel corporation                | $ 100 | $ 148 | $ 157 | $ 191 | $ 163 | $ 214
dow jones u.s . technology index | $ 100 | $ 170 | $ 191 | $ 191 | $ 209 | $ 270
s&p 500 index                    | $ 100 | $ 132 | $ 151 | $ 154 | $ 175 | $ 236

table of contents


shareowner return performance graph the following performance graph and related information shall not be deemed 201csoliciting material 201d or to be 201cfiled 201d with the securities and exchange commission , nor shall such information be incorporated by reference into any future filing under the securities act of 1933 or securities exchange act of 1934 , each as amended , except to the extent that the company specifically incorporates it by reference into such filing .
the following graph shows a five-year comparison of cumulative total shareowners 2019 returns for our class b common stock , the s&p 500 index , and the dow jones transportation average .
the comparison of the total cumulative return on investment , which is the change in the quarterly stock price plus reinvested dividends for each of the quarterly periods , assumes that $ 100 was invested on december 31 , 2001 in the s&p 500 index , the dow jones transportation average , and the class b common stock of united parcel service , inc .
comparison of five year cumulative total return $ 40.00 $ 60.00 $ 80.00 $ 100.00 $ 120.00 $ 140.00 $ 160.00 $ 180.00 $ 200.00 2001 2002 2003 2004 2005 2006 s&p 500 ups dj transport .

                                 | 12/31/01 | 12/31/02 | 12/31/03 | 12/31/04 | 12/31/05 | 12/31/06
-------------------------------- | -------- | -------- | -------- | -------- | -------- | --------
united parcel service inc .      | $ 100.00 | $ 117.19 | $ 140.49 | $ 163.54 | $ 146.35 | $ 148.92
s&p 500 index                    | $ 100.00 | $ 77.90  | $ 100.24 | $ 111.15 | $ 116.61 | $ 135.02
dow jones transportation average | $ 100.00 | $ 88.52  | $ 116.70 | $ 149.06 | $ 166.42 | $ 182.76

securities authorized for issuance under equity compensation plans the following table provides information as of december 31 , 2006 regarding compensation plans under which our class a common stock is authorized for issuance .
these plans do not authorize the issuance of our class b common stock.


jpmorgan chase & co .
/ 2008 annual report 83 credit risk capital credit risk capital is estimated separately for the wholesale business- es ( ib , cb , tss and am ) and consumer businesses ( rfs and cs ) .
credit risk capital for the overall wholesale credit portfolio is defined in terms of unexpected credit losses , both from defaults and declines in the portfolio value due to credit deterioration , measured over a one-year period at a confidence level consistent with an 201caa 201d credit rating standard .
unexpected losses are losses in excess of those for which provisions for credit losses are maintained .
the capital methodology is based upon several principal drivers of credit risk : exposure at default ( or loan-equivalent amount ) , default likelihood , credit spreads , loss severity and portfolio correlation .
credit risk capital for the consumer portfolio is based upon product and other relevant risk segmentation .
actual segment level default and severity experience are used to estimate unexpected losses for a one-year horizon at a confidence level consistent with an 201caa 201d credit rating standard .
statistical results for certain segments or portfolios are adjusted to ensure that capital is consistent with external bench- marks , such as subordination levels on market transactions or capital held at representative monoline competitors , where appropriate .
market risk capital the firm calculates market risk capital guided by the principle that capital should reflect the risk of loss in the value of portfolios and financial instruments caused by adverse movements in market vari- ables , such as interest and foreign exchange rates , credit spreads , securities prices and commodities prices .
daily value-at-risk ( 201cvar 201d ) , biweekly stress-test results and other factors are used to determine appropriate capital levels .
the firm allocates market risk capital to each business segment according to a formula that weights that seg- ment 2019s var and stress-test exposures .
see market risk management on pages 111 2013116 of this annual report for more information about these market risk measures .
operational risk capital capital is allocated to the lines of business for operational risk using a risk-based capital allocation methodology which estimates opera- tional risk on a bottom-up basis .
the operational risk capital model is based upon actual losses and potential scenario-based stress losses , with adjustments to the capital calculation to reflect changes in the quality of the control environment or the use of risk-transfer prod- ucts .
the firm believes its model is consistent with the new basel ii framework .
private equity risk capital capital is allocated to privately and publicly held securities , third-party fund investments and commitments in the private equity portfolio to cover the potential loss associated with a decline in equity markets and related asset devaluations .
in addition to negative market fluctua- tions , potential losses in private equity investment portfolios can be magnified by liquidity risk .
the capital allocation for the private equity portfolio is based upon measurement of the loss experience suffered by the firm and other market participants over a prolonged period of adverse equity market conditions .
regulatory capital the board of governors of the federal reserve system ( the 201cfederal reserve 201d ) establishes capital requirements , including well-capitalized standards for the consolidated financial holding company .
the office of the comptroller of the currency ( 201cocc 201d ) establishes similar capital requirements and standards for the firm 2019s national banks , including jpmorgan chase bank , n.a. , and chase bank usa , n.a .
the federal reserve granted the firm , for a period of 18 months fol- lowing the bear stearns merger , relief up to a certain specified amount and subject to certain conditions from the federal reserve 2019s risk-based capital and leverage requirements with respect to bear stearns 2019 risk-weighted assets and other exposures acquired .
the amount of such relief is subject to reduction by one-sixth each quarter subsequent to the merger and expires on october 1 , 2009 .
the occ granted jpmorgan chase bank , n.a .
similar relief from its risk-based capital and leverage requirements .
jpmorgan chase maintained a well-capitalized position , based upon tier 1 and total capital ratios at december 31 , 2008 and 2007 , as indicated in the tables below .
for more information , see note 30 on pages 212 2013213 of this annual report .
risk-based capital components and assets .

december 31 ( in millions )   | 2008      | 2007
----------------------------- | --------- | ---------
total tier 1capital ( a )     | $ 136104  | $ 88746
total tier 2 capital          | 48616     | 43496
total capital                 | $ 184720  | $ 132242
risk-weighted assets          | $ 1244659 | $ 1051879
total adjusted average assets | 1966895   | 1473541

( a ) the fasb has been deliberating certain amendments to both sfas 140 and fin 46r that may impact the accounting for transactions that involve qspes and vies .
based on the provisions of the current proposal and the firm 2019s interpretation of the propos- al , the firm estimates that the impact of consolidation could be up to $ 70 billion of credit card receivables , $ 40 billion of assets related to firm-sponsored multi-seller conduits , and $ 50 billion of other loans ( including residential mortgages ) ; the decrease in the tier 1 capital ratio could be approximately 80 basis points .
the ulti- mate impact could differ significantly due to the fasb 2019s continuing deliberations on the final requirements of the rule and market conditions.


on a geographic basis , the 1% ( 1 % ) increase in net sales reflects higher net sales in north america and emea , partially offset by lower net sales in asia .
the increase in net sales in north america was driven primarily by higher sales of digital entertainment devices , partially offset by lower demand for iden infrastructure equipment driven by customer expenditures returning to historic trends compared to an exceptionally strong 2005 .
the increase in net sales in emea was driven primarily by higher sales of digital entertainment devices .
the decrease in net sales in asia was due , in part , to delays in the granting of 3g licenses in china that led service providers to slow their near-term capital investment , as well as competitive pricing pressure .
net sales in north america continued to comprise a significant portion of the segment 2019s business , accounting for approximately 56% ( 56 % ) of the segment 2019s total net sales in 2006 , compared to approximately 55% ( 55 % ) of the segment 2019s total net sales in 2005 .
the segment reported operating earnings of $ 787 million in 2006 , compared to operating earnings of $ 1.2 billion in 2005 .
the 36% ( 36 % ) decrease in operating earnings was primarily due to : ( i ) a decrease in gross margin , due to an unfavorable product/regional mix and competitive pricing in the wireless networks market , and ( ii ) an increase in other charges ( income ) from an increase in reorganization of business charges , primarily related to employee severance , and from a legal reserve .
as a percentage of net sales in 2006 as compared to 2005 , gross margin , sg&a expenses , r&d expenditures and operating margin all decreased .
in 2006 , net sales to the segment 2019s top five customers , which included sprint nextel , comcast corporation , verizon , kddi and china mobile , represented 45% ( 45 % ) of the segment 2019s total net sales .
the segment 2019s backlog was $ 3.2 billion at december 31 , 2006 , compared to $ 2.4 billion at december 31 , 2005 .
the increase in backlog is primarily due to strong orders for our digital and hd/dvr set-tops .
in the market for digital entertainment devices , demand for the segment 2019s products depends primarily on the level of capital spending by broadband operators for constructing , rebuilding or upgrading their communications systems , and for offering advanced services .
in 2006 , our digital video customers significantly increased their purchases of the segment 2019s products and services , primarily due to increased demand for digital video set-tops , particularly hd/dvr set-tops .
during 2006 , the segment completed a number of significant acquisitions , including : ( i ) kreatel communications ab , a leading developer of innovative ip-based digital set-tops and software , ( ii ) nextnet wireless , inc. , a former clearwire corporation subsidiary and a leading provider of ofdm-based non-line-of-sight ( 201cnlos 201d ) wireless broadband infrastructure equipment , ( iii ) broadbus technologies , inc. , a provider of technology solutions for television on demand , and ( iv ) vertasent llc , a software developer for managing technology elements for switched digital video networks .
these acquisitions did not have a material impact on the segment results in 2006 .
enterprise mobility solutions segment the enterprise mobility solutions segment designs , manufactures , sells , installs and services analog and digital two-way radio , voice and data communications products and systems for private networks , wireless broadband systems and end-to-end enterprise mobility solutions to a wide range of enterprise markets , including government and public safety agencies ( which , together with all sales to distributors of two-way communications products , are referred to as the 201cgovernment and public safety market 201d ) , as well as retail , utility , transportation , manufacturing , healthcare and other commercial customers ( which , collectively , are referred to as the 201ccommercial enterprise market 201d ) .
in 2007 , the segment 2019s net sales represented 21% ( 21 % ) of the company 2019s consolidated net sales , compared to 13% ( 13 % ) in 2006 and 14% ( 14 % ) in 2005 .
( dollars in millions ) 2007 2006 2005 2007 20142006 2006 20142005 years ended december 31 percent change .

( dollars in millions ) | years ended december 31 2007 | years ended december 31 2006 | years ended december 31 2005 | years ended december 31 2007 20142006 | 2006 20142005
----------------------- | ---------------------------- | ---------------------------- | ---------------------------- | ------------------------------------- | -------------
segment net sales       | $ 7729                       | $ 5400                       | $ 5038                       | 43% ( 43 % )                          | 7% ( 7 % )
operating earnings      | 1213                         | 958                          | 860                          | 27% ( 27 % )                          | 11% ( 11 % )

segment results 20142007 compared to 2006 in 2007 , the segment 2019s net sales increased 43% ( 43 % ) to $ 7.7 billion , compared to $ 5.4 billion in 2006 .
the 43% ( 43 % ) increase in net sales was primarily due to increased net sales in the commercial enterprise market , driven by the net sales from the symbol business acquired in january 2007 .
net sales in the government and public safety market increased 6% ( 6 % ) , primarily due to strong demand in north america .
on a geographic basis , net sales increased in all regions .
62 management 2019s discussion and analysis of financial condition and results of operations


pension expense .

                                                                      | 2019           | 2018
--------------------------------------------------------------------- | -------------- | --------------
pension expense including special items noted below                   | $ 27.6         | $ 91.8
settlements termination benefits and curtailments ( "special items" ) | 7.2            | 48.9
weighted average discount rate 2013 service cost                      | 3.4% ( 3.4 % ) | 3.2% ( 3.2 % )
weighted average discount rate 2013 interest cost                     | 3.4% ( 3.4 % ) | 2.9% ( 2.9 % )
weighted average expected rate of return on plan assets               | 6.4% ( 6.4 % ) | 6.9% ( 6.9 % )
weighted average expected rate of compensation increase               | 3.5% ( 3.5 % ) | 3.5% ( 3.5 % )

pension expense decreased from the prior year due to lower pension settlements , lower loss amortization , primarily from favorable asset experience and the impact of higher discount rates , partially offset by lower expected returns on assets .
special items ( settlements , termination benefits , and curtailments ) decreased from the prior year primarily due to lower pension settlement losses .
in fiscal year 2019 , special items of $ 7.2 included pension settlement losses of $ 6.4 , of which $ 5.0 was recorded during the second quarter and related to the u.s .
supplementary pension plan , and $ .8 of termination benefits .
these amounts are reflected within "other non- operating income ( expense ) , net" on the consolidated income statements .
in fiscal year 2018 , special items of $ 48.9 included a pension settlement loss of $ 43.7 primarily in connection with the transfer of certain pension assets and payment obligations for our u.s .
salaried and hourly plans to an insurer during the fourth quarter , $ 4.8 of pension settlement losses related to lump sum payouts from the u.s .
supplementary pension plan , and $ .4 of termination benefits .
u.k .
lloyds equalization ruling on 26 october 2018 , the united kingdom high court issued a ruling related to the equalization of pension plan participants 2019 benefits for the gender effects of guaranteed minimum pensions .
as a result of this ruling , we estimated the impact of retroactively increasing benefits in our u.k .
plan in accordance with the high court ruling .
we treated the additional benefits as a prior service cost , which resulted in an increase to our projected benefit obligation and accumulated other comprehensive loss of $ 4.7 during the first quarter of fiscal year 2019 .
we are amortizing this cost over the average remaining life expectancy of the u.k .
participants .
2020 outlook in fiscal year 2020 , we expect pension expense to be approximately $ 5 to $ 20 , which includes expected pension settlement losses of $ 5 to $ 10 , depending on the timing of retirements .
the expected range reflects lower expected interest cost and higher total assets , partially offset by higher expected loss amortization primarily due to the impact of lower discount rates .
in fiscal year 2020 , we expect pension expense to include approximately $ 105 for amortization of actuarial losses .
in fiscal year 2019 , pension expense included amortization of actuarial losses of $ 76.2 .
net actuarial losses of $ 424.4 were recognized in accumulated other comprehensive income in fiscal year 2019 .
actuarial ( gains ) losses are amortized into pension expense over prospective periods to the extent they are not offset by future gains or losses .
future changes in the discount rate and actual returns on plan assets different from expected returns would impact the actuarial ( gains ) losses and resulting amortization in years beyond fiscal year 2020 .
pension funding pension funding includes both contributions to funded plans and benefit payments for unfunded plans , which are primarily non-qualified plans .
with respect to funded plans , our funding policy is that contributions , combined with appreciation and earnings , will be sufficient to pay benefits without creating unnecessary surpluses .
in addition , we make contributions to satisfy all legal funding requirements while managing our capacity to benefit from tax deductions attributable to plan contributions .
with the assistance of third-party actuaries , we analyze the liabilities and demographics of each plan , which help guide the level of contributions .
during 2019 and 2018 , our cash contributions to funded plans and benefit payments for unfunded plans were $ 40.2 and $ 68.3 , respectively .
for fiscal year 2020 , cash contributions to defined benefit plans are estimated to be $ 30 to $ 40 .
the estimate is based on expected contributions to certain international plans and anticipated benefit payments for unfunded plans , which are dependent upon the timing of retirements .
actual future contributions will depend on future funding legislation , discount rates , investment performance , plan design , and various other factors .
refer to the contractual obligations discussion on page 37 for a projection of future contributions.


management 2019s discussion and analysis of financial condition and results of operations 2013 ( continued ) ( amounts in millions , except per share amounts ) the effect of foreign exchange rate changes on cash and cash equivalents included in the consolidated statements of cash flows resulted in a decrease of $ 156.1 in 2015 .
the decrease was primarily a result of the u.s .
dollar being stronger than several foreign currencies , including the australian dollar , brazilian real , canadian dollar , euro and south african rand as of december 31 , 2015 compared to december 31 , 2014. .

balance sheet data                              | december 31 , 2016 | december 31 , 2015
----------------------------------------------- | ------------------ | ------------------
cash cash equivalents and marketable securities | $ 1100.6           | $ 1509.7
short-term borrowings                           | $ 85.7             | $ 132.9
current portion of long-term debt               | 323.9              | 1.9
long-term debt                                  | 1280.7             | 1610.3
total debt                                      | $ 1690.3           | $ 1745.1

liquidity outlook we expect our cash flow from operations , cash and cash equivalents to be sufficient to meet our anticipated operating requirements at a minimum for the next twelve months .
we also have a committed corporate credit facility as well as uncommitted facilities available to support our operating needs .
we continue to maintain a disciplined approach to managing liquidity , with flexibility over significant uses of cash , including our capital expenditures , cash used for new acquisitions , our common stock repurchase program and our common stock dividends .
from time to time , we evaluate market conditions and financing alternatives for opportunities to raise additional funds or otherwise improve our liquidity profile , enhance our financial flexibility and manage market risk .
our ability to access the capital markets depends on a number of factors , which include those specific to us , such as our credit rating , and those related to the financial markets , such as the amount or terms of available credit .
there can be no guarantee that we would be able to access new sources of liquidity on commercially reasonable terms , or at all .
funding requirements our most significant funding requirements include our operations , non-cancelable operating lease obligations , capital expenditures , acquisitions , common stock dividends , taxes and debt service .
additionally , we may be required to make payments to minority shareholders in certain subsidiaries if they exercise their options to sell us their equity interests .
notable funding requirements include : 2022 debt service 2013 our 2.25% ( 2.25 % ) senior notes in aggregate principal amount of $ 300.0 mature on november 15 , 2017 , and a $ 22.6 note classified within our other notes payable is due on june 30 , 2017 .
we expect to use available cash to fund the retirement of the outstanding notes upon maturity .
the remainder of our debt is primarily long-term , with maturities scheduled through 2024 .
see the table below for the maturity schedule of our long-term debt .
2022 acquisitions 2013 we paid cash of $ 52.1 , net of cash acquired of $ 13.6 , for acquisitions completed in 2016 .
we also paid $ 0.5 in up-front payments and $ 59.3 in deferred payments for prior-year acquisitions as well as ownership increases in our consolidated subsidiaries .
in addition to potential cash expenditures for new acquisitions , we expect to pay approximately $ 77.0 in 2017 related to prior-year acquisitions .
we may also be required to pay approximately $ 31.0 in 2017 related to put options held by minority shareholders if exercised .
we will continue to evaluate strategic opportunities to grow and continue to strengthen our market position , particularly in our digital and marketing services offerings , and to expand our presence in high-growth and key strategic world markets .
2022 dividends 2013 during 2016 , we paid four quarterly cash dividends of $ 0.15 per share on our common stock , which corresponded to aggregate dividend payments of $ 238.4 .
on february 10 , 2017 , we announced that our board of directors ( the 201cboard 201d ) had declared a common stock cash dividend of $ 0.18 per share , payable on march 15 , 2017 to holders of record as of the close of business on march 1 , 2017 .
assuming we pay a quarterly dividend of $ 0.18 per share and there is no significant change in the number of outstanding shares as of december 31 , 2016 , we would expect to pay approximately $ 280.0 over the next twelve months.


higher average borrowings .
additionally , the recapitalization that occurred late in the first quarter of 2005 resulted in a full year of interest in 2006 as compared to approximately ten months in 2005 .
the increase in interest expense in 2005 as compared to 2004 also resulted from the recapitalization in 2005 .
income tax expense income tax expense totaled $ 150.2 million , $ 116.1 million and $ 118.3 million for 2006 , 2005 and 2004 , respectively .
this resulted in an effective tax rate of 37.2% ( 37.2 % ) , 37.2% ( 37.2 % ) and 37.6% ( 37.6 % ) for 2006 , 2005 and 2004 , respectively .
net earnings net earnings totaled $ 259.1 million , $ 196.6 and $ 189.4 million for 2006 , 2005 and 2004 , respectively , or $ 1.37 , $ 1.53 and $ 1.48 per diluted share , respectively .
segment results of operations transaction processing services ( in thousands ) .

                                            | 2006      | 2005      | 2004
------------------------------------------- | --------- | --------- | --------
processing and services revenues            | $ 2458777 | $ 1208430 | $ 892033
cost of revenues                            | 1914148   | 904124    | 667078
gross profit                                | 544629    | 304306    | 224955
selling general and administrative expenses | 171106    | 94889     | 99581
research and development costs              | 70879     | 85702     | 54038
operating income                            | $ 302644  | $ 123715  | $ 71336

revenues for the transaction processing services segment are derived from three main revenue channels ; enterprise solutions , integrated financial solutions and international .
revenues from transaction processing services totaled $ 2458.8 million , $ 1208.4 and $ 892.0 million for 2006 , 2005 and 2004 , respectively .
the overall segment increase of $ 1250.4 million during 2006 , as compared to 2005 was primarily attributable to the certegy merger which contributed $ 1067.2 million to the overall increase .
the majority of the remaining 2006 growth is attributable to organic growth within the historically owned integrated financial solutions and international revenue channels , with international including $ 31.9 million related to the newly formed business process outsourcing operation in brazil .
the overall segment increase of $ 316.4 in 2005 as compared to 2004 results from the inclusion of a full year of results for the 2004 acquisitions of aurum , sanchez , kordoba , and intercept , which contributed $ 301.1 million of the increase .
cost of revenues for the transaction processing services segment totaled $ 1914.1 million , $ 904.1 million and $ 667.1 million for 2006 , 2005 and 2004 , respectively .
the overall segment increase of $ 1010.0 million during 2006 as compared to 2005 was primarily attributable to the certegy merger which contributed $ 848.2 million to the increase .
gross profit as a percentage of revenues ( 201cgross margin 201d ) was 22.2% ( 22.2 % ) , 25.2% ( 25.2 % ) and 25.2% ( 25.2 % ) for 2006 , 2005 and 2004 , respectively .
the decrease in gross profit in 2006 as compared to 2005 is primarily due to the february 1 , 2006 certegy merger , which businesses typically have lower margins than those of the historically owned fis businesses .
incremental intangible asset amortization relating to the certegy merger also contributed to the decrease in gross margin .
included in cost of revenues was depreciation and amortization of $ 272.4 million , $ 139.8 million , and $ 94.6 million for 2006 , 2005 and 2004 , respectively .
selling , general and administrative expenses totaled $ 171.1 million , $ 94.9 million and $ 99.6 million for 2006 , 2005 and 2004 , respectively .
the increase in 2006 compared to 2005 is primarily attributable to the certegy merger which contributed $ 73.7 million to the overall increase of $ 76.2 million .
the decrease of $ 4.7 million in 2005 as compared to 2004 is primarily attributable to the effect of acquisition related costs in 2004 .
included in selling , general and administrative expenses was depreciation and amortization of $ 11.0 million , $ 9.1 million and $ 2.3 million for 2006 , 2005 and 2004 , respectively.


entergy corporation and subsidiaries notes to financial statements ( a ) consists of pollution control revenue bonds and environmental revenue bonds , some of which are secured by collateral first mortgage bonds .
( b ) these notes do not have a stated interest rate , but have an implicit interest rate of 4.8% ( 4.8 % ) .
( c ) pursuant to the nuclear waste policy act of 1982 , entergy 2019s nuclear owner/licensee subsidiaries have contracts with the doe for spent nuclear fuel disposal service .
the contracts include a one-time fee for generation prior to april 7 , 1983 .
entergy arkansas is the only entergy company that generated electric power with nuclear fuel prior to that date and includes the one-time fee , plus accrued interest , in long-term debt .
( d ) see note 10 to the financial statements for further discussion of the waterford 3 and grand gulf lease obligations .
( e ) the fair value excludes lease obligations of $ 109 million at entergy louisiana and $ 34 million at system energy , long-term doe obligations of $ 181 million at entergy arkansas , and the note payable to nypa of $ 35 million at entergy , and includes debt due within one year .
fair values are classified as level 2 in the fair value hierarchy discussed in note 16 to the financial statements and are based on prices derived from inputs such as benchmark yields and reported trades .
the annual long-term debt maturities ( excluding lease obligations and long-term doe obligations ) for debt outstanding as of december 31 , 2015 , for the next five years are as follows : amount ( in thousands ) .

     | amount ( in thousands )
---- | -----------------------
2016 | $ 204079
2017 | $ 766451
2018 | $ 822690
2019 | $ 768588
2020 | $ 1631181

in november 2000 , entergy 2019s non-utility nuclear business purchased the fitzpatrick and indian point 3 power plants in a seller-financed transaction .
entergy issued notes to nypa with seven annual installments of approximately $ 108 million commencing one year from the date of the closing , and eight annual installments of $ 20 million commencing eight years from the date of the closing .
these notes do not have a stated interest rate , but have an implicit interest rate of 4.8% ( 4.8 % ) .
in accordance with the purchase agreement with nypa , the purchase of indian point 2 in 2001 resulted in entergy becoming liable to nypa for an additional $ 10 million per year for 10 years , beginning in september 2003 .
this liability was recorded upon the purchase of indian point 2 in september 2001 .
as part of the purchase agreement with nypa , entergy recorded a liability representing the net present value of the payments entergy would be liable to nypa for each year that the fitzpatrick and indian point 3 power plants would run beyond their respective original nrc license expiration date .
with the planned shutdown of fitzpatrick at the end of its current fuel cycle , entergy reduced this liability by $ 26.4 million in 2015 pursuant to the terms of the purchase agreement .
under a provision in a letter of credit supporting these notes , if certain of the utility operating companies or system energy were to default on other indebtedness , entergy could be required to post collateral to support the letter of credit .
entergy louisiana , entergy mississippi , entergy texas , and system energy have obtained long-term financing authorizations from the ferc that extend through october 2017 .
entergy arkansas has obtained long-term financing authorization from the apsc that extends through december 2018 .
entergy new orleans has obtained long-term financing authorization from the city council that extends through july 2016 .
capital funds agreement pursuant to an agreement with certain creditors , entergy corporation has agreed to supply system energy with sufficient capital to:


advance auto parts , inc .
and subsidiaries notes to consolidated financial statements 2013 ( continued ) december 30 , 2006 , december 31 , 2005 and january 1 , 2005 ( in thousands , except per share data ) 8 .
inventories , net inventories are stated at the lower of cost or market , cost being determined using the last-in , first-out ( "lifo" ) method for approximately 93% ( 93 % ) of inventories at both december 30 , 2006 and december 31 , 2005 .
under the lifo method , the company 2019s cost of sales reflects the costs of the most currently purchased inventories while the inventory carrying balance represents the costs relating to prices paid in prior years .
the company 2019s costs to acquire inventory have been generally decreasing in recent years as a result of its significant growth .
accordingly , the cost to replace inventory is less than the lifo balances carried for similar product .
as a result of the lifo method and the ability to obtain lower product costs , the company recorded a reduction to cost of sales of $ 9978 for fiscal year ended 2006 , an increase in cost of sales of $ 526 for fiscal year ended 2005 and a reduction to cost of sales of $ 11212 for fiscal year ended 2004 .
the remaining inventories are comprised of product cores , which consist of the non-consumable portion of certain parts and batteries and are valued under the first-in , first-out ( "fifo" ) method .
core values are included as part of our merchandise costs and are either passed on to the customer or returned to the vendor .
additionally , these products are not subject to the frequent cost changes like our other merchandise inventory , thus , there is no material difference from applying either the lifo or fifo valuation methods .
the company capitalizes certain purchasing and warehousing costs into inventory .
purchasing and warehousing costs included in inventory , at fifo , at december 30 , 2006 and december 31 , 2005 , were $ 95576 and $ 92833 , respectively .
inventories consist of the following : december 30 , december 31 , 2006 2005 .

                                         | december 30 2006 | december 31 2005
---------------------------------------- | ---------------- | ----------------
inventories at fifo net                  | $ 1380573        | $ 1294310
adjustments to state inventories at lifo | 82767            | 72789
inventories at lifo net                  | $ 1463340        | $ 1367099

replacement cost approximated fifo cost at december 30 , 2006 and december 31 , 2005 .
inventory quantities are tracked through a perpetual inventory system .
the company uses a cycle counting program in all distribution centers , parts delivered quickly warehouses , or pdqs , local area warehouses , or laws , and retail stores to ensure the accuracy of the perpetual inventory quantities of both merchandise and core inventory .
the company establishes reserves for estimated shrink based on historical accuracy and effectiveness of the cycle counting program .
the company also establishes reserves for potentially excess and obsolete inventories based on current inventory levels and the historical analysis of product sales and current market conditions .
the nature of the company 2019s inventory is such that the risk of obsolescence is minimal and excess inventory has historically been returned to the company 2019s vendors for credit .
the company provides reserves when less than full credit is expected from a vendor or when liquidating product will result in retail prices below recorded costs .
the company 2019s reserves against inventory for these matters were $ 31376 and $ 22825 at december 30 , 2006 and december 31 , 2005 , respectively .
9 .
property and equipment : property and equipment are stated at cost , less accumulated depreciation .
expenditures for maintenance and repairs are charged directly to expense when incurred ; major improvements are capitalized .
when items are sold or retired , the related cost and accumulated depreciation are removed from the accounts , with any gain or loss reflected in the consolidated statements of operations .
depreciation of land improvements , buildings , furniture , fixtures and equipment , and vehicles is provided over the estimated useful lives , which range from 2 to 40 years , of the respective assets using the straight-line method.


republic services , inc .
notes to consolidated financial statements 2014 ( continued ) 16 .
financial instruments fuel hedges we have entered into multiple swap agreements designated as cash flow hedges to mitigate some of our exposure related to changes in diesel fuel prices .
these swaps qualified for , and were designated as , effective hedges of changes in the prices of forecasted diesel fuel purchases ( fuel hedges ) .
the following table summarizes our outstanding fuel hedges as of december 31 , 2013 : year gallons hedged weighted average contract price per gallon .

year | gallons hedged | weighted average contractprice per gallon
---- | -------------- | -----------------------------------------
2014 | 27000000       | $ 3.81
2015 | 18000000       | 3.74
2016 | 12000000       | 3.68

if the national u.s .
on-highway average price for a gallon of diesel fuel as published by the department of energy exceeds the contract price per gallon , we receive the difference between the average price and the contract price ( multiplied by the notional gallons ) from the counterparty .
if the average price is less than the contract price per gallon , we pay the difference to the counterparty .
the fair values of our fuel hedges are determined using standard option valuation models with assumptions about commodity prices being based on those observed in underlying markets ( level 2 in the fair value hierarchy ) .
the aggregate fair values of our outstanding fuel hedges as of december 31 , 2013 and 2012 were current assets of $ 6.7 million and $ 3.1 million , respectively , and current liabilities of $ 0.1 million and $ 0.4 million , respectively , and have been recorded in other prepaid expenses and other current assets and other accrued liabilities in our consolidated balance sheets , respectively .
the ineffective portions of the changes in fair values resulted in ( losses ) gains of less than $ 0.1 million for the years ended december 31 , 2013 , 2012 and 2011 , and have been recorded in other income ( expense ) , net in our consolidated statements of income .
total gain ( loss ) recognized in other comprehensive income for fuel hedges ( the effective portion ) was $ 2.4 million , $ 3.4 million and $ ( 1.7 ) million , for the years ended december 31 , 2013 , 2012 and 2011 , respectively .
recycling commodity hedges our revenue from sale of recycling commodities is primarily from sales of old corrugated cardboard ( occ ) and old newspaper ( onp ) .
we use derivative instruments such as swaps and costless collars designated as cash flow hedges to manage our exposure to changes in prices of these commodities .
we have entered into multiple agreements related to the forecasted occ and onp sales .
the agreements qualified for , and were designated as , effective hedges of changes in the prices of certain forecasted recycling commodity sales ( commodity hedges ) .
we entered into costless collar agreements on forecasted sales of occ and onp .
the agreements involve combining a purchased put option giving us the right to sell occ and onp at an established floor strike price with a written call option obligating us to deliver occ and onp at an established cap strike price .
the puts and calls have the same settlement dates , are net settled in cash on such dates and have the same terms to expiration .
the contemporaneous combination of options resulted in no net premium for us and represent costless collars .
under these agreements , we will make or receive no payments as long as the settlement price is between the floor price and cap price ; however , if the settlement price is above the cap , we will pay the counterparty an amount equal to the excess of the settlement price over the cap times the monthly volumes hedged .
if the settlement price


entergy corporation and subsidiaries management's financial discussion and analysis net revenue 2004 compared to 2003 net revenue , which is entergy's measure of gross margin , consists of operating revenues net of : 1 ) fuel , fuel-related , and purchased power expenses and 2 ) other regulatory credits .
following is an analysis of the change in net revenue comparing 2004 to 2003. .

                                | ( in millions )
------------------------------- | ---------------
2003 net revenue                | $ 4214.5
volume/weather                  | 68.3
summer capacity charges         | 17.4
base rates                      | 10.6
deferred fuel cost revisions    | -46.3 ( 46.3 )
price applied to unbilled sales | -19.3 ( 19.3 )
other                           | -1.2 ( 1.2 )
2004 net revenue                | $ 4244.0

the volume/weather variance resulted primarily from increased usage , partially offset by the effect of milder weather on sales during 2004 compared to 2003 .
billed usage increased a total of 2261 gwh in the industrial and commercial sectors .
the summer capacity charges variance was due to the amortization in 2003 at entergy gulf states and entergy louisiana of deferred capacity charges for the summer of 2001 .
entergy gulf states' amortization began in june 2002 and ended in may 2003 .
entergy louisiana's amortization began in august 2002 and ended in july 2003 .
base rates increased net revenue due to a base rate increase at entergy new orleans that became effective in june 2003 .
the deferred fuel cost revisions variance resulted primarily from a revision in 2003 to an unbilled sales pricing estimate to more closely align the fuel component of that pricing with expected recoverable fuel costs at entergy louisiana .
deferred fuel cost revisions also decreased net revenue due to a revision in 2004 to the estimate of fuel costs filed for recovery at entergy arkansas in the march 2004 energy cost recovery rider .
the price applied to unbilled sales variance resulted from a decrease in fuel price in 2004 caused primarily by the effect of nuclear plant outages in 2003 on average fuel costs .
gross operating revenues and regulatory credits gross operating revenues include an increase in fuel cost recovery revenues of $ 475 million and $ 18 million in electric and gas sales , respectively , primarily due to higher fuel rates in 2004 resulting from increases in the market prices of purchased power and natural gas .
as such , this revenue increase is offset by increased fuel and purchased power expenses .
other regulatory credits increased primarily due to the following : 2022 cessation of the grand gulf accelerated recovery tariff that was suspended in july 2003 ; 2022 the amortization in 2003 of deferred capacity charges for summer 2001 power purchases at entergy gulf states and entergy louisiana ; 2022 the deferral in 2004 of $ 14.3 million of capacity charges related to generation resource planning as allowed by the lpsc ; 2022 the deferral in 2004 by entergy louisiana of $ 11.4 million related to the voluntary severance program , in accordance with a proposed stipulation entered into with the lpsc staff ; and


annual report 2013 duke realty corporation 37 in addition to the capitalization of overhead costs discussed above , we also capitalized $ 16.8 million , $ 9.4 million and $ 4.3 million of interest costs in the years ended december 31 , 2013 , 2012 and 2011 , respectively .
the following table summarizes our second generation capital expenditures by reportable operating segment ( in thousands ) : .

                                          | 2013    | 2012    | 2011
----------------------------------------- | ------- | ------- | -------
industrial                                | $ 41971 | $ 33095 | $ 34872
office                                    | 46600   | 30092   | 63933
medical office                            | 3106    | 641     | 410
non-reportable rental operations segments | 121     | 56      | 49
total                                     | $ 91798 | $ 63884 | $ 99264

both our first and second generation expenditures vary significantly between leases on a per square foot basis , dependent upon several factors including the product type , the nature of a tenant's operations , the specific physical characteristics of each individual property as well as the market in which the property is located .
second generation expenditures related to the 79 suburban office buildings that were sold in the blackstone office disposition totaled $ 26.2 million in 2011 .
dividends and distributions we are required to meet the distribution requirements of the internal revenue code of 1986 , as amended ( the "code" ) , in order to maintain our reit status .
we paid dividends of $ 0.68 per common share for each of the years ended december 31 , 2013 , 2012 and 2011 .
we expect to continue to distribute at least an amount equal to our taxable earnings , to meet the requirements to maintain our reit status , and additional amounts as determined by our board of directors .
distributions are declared at the discretion of our board of directors and are subject to actual cash available for distribution , our financial condition , capital requirements and such other factors as our board of directors deems relevant .
at december 31 , 2013 we had three series of preferred stock outstanding .
the annual dividend rates on our preferred shares range between 6.5% ( 6.5 % ) and 6.625% ( 6.625 % ) and are paid quarterly in arrears .
in february 2013 , we redeemed all of our outstanding series o shares for a total payment of $ 178.0 million , thus reducing our future quarterly dividend commitments by $ 3.7 million .
in march 2012 , we redeemed all of our 6.950% ( 6.950 % ) series m cumulative redeemable preferred shares ( "series m shares" ) for a total payment of $ 168.3 million , thus reducing our future quarterly dividend commitments by $ 2.9 million .
in july 2011 , we redeemed all of our 7.25% ( 7.25 % ) series n cumulative redeemable preferred shares ( "series n shares" ) for a total payment of $ 108.6 million , thus reducing our future quarterly dividend commitments by $ 2.0 million .
debt maturities debt outstanding at december 31 , 2013 had a face value totaling $ 4.3 billion with a weighted average interest rate of 5.49% ( 5.49 % ) and with maturity dates ranging between 2014 and 2028 .
of this total amount , we had $ 3.1 billion of unsecured debt , $ 1.1 billion of secured debt and $ 88.0 million outstanding on the drlp unsecured line of credit at december 31 , 2013 .
we made scheduled and unscheduled principal payments of $ 1.0 billion on outstanding debt during the year ended december 31 , 2013.


liquidity and capital resources we maintained a strong financial position throughout fiscal year 2019 .
as of 30 september 2019 , our consolidated balance sheet included cash and cash items of $ 2248.7 .
we continue to have consistent access to commercial paper markets , and cash flows from operating and financing activities are expected to meet liquidity needs for the foreseeable future .
as of 30 september 2019 , we had $ 971.5 of foreign cash and cash items compared to a total amount of cash and cash items of $ 2248.7 .
as a result of the tax act , we do not expect that a significant portion of our foreign subsidiaries' and affiliates' earnings will be subject to u.s .
income tax upon subsequent repatriation to the united states .
the repatriation of these earnings may be subject to foreign withholding and other taxes depending on the country in which the subsidiaries and affiliates reside .
however , because we have significant current investment plans outside the u.s. , it is our intent to permanently reinvest the majority of our foreign cash and cash items that would be subject to additional taxes outside the u.s .
refer to note 23 , income taxes , for additional information .
the table below summarizes our cash flows from operating activities , investing activities , and financing activities from continuing operations as reflected on the consolidated statements of cash flows: .

cash provided by ( used for ) | 2019               | 2018
----------------------------- | ------------------ | ------------------
operating activities          | $ 2969.9           | $ 2547.2
investing activities          | -2113.4 ( 2113.4 ) | -1641.6 ( 1641.6 )
financing activities          | -1370.5 ( 1370.5 ) | -1359.8 ( 1359.8 )

operating activities for the fiscal year ended 30 september 2019 , cash provided by operating activities was $ 2969.9 .
income from continuing operations of $ 1760.0 was adjusted for items including depreciation and amortization , deferred income taxes , impacts from the tax act , a charge for the facility closure of one of our customers , undistributed earnings of unconsolidated affiliates , gain on sale of assets and investments , share-based compensation , noncurrent capital lease receivables , and certain other adjustments .
the caption "gain on sale of assets and investments" includes a gain of $ 14.1 recognized on the disposition of our interest in high-tech gases ( beijing ) co. , ltd. , a previously held equity investment in our industrial gases 2013 asia segment .
refer to note 7 , acquisitions , to the consolidated financial statements for additional information .
the working capital accounts were a use of cash of $ 25.3 , primarily driven by $ 69.0 from trade receivables and $ 41.8 from payables and accrued liabilities , partially offset by $ 79.8 from other receivables .
the use of cash within "payables and accrued liabilities" was primarily driven by a $ 48.9 decrease in accrued utilities and a $ 30.3 decrease in accrued interest , partially offset by a $ 51.6 increase in customer advances primarily related to sale of equipment activity .
the decrease in accrued utilities was primarily driven by a contract modification to a tolling arrangement in india and lower utility costs in the industrial gases 2013 americas segment .
the source of cash from other receivables of $ 79.8 was primarily due to the maturities of forward exchange contracts that hedged foreign currency exposures and the collection of value added taxes .
for the fiscal year ended 30 september 2018 , cash provided by operating activities was $ 2547.2 , including income from continuing operations of $ 1455.6 .
other adjustments of $ 131.6 include a $ 54.9 net impact from the remeasurement of intercompany transactions .
the related hedging instruments that eliminate the earnings impact are included as a working capital adjustment in other receivables or payables and accrued liabilities .
in addition , other adjustments were impacted by cash received from the early termination of a cross currency swap of $ 54.4 , as well as the excess of pension expense over pension contributions of $ 23.5 .
the working capital accounts were a use of cash of $ 265.4 , primarily driven by payables and accrued liabilities , inventories , and trade receivables , partially offset by other receivables .
the use of cash in payables and accrued liabilities of $ 277.7 includes a decrease in customer advances of $ 145.7 primarily related to sale of equipment activity and $ 67.1 for maturities of forward exchange contracts that hedged foreign currency exposures .
the use of cash in inventories primarily resulted from the purchase of helium molecules .
in addition , inventories reflect the noncash impact of our change in accounting for u.s .
inventories from lifo to fifo .
the source of cash from other receivables of $ 128.3 was primarily due to the maturities of forward exchange contracts that hedged foreign currency exposures.


14 .
accounting for certain long-lived assets eog reviews its proved oil and gas properties for impairment purposes by comparing the expected undiscounted future cash flows at a depreciation , depletion and amortization group level to the unamortized capitalized cost of the asset .
the carrying rr values for assets determined to be impaired were adjusted to estimated fair value using the income approach described in the fair value measurement topic of the asc .
in certain instances , eog utilizes accepted offers from third-party purchasers as the basis for determining fair value .
during 2017 , proved oil and gas properties with a carrying amount of $ 370 million were written down to their fair value of $ 146 million , resulting in pretax impairment charges of $ 224 million .
during 2016 , proved oil and gas properties with a carrying rr amount of $ 643 million were written down to their fair value of $ 527 million , resulting in pretax impairment charges of $ 116 million .
impairments in 2017 , 2016 and 2015 included domestic legacy natural gas assets .
amortization and impairments of unproved oil and gas property costs , including amortization of capitalized interest , were $ 211 million , $ 291 million and $ 288 million during 2017 , 2016 and 2015 , respectively .
15 .
asset retirement obligations the following table presents the reconciliation of the beginning and ending aggregate carrying amounts of short-term and long-term legal obligations associated with the retirement of property , plant and equipment for the years ended december 31 , 2017 and 2016 ( in thousands ) : .

                                       | 2017             | 2016
-------------------------------------- | ---------------- | ----------------
carrying amount at beginning of period | $ 912926         | $ 811554
liabilities incurred ( 1 )             | 54764            | 212739
liabilities settled ( 2 )              | -61871 ( 61871 ) | -94800 ( 94800 )
accretion                              | 34708            | 32306
revisions                              | -9818 ( 9818 )   | -38286 ( 38286 )
foreign currency translations          | 16139            | -10587 ( 10587 )
carrying amount at end of period       | $ 946848         | $ 912926
current portion                        | $ 19259          | $ 18516
noncurrent portion                     | $ 927589         | $ 894410

( 1 ) includes $ 164 million in 2016 related to yates transaction ( see note 17 ) .
( 2 ) includes settlements related to asset sales .
the current and noncurrent portions of eog's asset retirement obligations are included in current liabilities - other and other liabilities , respectively , on the consolidated balance sheets.


30 2018 ppg annual report and 10-k foreign currency translation partially offset by : cost reclassifications associated with the adoption of the new revenue recognition standard .
refer to note 2 , "revenue recognition" within part 2 of this form 10-k cost management including restructuring cost savings 2017 vs .
2016 selling , general and administrative expenses decreased $ 1 million primarily due to : lower net periodic pension and other postretirement benefit costs lower selling and advertising costs restructuring cost savings partially offset by : wage and other cost inflation selling , general and administrative expenses from acquired businesses foreign currency translation other charges and other income .

( $ in millions except percentages )    | 2018      | % (  % ) change 2017 | % (  % ) change 2016 | % (  % ) change 2018 vs . 2017 | % (  % ) change 2017 vs . 2016
--------------------------------------- | --------- | -------------------- | -------------------- | ------------------------------ | ------------------------------
interest expense net of interest income | $ 95      | $ 85                 | $ 99                 | 11.8% ( 11.8 % )               | ( 14.1 ) % (  % )
business restructuring net              | $ 66      | $ 2014               | $ 191                | n/a                            | ( 100.0 ) % (  % )
pension settlement charges              | $ 2014    | $ 60                 | $ 968                | ( 100.0 ) % (  % )             | ( 93.8 ) % (  % )
other charges                           | $ 122     | $ 74                 | $ 242                | 64.9% ( 64.9 % )               | ( 69.4 ) % (  % )
other income                            | ( $ 114 ) | ( $ 150 )            | ( $ 127 )            | ( 24.0 ) % (  % )              | 18.1% ( 18.1 % )

interest expense , net of interest income interest expense , net of interest income increased $ 10 million in 2018 versus 2017 primarily due to the issuance of long- term debt in early 2018 .
interest expense , net of interest income decreased $ 14 million in 2017 versus 2016 due to lower interest rate debt outstanding in 2017 .
business restructuring , net a pretax restructuring charge of $ 83 million was recorded in the second quarter of 2018 , offset by certain changes in estimates to complete previously recorded programs of $ 17 million .
a pretax charge of $ 191 million was recorded in 2016 .
refer to note 8 , "business restructuring" in item 8 of this form 10-k for additional information .
pension settlement charges during 2017 , ppg made lump-sum payments to certain retirees who had participated in ppg's u.s .
qualified and non- qualified pension plans totaling approximately $ 127 million .
as the lump-sum payments were in excess of the expected 2017 service and interest costs for the affected plans , ppg remeasured the periodic benefit obligation of these plans in the period payments were made and recorded settlement charges totaling $ 60 million ( $ 38 million after-tax ) during 2017 .
during 2016 , ppg permanently transferred approximately $ 1.8 billion of its u.s .
and canadian pension obligations and assets to several highly rated insurance companies .
these actions triggered remeasurement and partial settlement of certain of the company 2019s defined benefit pension plans .
ppg recognized a $ 968 million pre-tax settlement charge in connection with these transactions .
refer to note 13 , "employee benefit plans" in item 8 of this form 10-k for additional information .
other charges other charges in 2018 and 2016 were higher than 2017 primarily due to environmental remediation charges .
these charges were principally for environmental remediation at a former chromium manufacturing plant and associated sites in new jersey .
refer to note 14 , "commitments and contingent liabilities" in item 8 of this form 10-k for additional information .
other income other income was lower in 2018 and 2016 than in 2017 primarily due to the gain from the sale of the mexican plaka business of $ 25 million and income from a legal settlement of $ 18 million in 2017 .
refer to note 3 , "acquisitions and divestitures" in item 8 of this form 10-k for additional information.


management 2019s discussion and analysis 164 jpmorgan chase & co./2013 annual report firm ) is required to hold more than the additional 2.5% ( 2.5 % ) of tier 1 common .
in addition , basel iii establishes a 6.5% ( 6.5 % ) tier i common equity standard for the definition of 201cwell capitalized 201d under the prompt corrective action ( 201cpca 201d ) requirements of the fdic improvement act ( 201cfdicia 201d ) .
the tier i common equity standard is effective from the first quarter of 2015 .
the following chart presents the basel iii minimum risk-based capital ratios during the transitional periods and on a fully phased-in basis .
the chart also includes management 2019s target for the firm 2019s tier 1 common ratio .
it is the firm 2019s current expectation that its basel iii tier 1 common ratio will exceed the regulatory minimums , both during the transition period and upon full implementation in 2019 and thereafter .
the firm estimates that its tier 1 common ratio under the basel iii advanced approach on a fully phased-in basis would be 9.5% ( 9.5 % ) as of december 31 , 2013 , achieving management 2019s previously stated objectives .
the tier 1 common ratio as calculated under the basel iii standardized approach is estimated at 9.4% ( 9.4 % ) as of december 31 , 2013 .
the tier 1 common ratio under both basel i and basel iii are non-gaap financial measures .
however , such measures are used by bank regulators , investors and analysts to assess the firm 2019s capital position and to compare the firm 2019s capital to that of other financial services companies .
the following table presents a comparison of the firm 2019s tier 1 common under basel i rules to its estimated tier 1 common under the advanced approach of the basel iii rules , along with the firm 2019s estimated risk-weighted assets .
key differences in the calculation of rwa between basel i and basel iii advanced approach include : ( 1 ) basel iii credit risk rwa is based on risk-sensitive approaches which largely rely on the use of internal credit models and parameters , whereas basel i rwa is based on fixed supervisory risk- weightings which vary only by counterparty type and asset class ; and ( 2 ) basel iii includes rwa for operational risk , whereas basel i does not .
operational risk capital takes into consideration operational losses in the quarter following the period in which those losses were realized , and the calculation generally incorporates such losses irrespective of whether the issues or business activity giving rise to the losses have been remediated or reduced .
the firm 2019s operational risk capital model continues to be refined in conjunction with the firm 2019s basel iii advanced approach parallel run .
as a result of model enhancements in 2013 , as well as taking into consideration the legal expenses incurred by the firm in 2013 , the firm 2019s operational risk capital increased substantially in 2013 over 2012 .
tier 1 common under basel iii includes additional adjustments and deductions not included in basel i tier 1 common , such as the inclusion of accumulated other comprehensive income ( 201caoci 201d ) related to afs securities and defined benefit pension and other postretirement employee benefit ( 201copeb 201d ) plans .
december 31 , 2013 ( in millions , except ratios ) .

tier 1 common under basel i rules                                                                   | $ 148887
--------------------------------------------------------------------------------------------------- | --------------
adjustments related to aoci for afs securities and defined benefit pension and opeb plans           | 1474
add back of basel i deductions ( a )                                                                | 1780
deduction for deferred tax asset related to net operating loss and foreign tax credit carryforwards | -741 ( 741 )
all other adjustments                                                                               | -198 ( 198 )
estimated tier 1 common under basel iii rules                                                       | $ 151202
estimated risk-weighted assets under basel iii advanced approach ( b )                              | $ 1590873
estimated tier 1 common ratio under basel iii advanced approach ( c )                               | 9.5% ( 9.5 % )

estimated risk-weighted assets under basel iii advanced approach ( b ) $ 1590873 estimated tier 1 common ratio under basel iii advanced approach ( c ) 9.5% ( 9.5 % ) ( a ) certain exposures , which are deducted from capital under basel i , are risked-weighted under basel iii.


entergy arkansas , inc .
management's financial discussion and analysis operating activities cash flow from operations increased $ 8.8 million in 2004 compared to 2003 primarily due to income tax benefits received in 2004 , and increased recovery of deferred fuel costs .
this increase was substantially offset by money pool activity .
in 2003 , the domestic utility companies and system energy filed , with the irs , a change in tax accounting method notification for their respective calculations of cost of goods sold .
the adjustment implemented a simplified method of allocation of overhead to the production of electricity , which is provided under the irs capitalization regulations .
the cumulative adjustment placing these companies on the new methodology resulted in a $ 1.171 billion deduction for entergy arkansas on entergy's 2003 income tax return .
there was no cash benefit from the method change in 2003 .
in 2004 , entergy arkansas realized $ 173 million in cash tax benefit from the method change .
this tax accounting method change is an issue across the utility industry and will likely be challenged by the irs on audit .
as of december 31 , 2004 , entergy arkansas has a net operating loss ( nol ) carryforward for tax purposes of $ 766.9 million , principally resulting from the change in tax accounting method related to cost of goods sold .
if the tax accounting method change is sustained , entergy arkansas expects to utilize the nol carryforward through 2006 .
cash flow from operations increased $ 80.1 million in 2003 compared to 2002 primarily due to income taxes paid of $ 2.2 million in 2003 compared to income taxes paid of $ 83.9 million in 2002 , and money pool activity .
this increase was partially offset by decreased recovery of deferred fuel costs in 2003 .
entergy arkansas' receivables from or ( payables to ) the money pool were as follows as of december 31 for each of the following years: .

2004             | 2003             | 2002             | 2001
---------------- | ---------------- | ---------------- | ----------------
( in thousands ) | ( in thousands ) | ( in thousands ) | ( in thousands )
$ 23561          | ( $ 69153 )      | $ 4279           | $ 23794

money pool activity used $ 92.7 million of entergy arkansas' operating cash flow in 2004 , provided $ 73.4 million in 2003 , and provided $ 19.5 million in 2002 .
see note 4 to the domestic utility companies and system energy financial statements for a description of the money pool .
investing activities the decrease of $ 68.1 million in net cash used in investing activities in 2004 compared to 2003 was primarily due to a decrease in construction expenditures resulting from less transmission upgrade work requested by merchant generators in 2004 combined with lower spending on customer support projects in 2004 .
the increase of $ 88.1 million in net cash used in investing activities in 2003 compared to 2002 was primarily due to an increase in construction expenditures of $ 57.4 million and the maturity of $ 38.4 million of other temporary investments in the first quarter of 2002 .
construction expenditures increased in 2003 primarily due to the following : 2022 a ferc ruling that shifted responsibility for transmission upgrade work performed for independent power producers to entergy arkansas ; and 2022 the ano 1 steam generator , reactor vessel head , and transformer replacement project .
financing activities the decrease of $ 90.7 million in net cash used in financing activities in 2004 compared to 2003 was primarily due to the net redemption of $ 2.4 million of long-term debt in 2004 compared to $ 109.3 million in 2003 , partially offset by the payment of $ 16.2 million more in common stock dividends during the same period.


management 2019s discussion and analysis we believe our credit ratings are primarily based on the credit rating agencies 2019 assessment of : 2030 our liquidity , market , credit and operational risk management practices ; 2030 the level and variability of our earnings ; 2030 our capital base ; 2030 our franchise , reputation and management ; 2030 our corporate governance ; and 2030 the external operating environment , including the assumed level of government support .
certain of the firm 2019s derivatives have been transacted under bilateral agreements with counterparties who may require us to post collateral or terminate the transactions based on changes in our credit ratings .
we assess the impact of these bilateral agreements by determining the collateral or termination payments that would occur assuming a downgrade by all rating agencies .
a downgrade by any one rating agency , depending on the agency 2019s relative ratings of the firm at the time of the downgrade , may have an impact which is comparable to the impact of a downgrade by all rating agencies .
we allocate a portion of our gce to ensure we would be able to make the additional collateral or termination payments that may be required in the event of a two-notch reduction in our long-term credit ratings , as well as collateral that has not been called by counterparties , but is available to them .
the table below presents the additional collateral or termination payments related to our net derivative liabilities under bilateral agreements that could have been called at the reporting date by counterparties in the event of a one-notch and two-notch downgrade in our credit ratings. .

in millions                                                             | as of december 2013 | as of december 2012
----------------------------------------------------------------------- | ------------------- | -------------------
additional collateral or termination payments for a one-notch downgrade | $ 911               | $ 1534
additional collateral or termination payments for a two-notch downgrade | 2989                | 2500

in millions 2013 2012 additional collateral or termination payments for a one-notch downgrade $ 911 $ 1534 additional collateral or termination payments for a two-notch downgrade 2989 2500 cash flows as a global financial institution , our cash flows are complex and bear little relation to our net earnings and net assets .
consequently , we believe that traditional cash flow analysis is less meaningful in evaluating our liquidity position than the excess liquidity and asset-liability management policies described above .
cash flow analysis may , however , be helpful in highlighting certain macro trends and strategic initiatives in our businesses .
year ended december 2013 .
our cash and cash equivalents decreased by $ 11.54 billion to $ 61.13 billion at the end of 2013 .
we generated $ 4.54 billion in net cash from operating activities .
we used net cash of $ 16.08 billion for investing and financing activities , primarily to fund loans held for investment and repurchases of common stock .
year ended december 2012 .
our cash and cash equivalents increased by $ 16.66 billion to $ 72.67 billion at the end of 2012 .
we generated $ 9.14 billion in net cash from operating and investing activities .
we generated $ 7.52 billion in net cash from financing activities from an increase in bank deposits , partially offset by net repayments of unsecured and secured long-term borrowings .
year ended december 2011 .
our cash and cash equivalents increased by $ 16.22 billion to $ 56.01 billion at the end of 2011 .
we generated $ 23.13 billion in net cash from operating and investing activities .
we used net cash of $ 6.91 billion for financing activities , primarily for repurchases of our series g preferred stock and common stock , partially offset by an increase in bank deposits .
goldman sachs 2013 annual report 89