edwards lifesciences corporation notes to consolidated financial statements ( continued ) 12 .
employee benefit plans ( continued ) equity and debt securities are valued at fair value based on quoted market prices reported on the active markets on which the individual securities are traded .
the insurance contracts are valued at the cash surrender value of the contracts , which is deemed to approximate its fair value .
the following benefit payments , which reflect expected future service , as appropriate , at december 31 , 2016 , are expected to be paid ( in millions ) : .

2017      | $ 4.5
--------- | -----
2018      | 4.0
2019      | 4.0
2020      | 4.6
2021      | 4.5
2021-2025 | 44.6

as of december 31 , 2016 , expected employer contributions for 2017 are $ 6.1 million .
defined contribution plans the company 2019s employees in the united states and puerto rico are eligible to participate in a qualified defined contribution plan .
in the united states , participants may contribute up to 25% ( 25 % ) of their eligible compensation ( subject to tax code limitation ) to the plan .
edwards lifesciences matches the first 3% ( 3 % ) of the participant 2019s annual eligible compensation contributed to the plan on a dollar-for-dollar basis .
edwards lifesciences matches the next 2% ( 2 % ) of the participant 2019s annual eligible compensation to the plan on a 50% ( 50 % ) basis .
in puerto rico , participants may contribute up to 25% ( 25 % ) of their annual compensation ( subject to tax code limitation ) to the plan .
edwards lifesciences matches the first 4% ( 4 % ) of participant 2019s annual eligible compensation contributed to the plan on a 50% ( 50 % ) basis .
the company also provides a 2% ( 2 % ) profit sharing contribution calculated on eligible earnings for each employee .
matching contributions relating to edwards lifesciences employees were $ 17.3 million , $ 15.3 million , and $ 12.8 million in 2016 , 2015 , and 2014 , respectively .
the company also has nonqualified deferred compensation plans for a select group of employees .
the plans provide eligible participants the opportunity to defer eligible compensation to future dates specified by the participant with a return based on investment alternatives selected by the participant .
the amount accrued under these nonqualified plans was $ 46.7 million and $ 35.5 million at december 31 , 2016 and 2015 , respectively .
13 .
common stock treasury stock in july 2014 , the board of directors approved a stock repurchase program authorizing the company to purchase up to $ 750.0 million of the company 2019s common stock .
in november 2016 , the board of directors approved a new stock repurchase program providing for an additional $ 1.0 billion of repurchases of our common stock .
the repurchase programs do not have an expiration date .
stock repurchased under these programs may be used to offset obligations under the company 2019s employee stock-based benefit programs and stock-based business acquisitions , and will reduce the total shares outstanding .
during 2016 , 2015 , and 2014 , the company repurchased 7.3 million , 2.6 million , and 4.4 million shares , respectively , at an aggregate cost of $ 662.3 million , $ 280.1 million , and $ 300.9 million , respectively , including


the authorized costs of $ 76 are to be recovered via a surcharge over a twenty-year period beginning october 2012 .
surcharges collected as of december 31 , 2015 and 2014 were $ 4 and $ 5 , respectively .
in addition to the authorized costs , the company expects to incur additional costs totaling $ 34 , which will be recovered from contributions made by the california state coastal conservancy .
contributions collected as of december 31 , 2015 and 2014 were $ 8 and $ 5 , respectively .
regulatory balancing accounts accumulate differences between revenues recognized and authorized revenue requirements until they are collected from customers or are refunded .
regulatory balancing accounts include low income programs and purchased power and water accounts .
debt expense is amortized over the lives of the respective issues .
call premiums on the redemption of long- term debt , as well as unamortized debt expense , are deferred and amortized to the extent they will be recovered through future service rates .
purchase premium recoverable through rates is primarily the recovery of the acquisition premiums related to an asset acquisition by the company 2019s california subsidiary during 2002 , and acquisitions in 2007 by the company 2019s new jersey subsidiary .
as authorized for recovery by the california and new jersey pucs , these costs are being amortized to depreciation and amortization in the consolidated statements of operations through november 2048 .
tank painting costs are generally deferred and amortized to operations and maintenance expense in the consolidated statements of operations on a straight-line basis over periods ranging from five to fifteen years , as authorized by the regulatory authorities in their determination of rates charged for service .
other regulatory assets include certain deferred business transformation costs , construction costs for treatment facilities , property tax stabilization , employee-related costs , business services project expenses , coastal water project costs , rate case expenditures and environmental remediation costs among others .
these costs are deferred because the amounts are being recovered in rates or are probable of recovery through rates in future periods .
regulatory liabilities the regulatory liabilities generally represent probable future reductions in revenues associated with amounts that are to be credited or refunded to customers through the rate-making process .
the following table summarizes the composition of regulatory liabilities as of december 31: .

                                                           | 2015  | 2014
---------------------------------------------------------- | ----- | -----
removal costs recovered through rates                      | $ 311 | $ 301
pension and other postretirement benefitbalancing accounts | 59    | 54
other                                                      | 32    | 37
total regulatory liabilities                               | $ 402 | $ 392

removal costs recovered through rates are estimated costs to retire assets at the end of their expected useful life that are recovered through customer rates over the life of the associated assets .
in december 2008 , the company 2019s subsidiary in new jersey , at the direction of the new jersey puc , began to depreciate $ 48 of the total balance into depreciation and amortization expense in the consolidated statements of operations via straight line amortization through november 2048 .
pension and other postretirement benefit balancing accounts represent the difference between costs incurred and costs authorized by the puc 2019s that are expected to be refunded to customers.


performance graph the table below compares the cumulative total shareholder return on our common stock with the cumulative total return of ( i ) the standard & poor's 500 composite stock index ( "s&p 500 index" ) , ( ii ) the standard & poor's industrials index ( "s&p industrials index" ) and ( iii ) the standard & poor's consumer durables & apparel index ( "s&p consumer durables & apparel index" ) , from december 31 , 2012 through december 31 , 2017 , when the closing price of our common stock was $ 43.94 .
the graph assumes investments of $ 100 on december 31 , 2012 in our common stock and in each of the three indices and the reinvestment of dividends .
the table below sets forth the value , as of december 31 for each of the years indicated , of a $ 100 investment made on december 31 , 2012 in each of our common stock , the s&p 500 index , the s&p industrials index and the s&p consumer durables & apparel index and includes the reinvestment of dividends. .

                                      | 2013     | 2014     | 2015     | 2016     | 2017
------------------------------------- | -------- | -------- | -------- | -------- | --------
masco                                 | $ 138.48 | $ 155.26 | $ 200.79 | $ 227.08 | $ 318.46
s&p 500 index                         | $ 132.04 | $ 149.89 | $ 151.94 | $ 169.82 | $ 206.49
s&p industrials index                 | $ 140.18 | $ 153.73 | $ 149.83 | $ 177.65 | $ 214.55
s&p consumer durables & apparel index | $ 135.84 | $ 148.31 | $ 147.23 | $ 138.82 | $ 164.39

$ 50.00 $ 100.00 $ 150.00 $ 200.00 $ 250.00 $ 300.00 $ 350.00 masco s&p 500 index s&p industrials index s&p consumer durables & apparel index


income and franchise tax provisions are allocable to contracts in process and , accordingly , are included in general and administrative expenses .
deferred income taxes are recorded when revenues and expenses are recognized in different periods for financial statement purposes than for tax return purposes .
deferred tax asset or liability account balances are calculated at the balance sheet date using current tax laws and rates in effect .
determinations of the expected realizability of deferred tax assets and the need for any valuation allowances against these deferred tax assets were evaluated based upon the stand-alone tax attributes of the company , and valuation allowances of $ 21 million and $ 18 million were deemed necessary as of december 31 , 2012 and 2011 , respectively .
uncertain tax positions meeting the more-likely-than-not recognition threshold , based on the merits of the position , are recognized in the financial statements .
we recognize the amount of tax benefit that is greater than 50% ( 50 % ) likely to be realized upon ultimate settlement with the related tax authority .
if a tax position does not meet the minimum statutory threshold to avoid payment of penalties , we recognize an expense for the amount of the penalty in the period the tax position is claimed or expected to be claimed in our tax return .
penalties , if probable and reasonably estimable , are recognized as a component of income tax expense .
we also recognize accrued interest related to uncertain tax positions in income tax expense .
the timing and amount of accrued interest is determined by the applicable tax law associated with an underpayment of income taxes .
see note 11 : income taxes .
under existing gaap , changes in accruals associated with uncertainties are recorded in earnings in the period they are determined .
cash and cash equivalents - the carrying amounts of cash and cash equivalents approximate fair value due to the short-term nature of these items , having original maturity dates of 90 days or less .
accounts receivable - accounts receivable include amounts billed and currently due from customers , amounts currently due but unbilled , certain estimated contract change amounts , claims or requests for equitable adjustment in negotiation that are probable of recovery , and amounts retained by the customer pending contract completion .
inventoried costs - inventoried costs primarily relate to work in process under contracts that recognize revenues using labor dollars or units of delivery as the basis of the percentage-of-completion calculation .
these costs represent accumulated contract costs less cost of sales , as calculated using the percentage-of-completion method .
accumulated contract costs include direct production costs , factory and engineering overhead , production tooling costs , and , for government contracts , allowable general and administrative expenses .
according to the provisions of the company's u.s .
government contracts , the customer asserts title to , or a security interest in , inventories related to such contracts as a result of contract advances , performance-based payments , and progress payments .
in accordance with industry practice , inventoried costs are classified as a current asset and include amounts related to contracts having production cycles longer than one year .
inventoried costs also include company owned raw materials , which are stated at the lower of cost or market , generally using the average cost method .
property , plant , and equipment - depreciable properties owned by the company are recorded at cost and depreciated over the estimated useful lives of individual assets .
costs incurred for computer software developed or obtained for internal use are capitalized and amortized over the expected useful life of the software , not to exceed nine years .
leasehold improvements are amortized over the shorter of their useful lives or the term of the lease .
the remaining assets are depreciated using the straight-line method , with the following lives: .

land improvements             | years 3 | years - | years 45
----------------------------- | ------- | ------- | --------
buildings and improvements    | 3       | -       | 60
capitalized software costs    | 3       | -       | 9
machinery and other equipment | 2       | -       | 45

the company evaluates the recoverability of its property , plant and equipment when there are changes in economic circumstances or business objectives that indicate the carrying value may not be recoverable .
the company's evaluations include estimated future cash flows , profitability and other factors in determining fair value .
as these assumptions and estimates may change over time , it may or may not be necessary to record impairment charges.


the following table displays the expected benefit payments in the years indicated : ( dollars in thousands ) .

2007         | $ 117
------------ | -----
2008         | 140
2009         | 203
2010         | 263
2011         | 328
next 5 years | 2731

1 4 .
d i v i d e n d r e s t r i c t i o n s a n d s t a t u t o r y f i n a n c i a l i n f o r m a t i o n a .
d i v i d e n d r e s t r i c t i o n s under bermuda law , group is prohibited from declaring or paying a dividend if such payment would reduce the realizable value of its assets to an amount less than the aggregate value of its liabilities and its issued share capital and share premium ( addi- tional paid-in capital ) accounts .
group 2019s ability to pay dividends and its operating expenses is dependent upon dividends from its subsidiaries .
the payment of such dividends by insurer subsidiaries is limited under bermuda law and the laws of the var- ious u.s .
states in which group 2019s insurance and reinsurance subsidiaries are domiciled or deemed domiciled .
the limitations are generally based upon net income and compliance with applicable policyholders 2019 surplus or minimum solvency margin and liquidity ratio requirements as determined in accordance with the relevant statutory accounting practices .
under bermuda law , bermuda re is prohibited from declaring or making payment of a dividend if it fails to meet its minimum solvency margin or minimum liquidity ratio .
as a long-term insurer , bermuda re is also unable to declare or pay a dividend to anyone who is not a policyholder unless , after payment of the dividend , the value of the assets in its long-term business fund , as certified by its approved actuary , exceeds its liabilities for long-term business by at least the $ 250000 minimum solvency margin .
prior approval of the bermuda monetary authority is required if bermuda re 2019s dividend payments would reduce its prior year-end total statutory capital by 15.0% ( 15.0 % ) or more .
delaware law provides that an insurance company which is a member of an insurance holding company system and is domi- ciled in the state shall not pay dividends without giving prior notice to the insurance commissioner of delaware and may not pay dividends without the approval of the insurance commissioner if the value of the proposed dividend , together with all other dividends and distributions made in the preceding twelve months , exceeds the greater of ( 1 ) 10% ( 10 % ) of statutory surplus or ( 2 ) net income , not including realized capital gains , each as reported in the prior year 2019s statutory annual statement .
in addition , no dividend may be paid in excess of unassigned earned surplus .
at december 31 , 2006 , everest re had $ 270.4 million available for payment of dividends in 2007 without the need for prior regulatory approval .
b .
s t a t u t o r y f i n a n c i a l i n f o r m a t i o n everest re prepares its statutory financial statements in accordance with accounting practices prescribed or permitted by the national association of insurance commissioners ( 201cnaic 201d ) and the delaware insurance department .
prescribed statutory accounting practices are set forth in the naic accounting practices and procedures manual .
the capital and statutory surplus of everest re was $ 2704.1 million ( unaudited ) and $ 2327.6 million at december 31 , 2006 and 2005 , respectively .
the statutory net income of everest re was $ 298.7 million ( unaudited ) for the year ended december 31 , 2006 , the statutory net loss was $ 26.9 million for the year ended december 31 , 2005 and the statutory net income $ 175.8 million for the year ended december 31 , 2004 .
bermuda re prepares its statutory financial statements in conformity with the accounting principles set forth in bermuda in the insurance act 1978 , amendments thereto and related regulations .
the statutory capital and surplus of bermuda re was $ 1893.9 million ( unaudited ) and $ 1522.5 million at december 31 , 2006 and 2005 , respectively .
the statutory net income of bermuda re was $ 409.8 million ( unaudited ) for the year ended december 31 , 2006 , the statutory net loss was $ 220.5 million for the year ended december 31 , 2005 and the statutory net income was $ 248.7 million for the year ended december 31 , 2004 .
1 5 .
c o n t i n g e n c i e s in the ordinary course of business , the company is involved in lawsuits , arbitrations and other formal and informal dispute resolution procedures , the outcomes of which will determine the company 2019s rights and obligations under insurance , reinsur- ance and other contractual agreements .
in some disputes , the company seeks to enforce its rights under an agreement or to collect funds owing to it .
in other matters , the company is resisting attempts by others to collect funds or enforce alleged rights .
these disputes arise from time to time and as they arise are addressed , and ultimately resolved , through both informal and formal means , including negotiated resolution , arbitration and litigation .
in all such matters , the company believes that


entergy louisiana , llc and subsidiaries management 2019s financial discussion and analysis results of operations net income 2017 compared to 2016 net income decreased $ 305.7 million primarily due to the effect of the enactment of the tax cuts and jobs act , in december 2017 , which resulted in a decrease of $ 182.6 million in net income in 2017 , and the effect of a settlement with the irs related to the 2010-2011 irs audit , which resulted in a $ 136.1 million reduction of income tax expense in 2016 .
also contributing to the decrease in net income were higher other operation and maintenance expenses .
the decrease was partially offset by higher net revenue and higher other income .
see note 3 to the financial statements for discussion of the effects of the tax cuts and jobs act and the irs audit .
2016 compared to 2015 net income increased $ 175.4 million primarily due to the effect of a settlement with the irs related to the 2010-2011 irs audit , which resulted in a $ 136.1 million reduction of income tax expense in 2016 .
also contributing to the increase were lower other operation and maintenance expenses , higher net revenue , and higher other income .
the increase was partially offset by higher depreciation and amortization expenses , higher interest expense , and higher nuclear refueling outage expenses .
see note 3 to the financial statements for discussion of the irs audit .
net revenue 2017 compared to 2016 net revenue consists of operating revenues net of : 1 ) fuel , fuel-related expenses , and gas purchased for resale , 2 ) purchased power expenses , and 3 ) other regulatory charges ( credits ) .
following is an analysis of the change in net revenue comparing 2017 to 2016 .
amount ( in millions ) .

                                                                                | amount ( in millions )
---------------------------------------------------------------------------------- | ----------------------
2016 net revenue                                                                   | $ 2438.4
regulatory credit resulting from reduction of thefederal corporate income tax rate | 55.5
retail electric price                                                              | 42.8
louisiana act 55 financing savings obligation                                      | 17.2
volume/weather                                                                     | -12.4 ( 12.4 )
other                                                                              | 19.0
2017 net revenue                                                                   | $ 2560.5

the regulatory credit resulting from reduction of the federal corporate income tax rate variance is due to the reduction of the vidalia purchased power agreement regulatory liability by $ 30.5 million and the reduction of the louisiana act 55 financing savings obligation regulatory liabilities by $ 25 million as a result of the enactment of the tax cuts and jobs act , in december 2017 , which lowered the federal corporate income tax rate from 35% ( 35 % ) to 21% ( 21 % ) .
the effects of the tax cuts and jobs act are discussed further in note 3 to the financial statements.


the goldman sachs group , inc .
and subsidiaries management 2019s discussion and analysis net revenues in equities were $ 6.60 billion , 4% ( 4 % ) lower than 2016 , primarily due to lower commissions and fees , reflecting a decline in our listed cash equity volumes in the u.s .
market volumes in the u.s .
also declined .
in addition , net revenues in equities client execution were lower , reflecting lower net revenues in derivatives , partially offset by higher net revenues in cash products .
net revenues in securities services were essentially unchanged .
operating expenses were $ 9.69 billion for 2017 , essentially unchanged compared with 2016 , due to decreased compensation and benefits expenses , reflecting lower net revenues , largely offset by increased technology expenses , reflecting higher expenses related to cloud-based services and software depreciation , and increased consulting costs .
pre-tax earnings were $ 2.21 billion in 2017 , 54% ( 54 % ) lower than 2016 .
investing & lending investing & lending includes our investing activities and the origination of loans , including our relationship lending activities , to provide financing to clients .
these investments and loans are typically longer-term in nature .
we make investments , some of which are consolidated , including through our merchant banking business and our special situations group , in debt securities and loans , public and private equity securities , infrastructure and real estate entities .
some of these investments are made indirectly through funds that we manage .
we also make unsecured loans through our digital platform , marcus : by goldman sachs and secured loans through our digital platform , goldman sachs private bank select .
the table below presents the operating results of our investing & lending segment. .

$ in millions               | year ended december 2018 | year ended december 2017 | year ended december 2016
--------------------------- | ------------------------ | ------------------------ | ------------------------
equity securities           | $ 4455                   | $ 4578                   | $ 2573
debt securities and loans   | 3795                     | 2660                     | 1689
total net revenues          | 8250                     | 7238                     | 4262
provision for credit losses | 674                      | 657                      | 182
operating expenses          | 3365                     | 2796                     | 2386
pre-taxearnings             | $ 4211                   | $ 3785                   | $ 1694

operating environment .
during 2018 , our investments in private equities benefited from company-specific events , including sales , and strong corporate performance , while investments in public equities reflected losses , as global equity prices generally decreased .
results for our investments in debt securities and loans reflected continued growth in loans receivables , resulting in higher net interest income .
if macroeconomic concerns negatively affect corporate performance or the origination of loans , or if global equity prices continue to decline , net revenues in investing & lending would likely be negatively impacted .
during 2017 , generally higher global equity prices and tighter credit spreads contributed to a favorable environment for our equity and debt investments .
results also reflected net gains from company-specific events , including sales , and corporate performance .
2018 versus 2017 .
net revenues in investing & lending were $ 8.25 billion for 2018 , 14% ( 14 % ) higher than 2017 .
net revenues in equity securities were $ 4.46 billion , 3% ( 3 % ) lower than 2017 , reflecting net losses from investments in public equities ( 2018 included $ 183 million of net losses ) compared with net gains in the prior year , partially offset by significantly higher net gains from investments in private equities ( 2018 included $ 4.64 billion of net gains ) , driven by company-specific events , including sales , and corporate performance .
for 2018 , 60% ( 60 % ) of the net revenues in equity securities were generated from corporate investments and 40% ( 40 % ) were generated from real estate .
net revenues in debt securities and loans were $ 3.80 billion , 43% ( 43 % ) higher than 2017 , primarily driven by significantly higher net interest income .
2018 included net interest income of approximately $ 2.70 billion compared with approximately $ 1.80 billion in 2017 .
provision for credit losses was $ 674 million for 2018 , compared with $ 657 million for 2017 , as the higher provision for credit losses primarily related to consumer loan growth in 2018 was partially offset by an impairment of approximately $ 130 million on a secured loan in 2017 .
operating expenses were $ 3.37 billion for 2018 , 20% ( 20 % ) higher than 2017 , primarily due to increased expenses related to consolidated investments and our digital lending and deposit platform , and increased compensation and benefits expenses , reflecting higher net revenues .
pre-tax earnings were $ 4.21 billion in 2018 , 11% ( 11 % ) higher than 2017 versus 2016 .
net revenues in investing & lending were $ 7.24 billion for 2017 , 70% ( 70 % ) higher than 2016 .
net revenues in equity securities were $ 4.58 billion , 78% ( 78 % ) higher than 2016 , primarily reflecting a significant increase in net gains from private equities ( 2017 included $ 3.82 billion of net gains ) , which were positively impacted by company-specific events and corporate performance .
in addition , net gains from public equities ( 2017 included $ 762 million of net gains ) were significantly higher , as global equity prices increased during the year .
for 2017 , 64% ( 64 % ) of the net revenues in equity securities were generated from corporate investments and 36% ( 36 % ) were generated from real estate .
net revenues in debt securities and loans were $ 2.66 billion , 57% ( 57 % ) higher than 2016 , reflecting significantly higher net interest income ( 2017 included approximately $ 1.80 billion of net interest income ) .
60 goldman sachs 2018 form 10-k


our refining and wholesale marketing gross margin is the difference between the prices of refined products sold and the costs of crude oil and other charge and blendstocks refined , including the costs to transport these inputs to our refineries , the costs of purchased products and manufacturing expenses , including depreciation .
the crack spread is a measure of the difference between market prices for refined products and crude oil , commonly used by the industry as an indicator of the impact of price on the refining margin .
crack spreads can fluctuate significantly , particularly when prices of refined products do not move in the same relationship as the cost of crude oil .
as a performance benchmark and a comparison with other industry participants , we calculate midwest ( chicago ) and u.s .
gulf coast crack spreads that we feel most closely track our operations and slate of products .
posted light louisiana sweet ( 201clls 201d ) prices and a 6-3-2-1 ratio of products ( 6 barrels of crude oil producing 3 barrels of gasoline , 2 barrels of distillate and 1 barrel of residual fuel ) are used for the crack spread calculation .
the following table lists calculated average crack spreads by quarter for the midwest ( chicago ) and gulf coast markets in 2008 .
crack spreads ( dollars per barrel ) 1st qtr 2nd qtr 3rd qtr 4th qtr 2008 .

crack spreads ( dollars per barrel ) | 1st qtr | 2nd qtr | 3rd qtr | 4th qtr    | 2008
------------------------------------ | ------- | ------- | ------- | ---------- | ------
chicago lls 6-3-2-1                  | $ 0.07  | $ 2.71  | $ 7.81  | $ 2.31     | $ 3.27
us gulf coast lls 6-3-2-1            | $ 1.39  | $ 1.99  | $ 6.32  | ( $ 0.01 ) | $ 2.45

in addition to the market changes indicated by the crack spreads , our refining and wholesale marketing gross margin is impacted by factors such as the types of crude oil and other charge and blendstocks processed , the selling prices realized for refined products , the impact of commodity derivative instruments used to mitigate price risk and the cost of purchased products for resale .
we process significant amounts of sour crude oil which can enhance our profitability compared to certain of our competitors , as sour crude oil typically can be purchased at a discount to sweet crude oil .
finally , our refining and wholesale marketing gross margin is impacted by changes in manufacturing costs , which are primarily driven by the level of maintenance activities at the refineries and the price of purchased natural gas used for plant fuel .
our 2008 refining and wholesale marketing gross margin was the key driver of the 43 percent decrease in rm&t segment income when compared to 2007 .
our average refining and wholesale marketing gross margin per gallon decreased 37 percent , to 11.66 cents in 2008 from 18.48 cents in 2007 , primarily due to the significant and rapid increases in crude oil prices early in 2008 and lagging wholesale price realizations .
our retail marketing gross margin for gasoline and distillates , which is the difference between the ultimate price paid by consumers and the cost of refined products , including secondary transportation and consumer excise taxes , also impacts rm&t segment profitability .
while on average demand has been increasing for several years , there are numerous factors including local competition , seasonal demand fluctuations , the available wholesale supply , the level of economic activity in our marketing areas and weather conditions that impact gasoline and distillate demand throughout the year .
in 2008 , demand began to drop due to the combination of significant increases in retail petroleum prices and a broad slowdown in general activity .
the gross margin on merchandise sold at retail outlets has historically been more constant .
the profitability of our pipeline transportation operations is primarily dependent on the volumes shipped through our crude oil and refined products pipelines .
the volume of crude oil that we transport is directly affected by the supply of , and refiner demand for , crude oil in the markets served directly by our crude oil pipelines .
key factors in this supply and demand balance are the production levels of crude oil by producers , the availability and cost of alternative modes of transportation , and refinery and transportation system maintenance levels .
the volume of refined products that we transport is directly affected by the production levels of , and user demand for , refined products in the markets served by our refined product pipelines .
in most of our markets , demand for gasoline peaks during the summer and declines during the fall and winter months , whereas distillate demand is more ratable throughout the year .
as with crude oil , other transportation alternatives and system maintenance levels influence refined product movements .
integrated gas our integrated gas strategy is to link stranded natural gas resources with areas where a supply gap is emerging due to declining production and growing demand .
our integrated gas operations include marketing and transportation of products manufactured from natural gas , such as lng and methanol , primarily in the u.s. , europe and west africa .
our most significant lng investment is our 60 percent ownership in a production facility in equatorial guinea , which sells lng under a long-term contract at prices tied to henry hub natural gas prices .
in 2008 , its


comcast corporation changes in our net deferred tax liability in 2015 that were not recorded as deferred income tax expense are primarily related to decreases of $ 28 million associated with items included in other comprehensive income ( loss ) and decreases of $ 132 million related to acquisitions made in 2015 .
our net deferred tax liability includes $ 23 billion related to cable franchise rights that will remain unchanged unless we recognize an impairment or dispose of a cable franchise .
as of december 31 , 2015 , we had federal net operating loss carryforwards of $ 135 million and various state net operating loss carryforwards that expire in periods through 2035 .
as of december 31 , 2015 , we also had foreign net operating loss carryforwards of $ 700 million that are related to the foreign operations of nbcuni- versal , the majority of which expire in periods through 2025 .
the determination of the realization of the state and foreign net operating loss carryforwards is dependent on our subsidiaries 2019 taxable income or loss , appor- tionment percentages , and state and foreign laws that can change from year to year and impact the amount of such carryforwards .
we recognize a valuation allowance if we determine it is more likely than not that some portion , or all , of a deferred tax asset will not be realized .
as of december 31 , 2015 and 2014 , our valuation allowance was primarily related to state and foreign net operating loss carryforwards .
uncertain tax positions our uncertain tax positions as of december 31 , 2015 totaled $ 1.1 billion , which exclude the federal benefits on state tax positions that were recorded as deferred income taxes .
included in our uncertain tax positions was $ 220 million related to tax positions of nbcuniversal and nbcuniversal enterprise for which we have been indemnified by ge .
if we were to recognize the tax benefit for our uncertain tax positions in the future , $ 592 million would impact our effective tax rate and the remaining amount would increase our deferred income tax liability .
the amount and timing of the recognition of any such tax benefit is dependent on the completion of examinations of our tax filings by the various tax authorities and the expiration of statutes of limitations .
in 2014 , we reduced our accruals for uncertain tax positions and the related accrued interest on these tax positions and , as a result , our income tax expense decreased by $ 759 million .
it is reasonably possible that certain tax contests could be resolved within the next 12 months that may result in a decrease in our effective tax rate .
reconciliation of unrecognized tax benefits .

( in millions )                                              | 2015       | 2014         | 2013
------------------------------------------------------------ | ---------- | ------------ | ------------
balance january 1                                            | $ 1171     | $ 1701       | $ 1573
additions based on tax positions related to the current year | 67         | 63           | 90
additions based on tax positions related to prior years      | 98         | 111          | 201
additions from acquired subsidiaries                         | 2014       | 2014         | 268
reductions for tax positions of prior years                  | -84 ( 84 ) | -220 ( 220 ) | -141 ( 141 )
reductions due to expiration of statutes of limitations      | -41 ( 41 ) | -448 ( 448 ) | -3 ( 3 )
settlements with tax authorities                             | -75 ( 75 ) | -36 ( 36 )   | -287 ( 287 )
balance december 31                                          | $ 1136     | $ 1171       | $ 1701

as of december 31 , 2015 and 2014 , our accrued interest associated with tax positions was $ 510 million and $ 452 million , respectively .
as of december 31 , 2015 and 2014 , $ 49 million and $ 44 million , respectively , of these amounts were related to tax positions of nbcuniversal and nbcuniversal enterprise for which we have been indemnified by ge .
during 2015 , the irs completed its examination of our income tax returns for the year 2013 .
various states are examining our tax returns , with most of the periods relating to tax years 2000 and forward .
the tax years of our state tax returns currently under examination vary by state .
109 comcast 2015 annual report on form 10-k


2009 levels , we returned a portion of these assets to active service .
at the end of 2010 , we continued to maintain in storage approximately 17% ( 17 % ) of our multiple purpose locomotives and 14% ( 14 % ) of our freight car inventory , reflecting our ability to effectively leverage our assets as volumes return to our network .
2022 fuel prices 2013 fuel prices generally increased throughout 2010 as the economy improved .
our average diesel fuel price per gallon increased nearly 20% ( 20 % ) from january to december of 2010 , driven by higher crude oil barrel prices and conversion spreads .
compared to 2009 , our diesel fuel price per gallon consumed increased 31% ( 31 % ) , driving operating expenses up by $ 566 million ( excluding any impact from year-over-year volume increases ) .
to partially offset the effect of higher fuel prices , we reduced our consumption rate by 3% ( 3 % ) during the year , saving approximately 27 million gallons of fuel .
the use of newer , more fuel efficient locomotives ; increased use of distributed locomotive power ( the practice of distributing locomotives throughout a train rather than positioning them all in the lead resulting in safer and more efficient train operations ) ; fuel conservation programs ; and efficient network operations and asset utilization all contributed to this improvement .
2022 free cash flow 2013 cash generated by operating activities ( adjusted for the reclassification of our receivables securitization facility ) totaled $ 4.5 billion , yielding record free cash flow of $ 1.4 billion in 2010 .
free cash flow is defined as cash provided by operating activities ( adjusted for the reclassification of our receivables securitization facility ) , less cash used in investing activities and dividends paid .
free cash flow is not considered a financial measure under accounting principles generally accepted in the u.s .
( gaap ) by sec regulation g and item 10 of sec regulation s-k .
we believe free cash flow is important in evaluating our financial performance and measures our ability to generate cash without additional external financings .
free cash flow should be considered in addition to , rather than as a substitute for , cash provided by operating activities .
the following table reconciles cash provided by operating activities ( gaap measure ) to free cash flow ( non-gaap measure ) : millions 2010 2009 2008 .

millions                                                                                | 2010           | 2009           | 2008
---------------------------------------------------------------------------------------- | -------------- | -------------- | --------------
cash provided by operating activities                                                    | $ 4105         | $ 3204         | $ 4044
receivables securitization facility [a]                                                  | 400            | 184            | 16
cash provided by operating activitiesadjusted for the receivables securitizationfacility | 4505           | 3388           | 4060
cash used in investing activities                                                        | -2488 ( 2488 ) | -2145 ( 2145 ) | -2738 ( 2738 )
dividends paid                                                                           | -602 ( 602 )   | -544 ( 544 )   | -481 ( 481 )
free cash flow                                                                           | $ 1415         | $ 699          | $ 841

[a] effective january 1 , 2010 , a new accounting standard required us to account for receivables transferred under our receivables securitization facility as secured borrowings in our consolidated statements of financial position and as financing activities in our consolidated statements of cash flows .
the receivables securitization facility is included in our free cash flow calculation to adjust cash provided by operating activities as though our receivables securitization facility had been accounted for under the new accounting standard for all periods presented .
2011 outlook 2022 safety 2013 operating a safe railroad benefits our employees , our customers , our shareholders , and the public .
we will continue using a multi-faceted approach to safety , utilizing technology , risk assessment , quality control , and training , and engaging our employees .
we will continue implementing total safety culture ( tsc ) throughout our operations .
tsc is designed to establish , maintain , reinforce , and promote safe practices among co-workers .
this process allows us to identify and implement best practices for employee and operational safety .
reducing grade crossing incidents is a critical aspect of our safety programs , and we will continue our efforts to maintain and close crossings ; install video cameras on locomotives ; and educate the public and law enforcement agencies about crossing safety through a combination of our own programs ( including risk assessment strategies ) , various industry programs , and engaging local communities .
2022 transportation plan 2013 to build upon our success in recent years , we will continue evaluating traffic flows and network logistic patterns , which can be quite dynamic , to identify additional opportunities to simplify operations , remove network variability , and improve network efficiency and asset utilization .
we plan to adjust manpower and our locomotive and rail car fleets to meet customer needs and put


the graph below shows a five-year comparison of the cumulative shareholder return on the company's common stock with the cumulative total return of the s&p smallcap 600 index and the s&p 600 electrical equipment index , all of which are published indices .
comparison of five-year cumulative total return from december 31 , 2002 to december 31 , 2007 assumes $ 100 invested with reinvestment of dividends period indexed returns .

company/index                | baseperiod 12/31/02 | baseperiod 12/31/03 | baseperiod 12/31/04 | baseperiod 12/31/05 | baseperiod 12/31/06 | 12/31/07
---------------------------- | ------------------- | ------------------- | ------------------- | ------------------- | ------------------- | --------
a o smith corp               | 100.00              | 132.23              | 115.36              | 138.20              | 150.26              | 142.72
s&p smallcap 600 index       | 100.00              | 138.79              | 170.22              | 183.30              | 211.01              | 210.39
s&p 600 electrical equipment | 100.00              | 126.12              | 152.18              | 169.07              | 228.83              | 253.33

12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 smith ( a o ) corp s&p smallcap 600 index s&p 600 electrical equipment


impairment net unrealized losses on securities available for sale were as follows as of december 31: .

( in millions )               | 2009             | 2008
----------------------------- | ---------------- | ----------------
fair value                    | $ 72699          | $ 54163
amortized cost                | 74843            | 60786
net unrealized loss pre-tax   | $ -2144 ( 2144 ) | $ -6623 ( 6623 )
net unrealized loss after-tax | $ -1316 ( 1316 ) | $ -4057 ( 4057 )

the above net unrealized loss amounts at december 31 , 2009 and december 31 , 2008 excluded the remaining net unrealized loss of $ 1.01 billion , or $ 635 million after-tax , and $ 2.27 billion , or $ 1.39 billion after- tax , respectively , related to reclassifications of securities available for sale to securities held to maturity .
these after-tax amounts are recorded in other comprehensive income .
the decline in the remaining after-tax unrealized loss amounts related to transferred securities resulted from amortization and from the recognition of losses from other-than-temporary impairment on certain of the securities .
we conduct periodic reviews of individual securities to assess whether other-than-temporary impairment exists .
to the extent that other-than-temporary impairment is identified , the impairment is broken into a credit component and a non-credit component .
the credit component is recognized in our consolidated statement of income , and the non-credit component is recognized in other comprehensive income to the extent that management does not intend to sell the security ( see note 3 of the notes to consolidated financial statements included under item 8 ) .
the assessment of other-than-temporary impairment involves an evaluation of economic and security- specific factors , which are more fully described in note 3 .
such factors are based upon estimates , derived by management , which contemplate current market conditions and security-specific performance .
to the extent that market conditions are worse than management 2019s expectations , other-than-temporary impairment could increase , in particular the credit component that would be recognized in our consolidated statement of income .
national housing prices , according to the case-shiller national hpi , have declined to date approximately 30% ( 30 % ) peak-to-current .
management currently estimates that national housing prices will continue to decline and bottom out during the second half of 2010 , consistent with a peak-to-trough housing price decline of approximately 37% ( 37 % ) .
as an indication of the sensitivity of our portfolio with respect to our more significant assumptions underlying our assessment of impairment , if we were to increase our default estimates to 110% ( 110 % ) of management 2019s current expectations with a corresponding slowing of prepayment speeds to 90% ( 90 % ) of management 2019s current expectations , credit-related other-than-temporary impairment could increase by approximately $ 120 million to $ 125 million , which impairment would be recorded in our consolidated statement of income .
excluding the securities for which other-than-temporary impairment was recorded , management considers the aggregate decline in fair value of the remaining securities and the resulting net unrealized losses to be temporary and not the result of any material changes in the credit characteristics of the securities .
additional information about our assessment of impairment is provided in note 3 of the notes to consolidated financial statements included under item 8.


polyplastics co. , ltd .
polyplastics is a leading supplier of engineered plastics in the asia-pacific region and is a venture between daicel chemical industries ltd. , japan ( 55% ( 55 % ) ) and ticona llc ( 45% ( 45 % ) ownership and a wholly-owned subsidiary of cna holdings llc ) .
polyplastics is a producer and marketer of pom and lcp , with principal production facilities located in japan , taiwan , malaysia and china .
fortron industries llc .
fortron is a leading global producer of polyphenylene sulfide ( "pps" ) , sold under the fortron ae brand , which is used in a wide variety of automotive and other applications , especially those requiring heat and/or chemical resistance .
fortron is a limited liability company whose members are ticona fortron inc .
( 50% ( 50 % ) ownership and a wholly-owned subsidiary of cna holdings llc ) and kureha corporation ( 50% ( 50 % ) ) .
fortron's facility is located in wilmington , north carolina .
this venture combines the sales , marketing , distribution , compounding and manufacturing expertise of celanese with the pps polymer technology expertise of kureha .
china acetate strategic ventures .
we hold ownership interest in three separate acetate production ventures in china as follows : nantong cellulose fibers co .
ltd .
( 31% ( 31 % ) ) , kunming cellulose fibers co .
ltd .
( 30% ( 30 % ) ) and zhuhai cellulose fibers co .
ltd .
( 30% ( 30 % ) ) .
the china national tobacco corporation , the chinese state-owned tobacco entity , controls the remaining ownership interest in each of these ventures .
our chinese acetate ventures fund their operations using operating cash flow and pay a dividend in the second quarter of each fiscal year based on the ventures' performance for the preceding year .
in 2012 , 2011 and 2010 , we received cash dividends of $ 83 million , $ 78 million and $ 71 million , respectively .
during 2012 , our venture's nantong facility completed an expansion of its acetate flake and acetate tow capacity , each by 30000 tons .
we made contributions of $ 29 million over three years related to the capacity expansion in nantong .
similar expansions since the ventures were formed have led to earnings growth and increased dividends for the company .
according to the euromonitor database services , china is estimated to have a 42% ( 42 % ) share of the world's 2011 cigarette consumption and is the fastest growing area for cigarette consumption at an estimated growth rate of 3.5% ( 3.5 % ) per year from 2011 through 2016 .
combined , these ventures are a leader in chinese domestic acetate production and we believe we are well positioned to supply chinese cigarette producers .
although our ownership interest in each of our china acetate ventures exceeds 20% ( 20 % ) , we account for these investments using the cost method of accounting because we determined that we cannot exercise significant influence over these entities due to local government investment in and influence over these entities , limitations on our involvement in the day-to-day operations and the present inability of the entities to provide timely financial information prepared in accordance with generally accepted accounting principles in the united states ( "us gaap" ) .
2022 other equity method investments infraservs .
we hold indirect ownership interests in several german infraserv groups that own and develop industrial parks and provide on-site general and administrative support to tenants .
our ownership interest in the equity investments in infraserv ventures are as follows : as of december 31 , 2012 ( in percentages ) .

                                  | as of december 31 2012 ( in percentages )
--------------------------------- | -----------------------------------------
infraserv gmbh & co . gendorf kg  | 39
infraserv gmbh & co . knapsack kg | 27
infraserv gmbh & co . hoechst kg  | 32

raw materials and energy we purchase a variety of raw materials and energy from sources in many countries for use in our production processes .
we have a policy of maintaining , when available , multiple sources of supply for materials .
however , some of our individual plants may have single sources of supply for some of their raw materials , such as carbon monoxide , steam and acetaldehyde .
although we have been able to obtain sufficient supplies of raw materials , there can be no assurance that unforeseen developments will not affect our raw material supply .
even if we have multiple sources of supply for a raw material , there can be no assurance that these sources can make up for the loss of a major supplier .
it is also possible profitability will be adversely affected if we are required to qualify additional sources of supply to our specifications in the event of the loss of a sole supplier .
in addition , the price of raw materials varies , often substantially , from year to year.


summary fin 48 changes during fiscal 2008 , our aggregate changes in our total gross amount of unrecognized tax benefits are summarized as follows: .

beginning balance as of december 1 2007                                      | $ 201808
---------------------------------------------------------------------------- | ----------------
gross increases in unrecognized tax benefits 2013 prior year tax positions   | 14009
gross increases in unrecognized tax benefits 2013 current year tax positions | 11350
settlements with taxing authorities                                          | -81213 ( 81213 )
lapse of statute of limitations                                              | -3512 ( 3512 )
foreign exchange gains and losses                                            | -2893 ( 2893 )
ending balance as of november 28 2008                                        | $ 139549

the gross liability for unrecognized tax benefits at november 28 , 2008 of $ 139.5 million is exclusive of interest and penalties .
if the total fin 48 gross liability for unrecognized tax benefits at november 28 , 2008 were recognized in the future , the following amounts , net of an estimated $ 12.9 million benefit related to deducting such payments on future tax returns , would result : $ 57.7 million of unrecognized tax benefits would decrease the effective tax rate and $ 68.9 million would decrease goodwill .
as of november 28 , 2008 , the combined amount of accrued interest and penalties related to tax positions taken on our tax returns and included in non-current income taxes payable was approximately $ 15.3 million .
we file income tax returns in the u.s .
on a federal basis and in many u.s .
state and foreign jurisdictions .
we are subject to the continual examination of our income tax returns by the irs and other domestic and foreign tax authorities .
our major tax jurisdictions are the u.s. , ireland and california .
for california , ireland and the u.s. , the earliest fiscal years open for examination are 2001 , 2002 and 2005 , respectively .
in august 2008 , a u.s .
income tax examination covering our fiscal years 2001 through 2004 was completed .
our accrued tax and interest related to these years was $ 100.0 million and was previously reported in long-term income taxes payable .
in conjunction with this resolution , we requested and received approval from the irs to repatriate certain foreign earnings in a tax-free manner , which resulted in a reduction of our long-term deferred income tax liability of $ 57.8 million .
together , these liabilities on our balance sheet decreased by $ 157.8 million .
also in august 2008 , we paid $ 80.0 million in conjunction with the aforementioned resolution , credited additional paid-in-capital for $ 41.3 million due to our use of certain tax attributes related to stock option deductions , including a portion of certain deferred tax assets not recorded in our financial statements pursuant to sfas 123r and made other individually immaterial adjustments to our tax balances totaling $ 15.8 million .
a net income statement tax benefit in the third quarter of fiscal 2008 of $ 20.7 million resulted .
the accounting treatment related to certain unrecognized tax benefits from acquired companies , including macromedia , will change when sfas 141r becomes effective .
sfas 141r will be effective in the first quarter of our fiscal year 2010 .
at such time , any changes to the recognition or measurement of these unrecognized tax benefits will be recorded through income tax expense , where currently the accounting treatment would require any adjustment to be recognized through the purchase price as an adjustment to goodwill .
the timing of the resolution of income tax examinations is highly uncertain and the amounts ultimately paid , if any , upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year .
while it is reasonably possible that some issues in the irs and other examinations could be resolved within the next 12 months , based upon the current facts and circumstances , we cannot estimate the timing of such resolution or range of potential changes as it relates to the unrecognized tax benefits that are recorded as part of our financial statements .
we do not expect any material settlements in fiscal 2009 but it is inherently uncertain to determine.


stock-based compensation 2013 we have several stock-based compensation plans under which employees and non-employee directors receive stock options , nonvested retention shares , and nonvested stock units .
we refer to the nonvested shares and stock units collectively as 201cretention awards 201d .
we issue treasury shares to cover option exercises and stock unit vestings , while new shares are issued when retention shares vest .
we adopted fasb statement no .
123 ( r ) , share-based payment ( fas 123 ( r ) ) , on january 1 , 2006 .
fas 123 ( r ) requires us to measure and recognize compensation expense for all stock-based awards made to employees and directors , including stock options .
compensation expense is based on the calculated fair value of the awards as measured at the grant date and is expensed ratably over the service period of the awards ( generally the vesting period ) .
the fair value of retention awards is the stock price on the date of grant , while the fair value of stock options is determined by using the black-scholes option pricing model .
we elected to use the modified prospective transition method as permitted by fas 123 ( r ) and did not restate financial results for prior periods .
we did not make an adjustment for the cumulative effect of these estimated forfeitures , as the impact was not material .
as a result of the adoption of fas 123 ( r ) , we recognized expense for stock options in 2006 , in addition to retention awards , which were expensed prior to 2006 .
stock-based compensation expense for the year ended december 31 , 2006 was $ 22 million , after tax , or $ 0.08 per basic and diluted share .
this includes $ 9 million for stock options and $ 13 million for retention awards for 2006 .
before taxes , stock-based compensation expense included $ 14 million for stock options and $ 21 million for retention awards for 2006 .
we recorded $ 29 million of excess tax benefits as an inflow of financing activities in the consolidated statement of cash flows for the year ended december 31 , 2006 .
prior to the adoption of fas 123 ( r ) , we applied the recognition and measurement principles of accounting principles board opinion no .
25 , accounting for stock issued to employees , and related interpretations .
no stock- based employee compensation expense related to stock option grants was reflected in net income , as all options granted under those plans had a grant price equal to the market value of our common stock on the date of grant .
stock-based compensation expense related to retention shares , stock units , and other incentive plans was reflected in net income .
the following table details the effect on net income and earnings per share had compensation expense for all of our stock-based awards , including stock options , been recorded in the years ended december 31 , 2005 and 2004 based on the fair value method under fasb statement no .
123 , accounting for stock-based compensation .
pro forma stock-based compensation expense year ended december 31 , millions of dollars , except per share amounts 2005 2004 .

pro forma stock-based compensation expense                                                                                | pro forma stock-based compensation expense |
------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ----------
millions of dollars except per share amounts                                                                              | 2005                                       | 2004
net income as reported                                                                                | $ 1026                                     | $ 604
stock-based employee compensation expense reported in net income net of tax                                               | 13                                         | 13
total stock-based employee compensation expense determined under fair value 2013based method for allawards net of tax [a] | -50 ( 50 )                                 | -35 ( 35 )
pro forma net income                                                                                | $ 989                                      | $ 582
earnings per share 2013 basic as reported                                                                                | $ 3.89                                     | $ 2.33
earnings per share 2013 basic pro forma                                                                                | $ 3.75                                     | $ 2.25
earnings per share 2013 diluted as reported                                                                               | $ 3.85                                     | $ 2.30
earnings per share 2013 diluted pro forma                                                                                | $ 3.71                                     | $ 2.22

[a] stock options for executives granted in 2003 and 2002 included a reload feature .
this reload feature allowed executives to exercise their options using shares of union pacific corporation common stock that they already owned and obtain a new grant of options in the amount of the shares used for exercise plus any shares withheld for tax purposes .
the reload feature of these option grants could only be exercised if the


part ii were issued in an initial aggregate principal amount of $ 500 million at a 2.25% ( 2.25 % ) fixed , annual interest rate and will mature on may 1 , 2023 .
the 2043 senior notes were issued in an initial aggregate principal amount of $ 500 million at a 3.625% ( 3.625 % ) fixed , annual interest rate and will mature on may 1 , 2043 .
interest on the senior notes is payable semi-annually on may 1 and november 1 of each year .
the issuance resulted in gross proceeds before expenses of $ 998 million .
on november 1 , 2011 , we entered into a committed credit facility agreement with a syndicate of banks which provides for up to $ 1 billion of borrowings with the option to increase borrowings to $ 1.5 billion with lender approval .
the facility matures november 1 , 2017 .
as of and for the periods ended may 31 , 2015 and 2014 , we had no amounts outstanding under our committed credit facility .
we currently have long-term debt ratings of aa- and a1 from standard and poor 2019s corporation and moody 2019s investor services , respectively .
if our long- term debt ratings were to decline , the facility fee and interest rate under our committed credit facility would increase .
conversely , if our long-term debt rating were to improve , the facility fee and interest rate would decrease .
changes in our long-term debt rating would not trigger acceleration of maturity of any then-outstanding borrowings or any future borrowings under the committed credit facility .
under this committed revolving credit facility , we have agreed to various covenants .
these covenants include limits on our disposal of fixed assets , the amount of debt secured by liens we may incur , as well as a minimum capitalization ratio .
in the event we were to have any borrowings outstanding under this facility and failed to meet any covenant , and were unable to obtain a waiver from a majority of the banks in the syndicate , any borrowings would become immediately due and payable .
as of may 31 , 2015 , we were in full compliance with each of these covenants and believe it is unlikely we will fail to meet any of these covenants in the foreseeable future .
liquidity is also provided by our $ 1 billion commercial paper program .
during the year ended may 31 , 2015 , we did not issue commercial paper , and as of may 31 , 2015 , there were no outstanding borrowings under this program .
we may issue commercial paper or other debt securities during fiscal 2016 depending on general corporate needs .
we currently have short-term debt ratings of a1+ and p1 from standard and poor 2019s corporation and moody 2019s investor services , respectively .
as of may 31 , 2015 , we had cash , cash equivalents and short-term investments totaling $ 5.9 billion , of which $ 4.2 billion was held by our foreign subsidiaries .
included in cash and equivalents as of may 31 , 2015 was $ 968 million of cash collateral received from counterparties as a result of hedging activity .
cash equivalents and short-term investments consist primarily of deposits held at major banks , money market funds , commercial paper , corporate notes , u.s .
treasury obligations , u.s .
government sponsored enterprise obligations and other investment grade fixed income securities .
our fixed income investments are exposed to both credit and interest rate risk .
all of our investments are investment grade to minimize our credit risk .
while individual securities have varying durations , as of may 31 , 2015 the weighted average remaining duration of our short-term investments and cash equivalents portfolio was 79 days .
to date we have not experienced difficulty accessing the credit markets or incurred higher interest costs .
future volatility in the capital markets , however , may increase costs associated with issuing commercial paper or other debt instruments or affect our ability to access those markets .
we believe that existing cash , cash equivalents , short-term investments and cash generated by operations , together with access to external sources of funds as described above , will be sufficient to meet our domestic and foreign capital needs in the foreseeable future .
we utilize a variety of tax planning and financing strategies to manage our worldwide cash and deploy funds to locations where they are needed .
we routinely repatriate a portion of our foreign earnings for which u.s .
taxes have previously been provided .
we also indefinitely reinvest a significant portion of our foreign earnings , and our current plans do not demonstrate a need to repatriate these earnings .
should we require additional capital in the united states , we may elect to repatriate indefinitely reinvested foreign funds or raise capital in the united states through debt .
if we were to repatriate indefinitely reinvested foreign funds , we would be required to accrue and pay additional u.s .
taxes less applicable foreign tax credits .
if we elect to raise capital in the united states through debt , we would incur additional interest expense .
off-balance sheet arrangements in connection with various contracts and agreements , we routinely provide indemnification relating to the enforceability of intellectual property rights , coverage for legal issues that arise and other items where we are acting as the guarantor .
currently , we have several such agreements in place .
however , based on our historical experience and the estimated probability of future loss , we have determined that the fair value of such indemnification is not material to our financial position or results of operations .
contractual obligations our significant long-term contractual obligations as of may 31 , 2015 and significant endorsement contracts , including related marketing commitments , entered into through the date of this report are as follows: .

description of commitment ( in millions ) | description of commitment 2016 | description of commitment 2017 | description of commitment 2018 | description of commitment 2019 | description of commitment 2020 | description of commitment thereafter | total
----------------------------------------- | ------------------------------ | ------------------------------ | ------------------------------ | ------------------------------ | ------------------------------ | ------------------------------------ | -------
operating leases                          | $ 447                          | $ 423                          | $ 371                          | $ 311                          | $ 268                          | $ 1154                               | $ 2974
capital leases                            | 2                              | 2                              | 1                              | 2014                           | 2014                           | 2014                                 | 5
long-term debt ( 1 )                      | 142                            | 77                             | 55                             | 36                             | 36                             | 1451                                 | 1797
endorsement contracts ( 2 )               | 1009                           | 919                            | 882                            | 706                            | 533                            | 2143                                 | 6192
product purchase obligations ( 3 )        | 3735                           | 2014                           | 2014                           | 2014                           | 2014                           | 2014                                 | 3735
other ( 4 )                               | 343                            | 152                            | 75                             | 72                             | 36                             | 92                                   | 770
total                                     | $ 5678                         | $ 1573                         | $ 1384                         | $ 1125                         | $ 873                          | $ 4840                               | $ 15473

( 1 ) the cash payments due for long-term debt include estimated interest payments .
estimates of interest payments are based on outstanding principal amounts , applicable fixed interest rates or currently effective interest rates as of may 31 , 2015 ( if variable ) , timing of scheduled payments and the term of the debt obligations .
( 2 ) the amounts listed for endorsement contracts represent approximate amounts of base compensation and minimum guaranteed royalty fees we are obligated to pay athlete , sport team and league endorsers of our products .
actual payments under some contracts may be higher than the amounts listed as these contracts provide for bonuses to be paid to the endorsers based upon athletic achievements and/or royalties on product sales in future periods .
actual payments under some contracts may also be lower as these contracts include provisions for reduced payments if athletic performance declines in future periods .
in addition to the cash payments , we are obligated to furnish our endorsers with nike product for their use .
it is not possible to determine how much we will spend on this product on an annual basis as the contracts generally do not stipulate a specific amount of cash to be spent on the product .
the amount of product provided to the endorsers will depend on many factors , including general playing conditions , the number of sporting events in which they participate and our own decisions regarding product and marketing initiatives .
in addition , the costs to design , develop , source and purchase the products furnished to the endorsers are incurred over a period of time and are not necessarily tracked separately from similar costs incurred for products sold to customers.


part i berths at the end of 2011 .
there are approximately 10 ships with an estimated 34000 berths that are expected to be placed in service in the north american cruise market between 2012 and 2016 .
europe in europe , cruising represents a smaller but growing sector of the vacation industry .
it has experienced a compound annual growth rate in cruise guests of approximately 9.6% ( 9.6 % ) from 2007 to 2011 and we believe this market has significant continued growth poten- tial .
we estimate that europe was served by 104 ships with approximately 100000 berths at the beginning of 2007 and by 121 ships with approximately 155000 berths at the end of 2011 .
there are approximately 10 ships with an estimated 28000 berths that are expected to be placed in service in the european cruise market between 2012 and 2016 .
the following table details the growth in the global , north american and european cruise markets in terms of cruise guests and estimated weighted-average berths over the past five years : global cruise guests ( 1 ) weighted-average supply of berths marketed globally ( 1 ) north american cruise guests ( 2 ) weighted-average supply of berths marketed in north america ( 1 ) european cruise guests ( 3 ) weighted-average supply of berths marketed in europe ( 1 ) .

year | global cruiseguests ( 1 ) | weighted-averagesupplyofberthsmarketedglobally ( 1 ) | northamericancruiseguests ( 2 ) | weighted-average supply ofberths marketedin northamerica ( 1 ) | europeancruiseguests | weighted-averagesupply ofberthsmarketed ineurope ( 1 )
---- | ------------------------- | ---------------------------------------------------- | ------------------------------- | -------------------------------------------------------------- | -------------------- | ------------------------------------------------------
2007 | 16586000                  | 327000                                               | 10247000                        | 212000                                                         | 4080000              | 105000
2008 | 17184000                  | 347000                                               | 10093000                        | 219000                                                         | 4500000              | 120000
2009 | 17340000                  | 363000                                               | 10198000                        | 222000                                                         | 5000000              | 131000
2010 | 18800000                  | 391000                                               | 10781000                        | 232000                                                         | 5540000              | 143000
2011 | 20227000                  | 412000                                               | 11625000                        | 245000                                                         | 5894000              | 149000

( 1 ) source : our estimates of the number of global cruise guests , and the weighted-average supply of berths marketed globally , in north america and europe are based on a combination of data that we obtain from various publicly available cruise industry trade information sources including seatrade insider and cruise line international association .
in addition , our estimates incorporate our own statistical analysis utilizing the same publicly available cruise industry data as a base .
( 2 ) source : cruise line international association based on cruise guests carried for at least two consecutive nights for years 2007 through 2010 .
year 2011 amounts represent our estimates ( see number 1 above ) .
( 3 ) source : european cruise council for years 2007 through 2010 .
year 2011 amounts represent our estimates ( see number 1 above ) .
other markets in addition to expected industry growth in north america and europe as discussed above , we expect the asia/pacific region to demonstrate an even higher growth rate in the near term , although it will continue to represent a relatively small sector compared to north america and europe .
we compete with a number of cruise lines ; however , our principal competitors are carnival corporation & plc , which owns , among others , aida cruises , carnival cruise lines , costa cruises , cunard line , holland america line , iberocruceros , p&o cruises and princess cruises ; disney cruise line ; msc cruises ; norwegian cruise line and oceania cruises .
cruise lines compete with other vacation alternatives such as land-based resort hotels and sightseeing destinations for consum- ers 2019 leisure time .
demand for such activities is influ- enced by political and general economic conditions .
companies within the vacation market are dependent on consumer discretionary spending .
operating strategies our principal operating strategies are to : and employees and protect the environment in which our vessels and organization operate , to better serve our global guest base and grow our business , order to enhance our revenues while continuing to expand and diversify our guest mix through interna- tional guest sourcing , and ensure adequate cash and liquidity , with the overall goal of maximizing our return on invested capital and long-term shareholder value , our brands throughout the world , revitalization of existing ships and the transfer of key innovations across each brand , while expanding our fleet with the new state-of-the-art cruise ships recently delivered and on order , by deploying them into those markets and itineraries that provide opportunities to optimize returns , while continuing our focus on existing key markets , support ongoing operations and initiatives , and the principal industry distribution channel , while enhancing our consumer outreach programs.


adobe systems incorporated notes to consolidated financial statements ( continued ) note 15 .
commitments and contingencies lease commitments we lease certain of our facilities and some of our equipment under non-cancellable operating lease arrangements that expire at various dates through 2028 .
we also have one land lease that expires in 2091 .
rent expense includes base contractual rent and variable costs such as building expenses , utilities , taxes , insurance and equipment rental .
rent expense and sublease income for these leases for fiscal 2014 , 2013 and 2012 were as follows ( in thousands ) : .

                       | 2014     | 2013     | 2012
---------------------- | -------- | -------- | --------
rent expense           | $ 111149 | $ 118976 | $ 105809
less : sublease income | 1412     | 3057     | 2330
net rent expense       | $ 109737 | $ 115919 | $ 103479

we occupy three office buildings in san jose , california where our corporate headquarters are located .
we reference these office buildings as the almaden tower and the east and west towers .
in august 2014 , we exercised our option to purchase the east and west towers for a total purchase price of $ 143.2 million .
upon purchase , our investment in the lease receivable of $ 126.8 million was credited against the total purchase price and we were no longer required to maintain a standby letter of credit as stipulated in the east and west towers lease agreement .
we capitalized the east and west towers as property and equipment on our consolidated balance sheets at $ 144.1 million , the lesser of cost or fair value , which represented the total purchase price plus other direct costs associated with the purchase .
see note 6 for discussion of our east and west towers purchase .
the lease agreement for the almaden tower is effective through march 2017 .
we are the investors in the lease receivable related to the almaden tower lease in the amount of $ 80.4 million , which is recorded as investment in lease receivable on our consolidated balance sheets .
as of november 28 , 2014 , the carrying value of the lease receivable related to the almaden tower approximated fair value .
under the agreement for the almaden tower , we have the option to purchase the building at any time during the lease term for $ 103.6 million .
if we purchase the building , the investment in the lease receivable may be credited against the purchase price .
the residual value guarantee under the almaden tower obligation is $ 89.4 million .
the almaden tower lease is subject to standard covenants including certain financial ratios that are reported to the lessor quarterly .
as of november 28 , 2014 , we were in compliance with all of the covenants .
in the case of a default , the lessor may demand we purchase the building for an amount equal to the lease balance , or require that we remarket or relinquish the building .
if we choose to remarket or are required to do so upon relinquishing the building , we are bound to arrange the sale of the building to an unrelated party and will be required to pay the lessor any shortfall between the net remarketing proceeds and the lease balance , up to the residual value guarantee amount less our investment in lease receivable .
the almaden tower lease qualifies for operating lease accounting treatment and , as such , the building and the related obligation are not included in our consolidated balance sheets .
see note 16 for discussion of our capital lease obligation .
unconditional purchase obligations our purchase obligations consist of agreements to purchase goods and services entered into in the ordinary course of business.


page 92 of 98 other information required by item 10 appearing under the caption 201cdirector nominees and continuing directors 201d and 201csection 16 ( a ) beneficial ownership reporting compliance , 201d of the company 2019s proxy statement to be filed pursuant to regulation 14a within 120 days after december 31 , 2006 , is incorporated herein by reference .
item 11 .
executive compensation the information required by item 11 appearing under the caption 201cexecutive compensation 201d in the company 2019s proxy statement , to be filed pursuant to regulation 14a within 120 days after december 31 , 2006 , is incorporated herein by reference .
additionally , the ball corporation 2000 deferred compensation company stock plan , the ball corporation deposit share program and the ball corporation directors deposit share program were created to encourage key executives and other participants to acquire a larger equity ownership interest in the company and to increase their interest in the company 2019s stock performance .
non-employee directors also participate in the 2000 deferred compensation company stock plan .
item 12 .
security ownership of certain beneficial owners and management the information required by item 12 appearing under the caption 201cvoting securities and principal shareholders , 201d in the company 2019s proxy statement to be filed pursuant to regulation 14a within 120 days after december 31 , 2006 , is incorporated herein by reference .
securities authorized for issuance under equity compensation plans are summarized below: .

plan category                                              | equity compensation plan information number of securities to be issued upon exercise of outstanding options warrants and rights ( a ) | equity compensation plan information weighted-average exercise price of outstanding options warrants and rights ( b ) | equity compensation plan information number of securities remaining available for future issuance under equity compensation plans ( excluding securities reflected in column ( a ) ) ( c )
---------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
equity compensation plans approved by security holders     | 4852978                                                                                | $ 26.69                                                                                | 5941210
equity compensation plans not approved by security holders | 2013                                                                                | 2013                                                                                | 2013
total                                                      | 4852978                                                                                | $ 26.69                                                                                | 5941210

item 13 .
certain relationships and related transactions the information required by item 13 appearing under the caption 201cratification of the appointment of independent registered public accounting firm , 201d in the company 2019s proxy statement to be filed pursuant to regulation 14a within 120 days after december 31 , 2006 , is incorporated herein by reference .
item 14 .
principal accountant fees and services the information required by item 14 appearing under the caption 201ccertain committees of the board , 201d in the company 2019s proxy statement to be filed pursuant to regulation 14a within 120 days after december 31 , 2006 , is incorporated herein by reference.


stock performance graph this performance graph shall not be deemed 201cfiled 201d for purposes of section 18 of the securities exchange act of 1934 , as amended ( the 201cexchange act 201d ) or otherwise subject to the liabilities under that section and shall not be deemed to be incorporated by reference into any filing of tractor supply company under the securities act of 1933 , as amended , or the exchange act .
the following graph compares the cumulative total stockholder return on our common stock from december 29 , 2012 to december 30 , 2017 ( the company 2019s fiscal year-end ) , with the cumulative total returns of the s&p 500 index and the s&p retail index over the same period .
the comparison assumes that $ 100 was invested on december 29 , 2012 , in our common stock and in each of the foregoing indices and in each case assumes reinvestment of dividends .
the historical stock price performance shown on this graph is not indicative of future performance. .

                       | 12/29/2012 | 12/28/2013 | 12/27/2014 | 12/26/2015 | 12/31/2016 | 12/30/2017
---------------------- | ---------- | ---------- | ---------- | ---------- | ---------- | ----------
tractor supply company | $ 100.00   | $ 174.14   | $ 181.29   | $ 201.04   | $ 179.94   | $ 180.52
s&p 500                | $ 100.00   | $ 134.11   | $ 155.24   | $ 156.43   | $ 173.74   | $ 211.67
s&p retail index       | $ 100.00   | $ 147.73   | $ 164.24   | $ 207.15   | $ 219.43   | $ 286.13


continued investments in ecommerce and technology .
the increase in operating expenses as a percentage of net sales for fiscal 2017 was partially offset by the impact of store closures in the fourth quarter of fiscal 2016 .
membership and other income was relatively flat for fiscal 2018 and increased $ 1.0 billion a0for fiscal 2017 , when compared to the same period in the previous fiscal year .
while fiscal 2018 included a $ 387 million gain from the sale of suburbia , a $ 47 million gain from a land sale , higher recycling income from our sustainability efforts and higher membership income from increased plus member penetration at sam's club , these gains were less than gains recognized in fiscal 2017 .
fiscal 2017 included a $ 535 million gain from the sale of our yihaodian business and a $ 194 million gain from the sale of shopping malls in chile .
for fiscal 2018 , loss on extinguishment of debt was a0$ 3.1 billion , due to the early extinguishment of long-term debt which allowed us to retire higher rate debt to reduce interest expense in future periods .
our effective income tax rate was 30.4% ( 30.4 % ) for fiscal 2018 and 30.3% ( 30.3 % ) for both fiscal 2017 and 2016 .
although relatively consistent year-over-year , our effective income tax rate may fluctuate from period to period as a result of factors including changes in our assessment of certain tax contingencies , valuation allowances , changes in tax laws , outcomes of administrative audits , the impact of discrete items and the mix of earnings among our u.s .
operations and international operations .
the reconciliation from the u.s .
statutory rate to the effective income tax rates for fiscal 2018 , 2017 and 2016 is presented in note 9 in the "notes to consolidated financial statements" and describes the impact of the enactment of the tax cuts and jobs act of 2017 ( the "tax act" ) to the fiscal 2018 effective income tax rate .
as a result of the factors discussed above , we reported $ 10.5 billion and $ 14.3 billion of consolidated net income for fiscal 2018 and 2017 , respectively , which represents a decrease of $ 3.8 billion and $ 0.8 billion for fiscal 2018 and 2017 , respectively , when compared to the previous fiscal year .
diluted net income per common share attributable to walmart ( "eps" ) was $ 3.28 and $ 4.38 for fiscal 2018 and 2017 , respectively .
walmart u.s .
segment .

( amounts in millions except unit counts )    | fiscal years ended january 31 , 2018 | fiscal years ended january 31 , 2017 | fiscal years ended january 31 , 2016
--------------------------------------------- | ------------------------------------ | ------------------------------------ | ------------------------------------
net sales                                     | $ 318477                             | $ 307833                             | $ 298378
percentage change from comparable period      | 3.5% ( 3.5 % )                       | 3.2% ( 3.2 % )                       | 3.6% ( 3.6 % )
calendar comparable sales increase            | 2.1% ( 2.1 % )                       | 1.6% ( 1.6 % )                       | 1.0% ( 1.0 % )
operating income                              | $ 17869                              | $ 17745                              | $ 19087
operating income as a percentage of net sales | 5.6% ( 5.6 % )                       | 5.8% ( 5.8 % )                       | 6.4% ( 6.4 % )
unit counts at period end                     | 4761                                 | 4672                                 | 4574
retail square feet at period end              | 705                                  | 699                                  | 690

net sales for the walmart u.s .
segment increased $ 10.6 billion or 3.5% ( 3.5 % ) and $ 9.5 billion or 3.2% ( 3.2 % ) for fiscal 2018 and 2017 , respectively , when compared to the previous fiscal year .
the increases in net sales were primarily due to increases in comparable store sales of 2.1% ( 2.1 % ) and 1.6% ( 1.6 % ) for fiscal 2018 and 2017 , respectively , and year-over-year growth in retail square feet of 0.7% ( 0.7 % ) and 1.4% ( 1.4 % ) for fiscal 2018 and 2017 , respectively .
additionally , for fiscal 2018 , sales generated from ecommerce acquisitions further contributed to the year-over-year increase .
gross profit rate decreased 24 basis points for fiscal 2018 and increased 24 basis points for fiscal 2017 , when compared to the previous fiscal year .
for fiscal 2018 , the decrease was primarily due to strategic price investments and the mix impact from ecommerce .
partially offsetting the negative factors for fiscal 2018 was the positive impact of savings from procuring merchandise .
for fiscal 2017 , the increase in gross profit rate was primarily due to improved margin in food and consumables , including the impact of savings in procuring merchandise and lower transportation expense from lower fuel costs .
operating expenses as a percentage of segment net sales was relatively flat for fiscal 2018 and increased 101 basis points for fiscal 2017 , when compared to the previous fiscal year .
fiscal 2018 and fiscal 2017 included charges related to discontinued real estate projects of $ 244 million and $ 249 million , respectively .
for fiscal 2017 , the increase was primarily driven by an increase in wage expense due to the investment in the associate wage structure ; the charge related to discontinued real estate projects ; and investments in digital retail and technology .
the increase in operating expenses as a percentage of segment net sales for fiscal 2017 was partially offset by the impact of store closures in fiscal 2016 .
as a result of the factors discussed above , segment operating income increased $ 124 million for fiscal 2018 and decreased $ 1.3 billion for fiscal 2017 , respectively.


performance graph the performance graph below shows the five-year cumulative total stockholder return on applied common stock during the period from october 28 , 2007 through october 28 , 2012 .
this is compared with the cumulative total return of the standard & poor 2019s 500 stock index and the rdg semiconductor composite index over the same period .
the comparison assumes $ 100 was invested on october 28 , 2007 in applied common stock and in each of the foregoing indices and assumes reinvestment of dividends , if any .
dollar amounts in the graph are rounded to the nearest whole dollar .
the performance shown in the graph represents past performance and should not be considered an indication of future performance .
comparison of 5 year cumulative total return* among applied materials , inc. , the s&p 500 index and the rdg semiconductor composite index * $ 100 invested on 10/28/07 in stock or 10/31/07 in index , including reinvestment of dividends .
indexes calculated on month-end basis .
copyright a9 2012 s&p , a division of the mcgraw-hill companies inc .
all rights reserved. .

                                  | 10/28/2007 | 10/26/2008 | 10/25/2009 | 10/31/2010 | 10/30/2011 | 10/28/2012
--------------------------------- | ---------- | ---------- | ---------- | ---------- | ---------- | ----------
applied materials                 | 100.00     | 61.22      | 71.06      | 69.23      | 72.37      | 62.92
s&p 500 index                     | 100.00     | 63.90      | 70.17      | 81.76      | 88.37      | 101.81
rdg semiconductor composite index | 100.00     | 54.74      | 68.59      | 84.46      | 91.33      | 82.37

dividends during fiscal 2012 , applied 2019s board of directors declared three quarterly cash dividends in the amount of $ 0.09 per share each and one quarterly cash dividend in the amount of $ 0.08 per share .
during fiscal 2011 , applied 2019s board of directors declared three quarterly cash dividends in the amount of $ 0.08 per share each and one quarterly cash dividend in the amount of $ 0.07 per share .
during fiscal 2010 , applied 2019s board of directors declared three quarterly cash dividends in the amount of $ 0.07 per share each and one quarterly cash dividend in the amount of $ 0.06 .
dividends declared during fiscal 2012 , 2011 and 2010 amounted to $ 438 million , $ 408 million and $ 361 million , respectively .
applied currently anticipates that it will continue to pay cash dividends on a quarterly basis in the future , although the declaration and amount of any future cash dividends are at the discretion of the board of directors and will depend on applied 2019s financial condition , results of operations , capital requirements , business conditions and other factors , as well as a determination that cash dividends are in the best interests of applied 2019s stockholders .
10/28/07 10/26/08 10/25/09 10/31/10 10/30/11 10/28/12 applied materials , inc .
s&p 500 rdg semiconductor composite