backlog backlog increased in 2015 compared to 2014 primarily due to higher orders on f-35 and c-130 programs .
backlog decreased slightly in 2014 compared to 2013 primarily due to lower orders on f-16 and f-22 programs .
trends we expect aeronautics 2019 2016 net sales to increase in the mid-single digit percentage range as compared to 2015 due to increased volume on the f-35 and c-130 programs , partially offset by decreased volume on the f-16 program .
operating profit is also expected to increase in the low single-digit percentage range , driven by increased volume on the f-35 program offset by contract mix that results in a slight decrease in operating margins between years .
information systems & global solutions our is&gs business segment provides advanced technology systems and expertise , integrated information technology solutions and management services across a broad spectrum of applications for civil , defense , intelligence and other government customers .
is&gs 2019 technical services business provides a comprehensive portfolio of technical and sustainment services .
is&gs has a portfolio of many smaller contracts as compared to our other business segments .
is&gs has been impacted by the continued downturn in certain federal agencies 2019 information technology budgets and increased re-competition on existing contracts coupled with the fragmentation of large contracts into multiple smaller contracts that are awarded primarily on the basis of price .
is&gs 2019 operating results included the following ( in millions ) : .

                    | 2015           | 2014           | 2013
------------------- | -------------- | -------------- | --------------
net sales           | $ 5596         | $ 5654         | $ 6115
operating profit    | 508            | 472            | 498
operating margins   | 9.1% ( 9.1 % ) | 8.3% ( 8.3 % ) | 8.1% ( 8.1 % )
backlog at year-end | $ 4800         | $ 6000         | $ 6300

2015 compared to 2014 is&gs 2019 net sales decreased $ 58 million , or 1% ( 1 % ) , in 2015 as compared to 2014 .
the decrease was attributable to lower net sales of approximately $ 395 million as a result of key program completions , lower customer funding levels and increased competition , coupled with the fragmentation of existing large contracts into multiple smaller contracts that are awarded primarily on the basis of price when re-competed ( including cms-citic ) .
these decreases were partially offset by higher net sales of approximately $ 230 million for businesses acquired in 2014 ; and approximately $ 110 million due to the start-up of new programs and growth in recently awarded programs .
is&gs 2019 operating profit increased $ 36 million , or 8% ( 8 % ) , in 2015 as compared to 2014 .
the increase was attributable to improved program performance and risk retirements , offset by decreased operating profit resulting from the activities mentioned above for net sales .
adjustments not related to volume , including net profit booking rate adjustments and other matters , were approximately $ 70 million higher in 2015 compared to 2014 .
2014 compared to 2013 is&gs 2019 net sales decreased $ 461 million , or 8% ( 8 % ) , in 2014 as compared to 2013 .
the decrease was primarily attributable to lower net sales of about $ 475 million due to the wind-down or completion of certain programs , driven by reductions in direct warfighter support ( including jieddo ) ; and approximately $ 320 million due to decreased volume in technical services programs reflecting market pressures .
the decreases were offset by higher net sales of about $ 330 million due to the start-up of new programs , growth in recently awarded programs and integration of recently acquired companies .
is&gs 2019 operating profit decreased $ 26 million , or 5% ( 5 % ) , in 2014 as compared to 2013 .
the decrease was primarily attributable to the activities mentioned above for sales , partially offset by severance recoveries related to the restructuring announced in november 2013 of approximately $ 20 million in 2014 .
adjustments not related to volume , including net profit booking rate adjustments , were comparable in 2014 and 2013.


table of contents the following table discloses purchases of shares of our common stock made by us or on our behalf during the fourth quarter of 2016 .
period total number of shares purchased average price paid per share total number of shares not purchased as part of publicly announced plans or programs ( a ) total number of shares purchased as part of publicly announced plans or programs approximate dollar value of shares that may yet be purchased under the plans or programs ( b ) .

period        | total numberof sharespurchased | averageprice paidper share | total number ofshares notpurchased as part ofpublicly announcedplans or programs ( a ) | total number ofshares purchased aspart of publiclyannounced plans orprograms | approximate dollarvalue of shares thatmay yet be purchasedunder the plans orprograms ( b )
------------- | ------------------------------ | -------------------------- | -------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------
october 2016  | 433272                         | $ 52.69                    | 50337                                                                                | 382935                                                                       | $ 2.7 billion
november 2016 | 667644                         | $ 62.25                    | 248349                                                                                | 419295                                                                       | $ 2.6 billion
december 2016 | 1559569                        | $ 66.09                    | 688                                                                                | 1558881                                                                      | $ 2.5 billion
total         | 2660485                        | $ 62.95                    | 299374                                                                                | 2361111                                                                      | $ 2.5 billion

( a ) the shares reported in this column represent purchases settled in the fourth quarter of 2016 relating to ( i ) our purchases of shares in open-market transactions to meet our obligations under stock-based compensation plans , and ( ii ) our purchases of shares from our employees and non-employee directors in connection with the exercise of stock options , the vesting of restricted stock , and other stock compensation transactions in accordance with the terms of our stock-based compensation plans .
( b ) on july 13 , 2015 , we announced that our board of directors authorized our purchase of up to $ 2.5 billion of our outstanding common stock .
this authorization has no expiration date .
as of december 31 , 2016 , the approximate dollar value of shares that may yet be purchased under the 2015 authorization is $ 40 million .
on september 21 , 2016 , we announced that our board of directors authorized our purchase of up to an additional $ 2.5 billion of our outstanding common stock with no expiration date .
as of december 31 , 2016 , no purchases have been made under the 2016 authorization.


marathon oil corporation notes to consolidated financial statements expected long-term return on plan assets 2013 the expected long-term return on plan assets assumption for our u.s .
funded plan is determined based on an asset rate-of-return modeling tool developed by a third-party investment group which utilizes underlying assumptions based on actual returns by asset category and inflation and takes into account our u.s .
pension plan 2019s asset allocation .
to determine the expected long-term return on plan assets assumption for our international plans , we consider the current level of expected returns on risk-free investments ( primarily government bonds ) , the historical levels of the risk premiums associated with the other applicable asset categories and the expectations for future returns of each asset class .
the expected return for each asset category is then weighted based on the actual asset allocation to develop the overall expected long-term return on plan assets assumption .
assumed weighted average health care cost trend rates .

                                    | 2018 | 2017             | 2016
----------------------------------- | ---- | ---------------- | ----------------
initial health care trend rate      | n/a  | 8.00% ( 8.00 % ) | 8.25% ( 8.25 % )
ultimate trend rate                 | n/a  | 4.70% ( 4.70 % ) | 4.50% ( 4.50 % )
year ultimate trend rate is reached | n/a  | 2025             | 2025

n/a all retiree medical subsidies are frozen as of january 1 , 2019 .
employer provided subsidies for post-65 retiree health care coverage were frozen effective january 1 , 2017 at january 1 , 2016 established amount levels .
company contributions are funded to a health reimbursement account on the retiree 2019s behalf to subsidize the retiree 2019s cost of obtaining health care benefits through a private exchange ( the 201cpost-65 retiree health benefits 201d ) .
therefore , a 1% ( 1 % ) change in health care cost trend rates would not have a material impact on either the service and interest cost components and the postretirement benefit obligations .
in the fourth quarter of 2018 , we terminated the post-65 retiree health benefits effective as of december 31 , 2020 .
the post-65 retiree health benefits will no longer be provided after that date .
in addition , the pre-65 retiree medical coverage subsidy has been frozen as of january 1 , 2019 , and the ability for retirees to opt in and out of this coverage , as well as pre-65 retiree dental and vision coverage , has also been eliminated .
retirees must enroll in connection with retirement for such coverage , or they lose eligibility .
these plan changes reduced our retiree medical benefit obligation by approximately $ 99 million .
plan investment policies and strategies 2013 the investment policies for our u.s .
and international pension plan assets reflect the funded status of the plans and expectations regarding our future ability to make further contributions .
long-term investment goals are to : ( 1 ) manage the assets in accordance with applicable legal requirements ; ( 2 ) produce investment returns which meet or exceed the rates of return achievable in the capital markets while maintaining the risk parameters set by the plan's investment committees and protecting the assets from any erosion of purchasing power ; and ( 3 ) position the portfolios with a long-term risk/ return orientation .
investment performance and risk is measured and monitored on an ongoing basis through quarterly investment meetings and periodic asset and liability studies .
u.s .
plan 2013 the plan 2019s current targeted asset allocation is comprised of 55% ( 55 % ) equity securities and 45% ( 45 % ) other fixed income securities .
over time , as the plan 2019s funded ratio ( as defined by the investment policy ) improves , in order to reduce volatility in returns and to better match the plan 2019s liabilities , the allocation to equity securities will decrease while the amount allocated to fixed income securities will increase .
the plan's assets are managed by a third-party investment manager .
international plan 2013 our international plan's target asset allocation is comprised of 55% ( 55 % ) equity securities and 45% ( 45 % ) fixed income securities .
the plan assets are invested in ten separate portfolios , mainly pooled fund vehicles , managed by several professional investment managers whose performance is measured independently by a third-party asset servicing consulting fair value measurements 2013 plan assets are measured at fair value .
the following provides a description of the valuation techniques employed for each major plan asset class at december 31 , 2018 and 2017 .
cash and cash equivalents 2013 cash and cash equivalents are valued using a market approach and are considered level 1 .
equity securities 2013 investments in common stock are valued using a market approach at the closing price reported in an active market and are therefore considered level 1 .
private equity investments include interests in limited partnerships which are valued based on the sum of the estimated fair values of the investments held by each partnership , determined using a combination of market , income and cost approaches , plus working capital , adjusted for liabilities , currency translation and estimated performance incentives .
these private equity investments are considered level 3 .
investments in pooled funds are valued using a market approach , these various funds consist of equity with underlying investments held in u.s .
and non-u.s .
securities .
the pooled funds are benchmarked against a relative public index and are considered level 2.


the company recognizes accrued interest and penalties related to tax positions as a component of income tax expense and accounts for sales tax collected from customers and remitted to taxing authorities on a net basis .
allowance for funds used during construction afudc is a non-cash credit to income with a corresponding charge to utility plant that represents the cost of borrowed funds or a return on equity funds devoted to plant under construction .
the regulated utility subsidiaries record afudc to the extent permitted by the pucs .
the portion of afudc attributable to borrowed funds is shown as a reduction of interest , net in the accompanying consolidated statements of operations .
any portion of afudc attributable to equity funds would be included in other income ( expenses ) in the accompanying consolidated statements of operations .
afudc is summarized in the following table for the years ended december 31: .

                                                      | 2015 | 2014 | 2013
----------------------------------------------------- | ---- | ---- | ----
allowance for other funds used during construction    | $ 13 | $ 9  | $ 13
allowance for borrowed funds used during construction | 8    | 6    | 6

environmental costs the company 2019s water and wastewater operations are subject to u.s .
federal , state , local and foreign requirements relating to environmental protection , and as such , the company periodically becomes subject to environmental claims in the normal course of business .
environmental expenditures that relate to current operations or provide a future benefit are expensed or capitalized as appropriate .
remediation costs that relate to an existing condition caused by past operations are accrued , on an undiscounted basis , when it is probable that these costs will be incurred and can be reasonably estimated .
remediation costs accrued amounted to $ 1 and $ 2 as of december 31 , 2015 and 2014 , respectively .
the accrual relates entirely to a conservation agreement entered into by a subsidiary of the company with the national oceanic and atmospheric administration ( 201cnoaa 201d ) requiring the company to , among other provisions , implement certain measures to protect the steelhead trout and its habitat in the carmel river watershed in the state of california .
the company has agreed to pay $ 1 annually from 2010 to 2016 .
the company 2019s inception-to-date costs related to the noaa agreement were recorded in regulatory assets in the accompanying consolidated balance sheets as of december 31 , 2015 and 2014 and are expected to be fully recovered from customers in future rates .
derivative financial instruments the company uses derivative financial instruments for purposes of hedging exposures to fluctuations in interest rates .
these derivative contracts are entered into for periods consistent with the related underlying exposures and do not constitute positions independent of those exposures .
the company does not enter into derivative contracts for speculative purposes and does not use leveraged instruments .
all derivatives are recognized on the balance sheet at fair value .
on the date the derivative contract is entered into , the company may designate the derivative as a hedge of the fair value of a recognized asset or liability ( fair-value hedge ) or a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability ( cash-flow hedge ) .
changes in the fair value of a fair-value hedge , along with the gain or loss on the underlying hedged item , are recorded in current-period earnings .
the effective portion of gains and losses on cash-flow hedges are recorded in other comprehensive income , until earnings are affected by the variability of cash flows .
any ineffective portion of designated hedges is recognized in current-period earnings .
cash flows from derivative contracts are included in net cash provided by operating activities in the accompanying consolidated statements of cash flows.


a wholly-owned subsidiary of the company is a registered life insurance company that maintains separate account assets , representing segregated funds held for purposes of funding individual and group pension contracts , and equal and offsetting separate account liabilities .
at decem - ber 31 , 2008 and 2007 , the level 3 separate account assets were approximately $ 4 and $ 12 , respectively .
the changes in level 3 assets primarily relate to purchases , sales and gains/ ( losses ) .
the net investment income and net gains and losses attributable to separate account assets accrue directly to the contract owner and are not reported as non-operating income ( expense ) on the consolidated statements of income .
level 3 assets , which includes equity method investments or consolidated investments of real estate funds , private equity funds and funds of private equity funds are valued based upon valuations received from internal as well as third party fund managers .
fair valuations at the underlying funds are based on a combination of methods which may include third-party independent appraisals and discounted cash flow techniques .
direct investments in private equity companies held by funds of private equity funds are valued based on an assessment of each under - lying investment , incorporating evaluation of additional significant third party financing , changes in valuations of comparable peer companies and the business environment of the companies , among other factors .
see note 2 for further detail on the fair value policies by the underlying funds .
changes in level 3 assets measured at fair value on a recurring basis for the year ended december 31 , 2008 .

                                                                                | investments    | other assets
------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------- | ------------
december 31 2007                                                                                | $ 1240         | $ 2014
realized and unrealized gains / ( losses ) net                                                                                | -409 ( 409 )   | -16 ( 16 )
purchases sales other settlements and issuances net                                                                                | 11             | 2
net transfers in and/or out of level 3                                                                                | -29 ( 29 )     | 78
december 31 2008                                                                                | $ 813          | $ 64
total net ( losses ) for the period included in earnings attributable to the change in unrealized gains or ( losses ) relating to assets stillheld at the reporting date | $ -366 ( 366 ) | $ -17 ( 17 )

total net ( losses ) for the period included in earnings attributable to the change in unrealized gains or ( losses ) relating to assets still held at the reporting date $ ( 366 ) $ ( 17 ) realized and unrealized gains and losses recorded for level 3 assets are reported in non-operating income ( expense ) on the consolidated statements of income .
non-controlling interest expense is recorded for consoli- dated investments to reflect the portion of gains and losses not attributable to the company .
the company transfers assets in and/or out of level 3 as significant inputs , including performance attributes , used for the fair value measurement become observable .
6 .
variable interest entities in the normal course of business , the company is the manager of various types of sponsored investment vehicles , including collateralized debt obligations and sponsored investment funds , that may be considered vies .
the company receives management fees or other incen- tive related fees for its services and may from time to time own equity or debt securities or enter into derivatives with the vehicles , each of which are considered variable inter- ests .
the company engages in these variable interests principally to address client needs through the launch of such investment vehicles .
the vies are primarily financed via capital contributed by equity and debt holders .
the company 2019s involvement in financing the operations of the vies is limited to its equity interests , unfunded capital commitments for certain sponsored investment funds and its capital support agreements for two enhanced cash funds .
the primary beneficiary of a vie is the party that absorbs a majority of the entity 2019s expected losses , receives a major - ity of the entity 2019s expected residual returns or both as a result of holding variable interests .
in order to determine whether the company is the primary beneficiary of a vie , management must make significant estimates and assumptions of probable future cash flows and assign probabilities to different cash flow scenarios .
assumptions made in such analyses include , but are not limited to , market prices of securities , market interest rates , poten- tial credit defaults on individual securities or default rates on a portfolio of securities , gain realization , liquidity or marketability of certain securities , discount rates and the probability of certain other outcomes .
vies in which blackrock is the primary beneficiary at december 31 , 2008 , the company was the primary beneficiary of three vies , which resulted in consolidation of three sponsored investment funds ( including two cash management funds and one private equity fund of funds ) .
creditors of the vies do not have recourse to the credit of the company .
during 2008 , the company determined it became the primary beneficiary of two enhanced cash management funds as a result of concluding that under various cash 177528_txt_59_96:layout 1 3/26/09 10:32 pm page 73


shareowner return performance graph the following performance graph and related information shall not be deemed 201csoliciting material 201d or to be 201cfiled 201d with the securities and exchange commission , nor shall such information be incorporated by reference into any future filing under the securities act of 1933 or securities exchange act of 1934 , each as amended , except to the extent that the company specifically incorporates such information by reference into such filing .
the following graph shows a five-year comparison of cumulative total shareowners 2019 returns for our class b common stock , the s&p 500 index , and the dow jones transportation average .
the comparison of the total cumulative return on investment , which is the change in the quarterly stock price plus reinvested dividends for each of the quarterly periods , assumes that $ 100 was invested on december 31 , 2002 in the s&p 500 index , the dow jones transportation average , and the class b common stock of united parcel service , inc .
comparison of five year cumulative total return $ 40.00 $ 60.00 $ 80.00 $ 100.00 $ 120.00 $ 140.00 $ 160.00 $ 180.00 $ 200.00 $ 220.00 2002 20072006200520042003 s&p 500 ups dj transport .

                                 | 12/31/02 | 12/31/03 | 12/31/04 | 12/31/05 | 12/31/06 | 12/31/07
-------------------------------- | -------- | -------- | -------- | -------- | -------- | --------
united parcel service inc .      | $ 100.00 | $ 119.89 | $ 139.55 | $ 124.88 | $ 127.08 | $ 122.64
s&p 500 index                    | $ 100.00 | $ 128.68 | $ 142.68 | $ 149.69 | $ 173.33 | $ 182.85
dow jones transportation average | $ 100.00 | $ 131.84 | $ 168.39 | $ 188.00 | $ 206.46 | $ 209.40

securities authorized for issuance under equity compensation plans the following table provides information as of december 31 , 2007 regarding compensation plans under which our class a common stock is authorized for issuance .
these plans do not authorize the issuance of our class b common stock.


table of contents notes to consolidated financial statements of american airlines , inc .
the asset .
projected cash flows are discounted at a required market rate of return that reflects the relative risk of achieving the cash flows and the time value of money .
the cost approach , which estimates value by determining the current cost of replacing an asset with another of equivalent economic utility , was used , as appropriate , for certain assets for which the market and income approaches could not be applied due to the nature of the asset .
the cost to replace a given asset reflects the estimated reproduction or replacement cost for the asset , less an allowance for loss in value due to depreciation .
the fair value of us airways 2019 dividend miles loyalty program liability was determined based on the weighted average equivalent ticket value of outstanding miles which were expected to be redeemed for future travel at december 9 , 2013 .
the weighted average equivalent ticket value contemplates differing classes of service , domestic and international itineraries and the carrier providing the award travel .
pro-forma impact of the merger american 2019s unaudited pro-forma results presented below include the effects of the merger as if it had been consummated as of january 1 , 2012 .
the pro- forma results include the depreciation and amortization associated with the acquired tangible and intangible assets , lease and debt fair value adjustments , the elimination of any deferred gains or losses , adjustments relating to reflecting the fair value of the loyalty program liability and the impact of income changes on profit sharing expense , among others .
in addition , the pro-forma results below reflect the impact of higher wage rates related to memorandums of understanding with us airways 2019 pilots that became effective upon closing of the merger , as well as the elimination of american 2019s reorganization items , net and merger transition costs .
however , the pro-forma results do not include any anticipated synergies or other expected benefits of the merger .
accordingly , the unaudited pro-forma financial information below is not necessarily indicative of either future results of operations or results that might have been achieved had the acquisition been consummated as of january 1 , 2012 .
december 31 , ( in millions ) .

           | december 31 2013 ( in millions )
---------- | --------------------------------
revenue    | $ 40782
net income | 2707

5 .
basis of presentation and summary of significant accounting policies ( a ) basis of presentation on december 30 , 2015 , us airways merged with and into american , which is reflected in american 2019s consolidated financial statements as though the transaction had occurred on december 9 , 2013 , when a subsidiary of amr merged with and into us airways group .
thus , the full years of 2015 and 2014 and the period from december 9 , 2013 to december 31 , 2013 are comprised of the consolidated financial data of american and us airways .
for the periods prior to december 9 , 2013 , the financial data reflects the results of american only .
for financial reporting purposes , the transaction constituted a transfer of assets between entities under common control and was accounted for in a manner similar to the pooling of interests method of accounting .
under this method , the carrying amount of net assets recognized in the balance sheets of each combining entity are carried forward to the balance sheet of the combined entity and no other assets or liabilities are recognized .
the preparation of financial statements in accordance with accounting principles generally accepted in the united states ( gaap ) requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities , revenues and expenses , and the disclosure of contingent assets and liabilities at the date of the financial statements .
actual results could differ from those estimates .
the most significant areas of judgment relate to passenger revenue recognition , impairment of goodwill , impairment of long-lived and


contractual obligations                            | payments due by period ( in thousands ) total | payments due by period ( in thousands ) 2017 | payments due by period ( in thousands ) 2018 | payments due by period ( in thousands ) 2019 | payments due by period ( in thousands ) 2020 | payments due by period ( in thousands ) 2021 | payments due by period ( in thousands ) thereafter
-------------------------------------------------- | --------------------------------------------- | -------------------------------------------- | -------------------------------------------- | -------------------------------------------- | -------------------------------------------- | -------------------------------------------- | --------------------------------------------------
long-term debt ( 1 )                               | $ 3508789                                     | $ 203244                                     | $ 409257                                     | $ 366456                                     | $ 461309                                     | $ 329339                                     | $ 1739184
line of credit ( 2 )                               | 56127                                         | 2650                                         | 2650                                         | 2650                                         | 48177                                        | 2014                                         | 2014
share of unconsolidated joint ventures' debt ( 3 ) | 91235                                         | 2444                                         | 28466                                        | 5737                                         | 11598                                        | 1236                                         | 41754
ground leases                                      | 311120                                        | 10745                                        | 5721                                         | 5758                                         | 5793                                         | 5822                                         | 277281
development and construction backlog costs ( 4 )   | 344700                                        | 331553                                       | 13147                                        | 2014                                         | 2014                                         | 2014                                         | 2014
other                                              | 43357                                         | 7502                                         | 7342                                         | 5801                                         | 4326                                         | 3906                                         | 14480
total contractual obligations                      | $ 4355328                                     | $ 558138                                     | $ 466583                                     | $ 386402                                     | $ 531203                                     | $ 340303                                     | $ 2072699

( 1 ) our long-term debt consists of both secured and unsecured debt and includes both principal and interest .
interest payments for variable rate debt were calculated using the interest rates as of december 31 , 2016 .
repayment of our $ 250.0 million variable rate term note , which has a contractual maturity date in january 2019 , is reflected as a 2020 obligation in the table above based on the ability to exercise a one-year extension , which we may exercise at our discretion .
( 2 ) our unsecured line of credit has a contractual maturity date in january 2019 , but is reflected as a 2020 obligation in the table above based on the ability to exercise a one-year extension , which we may exercise at our discretion .
interest payments for our unsecured line of credit were calculated using the most recent stated interest rate that was in effect.ff ( 3 ) our share of unconsolidated joint venture debt includes both principal and interest .
interest expense for variable rate debt was calculated using the interest rate at december 31 , 2016 .
( 4 ) represents estimated remaining costs on the completion of owned development projects and third-party construction projects .
related party y transactionstt we provide property and asset management , leasing , construction and other tenant-related services to ww unconsolidated companies in which we have equity interests .
for the years ended december 31 , 2016 , 2015 and 2014 we earned management fees of $ 4.5 million , $ 6.8 million and $ 8.5 million , leasing fees of $ 2.4 million , $ 3.0 million and $ 3.4 million and construction and development fees of $ 8.0 million , $ 6.1 million and $ 5.8 million , respectively , from these companies , prior to elimination of our ownership percentage .
yy we recorded these fees based ww on contractual terms that approximate market rates for these types of services and have eliminated our ownership percentages of these fees in the consolidated financial statements .
commitments and contingenciesg the partnership has guaranteed the repayment of $ 32.9 million of economic development bonds issued by various municipalities in connection with certain commercial developments .
we will be required to make payments under ww our guarantees to the extent that incremental taxes from specified developments are not sufficient to pay the bond ff debt service .
management does not believe that it is probable that we will be required to make any significant payments in satisfaction of these guarantees .
the partnership also has guaranteed the repayment of an unsecured loan of one of our unconsolidated subsidiaries .
at december 31 , 2016 , the maximum guarantee exposure for this loan was approximately $ 52.1 million .
we lease certain land positions with terms extending toww march 2114 , with a total future payment obligation of $ 311.1 million .
the payments on these ground leases , which are classified as operating leases , are not material in any individual year .
in addition to ground leases , we are party to other operating leases as part of conducting our business , including leases of office space from third parties , with a total future payment obligation of ff $ 43.4 million at december 31 , 2016 .
no future payments on these leases are material in any individual year .
we are subject to various legal proceedings and claims that arise in the ordinary course of business .
in the opinion ww of management , the amount of any ultimate liability with respect to these actions is not expected to materially affect ff our consolidated financial statements or results of operations .
we own certain parcels of land that are subject to special property tax assessments levied by quasi municipalww entities .
to the extent that such special assessments are fixed and determinable , the discounted value of the fulltt


25feb201400255845 performance graph the following graph compares the performance of our common stock with that of the s&p 500 index and the s&p 500 healthcare equipment index .
the cumulative total return listed below assumes an initial investment of $ 100 on december 31 , 2008 and reinvestment of dividends .
comparison of five year cumulative total return 2008 2009 2010 2011 20132012 edwards lifesciences s&p 500 s&p 500 healthcare equipment december 31 .

total cumulative return            | 2009     | 2010     | 2011     | 2012     | 2013
---------------------------------- | -------- | -------- | -------- | -------- | --------
edwards lifesciences               | $ 158.05 | $ 294.23 | $ 257.32 | $ 328.19 | $ 239.34
s&p 500                            | 126.46   | 145.51   | 148.59   | 172.37   | 228.19
s&p 500 healthcare equipment index | 120.83   | 117.02   | 123.37   | 145.84   | 186.00


2007 annual report 39 corporate snap-on 2019s general corporate expenses totaled $ 53.8 million in 2006 , up from $ 46.4 million in 2005 , primarily due to $ 15.2 million of increased stock-based and performance-based incentive compensation , including $ 6.3 million from the january 1 , 2006 , adoption of sfas no .
123 ( r ) .
increased expenses in 2006 also included $ 4.2 million of higher insurance and other costs .
these expense increases were partially offset by $ 9.5 million of benefits from rci initiatives .
see note 13 to the consolidated financial statements for information on the company 2019s adoption of sfas no .
123 ( r ) .
financial condition snap-on 2019s growth has historically been funded by a combination of cash provided by operating activities and debt financing .
snap-on believes that its cash from operations , coupled with its sources of borrowings , are sufficient to fund its anticipated requirements for working capital , capital expenditures , restructuring activities , acquisitions , common stock repurchases and dividend payments .
due to snap-on 2019s credit rating over the years , external funds have been available at a reasonable cost .
as of the close of business on february 15 , 2008 , snap-on 2019s long-term debt and commercial paper was rated a3 and p-2 by moody 2019s investors service and a- and a-2 by standard & poor 2019s .
snap-on believes that the strength of its balance sheet , combined with its cash flows from operating activities , affords the company the financial flexibility to respond to both internal growth opportunities and those available through acquisitions .
the following discussion focuses on information included in the accompanying consolidated balance sheets .
snap-on has been focused on improving asset utilization by making more effective use of its investment in certain working capital items .
the company assesses management 2019s operating performance and effectiveness relative to those components of working capital , particularly accounts receivable and inventories , that are more directly impacted by operational decisions .
as of december 29 , 2007 , working capital ( current assets less current liabilities ) of $ 548.2 million was up $ 117.0 million from $ 431.2 million as of december 30 , 2006 .
the increase in year-over-year working capital primarily reflects higher levels of 201ccash and cash equivalents 201d of $ 29.6 million , lower 201cnotes payable and current maturities of long-term debt 201d of $ 27.7 million , and $ 27.7 million of increased 201caccounts receivable 2013 net of allowances . 201d the following represents the company 2019s working capital position as of december 29 , 2007 , and december 30 , 2006 .
( amounts in millions ) 2007 2006 .

( amounts in millions ) ad                             | 2007             | 2006
------------------------------------------------------ | ---------------- | ----------------
cash and cash equivalents                              | $ 93.0           | $ 63.4
accounts receivable 2013 net of allowances             | 586.9            | 559.2
inventories                                            | 322.4            | 323.0
other current assets                                   | 185.1            | 167.6
total current assets                                   | 1187.4           | 1113.2
accounts payable                                       | -171.6 ( 171.6 ) | -178.8 ( 178.8 )
notes payable and current maturities of long-term debt | -15.9 ( 15.9 )   | -43.6 ( 43.6 )
other current liabilities                              | -451.7 ( 451.7 ) | -459.6 ( 459.6 )
total current liabilities                              | -639.2 ( 639.2 ) | -682.0 ( 682.0 )
total working capital                                  | $ 548.2          | $ 431.2

accounts receivable at the end of 2007 was $ 586.9 million , up $ 27.7 million from year-end 2006 levels .
the year-over- year increase in accounts receivable primarily reflects the impact of higher sales in the fourth quarter of 2007 and $ 25.1 million of currency translation .
this increase in accounts receivable was partially offset by lower levels of receivables as a result of an improvement in days sales outstanding from 76 days at year-end 2006 to 73 days at year-end 2007.


dish network corporation notes to consolidated financial statements - continued capital lease obligations anik f3 .
anik f3 , an fss satellite , was launched and commenced commercial operation during april 2007 .
this satellite is accounted for as a capital lease and depreciated over the term of the satellite service agreement .
we have leased 100% ( 100 % ) of the ku-band capacity on anik f3 for a period of 15 years .
ciel ii .
ciel ii , a canadian dbs satellite , was launched in december 2008 and commenced commercial operation during february 2009 .
this satellite is accounted for as a capital lease and depreciated over the term of the satellite service agreement .
we have leased 100% ( 100 % ) of the capacity on ciel ii for an initial 10 year term .
as of december 31 , 2014 and 2013 , we had $ 500 million capitalized for the estimated fair value of satellites acquired under capital leases included in 201cproperty and equipment , net , 201d with related accumulated depreciation of $ 279 million and $ 236 million , respectively .
in our consolidated statements of operations and comprehensive income ( loss ) , we recognized $ 43 million , $ 43 million and $ 43 million in depreciation expense on satellites acquired under capital lease agreements during the years ended december 31 , 2014 , 2013 and 2012 , respectively .
future minimum lease payments under the capital lease obligations , together with the present value of the net minimum lease payments as of december 31 , 2014 are as follows ( in thousands ) : for the years ended december 31 .

2015                                                                                | $ 77089
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------
2016                                                                                | 76809
2017                                                                                | 76007
2018                                                                                | 75982
2019                                                                                | 50331
thereafter                                                                                | 112000
total minimum lease payments                                                                                | 468218
less : amount representing lease of the orbital location and estimated executory costs ( primarily insurance and maintenance ) including profit thereon included in total minimum lease payments | -220883 ( 220883 )
net minimum lease payments                                                                                | 247335
less : amount representing interest                                                                                | -52421 ( 52421 )
present value of net minimum lease payments                                                                                | 194914
less : current portion                                                                                | -28378 ( 28378 )
long-term portion of capital lease obligations                                                                                | $ 166536

the summary of future maturities of our outstanding long-term debt as of december 31 , 2014 is included in the commitments table in note 16 .
12 .
income taxes and accounting for uncertainty in income taxes income taxes our income tax policy is to record the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported on our consolidated balance sheets , as well as probable operating loss , tax credit and other carryforwards .
deferred tax assets are offset by valuation allowances when we believe it is more likely than not that net deferred tax assets will not be realized .
we periodically evaluate our need for a valuation allowance .
determining necessary valuation allowances requires us to make assessments about historical financial information as well as the timing of future events , including the probability of expected future taxable income and available tax planning opportunities .
we file consolidated tax returns in the u.s .
the income taxes of domestic and foreign subsidiaries not included in the u.s .
tax group are presented in our consolidated financial statements based on a separate return basis for each tax paying entity.


packaging corporation of america notes to consolidated financial statements ( continued ) december 31 , 2006 4 .
stock-based compensation ( continued ) same period was $ 1988000 lower , than if it had continued to account for share-based compensation under apb no .
25 .
basic and diluted earnings per share for the year ended december 31 , 2006 were both $ 0.02 lower than if the company had continued to account for share-based compensation under apb no .
25 .
prior to the adoption of sfas no .
123 ( r ) , the company presented all tax benefits of deductions resulting from share-based payment arrangements as operating cash flows in the statements of cash flows .
sfas no .
123 ( r ) requires the cash flows resulting from the tax benefits from tax deductions in excess of the compensation cost recognized for those share awards ( excess tax benefits ) to be classified as financing cash flows .
the excess tax benefit of $ 2885000 classified as a financing cash inflow for the year ended december 31 , 2006 would have been classified as an operating cash inflow if the company had not adopted sfas no .
123 ( r ) .
as a result of adopting sfas no 123 ( r ) , unearned compensation previously recorded in stockholders 2019 equity was reclassified against additional paid in capital on january 1 , 2006 .
all stock-based compensation expense not recognized as of december 31 , 2005 and compensation expense related to post 2005 grants of stock options and amortization of restricted stock will be recorded directly to additional paid in capital .
compensation expense for stock options and restricted stock recognized in the statements of income for the year ended december 31 , 2006 , 2005 and 2004 was as follows : year ended december 31 , ( in thousands ) 2006 2005 2004 .

( in thousands )                     | year ended december 31 , 2006 | year ended december 31 , 2005 | year ended december 31 , 2004
------------------------------------ | ----------------------------- | ----------------------------- | -----------------------------
stock options                        | $ -3273 ( 3273 )              | $ 2014                        | $ 2014
restricted stock                     | -2789 ( 2789 )                | -1677 ( 1677 )                | -663 ( 663 )
impact on income before income taxes | -6062 ( 6062 )                | -1677 ( 1677 )                | -663 ( 663 )
income tax benefit                   | 2382                          | 661                           | 260
impact on net income                 | $ -3680 ( 3680 )              | $ -1016 ( 1016 )              | $ -403 ( 403 )


in reporting environmental results , the company classifies its gross exposure into direct , assumed reinsurance , and london market .
the following table displays gross environmental reserves and other statistics by category as of december 31 , 2011 .
summary of environmental reserves as of december 31 , 2011 .

                    | total reserves
------------------- | --------------
gross [1] [2]       |
direct              | $ 271
assumed reinsurance | 39
london market       | 57
total               | 367
ceded               | -47 ( 47 )
net                 | $ 320

[1] the one year gross paid amount for total environmental claims is $ 58 , resulting in a one year gross survival ratio of 6.4 .
[2] the three year average gross paid amount for total environmental claims is $ 58 , resulting in a three year gross survival ratio of 6.4 .
during the second quarters of 2011 , 2010 and 2009 , the company completed its annual ground-up asbestos reserve evaluations .
as part of these evaluations , the company reviewed all of its open direct domestic insurance accounts exposed to asbestos liability , as well as assumed reinsurance accounts and its london market exposures for both direct insurance and assumed reinsurance .
based on this evaluation , the company strengthened its net asbestos reserves by $ 290 in second quarter 2011 .
during 2011 , for certain direct policyholders , the company experienced increases in claim frequency , severity and expense which were driven by mesothelioma claims , particularly against certain smaller , more peripheral insureds .
the company also experienced unfavorable development on its assumed reinsurance accounts driven largely by the same factors experienced by the direct policyholders .
during 2010 and 2009 , for certain direct policyholders , the company experienced increases in claim severity and expense .
increases in severity and expense were driven by litigation in certain jurisdictions and , to a lesser extent , development on primarily peripheral accounts .
the company also experienced unfavorable development on its assumed reinsurance accounts driven largely by the same factors experienced by the direct policyholders .
the net effect of these changes in 2010 and 2009 resulted in $ 169 and $ 138 increases in net asbestos reserves , respectively .
the company currently expects to continue to perform an evaluation of its asbestos liabilities annually .
the company divides its gross asbestos exposures into direct , assumed reinsurance and london market .
the company further divides its direct asbestos exposures into the following categories : major asbestos defendants ( the 201ctop 70 201d accounts in tillinghast 2019s published tiers 1 and 2 and wellington accounts ) , which are subdivided further as : structured settlements , wellington , other major asbestos defendants , accounts with future expected exposures greater than $ 2.5 , accounts with future expected exposures less than $ 2.5 , and unallocated .
2022 structured settlements are those accounts where the company has reached an agreement with the insured as to the amount and timing of the claim payments to be made to the insured .
2022 the wellington subcategory includes insureds that entered into the 201cwellington agreement 201d dated june 19 , 1985 .
the wellington agreement provided terms and conditions for how the signatory asbestos producers would access their coverage from the signatory insurers .
2022 the other major asbestos defendants subcategory represents insureds included in tiers 1 and 2 , as defined by tillinghast that are not wellington signatories and have not entered into structured settlements with the hartford .
the tier 1 and 2 classifications are meant to capture the insureds for which there is expected to be significant exposure to asbestos claims .
2022 accounts with future expected exposures greater or less than $ 2.5 include accounts that are not major asbestos defendants .
2022 the unallocated category includes an estimate of the reserves necessary for asbestos claims related to direct insureds that have not previously tendered asbestos claims to the company and exposures related to liability claims that may not be subject to an aggregate limit under the applicable policies .
an account may move between categories from one evaluation to the next .
for example , an account with future expected exposure of greater than $ 2.5 in one evaluation may be reevaluated due to changing conditions and recategorized as less than $ 2.5 in a subsequent evaluation or vice versa.


net cash flows provided by operating activities of $ 704.4 million for 2016 increased $ 154.7 million from 2015 due primarily to ( 1 ) improved operating performance and ( 2 ) lower supplier payments in 2016 compared to 2015 , partially offset by ( 1 ) the impact of excess tax benefits from stock plans , primarily due to our increased stock price , and ( 2 ) an increase in accounts receivable due to increased sales , primarily in the united states .
net cash flows provided by operating activities of $ 549.7 million for 2015 decreased $ 472.6 million from 2014 due primarily to ( 1 ) the $ 750.0 million upfront payment received from medtronic under a litigation settlement agreement , and ( 2 ) a higher bonus payout in 2015 associated with 2014 performance .
these decreases were partially offset by ( 1 ) income tax payments of $ 224.5 million made in 2014 related to the medtronic settlement , ( 2 ) improved operating performance in 2015 , and ( 3 ) the $ 50.0 million charitable contribution made in 2014 to the edwards lifesciences foundation .
net cash used in investing activities of $ 211.7 million in 2016 consisted primarily of capital expenditures of $ 176.1 million and $ 41.3 million for the acquisition of intangible assets .
net cash used in investing activities of $ 316.1 million in 2015 consisted primarily of a $ 320.1 million net payment associated with the acquisition of cardiaq , and capital expenditures of $ 102.7 million , partially offset by net proceeds from investments of $ 119.6 million .
net cash used in investing activities of $ 633.0 million in 2014 consisted primarily of net purchases of investments of $ 527.4 million and capital expenditures of $ 82.9 million .
net cash used in financing activities of $ 268.5 million in 2016 consisted primarily of purchases of treasury stock of $ 662.3 million , partially offset by ( 1 ) net proceeds from the issuance of debt of $ 222.1 million , ( 2 ) proceeds from stock plans of $ 103.3 million , and ( 3 ) the excess tax benefit from stock plans of $ 64.3 million .
net cash used in financing activities of $ 158.6 million in 2015 consisted primarily of purchases of treasury stock of $ 280.1 million , partially offset by ( 1 ) proceeds from stock plans of $ 87.2 million , and ( 2 ) the excess tax benefit from stock plans of $ 41.3 million .
net cash used in financing activities of $ 153.0 million in 2014 consisted primarily of purchases of treasury stock of $ 300.9 million , partially offset by ( 1 ) proceeds from stock plans of $ 113.3 million , and ( 2 ) the excess tax benefit from stock plans of $ 49.4 million ( including the realization of previously unrealized excess tax benefits ) .
a summary of all of our contractual obligations and commercial commitments as of december 31 , 2016 were as follows ( in millions ) : .

contractual obligations                        | payments due by period total | payments due by period less than1 year | payments due by period 1-3years | payments due by period 4-5years | payments due by period after 5years
---------------------------------------------- | ---------------------------- | -------------------------------------- | ------------------------------- | ------------------------------- | -----------------------------------
debt                                           | $ 825.0                      | $ 2014                                 | $ 825.0                         | $ 2014                          | $ 2014
operating leases                               | 72.6                         | 22.3                                   | 24.9                            | 8.8                             | 16.6
interest on debt                               | 30.8                         | 16.4                                   | 14.4                            | 2014                            | 2014
pension obligations ( a )                      | 6.1                          | 6.1                                    | 2014                            | 2014                            | 2014
capital commitment obligations ( b )           | 0.6                          | 0.3                                    | 0.3                             | 2014                            | 2014
purchase and other commitments                 | 16.4                         | 13.7                                   | 2.7                             | 2014                            | 2014
total contractual cash obligations ( c ) ( d ) | $ 951.5                      | $ 58.8                                 | $ 867.3                         | $ 8.8                           | $ 16.6

( a ) the amount included in 2018 2018less than 1 year 2019 2019 reflects anticipated contributions to our various pension plans .
anticipated contributions beyond one year are not determinable .
the total accrued benefit liability for our pension plans recognized as of december 31 , 2016 was $ 50.1 million .
this amount is impacted


indemnification and repurchase claims are typically settled on an individual loan basis through make-whole payments or loan repurchases ; however , on occasion we may negotiate pooled settlements with investors .
in connection with pooled settlements , we typically do not repurchase loans and the consummation of such transactions generally results in us no longer having indemnification and repurchase exposure with the investor in the transaction .
for the first and second-lien mortgage balances of unresolved and settled claims contained in the tables below , a significant amount of these claims were associated with sold loans originated through correspondent lender and broker origination channels .
in certain instances when indemnification or repurchase claims are settled for these types of sold loans , we have recourse back to the correspondent lenders , brokers and other third-parties ( e.g. , contract underwriting companies , closing agents , appraisers , etc. ) .
depending on the underlying reason for the investor claim , we determine our ability to pursue recourse with these parties and file claims with them accordingly .
our historical recourse recovery rate has been insignificant as our efforts have been impacted by the inability of such parties to reimburse us for their recourse obligations ( e.g. , their capital availability or whether they remain in business ) or factors that limit our ability to pursue recourse from these parties ( e.g. , contractual loss caps , statutes of limitations ) .
origination and sale of residential mortgages is an ongoing business activity , and , accordingly , management continually assesses the need to recognize indemnification and repurchase liabilities pursuant to the associated investor sale agreements .
we establish indemnification and repurchase liabilities for estimated losses on sold first and second-lien mortgages for which indemnification is expected to be provided or for loans that are expected to be repurchased .
for the first and second- lien mortgage sold portfolio , we have established an indemnification and repurchase liability pursuant to investor sale agreements based on claims made , demand patterns observed to date and/or expected in the future , and our estimate of future claims on a loan by loan basis .
to estimate the mortgage repurchase liability arising from breaches of representations and warranties , we consider the following factors : ( i ) borrower performance in our historically sold portfolio ( both actual and estimated future defaults ) , ( ii ) the level of outstanding unresolved repurchase claims , ( iii ) estimated probable future repurchase claims , considering information about file requests , delinquent and liquidated loans , resolved and unresolved mortgage insurance rescission notices and our historical experience with claim rescissions , ( iv ) the potential ability to cure the defects identified in the repurchase claims ( 201crescission rate 201d ) , and ( v ) the estimated severity of loss upon repurchase of the loan or collateral , make-whole settlement , or indemnification .
see note 24 commitments and guarantees in the notes to consolidated financial statements in item 8 of this report for additional information .
the following tables present the unpaid principal balance of repurchase claims by vintage and total unresolved repurchase claims for the past five quarters .
table 28 : analysis of quarterly residential mortgage repurchase claims by vintage dollars in millions december 31 september 30 june 30 march 31 december 31 .

dollars in millions          | december 31 2012 | september 30 2012 | june 30 2012 | march 31 2012 | december 312011
---------------------------- | ---------------- | ----------------- | ------------ | ------------- | ---------------
2004 & prior                 | $ 11             | $ 15              | $ 31         | $ 10          | $ 11
2005                         | 8                | 10                | 19           | 12            | 13
2006                         | 23               | 30                | 56           | 41            | 28
2007                         | 45               | 137               | 182          | 100           | 90
2008                         | 7                | 23                | 49           | 17            | 18
2008 & prior                 | 94               | 215               | 337          | 180           | 160
2009 2013 2012               | 38               | 52                | 42           | 33            | 29
total                        | $ 132            | $ 267             | $ 379        | $ 213         | $ 189
fnma fhlmc and gnma % (  % ) | 94% ( 94 % )     | 87% ( 87 % )      | 86% ( 86 % ) | 88% ( 88 % )  | 91% ( 91 % )

the pnc financial services group , inc .
2013 form 10-k 79


mastercard incorporated notes to consolidated financial statements 2014continued the municipal bond portfolio is comprised of tax exempt bonds and is diversified across states and sectors .
the portfolio has an average credit quality of double-a .
the short-term bond funds invest in fixed income securities , including corporate bonds , mortgage-backed securities and asset-backed securities .
the company holds investments in ars .
interest on these securities is exempt from u.s .
federal income tax and the interest rate on the securities typically resets every 35 days .
the securities are fully collateralized by student loans with guarantees , ranging from approximately 95% ( 95 % ) to 98% ( 98 % ) of principal and interest , by the u.s .
government via the department of education .
beginning on february 11 , 2008 , the auction mechanism that normally provided liquidity to the ars investments began to fail .
since mid-february 2008 , all investment positions in the company 2019s ars investment portfolio have experienced failed auctions .
the securities for which auctions have failed have continued to pay interest in accordance with the contractual terms of such instruments and will continue to accrue interest and be auctioned at each respective reset date until the auction succeeds , the issuer redeems the securities or they mature .
during 2008 , ars were reclassified as level 3 from level 2 .
as of december 31 , 2010 , the ars market remained illiquid , but issuer call and redemption activity in the ars student loan sector has occurred periodically since the auctions began to fail .
during 2010 and 2009 , the company did not sell any ars in the auction market , but there were calls at par .
the table below includes a roll-forward of the company 2019s ars investments from january 1 , 2009 to december 31 , 2010 .
significant unobservable inputs ( level 3 ) ( in millions ) .

                                                  | significant unobservable inputs ( level 3 ) ( in millions )
------------------------------------------------- | -----------------------------------------------------------
fair value december 31 2008                       | $ 192
calls at par                                      | -28 ( 28 )
recovery of unrealized losses due to issuer calls | 5
increase in fair value                            | 11
fair value december 31 2009                       | 180
calls at par                                      | -94 ( 94 )
recovery of unrealized losses due to issuer calls | 13
increase in fair value                            | 7
fair value december 31 2010                       | $ 106

the company evaluated the estimated impairment of its ars portfolio to determine if it was other-than- temporary .
the company considered several factors including , but not limited to , the following : ( 1 ) the reasons for the decline in value ( changes in interest rates , credit event , or market fluctuations ) ; ( 2 ) assessments as to whether it is more likely than not that it will hold and not be required to sell the investments for a sufficient period of time to allow for recovery of the cost basis ; ( 3 ) whether the decline is substantial ; and ( 4 ) the historical and anticipated duration of the events causing the decline in value .
the evaluation for other-than-temporary impairments is a quantitative and qualitative process , which is subject to various risks and uncertainties .
the risks and uncertainties include changes in credit quality , market liquidity , timing and amounts of issuer calls and interest rates .
as of december 31 , 2010 , the company believed that the unrealized losses on the ars were not related to credit quality but rather due to the lack of liquidity in the market .
the company believes that it is more


notes to consolidated financial statements minority partner approves the annual budget , receives a detailed monthly reporting package from us , meets with us on a quarterly basis to review the results of the joint venture , reviews and approves the joint venture 2019s tax return before filing , and approves all leases that cover more than a nominal amount of space relative to the total rentable space at each property we do not consolidate the joint venture as we consider these to be substantive participation rights .
our joint venture agreements also contain certain pro- tective rights such as the requirement of partner approval to sell , finance or refinance the property and the payment of capital expenditures and operating expenditures outside of the approved budget or operating plan .
the table below provides general information on each joint venture as of december 31 , 2009 ( in thousands ) : property partner ownership interest economic interest square feet acquired acquisition price ( 1 ) 1221 avenue of the americas ( 2 ) rgii 45.00% ( 45.00 % ) 45.00% ( 45.00 % ) 2550 12/03 $ 1000000 1515 broadway ( 3 ) sitq 55.00% ( 55.00 % ) 68.45% ( 68.45 % ) 1750 05/02 $ 483500 .

property                            | partner                    | ownership interest | economic interest  | square feet | acquired | acquisition price ( 1 )
----------------------------------- | -------------------------- | ------------------ | ------------------ | ----------- | -------- | -----------------------
1221 avenue of the americas ( 2 )   | rgii                       | 45.00% ( 45.00 % ) | 45.00% ( 45.00 % ) | 2550        | 12/03    | $ 1000000
1515 broadway ( 3 )                 | sitq                       | 55.00% ( 55.00 % ) | 68.45% ( 68.45 % ) | 1750        | 05/02    | $ 483500
100 park avenue                     | prudential                 | 49.90% ( 49.90 % ) | 49.90% ( 49.90 % ) | 834         | 02/00    | $ 95800
379 west broadway                   | sutton                     | 45.00% ( 45.00 % ) | 45.00% ( 45.00 % ) | 62          | 12/05    | $ 19750
21 west 34thstreet ( 4 )            | sutton                     | 50.00% ( 50.00 % ) | 50.00% ( 50.00 % ) | 30          | 07/05    | $ 22400
800 third avenue ( 5 )              | private investors          | 42.95% ( 42.95 % ) | 42.95% ( 42.95 % ) | 526         | 12/06    | $ 285000
521 fifth avenue                    | cif                        | 50.10% ( 50.10 % ) | 50.10% ( 50.10 % ) | 460         | 12/06    | $ 240000
one court square                    | jp morgan                  | 30.00% ( 30.00 % ) | 30.00% ( 30.00 % ) | 1402        | 01/07    | $ 533500
1604-1610 broadway ( 6 )            | onyx/sutton                | 45.00% ( 45.00 % ) | 63.00% ( 63.00 % ) | 30          | 11/05    | $ 4400
1745 broadway ( 7 )                 | witkoff/sitq/lehman bros . | 32.26% ( 32.26 % ) | 32.26% ( 32.26 % ) | 674         | 04/07    | $ 520000
1 and 2 jericho plaza               | onyx/credit suisse         | 20.26% ( 20.26 % ) | 20.26% ( 20.26 % ) | 640         | 04/07    | $ 210000
2 herald square ( 8 )               | gramercy                   | 55.00% ( 55.00 % ) | 55.00% ( 55.00 % ) | 354         | 04/07    | $ 225000
885 third avenue ( 9 )              | gramercy                   | 55.00% ( 55.00 % ) | 55.00% ( 55.00 % ) | 607         | 07/07    | $ 317000
16 court street                     | cif                        | 35.00% ( 35.00 % ) | 35.00% ( 35.00 % ) | 318         | 07/07    | $ 107500
the meadows ( 10 )                  | onyx                       | 50.00% ( 50.00 % ) | 50.00% ( 50.00 % ) | 582         | 09/07    | $ 111500
388 and 390 greenwich street ( 11 ) | sitq                       | 50.60% ( 50.60 % ) | 50.60% ( 50.60 % ) | 2600        | 12/07    | $ 1575000
27-29 west 34thstreet ( 12 )        | sutton                     | 50.00% ( 50.00 % ) | 50.00% ( 50.00 % ) | 41          | 01/06    | $ 30000
1551-1555 broadway ( 13 )           | sutton                     | 10.00% ( 10.00 % ) | 10.00% ( 10.00 % ) | 26          | 07/05    | $ 80100
717 fifth avenue ( 14 )             | sutton/nakash              | 32.75% ( 32.75 % ) | 32.75% ( 32.75 % ) | 120         | 09/06    | $ 251900

the meadows ( 10 ) onyx 50.00% ( 50.00 % ) 50.00% ( 50.00 % ) 582 09/07 $ 111500 388 and 390 greenwich street ( 11 ) sitq 50.60% ( 50.60 % ) 50.60% ( 50.60 % ) 2600 12/07 $ 1575000 27 201329 west 34th street ( 12 ) sutton 50.00% ( 50.00 % ) 50.00% ( 50.00 % ) 41 01/06 $ 30000 1551 20131555 broadway ( 13 ) sutton 10.00% ( 10.00 % ) 10.00% ( 10.00 % ) 26 07/05 $ 80100 717 fifth avenue ( 14 ) sutton/nakash 32.75% ( 32.75 % ) 32.75% ( 32.75 % ) 120 09/06 $ 251900 ( 1 ) acquisition price represents the actual or implied purchase price for the joint venture .
( 2 ) we acquired our interest from the mcgraw-hill companies , or mhc .
mhc is a tenant at the property and accounted for approximately 14.7% ( 14.7 % ) of the property 2019s annualized rent at december 31 , 2009 .
we do not manage this joint venture .
( 3 ) under a tax protection agreement established to protect the limited partners of the partnership that transferred 1515 broadway to the joint venture , the joint venture has agreed not to adversely affect the limited partners 2019 tax positions before december 2011 .
one tenant , whose leases primarily ends in 2015 , represents approximately 77.4% ( 77.4 % ) of this joint venture 2019s annualized rent at december 31 , 2009 .
( 4 ) effective november 2006 , we deconsolidated this investment .
as a result of the recapitalization of the property , we were no longer the primary beneficiary .
both partners had the same amount of equity at risk and neither partner controlled the joint venture .
( 5 ) we invested approximately $ 109.5 million in this asset through the origination of a loan secured by up to 47% ( 47 % ) of the interests in the property 2019s ownership , with an option to convert the loan to an equity interest .
certain existing members have the right to re-acquire approximately 4% ( 4 % ) of the property 2019s equity .
these interests were re-acquired in december 2008 and reduced our interest to 42.95% ( 42.95 % ) ( 6 ) effective april 2007 , we deconsolidated this investment .
as a result of the recapitalization of the property , we were no longer the primary beneficiary .
both partners had the same amount of equity at risk and neither partner controlled the joint venture .
( 7 ) we have the ability to syndicate our interest down to 14.79% ( 14.79 % ) .
( 8 ) we , along with gramercy , together as tenants-in-common , acquired a fee interest in 2 herald square .
the fee interest is subject to a long-term operating lease .
( 9 ) we , along with gramercy , together as tenants-in-common , acquired a fee and leasehold interest in 885 third avenue .
the fee and leasehold interests are subject to a long-term operating lease .
( 10 ) we , along with onyx acquired the remaining 50% ( 50 % ) interest on a pro-rata basis in september 2009 .
( 11 ) the property is subject to a 13-year triple-net lease arrangement with a single tenant .
( 12 ) effective may 2008 , we deconsolidated this investment .
as a result of the recapitalization of the property , we were no longer the primary beneficiary .
both partners had the same amount of equity at risk and neither partner controlled the joint venture .
( 13 ) effective august 2008 , we deconsolidated this investment .
as a result of the sale of 80% ( 80 % ) of our interest , the joint venture was no longer a vie .
( 14 ) effective september 2008 , we deconsolidated this investment .
as a result of the recapitalization of the property , we were no longer the primary beneficiary.


notes to consolidated financial statements the firm permanently reinvests eligible earnings of certain foreign subsidiaries and , accordingly , does not accrue any u.s .
income taxes that would arise if such earnings were repatriated .
as of december 2012 and december 2011 , this policy resulted in an unrecognized net deferred tax liability of $ 3.75 billion and $ 3.32 billion , respectively , attributable to reinvested earnings of $ 21.69 billion and $ 20.63 billion , respectively .
unrecognized tax benefits the firm recognizes tax positions in the financial statements only when it is more likely than not that the position will be sustained on examination by the relevant taxing authority based on the technical merits of the position .
a position that meets this standard is measured at the largest amount of benefit that will more likely than not be realized on settlement .
a liability is established for differences between positions taken in a tax return and amounts recognized in the financial statements .
as of december 2012 and december 2011 , the accrued liability for interest expense related to income tax matters and income tax penalties was $ 374 million and $ 233 million , respectively .
the firm recognized $ 95 million , $ 21 million and $ 28 million of interest and income tax penalties for the years ended december 2012 , december 2011 and december 2010 , respectively .
it is reasonably possible that unrecognized tax benefits could change significantly during the twelve months subsequent to december 2012 due to potential audit settlements , however , at this time it is not possible to estimate any potential change .
the table below presents the changes in the liability for unrecognized tax benefits .
this liability is included in 201cother liabilities and accrued expenses . 201d see note 17 for further information. .

in millions                                                  | as of december 2012 | as of december 2011 | as of december 2010
------------------------------------------------------------ | ------------------- | ------------------- | -------------------
balance beginning of year                                    | $ 1887              | $ 2081              | $ 1925
increases based on tax positions related to the current year | 190                 | 171                 | 171
increases based on tax positions related to prior years      | 336                 | 278                 | 162
decreases related to tax positions of prior years            | -109 ( 109 )        | -41 ( 41 )          | -104 ( 104 )
decreases related to settlements                             | -35 ( 35 )          | -638 ( 638 )        | -128 ( 128 )
acquisitions/ ( dispositions )                               | -47 ( 47 )          | 47                  | 56
exchange rate fluctuations                                   | 15                  | -11 ( 11 )          | -1 ( 1 )
balance end of year                                          | $ 2237              | $ 1887              | $ 2081
related deferred income tax asset1                           | 685                 | 569                 | 972
net unrecognized tax benefit2                                | $ 1552              | $ 1318              | $ 1109

related deferred income tax asset 1 685 569 972 net unrecognized tax benefit 2 $ 1552 $ 1318 $ 1109 1 .
included in 201cother assets . 201d see note 12 .
2 .
if recognized , the net tax benefit would reduce the firm 2019s effective income tax rate .
194 goldman sachs 2012 annual report


62 general mills amounts recorded in accumulated other comprehensive loss unrealized losses from interest rate cash flow hedges recorded in aoci as of may 27 , 2012 , totaled $ 73.6 million after tax .
these deferred losses are primarily related to interest rate swaps that we entered into in contemplation of future borrowings and other financ- ing requirements and that are being reclassified into net interest over the lives of the hedged forecasted transac- tions .
unrealized losses from foreign currency cash flow hedges recorded in aoci as of may 27 , 2012 , were $ 1.7 million after-tax .
the net amount of pre-tax gains and losses in aoci as of may 27 , 2012 , that we expect to be reclassified into net earnings within the next 12 months is $ 14.0 million of expense .
credit-risk-related contingent features certain of our derivative instruments contain provisions that require us to maintain an investment grade credit rating on our debt from each of the major credit rat- ing agencies .
if our debt were to fall below investment grade , the counterparties to the derivative instruments could request full collateralization on derivative instru- ments in net liability positions .
the aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a liability position on may 27 , 2012 , was $ 19.9 million .
we have posted col- lateral of $ 4.3 million in the normal course of business associated with these contracts .
if the credit-risk-related contingent features underlying these agreements had been triggered on may 27 , 2012 , we would have been required to post an additional $ 15.6 million of collateral to counterparties .
concentrations of credit and counterparty credit risk during fiscal 2012 , wal-mart stores , inc .
and its affili- ates ( wal-mart ) accounted for 22 percent of our con- solidated net sales and 30 percent of our net sales in the u.s .
retail segment .
no other customer accounted for 10 percent or more of our consolidated net sales .
wal- mart also represented 6 percent of our net sales in the international segment and 7 percent of our net sales in the bakeries and foodservice segment .
as of may 27 , 2012 , wal-mart accounted for 26 percent of our u.s .
retail receivables , 5 percent of our international receiv- ables , and 9 percent of our bakeries and foodservice receivables .
the five largest customers in our u.s .
retail segment accounted for 54 percent of its fiscal 2012 net sales , the five largest customers in our international segment accounted for 26 percent of its fiscal 2012 net sales , and the five largest customers in our bakeries and foodservice segment accounted for 46 percent of its fis- cal 2012 net sales .
we enter into interest rate , foreign exchange , and cer- tain commodity and equity derivatives , primarily with a diversified group of highly rated counterparties .
we continually monitor our positions and the credit rat- ings of the counterparties involved and , by policy , limit the amount of credit exposure to any one party .
these transactions may expose us to potential losses due to the risk of nonperformance by these counterparties ; however , we have not incurred a material loss .
we also enter into commodity futures transactions through vari- ous regulated exchanges .
the amount of loss due to the credit risk of the coun- terparties , should the counterparties fail to perform according to the terms of the contracts , is $ 19.5 million against which we do not hold collateral .
under the terms of master swap agreements , some of our transactions require collateral or other security to support financial instruments subject to threshold levels of exposure and counterparty credit risk .
collateral assets are either cash or u.s .
treasury instruments and are held in a trust account that we may access if the counterparty defaults .
note 8 .
debt notes payable the components of notes payable and their respective weighted-average interest rates at the end of the periods were as follows: .

in millions            | may 27 2012 notes payable | may 27 2012 weighted- average interest rate | may 27 2012 notespayable | weighted-averageinterest rate
---------------------- | ------------------------- | ------------------------------------------- | ------------------------ | -----------------------------
u.s . commercial paper | $ 412.0                   | 0.2% ( 0.2 % )                              | $ 192.5                  | 0.2% ( 0.2 % )
financial institutions | 114.5                     | 10.0                                        | 118.8                    | 11.5
total                  | $ 526.5                   | 2.4% ( 2.4 % )                              | $ 311.3                  | 4.5% ( 4.5 % )

to ensure availability of funds , we maintain bank credit lines sufficient to cover our outstanding short- term borrowings .
commercial paper is a continuing source of short-term financing .
we have commercial paper programs available to us in the united states and europe .
in april 2012 , we entered into fee-paid commit- ted credit lines , consisting of a $ 1.0 billion facility sched- uled to expire in april 2015 and a $ 1.7 billion facility


18 .
allowance for credit losses .

in millions of dollars                                                                 | 2009               | 2008 ( 1 )         | 2007 ( 1 )
-------------------------------------------------------------------------------------- | ------------------ | ------------------ | ----------------
allowance for loan losses at beginning of year                                         | $ 29616            | $ 16117            | $ 8940
gross credit losses                                                                    | -32784 ( 32784 )   | -20760 ( 20760 )   | -11864 ( 11864 )
gross recoveries                                                                       | 2043               | 1749               | 1938
net credit ( losses ) recoveries ( ncls )                                              | $ -30741 ( 30741 ) | $ -19011 ( 19011 ) | $ -9926 ( 9926 )
ncls                                                                                | $ 30741            | $ 19011            | $ 9926
net reserve builds ( releases )                                                        | 5741               | 11297              | 6550
net specific reserve builds ( releases )                                               | 2278               | 3366               | 356
total provision for credit losses                                                      | $ 38760            | $ 33674            | $ 16832
other net ( 2 )                                                                        | -1602 ( 1602 )     | -1164 ( 1164 )     | 271
allowance for loan losses at end of year                                               | $ 36033            | $ 29616            | $ 16117
allowance for credit losses on unfunded lending commitments at beginning of year ( 3 ) | $ 887              | $ 1250             | $ 1100
provision for unfunded lending commitments                                             | 244                | -363 ( 363 )       | 150
allowance for credit losses on unfunded lending commitments at end of year ( 3 )       | $ 1157             | $ 887              | $ 1250
total allowance for loans leases and unfunded lending commitments                      | $ 37190            | $ 30503            | $ 17367

( 1 ) reclassified to conform to the current period 2019s presentation .
( 2 ) 2009 primarily includes reductions to the loan loss reserve of approximately $ 543 million related to securitizations , approximately $ 402 million related to the sale or transfers to held-for-sale of u.s .
real estate lending loans , and $ 562 million related to the transfer of the u.k .
cards portfolio to held-for-sale .
2008 primarily includes reductions to the loan loss reserve of approximately $ 800 million related to fx translation , $ 102 million related to securitizations , $ 244 million for the sale of the german retail banking operation , $ 156 million for the sale of citicapital , partially offset by additions of $ 106 million related to the cuscatl e1n and bank of overseas chinese acquisitions .
2007 primarily includes reductions to the loan loss reserve of $ 475 million related to securitizations and transfers to loans held-for-sale , and reductions of $ 83 million related to the transfer of the u.k .
citifinancial portfolio to held-for-sale , offset by additions of $ 610 million related to the acquisitions of egg , nikko cordial , grupo cuscatl e1n and grupo financiero uno .
( 3 ) represents additional credit loss reserves for unfunded corporate lending commitments and letters of credit recorded in other liabilities on the consolidated balance sheet.


2022 asset utilization 2013 in response to economic conditions and lower revenue in 2009 , we implemented productivity initiatives to improve efficiency and reduce costs , in addition to adjusting our resources to reflect lower demand .
although varying throughout the year , our resource reductions included removing from service approximately 26% ( 26 % ) of our road locomotives and 18% ( 18 % ) of our freight car inventory by year end .
we also reduced shift levels at most rail facilities and closed or significantly reduced operations in 30 of our 114 principal rail yards .
these demand-driven resource adjustments and our productivity initiatives combined to reduce our workforce by 10% ( 10 % ) .
2022 fuel prices 2013 as the economy worsened during the third and fourth quarters of 2008 , fuel prices dropped dramatically , reaching $ 33.87 per barrel in december 2008 , a near five-year low .
throughout 2009 , crude oil prices generally increased , ending the year around $ 80 per barrel .
overall , our average fuel price decreased by 44% ( 44 % ) in 2009 , reducing operating expenses by $ 1.3 billion compared to 2008 .
we also reduced our consumption rate by 4% ( 4 % ) during the year , saving approximately 40 million gallons of fuel .
the use of newer , more fuel efficient locomotives ; increased use of distributed locomotive power ; fuel conservation programs ; and improved network operations and asset utilization all contributed to this improvement .
2022 free cash flow 2013 cash generated by operating activities totaled $ 3.2 billion , yielding free cash flow of $ 515 million in 2009 .
free cash flow is defined as cash provided by operating activities , 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 united states ( 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 of dollars 2009 2008 2007 .

millions of dollars                   | 2009           | 2008           | 2007
------------------------------------- | -------------- | -------------- | --------------
cash provided by operating activities | $ 3234         | $ 4070         | $ 3277
cash used in investing activities     | -2175 ( 2175 ) | -2764 ( 2764 ) | -2426 ( 2426 )
dividends paid                        | -544 ( 544 )   | -481 ( 481 )   | -364 ( 364 )
free cash flow                        | $ 515          | $ 825          | $ 487

2010 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 by 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 , upgrade , and close crossings ; install video cameras on locomotives ; and educate the public about crossing safety through our own programs , various industry programs , and other activities .
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 from year-to-year , 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


american tower corporation and subsidiaries notes to consolidated financial statements when they are determined uncollectible .
such determination includes analysis and consideration of the particular conditions of the account .
changes in the allowances were as follows for the years ended december 31 , ( in thousands ) : .

                                       | 2012             | 2011             | 2010
-------------------------------------- | ---------------- | ---------------- | ----------------
balance as of january 1                | $ 24412          | $ 22505          | $ 28520
current year increases                 | 8028             | 17008            | 16219
write-offs net of recoveries and other | -12034 ( 12034 ) | -15101 ( 15101 ) | -22234 ( 22234 )
balance as of december 31              | $ 20406          | $ 24412          | $ 22505

functional currency 2014as a result of changes to the organizational structure of the company 2019s subsidiaries in latin america in 2010 , the company determined that effective january 1 , 2010 , the functional currency of its foreign subsidiary in brazil is the brazilian real .
from that point forward , all assets and liabilities held by the subsidiary in brazil are translated into u.s .
dollars at the exchange rate in effect at the end of the applicable reporting period .
revenues and expenses are translated at the average monthly exchange rates and the cumulative translation effect is included in equity .
the change in functional currency from u.s .
dollars to brazilian real gave rise to an increase in the net value of certain non-monetary assets and liabilities .
the aggregate impact on such assets and liabilities was $ 39.8 million with an offsetting increase in accumulated other comprehensive income during the year ended december 31 , 2010 .
as a result of the renegotiation of the company 2019s agreements with grupo iusacell , s.a .
de c.v .
( 201ciusacell 201d ) , which included , among other changes , converting iusacell 2019s contractual obligations to the company from u.s .
dollars to mexican pesos , the company determined that effective april 1 , 2010 , the functional currency of certain of its foreign subsidiaries in mexico is the mexican peso .
from that point forward , all assets and liabilities held by those subsidiaries in mexico are translated into u.s .
dollars at the exchange rate in effect at the end of the applicable reporting period .
revenues and expenses are translated at the average monthly exchange rates and the cumulative translation effect is included in equity .
the change in functional currency from u.s .
dollars to mexican pesos gave rise to a decrease in the net value of certain non-monetary assets and liabilities .
the aggregate impact on such assets and liabilities was $ 33.6 million with an offsetting decrease in accumulated other comprehensive income .
the functional currency of the company 2019s other foreign operating subsidiaries is also the respective local currency .
all assets and liabilities held by the subsidiaries are translated into u.s .
dollars at the exchange rate in effect at the end of the applicable fiscal reporting period .
revenues and expenses are translated at the average monthly exchange rates .
the cumulative translation effect is included in equity as a component of accumulated other comprehensive income .
foreign currency transaction gains and losses are recognized in the consolidated statements of operations and are the result of transactions of a subsidiary being denominated in a currency other than its functional currency .
cash and cash equivalents 2014cash and cash equivalents include cash on hand , demand deposits and short-term investments , including money market funds , with remaining maturities of three months or less when acquired , whose cost approximates fair value .
restricted cash 2014the company classifies as restricted cash all cash pledged as collateral to secure obligations and all cash whose use is otherwise limited by contractual provisions , including cash on deposit in reserve accounts relating to the commercial mortgage pass-through certificates , series 2007-1 issued in the company 2019s securitization transaction and the secured cellular site revenue notes , series 2010-1 class c , series 2010-2 class c and series 2010-2 class f , assumed by the company as a result of the acquisition of certain legal entities from unison holdings , llc and unison site management ii , l.l.c .
( collectively , 201cunison 201d ) .