future capital commitments future capital commitments consist of contracted commitments , including ship construction contracts , and future expected capital expenditures necessary for operations as well as our ship refurbishment projects .
as of december 31 , 2018 , anticipated capital expenditures were $ 1.6 billion , $ 1.2 billion and $ 0.7 billion for the years ending december 31 , 2019 , 2020 and 2021 , respectively .
we have export credit financing in place for the anticipated expenditures related to ship construction contracts of $ 0.6 billion , $ 0.5 billion and $ 0.2 billion for the years ending december 31 , 2019 , 2020 and 2021 , respectively .
these future expected capital expenditures will significantly increase our depreciation and amortization expense as we take delivery of the ships .
project leonardo will introduce an additional six ships , each approximately 140000 gross tons with approximately 3300 berths , with expected delivery dates from 2022 through 2027 , subject to certain conditions .
we have a breakaway plus class ship , norwegian encore , with approximately 168000 gross tons with 4000 berths , on order for delivery in the fall of 2019 .
for the regent brand , we have orders for two explorer class ships , seven seas splendor and an additional ship , to be delivered in 2020 and 2023 , respectively .
each of the explorer class ships will be approximately 55000 gross tons and 750 berths .
for the oceania cruises brand , we have orders for two allura class ships to be delivered in 2022 and 2025 .
each of the allura class ships will be approximately 67000 gross tons and 1200 berths .
the combined contract prices of the 11 ships on order for delivery was approximately 20ac7.9 billion , or $ 9.1 billion based on the euro/u.s .
dollar exchange rate as of december 31 , 2018 .
we have obtained export credit financing which is expected to fund approximately 80% ( 80 % ) of the contract price of each ship , subject to certain conditions .
we do not anticipate any contractual breaches or cancellations to occur .
however , if any such events were to occur , it could result in , among other things , the forfeiture of prior deposits or payments made by us and potential claims and impairment losses which may materially impact our business , financial condition and results of operations .
capitalized interest for the years ended december 31 , 2018 , 2017 and 2016 was $ 30.4 million , $ 29.0 million and $ 33.7 million , respectively , primarily associated with the construction of our newbuild ships .
off-balance sheet transactions contractual obligations as of december 31 , 2018 , our contractual obligations with initial or remaining terms in excess of one year , including interest payments on long-term debt obligations , were as follows ( in thousands ) : less than 1 year 1-3 years 3-5 years more than 5 years .

                                  | total      | less than1 year | 1-3 years | 3-5 years | more than5 years
--------------------------------- | ---------- | --------------- | --------- | --------- | ----------------
long-term debt ( 1 )              | $ 6609866  | $ 681218        | $ 3232177 | $ 929088  | $ 1767383
operating leases ( 2 )            | 128550     | 16651           | 31420     | 27853     | 52626
ship construction contracts ( 3 ) | 5141441    | 912858          | 662687    | 1976223   | 1589673
port facilities ( 4 )             | 1738036    | 62388           | 151682    | 157330    | 1366636
interest ( 5 )                    | 974444     | 222427          | 404380    | 165172    | 182465
other ( 6 )                       | 1381518    | 248107          | 433161    | 354454    | 345796
total ( 7 )                       | $ 15973855 | $ 2143649       | $ 4915507 | $ 3610120 | $ 5304579

( 1 ) long-term debt includes discount and premiums aggregating $ 0.4 million and capital leases .
long-term debt excludes deferred financing fees which are a direct deduction from the carrying value of the related debt liability in the consolidated balance sheets .
( 2 ) operating leases are primarily for offices , motor vehicles and office equipment .
( 3 ) ship construction contracts are for our newbuild ships based on the euro/u.s .
dollar exchange rate as of december 31 , 2018 .
export credit financing is in place from syndicates of banks .
the amount does not include the two project leonardo ships , one explorer class ship and two allura class ships which were still subject to financing and certain italian government approvals as of december 31 , 2018 .
we refer you to note 17 2014 201csubsequent events 201d in the notes to consolidated financial statements for details regarding the financing for certain ships .
( 4 ) port facilities are for our usage of certain port facilities .
( 5 ) interest includes fixed and variable rates with libor held constant as of december 31 , 2018 .
( 6 ) other includes future commitments for service , maintenance and other business enhancement capital expenditure contracts .
( 7 ) total excludes $ 0.5 million of unrecognized tax benefits as of december 31 , 2018 , because an estimate of the timing of future tax settlements cannot be reasonably determined.


notes to consolidated financial statements 2013 ( continued ) ( amounts in millions , except per share amounts ) guarantees we have guaranteed certain obligations of our subsidiaries relating principally to operating leases and credit facilities of certain subsidiaries .
the amount of parent company guarantees on lease obligations was $ 857.3 and $ 619.4 as of december 31 , 2016 and 2015 , respectively , and the amount of parent company guarantees primarily relating to credit facilities was $ 395.6 and $ 336.5 as of december 31 , 2016 and 2015 , respectively .
in the event of non-payment by the applicable subsidiary of the obligations covered by a guarantee , we would be obligated to pay the amounts covered by that guarantee .
as of december 31 , 2016 , there were no material assets pledged as security for such parent company guarantees .
contingent acquisition obligations the following table details the estimated future contingent acquisition obligations payable in cash as of december 31 .

                                                                      | 2017    | 2018    | 2019   | 2020   | 2021   | thereafter | total
--------------------------------------------------------------------- | ------- | ------- | ------ | ------ | ------ | ---------- | -------
deferred acquisition payments                                         | $ 76.9  | $ 31.6  | $ 25.1 | $ 8.9  | $ 26.9 | $ 11.4     | $ 180.8
redeemable noncontrolling interests and call options with affiliates1 | 34.7    | 76.5    | 32.9   | 3.9    | 3.1    | 4.2        | 155.3
total contingent acquisition payments                                 | $ 111.6 | $ 108.1 | $ 58.0 | $ 12.8 | $ 30.0 | $ 15.6     | $ 336.1

1 we have entered into certain acquisitions that contain both redeemable noncontrolling interests and call options with similar terms and conditions .
the estimated amounts listed would be paid in the event of exercise at the earliest exercise date .
we have certain redeemable noncontrolling interests that are exercisable at the discretion of the noncontrolling equity owners as of december 31 , 2016 .
these estimated payments of $ 25.9 are included within the total payments expected to be made in 2017 , and will continue to be carried forward into 2018 or beyond until exercised or expired .
redeemable noncontrolling interests are included in the table at current exercise price payable in cash , not at applicable redemption value in accordance with the authoritative guidance for classification and measurement of redeemable securities .
the majority of these payments are contingent upon achieving projected operating performance targets and satisfying other conditions specified in the related agreements and are subject to revision in accordance with the terms of the respective agreements .
see note 4 for further information relating to the payment structure of our acquisitions .
legal matters in the normal course of business , we are involved in various legal proceedings , and subject to investigations , inspections , audits , inquiries and similar actions by governmental authorities .
the types of allegations that arise in connection with such legal proceedings vary in nature , but can include claims related to contract , employment , tax and intellectual property matters .
we evaluate all cases each reporting period and record liabilities for losses from legal proceedings when we determine that it is probable that the outcome in a legal proceeding will be unfavorable and the amount , or potential range , of loss can be reasonably estimated .
in certain cases , we cannot reasonably estimate the potential loss because , for example , the litigation is in its early stages .
while any outcome related to litigation or such governmental proceedings in which we are involved cannot be predicted with certainty , management believes that the outcome of these matters , individually and in the aggregate , will not have a material adverse effect on our financial condition , results of operations or cash flows .
as previously disclosed , on april 10 , 2015 , a federal judge in brazil authorized the search of the records of an agency 2019s offices in s e3o paulo and brasilia , in connection with an ongoing investigation by brazilian authorities involving payments potentially connected to local government contracts .
the company had previously investigated the matter and taken a number of remedial and disciplinary actions .
the company is in the process of concluding a settlement related to these matters with government agencies .
the company confirmed that one of its standalone domestic agencies has been contacted by the department of justice antitrust division for documents regarding video production practices and is cooperating with the government.


our tax returns are currently under examination in various foreign jurisdictions .
the major foreign tax jurisdictions under examination include germany , italy and switzerland .
it is reasonably possible that such audits will be resolved in the next twelve months , but we do not anticipate that the resolution of these audits would result in any material impact on our results of operations or financial position .
12 .
capital stock and earnings per share we have 2 million shares of series a participating cumulative preferred stock authorized for issuance , none of which were outstanding as of december 31 , 2007 .
the numerator for both basic and diluted earnings per share is net earnings available to common stockholders .
the denominator for basic earnings per share is the weighted average number of common shares outstanding during the period .
the denominator for diluted earnings per share is weighted average shares outstanding adjusted for the effect of dilutive stock options and other equity awards .
the following is a reconciliation of weighted average shares for the basic and diluted share computations for the years ending december 31 ( in millions ) : .

                                                                       | 2007  | 2006  | 2005
---------------------------------------------------------------------- | ----- | ----- | -----
weighted average shares outstanding for basic net earnings per share   | 235.5 | 243.0 | 247.1
effect of dilutive stock options and other equity awards               | 2.0   | 2.4   | 2.7
weighted average shares outstanding for diluted net earnings per share | 237.5 | 245.4 | 249.8

weighted average shares outstanding for basic net earnings per share 235.5 243.0 247.1 effect of dilutive stock options and other equity awards 2.0 2.4 2.7 weighted average shares outstanding for diluted net earnings per share 237.5 245.4 249.8 for the year ended december 31 , 2007 , an average of 3.1 million options to purchase shares of common stock were not included in the computation of diluted earnings per share as the exercise prices of these options were greater than the average market price of the common stock .
for the years ended december 31 , 2006 and 2005 , an average of 7.6 million and 2.9 million options , respectively , were not included .
in december 2005 , our board of directors authorized a stock repurchase program of up to $ 1 billion through december 31 , 2007 .
in december 2006 , our board of directors authorized an additional stock repurchase program of up to $ 1 billion through december 31 , 2008 .
as of december 31 , 2007 we had acquired approximately 19345200 shares at a cost of $ 1378.9 million , before commissions .
13 .
segment data we design , develop , manufacture and market reconstructive orthopaedic implants , including joint and dental , spinal implants , trauma products and related orthopaedic surgical products which include surgical supplies and instruments designed to aid in orthopaedic surgical procedures and post-operation rehabilitation .
we also provide other healthcare related services .
revenue related to these services currently represents less than 1 percent of our total net sales .
we manage operations through three major geographic segments 2013 the americas , which is comprised principally of the united states and includes other north , central and south american markets ; europe , which is comprised principally of europe and includes the middle east and africa ; and asia pacific , which is comprised primarily of japan and includes other asian and pacific markets .
this structure is the basis for our reportable segment information discussed below .
management evaluates operating segment performance based upon segment operating profit exclusive of operating expenses pertaining to global operations and corporate expenses , share-based compensation expense , settlement , acquisition , integration and other expenses , inventory step-up , in-process research and development write- offs and intangible asset amortization expense .
global operations include research , development engineering , medical education , brand management , corporate legal , finance , and human resource functions , and u.s .
and puerto rico based manufacturing operations and logistics .
intercompany transactions have been eliminated from segment operating profit .
management reviews accounts receivable , inventory , property , plant and equipment , goodwill and intangible assets by reportable segment exclusive of u.s and puerto rico based manufacturing operations and logistics and corporate assets .
z i m m e r h o l d i n g s , i n c .
2 0 0 7 f o r m 1 0 - k a n n u a l r e p o r t notes to consolidated financial statements ( continued )


liquidity and capital resources the major components of changes in cash flows for 2016 , 2015 and 2014 are discussed in the following paragraphs .
the following table summarizes our cash flow from operating activities , investing activities and financing activities for the years ended december 31 , 2016 , 2015 and 2014 ( in millions of dollars ) : .

                                          | 2016             | 2015               | 2014
----------------------------------------- | ---------------- | ------------------ | ----------------
net cash provided by operating activities | $ 1847.8         | $ 1679.7           | $ 1529.8
net cash used in investing activities     | -961.2 ( 961.2 ) | -1482.8 ( 1482.8 ) | -959.8 ( 959.8 )
net cash used in financing activities     | -851.2 ( 851.2 ) | -239.7 ( 239.7 )   | -708.1 ( 708.1 )

cash flows provided by operating activities the most significant items affecting the comparison of our operating cash flows for 2016 and 2015 are summarized below : changes in assets and liabilities , net of effects from business acquisitions and divestitures , decreased our cash flow from operations by $ 205.2 million in 2016 , compared to a decrease of $ 316.7 million in 2015 , primarily as a result of the following : 2022 our accounts receivable , exclusive of the change in allowance for doubtful accounts and customer credits , increased $ 52.3 million during 2016 due to the timing of billings net of collections , compared to a $ 15.7 million increase in 2015 .
as of december 31 , 2016 and 2015 , our days sales outstanding were 38.1 and 38.3 days , or 26.1 and 25.8 days net of deferred revenue , respectively .
2022 our accounts payable decreased $ 9.8 million during 2016 compared to an increase of $ 35.6 million during 2015 , due to the timing of payments .
2022 cash paid for capping , closure and post-closure obligations was $ 11.0 million lower during 2016 compared to 2015 .
the decrease in cash paid for capping , closure , and post-closure obligations is primarily due to payments in 2015 related to a required capping event at one of our closed landfills .
2022 cash paid for remediation obligations was $ 13.2 million lower during 2016 compared to 2015 primarily due to the timing of obligations .
in addition , cash paid for income taxes was approximately $ 265 million and $ 321 million for 2016 and 2015 , respectively .
income taxes paid in 2016 and 2015 reflect the favorable tax depreciation provisions of the protecting americans from tax hikes act signed into law in december 2015 as well as the realization of certain tax credits .
cash paid for interest was $ 330.2 million and $ 327.6 million for 2016 and 2015 , respectively .
the most significant items affecting the comparison of our operating cash flows for 2015 and 2014 are summarized below : changes in assets and liabilities , net of effects of business acquisitions and divestitures , decreased our cash flow from operations by $ 316.7 million in 2015 , compared to a decrease of $ 295.6 million in 2014 , primarily as a result of the following : 2022 our accounts receivable , exclusive of the change in allowance for doubtful accounts and customer credits , increased $ 15.7 million during 2015 due to the timing of billings , net of collections , compared to a $ 54.3 million increase in 2014 .
as of december 31 , 2015 and 2014 , our days sales outstanding were 38 days , or 26 and 25 days net of deferred revenue , respectively .
2022 our accounts payable increased $ 35.6 million and $ 3.3 million during 2015 and 2014 , respectively , due to the timing of payments as of december 31 , 2015.


zimmer biomet holdings , inc .
and subsidiaries 2017 form 10-k annual report notes to consolidated financial statements ( continued ) substantially complete .
the following table summarizes the liabilities related to these integration plans ( in millions ) : employee termination benefits contract terminations total .

                                       | employee termination benefits | contract terminations | total
-------------------------------------- | ----------------------------- | --------------------- | --------------
balance december 31 2016               | $ 38.1                        | $ 35.1                | $ 73.2
additions                              | 12.1                          | 5.2                   | 17.3
cash payments                          | -36.7 ( 36.7 )                | -10.4 ( 10.4 )        | -47.1 ( 47.1 )
foreign currency exchange rate changes | 1.3                           | 0.4                   | 1.7
balance december 31 2017               | $ 14.8                        | $ 30.3                | $ 45.1

we have also recognized other employee termination benefits related to ldr , other acquisitions and our operational excellence initiatives .
dedicated project personnel expenses include the salary , benefits , travel expenses and other costs directly associated with employees who are 100 percent dedicated to our integration of acquired businesses , employees who have been notified of termination , but are continuing to work on transferring their responsibilities and employees working on our quality enhancement and remediation efforts and operational excellence initiatives .
relocated facilities expenses are the moving costs , lease expenses and other facility costs incurred during the relocation period in connection with relocating certain facilities .
certain litigation matters relate to net expenses recognized during the year for the estimated or actual settlement of certain pending litigation and similar claims , including matters where we recognized income from a settlement on more favorable terms than our previous estimate , or we reduced our estimate of a previously recorded contingent liability .
these litigation matters have included royalty disputes , patent litigation matters , product liability litigation matters and commercial litigation matters .
contract termination costs relate to terminated agreements in connection with the integration of acquired companies and changes to our distribution model as part of business restructuring and operational excellence initiatives .
the terminated contracts primarily relate to sales agents and distribution agreements .
information technology integration costs are non- capitalizable costs incurred related to integrating information technology platforms of acquired companies or other significant software implementations as part of our quality and operational excellence initiatives .
as part of the biomet merger , we recognized $ 209.0 million of intangible assets for in-process research and development ( 201cipr&d 201d ) projects .
during 2017 and 2016 , we recorded impairment losses of $ 18.8 million and $ 30.0 million , respectively , related to these ipr&d intangible assets .
the impairments were primarily due to the termination of certain ipr&d projects .
we also recognized $ 479.0 million of intangible assets for trademarks that we designated as having an indefinite life .
during 2017 , we reclassified one of these trademarks to a finite life asset which resulted in an impairment of $ 8.0 million .
loss/impairment on disposal of assets relates to assets that we have sold or intend to sell , or for which the economic useful life of the asset has been significantly reduced due to integration or our quality and operational excellence initiatives .
contingent consideration adjustments represent the changes in the fair value of contingent consideration obligations to be paid to the prior owners of acquired businesses .
certain r&d agreements relate to agreements with upfront payments to obtain intellectual property to be used in r&d projects that have no alternative future use in other projects .
cash and cash equivalents 2013 we consider all highly liquid investments with an original maturity of three months or less to be cash equivalents .
the carrying amounts reported in the balance sheet for cash and cash equivalents are valued at cost , which approximates their fair value .
accounts receivable 2013 accounts receivable consists of trade and other miscellaneous receivables .
we grant credit to customers in the normal course of business and maintain an allowance for doubtful accounts for potential credit losses .
we determine the allowance for doubtful accounts by geographic market and take into consideration historical credit experience , creditworthiness of the customer and other pertinent information .
we make concerted efforts to collect all accounts receivable , but sometimes we have to write-off the account against the allowance when we determine the account is uncollectible .
the allowance for doubtful accounts was $ 60.2 million and $ 51.6 million as of december 31 , 2017 and 2016 , respectively .
inventories 2013 inventories are stated at the lower of cost or market , with cost determined on a first-in first-out basis .
property , plant and equipment 2013 property , plant and equipment is carried at cost less accumulated depreciation .
depreciation is computed using the straight-line method based on estimated useful lives of ten to forty years for buildings and improvements and three to eight years for machinery and equipment .
maintenance and repairs are expensed as incurred .
we review property , plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable .
an impairment loss would be recognized when estimated future undiscounted cash flows relating to the asset are less than its carrying amount .
an impairment loss is measured as the amount by which the carrying amount of an asset exceeds its fair value .
software costs 2013 we capitalize certain computer software and software development costs incurred in connection with developing or obtaining computer software for internal use when both the preliminary project stage is completed and it is probable that the software will be used as intended .
capitalized software costs generally include external direct costs of materials and services utilized in developing or obtaining computer software and compensation and related


meet customer needs and put us in a position to handle demand changes .
we will also continue utilizing industrial engineering techniques to improve productivity .
2022 fuel prices 2013 uncertainty about the economy makes fuel price projections difficult , and we could see volatile fuel prices during the year , as they are sensitive to global and u.s .
domestic demand , refining capacity , geopolitical issues and events , weather conditions and other factors .
to reduce the impact of fuel price on earnings , we will continue to seek recovery from our customers through our fuel surcharge programs and to expand our fuel conservation efforts .
2022 capital plan 2013 in 2010 , we plan to make total capital investments of approximately $ 2.5 billion , including expenditures for ptc , which may be revised if business conditions or new laws or regulations affect our ability to generate sufficient returns on these investments .
see further discussion in this item 7 under liquidity and capital resources 2013 capital plan .
2022 positive train control ( ptc ) 2013 in response to a legislative mandate to implement ptc by the end of 2015 , we expect to spend approximately $ 200 million during 2010 on the development of ptc .
we currently estimate that ptc will cost us approximately $ 1.4 billion to implement by the end of 2015 , in accordance with rules issued by the fra .
this includes costs for installing the new system along our tracks , upgrading locomotives to work with the new system , and adding digital data communication equipment so all the parts of the system can communicate with each other .
2022 financial expectations 2013 we remain cautious about economic conditions but expect volume to increase from 2009 levels .
in addition , we anticipate continued pricing opportunities and further productivity improvements .
results of operations operating revenues millions of dollars 2009 2008 2007 % (  % ) change 2009 v 2008 % (  % ) change 2008 v 2007 .

millions of dollars | 2009    | 2008    | 2007    | % (  % ) change 2009 v 2008 | % (  % ) change 2008 v 2007
------------------- | ------- | ------- | ------- | --------------------------- | ---------------------------
freight revenues    | $ 13373 | $ 17118 | $ 15486 | ( 22 ) % (  % )             | 11% ( 11 % )
other revenues      | 770     | 852     | 797     | -10 ( 10 )                  | 7
total               | $ 14143 | $ 17970 | $ 16283 | ( 21 ) % (  % )             | 10% ( 10 % )

freight revenues are revenues generated by transporting freight or other materials from our six commodity groups .
freight revenues vary with volume ( carloads ) and average revenue per car ( arc ) .
changes in price , traffic mix and fuel surcharges drive arc .
we provide some of our customers with contractual incentives for meeting or exceeding specified cumulative volumes or shipping to and from specific locations , which we record as a reduction to freight revenues based on the actual or projected future shipments .
we recognize freight revenues on a percentage-of-completion basis as freight moves from origin to destination .
we allocate freight revenues between reporting periods based on the relative transit time in each reporting period and recognize expenses as we incur them .
other revenues include revenues earned by our subsidiaries , revenues from our commuter rail operations , and accessorial revenues , which we earn when customers retain equipment owned or controlled by us or when we perform additional services such as switching or storage .
we recognize other revenues as we perform services or meet contractual obligations .
freight revenues and volume levels for all six commodity groups decreased during 2009 , reflecting continued economic weakness .
we experienced the largest volume declines in automotive and industrial


part ii item 5 .
market for registrant 2019s common equity , related stockholder matters and issuer purchases of equity securities market price of and dividends on the registrant 2019s common equity and related stockholder matters market information .
our class a common stock is quoted on the nasdaq global select market under the symbol 201cdish . 201d the high and low closing sale prices of our class a common stock during 2014 and 2013 on the nasdaq global select market ( as reported by nasdaq ) are set forth below. .

2014           | high    | low
-------------- | ------- | -------
first quarter  | $ 62.42 | $ 54.10
second quarter | 65.64   | 56.23
third quarter  | 66.71   | 61.87
fourth quarter | 79.41   | 57.96
2013           | high    | low
first quarter  | $ 38.02 | $ 34.19
second quarter | 42.52   | 36.24
third quarter  | 48.09   | 41.66
fourth quarter | 57.92   | 45.68

as of february 13 , 2015 , there were approximately 8208 holders of record of our class a common stock , not including stockholders who beneficially own class a common stock held in nominee or street name .
as of february 10 , 2015 , 213247004 of the 238435208 outstanding shares of our class b common stock were beneficially held by charles w .
ergen , our chairman , and the remaining 25188204 were held in trusts established by mr .
ergen for the benefit of his family .
there is currently no trading market for our class b common stock .
dividends .
on december 28 , 2012 , we paid a cash dividend of $ 1.00 per share , or approximately $ 453 million , on our outstanding class a and class b common stock to stockholders of record at the close of business on december 14 , 2012 .
while we currently do not intend to declare additional dividends on our common stock , we may elect to do so from time to time .
payment of any future dividends will depend upon our earnings and capital requirements , restrictions in our debt facilities , and other factors the board of directors considers appropriate .
we currently intend to retain our earnings , if any , to support future growth and expansion , although we may repurchase shares of our common stock from time to time .
see further discussion under 201citem 7 .
management 2019s discussion and analysis of financial condition and results of operations 2013 liquidity and capital resources 201d in this annual report on form 10-k .
securities authorized for issuance under equity compensation plans .
see 201citem 12 .
security ownership of certain beneficial owners and management and related stockholder matters 201d in this annual report on form 10-k.


upon the death of the employee , the employee 2019s beneficiary typically receives the designated portion of the death benefits directly from the insurance company and the company receives the remainder of the death benefits .
it is currently expected that minimal cash payments will be required to fund these policies .
the net periodic pension cost for these split-dollar life insurance arrangements was $ 5 million for the years ended december 31 , 2014 , 2013 and 2012 .
the company has recorded a liability representing the actuarial present value of the future death benefits as of the employees 2019 expected retirement date of $ 66 million and $ 51 million as of december 31 , 2014 and december 31 , 2013 , respectively .
deferred compensation plan the company amended and reinstated its deferred compensation plan ( 201cthe plan 201d ) effective june 1 , 2013 to reopen the plan to certain participants .
under the plan , participants may elect to defer base salary and cash incentive compensation in excess of 401 ( k ) plan limitations .
participants under the plan may choose to invest their deferred amounts in the same investment alternatives available under the company's 401 ( k ) plan .
the plan also allows for company matching contributions for the following : ( i ) the first 4% ( 4 % ) of compensation deferred under the plan , subject to a maximum of $ 50000 for board officers , ( ii ) lost matching amounts that would have been made under the 401 ( k ) plan if participants had not participated in the plan , and ( iii ) discretionary amounts as approved by the compensation and leadership committee of the board of directors .
defined contribution plan the company and certain subsidiaries have various defined contribution plans , in which all eligible employees may participate .
in the u.s. , the 401 ( k ) plan is a contributory plan .
matching contributions are based upon the amount of the employees 2019 contributions .
the company 2019s expenses for material defined contribution plans for the years ended december 31 , 2014 , 2013 and 2012 were $ 31 million , $ 32 million and $ 30 million , respectively .
beginning january 1 , 2012 , the company may make an additional discretionary 401 ( k ) plan matching contribution to eligible employees .
for the years ended december 31 , 2014 , 2013 , and 2012 the company made no discretionary matching contributions .
8 .
share-based compensation plans and other incentive plans stock options , stock appreciation rights and employee stock purchase plan the company grants options to acquire shares of common stock to certain employees and to existing option holders of acquired companies in connection with the merging of option plans following an acquisition .
each option granted and stock appreciation right has an exercise price of no less than 100% ( 100 % ) of the fair market value of the common stock on the date of the grant .
the awards have a contractual life of five to fifteen years and vest over two to four years .
stock options and stock appreciation rights assumed or replaced with comparable stock options or stock appreciation rights in conjunction with a change in control of the company only become exercisable if the holder is also involuntarily terminated ( for a reason other than cause ) or quits for good reason within 24 months of a change in control .
the employee stock purchase plan allows eligible participants to purchase shares of the company 2019s common stock through payroll deductions of up to 20% ( 20 % ) of eligible compensation on an after-tax basis .
plan participants cannot purchase more than $ 25000 of stock in any calendar year .
the price an employee pays per share is 85% ( 85 % ) of the lower of the fair market value of the company 2019s stock on the close of the first trading day or last trading day of the purchase period .
the plan has two purchase periods , the first from october 1 through march 31 and the second from april 1 through september 30 .
for the years ended december 31 , 2014 , 2013 and 2012 , employees purchased 1.4 million , 1.5 million and 1.4 million shares , respectively , at purchase prices of $ 51.76 and $ 53.79 , $ 43.02 and $ 50.47 , and $ 34.52 and $ 42.96 , respectively .
the company calculates the value of each employee stock option , estimated on the date of grant , using the black-scholes option pricing model .
the weighted-average estimated fair value of employee stock options granted during 2014 , 2013 and 2012 was $ 11.02 , $ 9.52 and $ 9.60 , respectively , using the following weighted-average assumptions: .

                        | 2014             | 2013             | 2012
----------------------- | ---------------- | ---------------- | ----------------
expected volatility     | 21.7% ( 21.7 % ) | 22.1% ( 22.1 % ) | 24.0% ( 24.0 % )
risk-free interest rate | 1.6% ( 1.6 % )   | 0.9% ( 0.9 % )   | 0.8% ( 0.8 % )
dividend yield          | 2.5% ( 2.5 % )   | 2.4% ( 2.4 % )   | 2.2% ( 2.2 % )
expected life ( years ) | 5.2              | 5.9              | 6.1

the company uses the implied volatility for traded options on the company 2019s stock as the expected volatility assumption required in the black-scholes model .
the selection of the implied volatility approach was based upon the availability of actively traded options on the company 2019s stock and the company 2019s assessment that implied volatility is more representative of future stock price trends than historical volatility .
the risk-free interest rate assumption is based upon the average daily closing rates during the year for u.s .
treasury notes that have a life which approximates the expected life of the option .
the dividend yield assumption is based on the company 2019s future expectation of dividend payouts .
the expected life of employee stock options represents the average of the contractual term of the options and the weighted-average vesting period for all option tranches.


cdw corporation and subsidiaries notes to consolidated financial statements 2013 denominator was impacted by the common shares issued during both the ipo and the underwriters 2019 exercise in full of the overallotment option granted to them in connection with the ipo .
because such common shares were issued on july 2 , 2013 and july 31 , 2013 , respectively , they are only partially reflected in the 2013 denominator .
such shares will be fully reflected in the 2014 denominator .
see note 9 for additional discussion of the ipo .
the dilutive effect of outstanding restricted stock , restricted stock units , stock options and mpk plan units is reflected in the denominator for diluted earnings per share using the treasury stock method .
the following is a reconciliation of basic shares to diluted shares: .

( in millions )                   | years ended december 31 , 2013 | years ended december 31 , 2012 | years ended december 31 , 2011
--------------------------------- | ------------------------------ | ------------------------------ | ------------------------------
weighted-average shares - basic   | 156.6                          | 145.1                          | 144.8
effect of dilutive securities     | 2.1                            | 0.7                            | 0.1
weighted-average shares - diluted | 158.7                          | 145.8                          | 144.9

for the years ended december 31 , 2013 , 2012 and 2011 , diluted earnings per share excludes the impact of 0.0 million , 0.0 million , and 4.3 million potential common shares , respectively , as their inclusion would have had an anti-dilutive effect .
12 .
deferred compensation plan on march 10 , 2010 , in connection with the company 2019s purchase of $ 28.5 million principal amount of its outstanding senior subordinated debt , the company established the restricted debt unit plan ( the 201crdu plan 201d ) , an unfunded nonqualified deferred compensation plan .
the total number of rdus that can be granted under the rdu plan is 28500 .
at december 31 , 2013 , 28500 rdus were outstanding .
rdus that are outstanding vest daily on a pro rata basis over the three-year period from january 1 , 2012 ( or , if later , the date of hire or the date of a subsequent rdu grant ) through december 31 , 2014 .
participants have no rights to the underlying debt .
the total amount of compensation available to be paid under the rdu plan was initially to be based on two components , a principal component and an interest component .
the principal component credits the rdu plan with a notional amount equal to the $ 28.5 million face value of the senior subordinated notes ( the 201cdebt pool 201d ) , together with certain redemption premium equivalents as noted below .
the interest component credits the rdu plan with amounts equal to the interest that would have been earned on the debt pool from march 10 , 2010 through maturity on october 12 , 2017 , except as discussed below .
interest amounts for 2010 and 2011 were deferred until 2012 , and thereafter , interest amounts were paid to participants semi-annually on the interest payment due dates .
payments totaling $ 1.7 million and $ 1.3 million were made to participants under the rdu plan in april and october 2013 , respectively , in connection with the semi-annual interest payments due .
the company used a portion of the ipo proceeds together with incremental borrowings to redeem $ 324.0 million of the total senior subordinated notes outstanding on august 1 , 2013 .
in connection with the ipo and the partial redemption of the senior subordinated notes , the company amended the rdu plan to increase the retentive value of the plan .
in accordance with the original terms of the rdu plan , the principal component of the rdus converted to a cash-denominated pool upon the redemption of the senior subordinated notes .
in addition , the company added $ 1.4 million to the principal component in the year ended december 31 , 2013 as redemption premium equivalents in accordance with the terms of the rdu plan .
under the terms of the amended rdu plan , upon the partial redemption of outstanding senior subordinated notes , the rdus ceased to accrue the proportionate related interest component credits .
the


printing papers net sales for 2006 decreased 3% ( 3 % ) from both 2005 and 2004 due principally to the sale of the u.s .
coated papers business in august 2006 .
however , operating profits in 2006 were 43% ( 43 % ) higher than in 2005 and 33% ( 33 % ) higher than in 2004 .
compared with 2005 , earnings improved for u.s .
uncoated papers , market pulp and european papers , but this was partially offset by earnings declines in brazilian papers .
benefits from higher average sales price realizations in the united states , europe and brazil ( $ 284 million ) , improved manufacturing operations ( $ 73 million ) , reduced lack-of-order downtime ( $ 41 million ) , higher sales volumes in europe ( $ 23 million ) , and other items ( $ 65 million ) were partially offset by higher raw material and energy costs ( $ 109 million ) , higher freight costs ( $ 45 million ) and an impairment charge to reduce the carrying value of the fixed assets at the saillat , france mill ( $ 128 million ) .
compared with 2004 , higher earnings in 2006 in the u.s .
uncoated papers , market pulp and coated papers businesses were offset by lower earn- ings in the european and brazilian papers busi- nesses .
the printing papers segment took 555000 tons of downtime in 2006 , including 150000 tons of lack-of-order downtime to align production with customer demand .
this compared with 970000 tons of total downtime in 2005 , of which 520000 tons related to lack-of-orders .
printing papers in millions 2006 2005 2004 .

in millions      | 2006   | 2005   | 2004
---------------- | ------ | ------ | ------
sales            | $ 6930 | $ 7170 | $ 7135
operating profit | $ 677  | $ 473  | $ 508

u.s .
uncoated papers net sales in 2006 were $ 3.5 billion , compared with $ 3.2 billion in 2005 and $ 3.3 billion in 2004 .
sales volumes increased in 2006 over 2005 , particularly in cut-size paper and printing papers .
average sales price realizations increased significantly , reflecting benefits from price increases announced in late 2005 and early 2006 .
lack-of-order downtime declined from 450000 tons in 2005 to 40000 tons in 2006 , reflecting firm market demand and the impact of the permanent closure of three uncoated freesheet machines in 2005 .
operating earnings in 2006 more than doubled compared with both 2005 and 2004 .
the benefits of improved aver- age sales price realizations more than offset higher input costs for freight , wood and energy , which were all above 2005 levels .
mill operations were favorable compared with 2005 due to current-year improve- ments in machine performance , lower labor , chem- ical and energy consumption costs , as well as approximately $ 30 million of charges incurred in 2005 for machine shutdowns .
u.s .
coated papers net sales were $ 920 million in 2006 , $ 1.6 billion in 2005 and $ 1.4 billion in 2004 .
operating profits in 2006 were 26% ( 26 % ) lower than in 2005 .
a small operating loss was reported for the business in 2004 .
this business was sold in the third quarter of 2006 .
during the first two quarters of 2006 , sales volumes were up slightly versus 2005 .
average sales price realizations for coated freesheet paper and coated groundwood paper were higher than in 2005 , reflecting the impact of previously announced price increases .
however , input costs for energy , wood and other raw materials increased over 2005 levels .
manufacturing operations were favorable due to higher machine efficiency and mill cost savings .
u.s .
market pulp sales in 2006 were $ 509 mil- lion , compared with $ 526 million and $ 437 million in 2005 and 2004 , respectively .
sales volumes in 2006 were down from 2005 levels , primarily for paper and tissue pulp .
average sales price realizations were higher in 2006 , reflecting higher average prices for fluff pulp and bleached hardwood and softwood pulp .
operating earnings increased 30% ( 30 % ) from 2005 and more than 100% ( 100 % ) from 2004 principally due to the impact of the higher average sales prices .
input costs for wood and energy were higher in 2006 than in 2005 .
manufacturing operations were unfavorable , driven primarily by poor operations at our riegel- wood , north carolina mill .
brazil ian paper net sales for 2006 of $ 496 mil- lion were higher than the $ 465 million in 2005 and the $ 417 million in 2004 .
the sales increase in 2006 reflects higher sales volumes than in 2005 , partic- ularly for uncoated freesheet paper , and a strengthening of the brazilian currency versus the u.s .
dollar .
average sales price realizations improved in 2006 , primarily for uncoated freesheet paper and wood chips .
despite higher net sales , operating profits for 2006 of $ 122 million were down from $ 134 million in 2005 and $ 166 million in 2004 , due principally to incremental costs associated with an extended mill outage in mogi guacu to convert to an elemental-chlorine-free bleaching process , to rebuild the primary recovery boiler , and for other environmental upgrades .
european papers net sales in 2006 were $ 1.5 bil- lion , compared with $ 1.4 billion in 2005 and $ 1.5 bil- lion in 2004 .
sales volumes in 2006 were higher than in 2005 at our eastern european mills due to stron- ger market demand .
average sales price realizations increased in 2006 in both eastern and western european markets .
operating earnings in 2006 rose 20% ( 20 % ) from 2005 , but were 15% ( 15 % ) below 2004 levels .
the improvement in 2006 compared with 2005


jpmorgan chase & co .
/ 2008 annual report 175jpmorgan chase & co .
/ 2008 annual report 175jpmorgan chase & co .
/ 2008 annual report 175jpmorgan chase & co .
/ 2008 annual report 175jpmorgan chase & co .
/ 2008 annual report 175 securities borrowed and securities lent are recorded at the amount of cash collateral advanced or received .
securities borrowed consist primarily of government and equity securities .
jpmorgan chase moni- tors the market value of the securities borrowed and lent on a daily basis and calls for additional collateral when appropriate .
fees received or paid in connection with securities borrowed and lent are recorded in interest income or interest expense .
the following table details the components of collateralized financings. .

december 31 ( in millions )                        | 2008     | 2007
-------------------------------------------------- | -------- | --------
securities purchased under resale agreements ( a ) | $ 200265 | $ 169305
securities borrowed ( b )                          | 124000   | 84184
securities sold under repurchase agreements ( c )  | $ 174456 | $ 126098
securities loaned                                  | 6077     | 10922

( a ) includes resale agreements of $ 20.8 billion and $ 19.1 billion accounted for at fair value at december 31 , 2008 and 2007 , respectively .
( b ) includes securities borrowed of $ 3.4 billion accounted for at fair value at december 31 , 2008 .
( c ) includes repurchase agreements of $ 3.0 billion and $ 5.8 billion accounted for at fair value at december 31 , 2008 and 2007 , respectively .
jpmorgan chase pledges certain financial instruments it owns to col- lateralize repurchase agreements and other securities financings .
pledged securities that can be sold or repledged by the secured party are identified as financial instruments owned ( pledged to various parties ) on the consolidated balance sheets .
at december 31 , 2008 , the firm received securities as collateral that could be repledged , delivered or otherwise used with a fair value of approximately $ 511.9 billion .
this collateral was generally obtained under resale or securities borrowing agreements .
of these securities , approximately $ 456.6 billion were repledged , delivered or otherwise used , generally as collateral under repurchase agreements , securities lending agreements or to cover short sales .
note 14 2013 loans the accounting for a loan may differ based upon whether it is origi- nated or purchased and as to whether the loan is used in an invest- ing or trading strategy .
for purchased loans held-for-investment , the accounting also differs depending on whether a loan is credit- impaired at the date of acquisition .
purchased loans with evidence of credit deterioration since the origination date and for which it is probable , at acquisition , that all contractually required payments receivable will not be collected are considered to be credit-impaired .
the measurement framework for loans in the consolidated financial statements is one of the following : 2022 at the principal amount outstanding , net of the allowance for loan losses , unearned income and any net deferred loan fees or costs , for loans held for investment ( other than purchased credit- impaired loans ) ; 2022 at the lower of cost or fair value , with valuation changes record- ed in noninterest revenue , for loans that are classified as held- for-sale ; or 2022 at fair value , with changes in fair value recorded in noninterest revenue , for loans classified as trading assets or risk managed on a fair value basis ; 2022 purchased credit-impaired loans held for investment are account- ed for under sop 03-3 and initially measured at fair value , which includes estimated future credit losses .
accordingly , an allowance for loan losses related to these loans is not recorded at the acquisition date .
see note 5 on pages 156 2013158 of this annual report for further information on the firm 2019s elections of fair value accounting under sfas 159 .
see note 6 on pages 158 2013160 of this annual report for further information on loans carried at fair value and classified as trading assets .
for loans held for investment , other than purchased credit-impaired loans , interest income is recognized using the interest method or on a basis approximating a level rate of return over the term of the loan .
loans within the held-for-investment portfolio that management decides to sell are transferred to the held-for-sale portfolio .
transfers to held-for-sale are recorded at the lower of cost or fair value on the date of transfer .
credit-related losses are charged off to the allowance for loan losses and losses due to changes in interest rates , or exchange rates , are recognized in noninterest revenue .
loans within the held-for-sale portfolio that management decides to retain are transferred to the held-for-investment portfolio at the lower of cost or fair value .
these loans are subsequently assessed for impairment based on the firm 2019s allowance methodology .
for a fur- ther discussion of the methodologies used in establishing the firm 2019s allowance for loan losses , see note 15 on pages 178 2013180 of this annual report .
nonaccrual loans are those on which the accrual of interest is dis- continued .
loans ( other than certain consumer and purchased credit- impaired loans discussed below ) are placed on nonaccrual status immediately if , in the opinion of management , full payment of princi- pal or interest is in doubt , or when principal or interest is 90 days or more past due and collateral , if any , is insufficient to cover principal and interest .
loans are charged off to the allowance for loan losses when it is highly certain that a loss has been realized .
interest accrued but not collected at the date a loan is placed on nonaccrual status is reversed against interest income .
in addition , the amortiza- tion of net deferred loan fees is suspended .
interest income on nonaccrual loans is recognized only to the extent it is received in cash .
however , where there is doubt regarding the ultimate col- lectibility of loan principal , all cash thereafter received is applied to reduce the carrying value of such loans ( i.e. , the cost recovery method ) .
loans are restored to accrual status only when future pay- ments of interest and principal are reasonably assured .
consumer loans , other than purchased credit-impaired loans , are generally charged to the allowance for loan losses upon reaching specified stages of delinquency , in accordance with the federal financial institutions examination council policy .
for example , credit card loans are charged off by the end of the month in which the account becomes 180 days past due or within 60 days from receiv- ing notification of the filing of bankruptcy , whichever is earlier .
residential mortgage products are generally charged off to net real- izable value at no later than 180 days past due .
other consumer


notes to consolidated financial statements bank subsidiaries gs bank usa , an fdic-insured , new york state-chartered bank and a member of the federal reserve system , is supervised and regulated by the federal reserve board , the fdic , the new york state department of financial services and the consumer financial protection bureau , and is subject to minimum capital requirements ( described below ) that are calculated in a manner similar to those applicable to bank holding companies .
gs bank usa computes its capital ratios in accordance with the regulatory capital requirements currently applicable to state member banks , which are based on basel 1 as implemented by the federal reserve board , for purposes of assessing the adequacy of its capital .
under the regulatory framework for prompt corrective action that is applicable to gs bank usa , in order to be considered a 201cwell-capitalized 201d depository institution , gs bank usa must maintain a tier 1 capital ratio of at least 6% ( 6 % ) , a total capital ratio of at least 10% ( 10 % ) and a tier 1 leverage ratio of at least 5% ( 5 % ) .
gs bank usa has agreed with the federal reserve board to maintain minimum capital ratios in excess of these 201cwell- capitalized 201d levels .
accordingly , for a period of time , gs bank usa is expected to maintain a tier 1 capital ratio of at least 8% ( 8 % ) , a total capital ratio of at least 11% ( 11 % ) and a tier 1 leverage ratio of at least 6% ( 6 % ) .
as noted in the table below , gs bank usa was in compliance with these minimum capital requirements as of december 2012 and december 2011 .
the table below presents information regarding gs bank usa 2019s regulatory capital ratios under basel 1 as implemented by the federal reserve board. .

$ in millions         | as of december 2012 | as of december 2011
--------------------- | ------------------- | -------------------
tier 1 capital        | $ 20704             | $ 19251
tier 2 capital        | $ 39                | $ 6
total capital         | $ 20743             | $ 19257
risk-weighted assets  | $ 109669            | $ 112824
tier 1 capital ratio  | 18.9% ( 18.9 % )    | 17.1% ( 17.1 % )
total capital ratio   | 18.9% ( 18.9 % )    | 17.1% ( 17.1 % )
tier 1 leverage ratio | 17.6% ( 17.6 % )    | 18.5% ( 18.5 % )

effective january 1 , 2013 , gs bank usa implemented the revised market risk regulatory framework outlined above .
these changes resulted in increased regulatory capital requirements for market risk , and will be reflected in all of gs bank usa 2019s basel-based capital ratios for periods beginning on or after january 1 , 2013 .
gs bank usa is also currently working to implement the basel 2 framework , as implemented by the federal reserve board .
gs bank usa will adopt basel 2 once approved to do so by regulators .
in addition , the capital requirements for gs bank usa are expected to be impacted by the june 2012 proposed modifications to the agencies 2019 capital adequacy regulations outlined above , including the requirements of a floor to the advanced risk-based capital ratios .
if enacted as proposed , these proposals would also change the regulatory framework for prompt corrective action that is applicable to gs bank usa by , among other things , introducing a common equity tier 1 ratio requirement , increasing the minimum tier 1 capital ratio requirement and introducing a supplementary leverage ratio as a component of the prompt corrective action analysis .
gs bank usa will also be impacted by aspects of the dodd-frank act , including new stress tests .
the deposits of gs bank usa are insured by the fdic to the extent provided by law .
the federal reserve board requires depository institutions to maintain cash reserves with a federal reserve bank .
the amount deposited by the firm 2019s depository institution held at the federal reserve bank was approximately $ 58.67 billion and $ 40.06 billion as of december 2012 and december 2011 , respectively , which exceeded required reserve amounts by $ 58.59 billion and $ 39.51 billion as of december 2012 and december 2011 , respectively .
transactions between gs bank usa and its subsidiaries and group inc .
and its subsidiaries and affiliates ( other than , generally , subsidiaries of gs bank usa ) are regulated by the federal reserve board .
these regulations generally limit the types and amounts of transactions ( including credit extensions from gs bank usa ) that may take place and generally require those transactions to be on market terms or better to gs bank usa .
the firm 2019s principal non-u.s .
bank subsidiaries include gsib , a wholly-owned credit institution , regulated by the fsa , and gs bank europe , a wholly-owned credit institution , regulated by the central bank of ireland , which are both subject to minimum capital requirements .
as of december 2012 and december 2011 , gsib and gs bank europe were both in compliance with all regulatory capital requirements .
on january 18 , 2013 , gs bank europe surrendered its banking license to the central bank of ireland after transferring its deposits to gsib .
goldman sachs 2012 annual report 187


constitutes an event of default under our other debt instruments , including our senior notes , and , therefore , our senior notes would also be subject to acceleration of maturity .
if such acceleration were to occur , we would not have sufficient liquidity available to repay the indebtedness .
we would likely have to seek an amendment under our credit facilities for relief from the financial covenants or repay the debt with proceeds from the issuance of new debt or equity , or asset sales , if necessary .
we may be unable to amend our credit facilities or raise sufficient capital to repay such obligations in the event the maturities are accelerated .
financial assurance we must provide financial assurance to governmental agencies and a variety of other entities under applicable environmental regulations relating to our landfill operations for capping , closure and post-closure costs , and related to our performance under certain collection , landfill and transfer station contracts .
we satisfy these financial assurance requirements by providing surety bonds , letters of credit , or insurance policies ( the financial assurance instruments ) , or trust deposits , which are included in restricted cash and marketable securities and other assets in our consolidated balance sheets .
the amount of the financial assurance requirements for capping , closure and post-closure costs is determined by applicable state environmental regulations .
the financial assurance requirements for capping , closure and post-closure costs may be associated with a portion of the landfill or the entire landfill .
generally , states require a third-party engineering specialist to determine the estimated capping , closure and post-closure costs that are used to determine the required amount of financial assurance for a landfill .
the amount of financial assurance required can , and generally will , differ from the obligation determined and recorded under u.s .
gaap .
the amount of the financial assurance requirements related to contract performance varies by contract .
additionally , we must provide financial assurance for our insurance program and collateral for certain performance obligations .
we do not expect a material increase in financial assurance requirements during 2014 , although the mix of financial assurance instruments may change .
these financial instruments are issued in the normal course of business and are not considered indebtedness .
because we currently have no liability for the financial assurance instruments , they are not reflected in our consolidated balance sheets ; however , we record capping , closure and post-closure liabilities and self-insurance liabilities as they are incurred .
the underlying obligations of the financial assurance instruments , in excess of those already reflected in our consolidated balance sheets , would be recorded if it is probable that we would be unable to fulfill our related obligations .
we do not expect this to occur .
off-balance sheet arrangements we have no off-balance sheet debt or similar obligations , other than financial assurance instruments and operating leases , that are not classified as debt .
we do not guarantee any third-party debt .
free cash flow we define free cash flow , which is not a measure determined in accordance with u.s .
gaap , as cash provided by operating activities less purchases of property and equipment , plus proceeds from sales of property and equipment as presented in our consolidated statements of cash flows .
our free cash flow for the years ended december 31 , 2013 , 2012 and 2011 is calculated as follows ( in millions of dollars ) : .

                                              | 2013             | 2012             | 2011
--------------------------------------------- | ---------------- | ---------------- | ----------------
cash provided by operating activities         | $ 1548.2         | $ 1513.8         | $ 1766.7
purchases of property and equipment           | -880.8 ( 880.8 ) | -903.5 ( 903.5 ) | -936.5 ( 936.5 )
proceeds from sales of property and equipment | 23.9             | 28.7             | 34.6
free cash flow                                | $ 691.3          | $ 639.0          | $ 864.8


brokerage and asset management brokerage and asset management ( bam ) , which constituted approximately 6% ( 6 % ) of citi holdings by assets as of december 31 , 2009 , consists of citi 2019s global retail brokerage and asset management businesses .
this segment was substantially affected and reduced in size in 2009 due to the divestitures of smith barney ( to the morgan stanley smith barney joint venture ( mssb jv ) ) and nikko cordial securities .
at december 31 , 2009 , bam had approximately $ 35 billion of assets , which included $ 26 billion of assets from the 49% ( 49 % ) interest in the mssb jv ( $ 13 billion investment and $ 13 billion in loans associated with the clients of the mssb jv ) and $ 9 billion of assets from a diverse set of asset management and insurance businesses of which approximately half will be transferred into the latam rcb during the first quarter of 2010 , as discussed under 201cciti holdings 201d above .
morgan stanley has options to purchase citi 2019s remaining stake in the mssb jv over three years starting in 2012 .
the 2009 results include an $ 11.1 billion gain ( $ 6.7 billion after-tax ) on the sale of smith barney .
in millions of dollars 2009 2008 2007 % (  % ) change 2009 vs .
2008 % (  % ) change 2008 vs .
2007 .

in millions of dollars                                       | 2009     | 2008             | 2007    | % (  % ) change 2009 vs . 2008 | % (  % ) change 2008 vs . 2007
------------------------------------------------------------ | -------- | ---------------- | ------- | ------------------------------ | ------------------------------
net interest revenue                                         | $ 432    | $ 1224           | $ 908   | ( 65 ) % (  % )                | 35% ( 35 % )
non-interest revenue                                         | 14703    | 7199             | 9751    | nm                             | -26 ( 26 )
total revenues net of interest expense                       | $ 15135  | $ 8423           | $ 10659 | 80% ( 80 % )                   | ( 21 ) % (  % )
total operating expenses                                     | $ 3350   | $ 9236           | $ 7960  | ( 64 ) % (  % )                | 16% ( 16 % )
net credit losses                                            | $ 3      | $ 10             | $ 2014  | ( 70 ) % (  % )                | 2014
credit reserve build/ ( release )                            | 36       | 8                | 4       | nm                             | 100% ( 100 % )
provision for unfunded lending commitments                   | -5 ( 5 ) | 2014             | 2014    | 2014                           | 2014
provision for benefits and claims                            | $ 155    | $ 205            | $ 154   | ( 24 ) % (  % )                | 33% ( 33 % )
provisions for loan losses and for benefits and claims       | $ 189    | $ 223            | $ 158   | ( 15 ) % (  % )                | 41% ( 41 % )
income ( loss ) from continuing operations before taxes      | $ 11596  | $ -1036 ( 1036 ) | $ 2541  | nm                             | nm
income taxes ( benefits )                                    | 4489     | -272 ( 272 )     | 834     | nm                             | nm
income ( loss ) from continuing operations                   | $ 7107   | $ -764 ( 764 )   | $ 1707  | nm                             | nm
net income ( loss ) attributable to noncontrolling interests | 12       | -179 ( 179 )     | 35      | nm                             | nm
net income ( loss )                                          | $ 7095   | $ -585 ( 585 )   | $ 1672  | nm                             | nm
eop assets ( in billions of dollars )                        | $ 35     | $ 58             | $ 56    | ( 40 ) % (  % )                | 4% ( 4 % )
eop deposits ( in billions of dollars )                      | 60       | 58               | 46      | 3                              | 26

nm not meaningful 2009 vs .
2008 revenues , net of interest expense increased 80% ( 80 % ) versus the prior year mainly driven by the $ 11.1 billion pretax gain on the sale ( $ 6.7 billion after-tax ) on the mssb jv transaction in the second quarter of 2009 and a $ 320 million pretax gain on the sale of the managed futures business to the mssb jv in the third quarter of 2009 .
excluding these gains , revenue decreased primarily due to the absence of smith barney from may 2009 onwards and the absence of fourth-quarter revenue of nikko asset management , partially offset by an improvement in marks in retail alternative investments .
revenues in the prior year include a $ 347 million pretax gain on sale of citistreet and charges related to the settlement of auction rate securities of $ 393 million pretax .
operating expenses decreased 64% ( 64 % ) from the prior year , mainly driven by the absence of smith barney and nikko asset management expenses , re- engineering efforts and the absence of 2008 one-time expenses ( $ 0.9 billion intangible impairment , $ 0.2 billion of restructuring and $ 0.5 billion of write- downs and other charges ) .
provisions for loan losses and for benefits and claims decreased 15% ( 15 % ) mainly reflecting a $ 50 million decrease in provision for benefits and claims , partially offset by increased reserve builds of $ 28 million .
assets decreased 40% ( 40 % ) versus the prior year , mostly driven by the sales of nikko cordial securities and nikko asset management ( $ 25 billion ) and the managed futures business ( $ 1.4 billion ) , partially offset by increased smith barney assets of $ 4 billion .
2008 vs .
2007 revenues , net of interest expense decreased 21% ( 21 % ) from the prior year primarily due to lower transactional and investment revenues in smith barney , lower revenues in nikko asset management and higher markdowns in retail alternative investments .
operating expenses increased 16% ( 16 % ) versus the prior year , mainly driven by a $ 0.9 billion intangible impairment in nikko asset management in the fourth quarter of 2008 , $ 0.2 billion of restructuring charges and $ 0.5 billion of write-downs and other charges .
provisions for loan losses and for benefits and claims increased $ 65 million compared to the prior year , mainly due to a $ 52 million increase in provisions for benefits and claims .
assets increased 4% ( 4 % ) versus the prior year.


bhge 2018 form 10-k | 85 it is expected that the amount of unrecognized tax benefits will change in the next twelve months due to expiring statutes , audit activity , tax payments , and competent authority proceedings related to transfer pricing or final decisions in matters that are the subject of litigation in various taxing jurisdictions in which we operate .
at december 31 , 2018 , we had approximately $ 96 million of tax liabilities , net of $ 1 million of tax assets , related to uncertain tax positions , each of which are individually insignificant , and each of which are reasonably possible of being settled within the next twelve months .
we conduct business in more than 120 countries and are subject to income taxes in most taxing jurisdictions in which we operate .
all internal revenue service examinations have been completed and closed through year end 2015 for the most significant u.s .
returns .
we believe there are no other jurisdictions in which the outcome of unresolved issues or claims is likely to be material to our results of operations , financial position or cash flows .
we further believe that we have made adequate provision for all income tax uncertainties .
note 13 .
stock-based compensation in july 2017 , we adopted the bhge 2017 long-term incentive plan ( lti plan ) under which we may grant stock options and other equity-based awards to employees and non-employee directors providing services to the company and our subsidiaries .
a total of up to 57.4 million shares of class a common stock are authorized for issuance pursuant to awards granted under the lti plan over its term which expires on the date of the annual meeting of the company in 2027 .
a total of 46.2 million shares of class a common stock are available for issuance as of december 31 , 2018 .
stock-based compensation cost was $ 121 million and $ 37 million in 2018 and 2017 , respectively .
stock-based compensation cost is measured at the date of grant based on the calculated fair value of the award and is generally recognized on a straight-line basis over the vesting period of the equity grant .
the compensation cost is determined based on awards ultimately expected to vest ; therefore , we have reduced the cost for estimated forfeitures based on historical forfeiture rates .
forfeitures are estimated at the time of grant and revised , if necessary , in subsequent periods to reflect actual forfeitures .
there were no stock-based compensation costs capitalized as the amounts were not material .
stock options we may grant stock options to our officers , directors and key employees .
stock options generally vest in equal amounts over a three-year vesting period provided that the employee has remained continuously employed by the company through such vesting date .
the fair value of each stock option granted is estimated using the black- scholes option pricing model .
the following table presents the weighted average assumptions used in the option pricing model for options granted under the lti plan .
the expected life of the options represents the period of time the options are expected to be outstanding .
the expected life is based on a simple average of the vesting term and original contractual term of the awards .
the expected volatility is based on the historical volatility of our five main competitors over a six year period .
the risk-free interest rate is based on the observed u.s .
treasury yield curve in effect at the time the options were granted .
the dividend yield is based on a five year history of dividend payouts in baker hughes. .

                                                    | 2018             | 2017
--------------------------------------------------- | ---------------- | ----------------
expected life ( years )                             | 6                | 6
risk-free interest rate                             | 2.5% ( 2.5 % )   | 2.1% ( 2.1 % )
volatility                                          | 33.7% ( 33.7 % ) | 36.4% ( 36.4 % )
dividend yield                                      | 2% ( 2 % )       | 1.2% ( 1.2 % )
weighted average fair value per share at grant date | $ 10.34          | $ 12.32

baker hughes , a ge company notes to consolidated and combined financial statements


is used to monitor the risk in the loan classes .
loans with higher fico scores and lower ltvs tend to have a lower level of risk .
conversely , loans with lower fico scores , higher ltvs , and in certain geographic locations tend to have a higher level of risk .
in the first quarter of 2013 , we refined our process for the home equity and residential real estate asset quality indicators shown in the following tables .
these refinements include , but are not limited to , improvements in the process for determining lien position and ltv in both table 67 and table 68 .
additionally , as of the first quarter of 2013 , we are now presenting table 67 at recorded investment as opposed to our prior presentation of outstanding balance .
table 68 continues to be presented at outstanding balance .
both the 2013 and 2012 period end balance disclosures are presented in the below tables using this refined process .
consumer purchased impaired loan class estimates of the expected cash flows primarily determine the credit impacts of consumer purchased impaired loans .
consumer cash flow estimates are influenced by a number of credit related items , which include , but are not limited to : estimated real estate values , payment patterns , updated fico scores , the current economic environment , updated ltv ratios and the date of origination .
these key factors are monitored to help ensure that concentrations of risk are mitigated and cash flows are maximized .
see note 6 purchased loans for additional information .
table 66 : home equity and residential real estate balances in millions december 31 december 31 home equity and residential real estate loans 2013 excluding purchased impaired loans ( a ) $ 44376 $ 42725 home equity and residential real estate loans 2013 purchased impaired loans ( b ) 5548 6638 government insured or guaranteed residential real estate mortgages ( a ) 1704 2279 purchase accounting adjustments 2013 purchased impaired loans ( 116 ) ( 482 ) total home equity and residential real estate loans ( a ) $ 51512 $ 51160 ( a ) represents recorded investment .
( b ) represents outstanding balance .
136 the pnc financial services group , inc .
2013 form 10-k .

in millions                                                                                | december 31 2013 | december 31 2012
------------------------------------------------------------------------------------------- | ---------------- | ----------------
home equity and residential real estate loans 2013 excluding purchased impaired loans ( a ) | $ 44376          | $ 42725
home equity and residential real estate loans 2013 purchased impaired loans ( b )           | 5548             | 6638
government insured or guaranteed residential real estate mortgages ( a )                    | 1704             | 2279
purchase accounting adjustments 2013 purchased impaired loans                               | -116 ( 116 )     | -482 ( 482 )
total home equity and residential real estate loans ( a )                                   | $ 51512          | $ 51160

is used to monitor the risk in the loan classes .
loans with higher fico scores and lower ltvs tend to have a lower level of risk .
conversely , loans with lower fico scores , higher ltvs , and in certain geographic locations tend to have a higher level of risk .
in the first quarter of 2013 , we refined our process for the home equity and residential real estate asset quality indicators shown in the following tables .
these refinements include , but are not limited to , improvements in the process for determining lien position and ltv in both table 67 and table 68 .
additionally , as of the first quarter of 2013 , we are now presenting table 67 at recorded investment as opposed to our prior presentation of outstanding balance .
table 68 continues to be presented at outstanding balance .
both the 2013 and 2012 period end balance disclosures are presented in the below tables using this refined process .
consumer purchased impaired loan class estimates of the expected cash flows primarily determine the credit impacts of consumer purchased impaired loans .
consumer cash flow estimates are influenced by a number of credit related items , which include , but are not limited to : estimated real estate values , payment patterns , updated fico scores , the current economic environment , updated ltv ratios and the date of origination .
these key factors are monitored to help ensure that concentrations of risk are mitigated and cash flows are maximized .
see note 6 purchased loans for additional information .
table 66 : home equity and residential real estate balances in millions december 31 december 31 home equity and residential real estate loans 2013 excluding purchased impaired loans ( a ) $ 44376 $ 42725 home equity and residential real estate loans 2013 purchased impaired loans ( b ) 5548 6638 government insured or guaranteed residential real estate mortgages ( a ) 1704 2279 purchase accounting adjustments 2013 purchased impaired loans ( 116 ) ( 482 ) total home equity and residential real estate loans ( a ) $ 51512 $ 51160 ( a ) represents recorded investment .
( b ) represents outstanding balance .
136 the pnc financial services group , inc .
2013 form 10-k


american tower corporation and subsidiaries notes to consolidated financial statements 2014 ( continued ) maturities 2014as of december 31 , 2003 , aggregate principal payments of long-term debt , including capital leases , for the next five years and thereafter are estimated to be ( in thousands ) : year ending december 31 .

2004                                                                          | $ 77622
----------------------------------------------------------------------------- | ------------------
2005                                                                          | 115444
2006                                                                          | 365051
2007                                                                          | 728153
2008                                                                          | 808043
thereafter                                                                    | 1650760
total cash obligations                                                        | 3745073
accreted value of original issue discount of the ati 12.25% ( 12.25 % ) notes | -339601 ( 339601 )
accreted value of the related warrants                                        | -44247 ( 44247 )
balance as of december 31 2003                                                | $ 3361225

the holders of the company 2019s convertible notes have the right to require the company to repurchase their notes on specified dates prior to their maturity dates in 2009 and 2010 , but the company may pay the purchase price by issuing shares of class a common stock , subject to certain conditions .
obligations with respect to the right of the holders to put the 6.25% ( 6.25 % ) notes and 5.0% ( 5.0 % ) notes have been included in the table above as if such notes mature on the date of their put rights in 2006 and 2007 , respectively .
( see note 19. ) 8 .
derivative financial instruments under the terms of the credit facilities , the company is required to enter into interest rate protection agreements on at least 50% ( 50 % ) of its variable rate debt .
under these agreements , the company is exposed to credit risk to the extent that a counterparty fails to meet the terms of a contract .
such exposure is limited to the current value of the contract at the time the counterparty fails to perform .
the company believes its contracts as of december 31 , 2003 are with credit worthy institutions .
as of december 31 , 2003 , the company had three interest rate caps outstanding that include an aggregate notional amount of $ 500.0 million ( each at an interest rate of 5% ( 5 % ) ) and expire in 2004 .
as of december 31 , 2003 and 2002 , liabilities related to derivative financial instruments of $ 0.0 million and $ 15.5 million are reflected in other long-term liabilities in the accompanying consolidated balance sheet .
during the year ended december 31 , 2003 , the company recorded an unrealized loss of approximately $ 0.3 million ( net of a tax benefit of approximately $ 0.2 million ) in other comprehensive loss for the change in fair value of cash flow hedges and reclassified $ 5.9 million ( net of a tax benefit of approximately $ 3.2 million ) into results of operations .
during the year ended december 31 , 2002 , the company recorded an unrealized loss of approximately $ 9.1 million ( net of a tax benefit of approximately $ 4.9 million ) in other comprehensive loss for the change in fair value of cash flow hedges and reclassified $ 19.5 million ( net of a tax benefit of approximately $ 10.5 million ) into results of operations .
hedge ineffectiveness resulted in a gain of approximately $ 1.0 million and a loss of approximately $ 2.2 million for the years ended december 31 , 2002 and 2001 , respectively , which are recorded in loss on investments and other expense in the accompanying consolidated statements of operations for those periods .
the company records the changes in fair value of its derivative instruments that are not accounted for as hedges in loss on investments and other expense .
the company does not anticipate reclassifying any derivative losses into its statement of operations within the next twelve months , as there are no amounts included in other comprehensive loss as of december 31 , 2003.


2022 designate subsidiaries as unrestricted subsidiaries ; and 2022 sell certain assets or merge with or into other companies .
subject to certain exceptions , the indentures governing the senior subordinated notes and the senior discount notes permit the issuers of the notes and their restricted subsidiaries to incur additional indebtedness , including secured indebtedness .
in addition , the senior credit facilities require bcp crystal to maintain the following financial covenants : a maximum total leverage ratio , a maximum bank debt leverage ratio , a minimum interest coverage ratio and maximum capital expenditures limitation .
the maximum consolidated net bank debt to adjusted ebitda ratio , as defined , previously required under the senior credit facilities , was eliminated when the company amended the facilities in january 2005 .
as of december 31 , 2006 , the company was in compliance with all of the financial covenants related to its debt agreements .
principal payments scheduled to be made on the company 2019s debt , including short term borrowings , is as follows : ( in $ millions ) .

                 | total ( in $ millions )
---------------- | -----------------------
2007             | 309
2008             | 25
2009             | 50
2010             | 39
2011             | 1485
thereafter ( 1 ) | 1590
total            | 3498

( 1 ) includes $ 2 million purchase accounting adjustment to assumed debt .
17 .
benefit obligations pension obligations .
pension obligations are established for benefits payable in the form of retirement , disability and surviving dependent pensions .
the benefits offered vary according to the legal , fiscal and economic conditions of each country .
the commitments result from participation in defined contribution and defined benefit plans , primarily in the u.s .
benefits are dependent on years of service and the employee 2019s compensation .
supplemental retirement benefits provided to certain employees are non-qualified for u.s .
tax purposes .
separate trusts have been established for some non-qualified plans .
the company sponsors defined benefit pension plans in north america , europe and asia .
as of december 31 , 2006 , the company 2019s u.s .
qualified pension plan represented greater than 84% ( 84 % ) and 76% ( 76 % ) of celanese 2019s pension plan assets and liabilities , respectively .
independent trusts or insurance companies administer the majority of these plans .
pension costs under the company 2019s retirement plans are actuarially determined .
the company sponsors various defined contribution plans in north america , europe , and asia covering certain employees .
employees may contribute to these plans and the company will match these contributions in varying amounts .
the company 2019s matching contribution to the defined contribution plans are based on specified percentages of employee contributions and aggregated $ 11 million , $ 12 million , $ 8 million and $ 3 million for the years ended december 31 , 2006 and 2005 , the nine months ended december 31 , 2004 and the three months ended march 31 , 2004 , respectively .
celanese corporation and subsidiaries notes to consolidated financial statements 2014 ( continued )


in accordance with sfas no .
142 , goodwill and other intangible assets , the goodwill is not amortized , but will be subject to a periodic assessment for impairment by applying a fair-value-based test .
none of this goodwill is expected to be deductible for tax purposes .
the company performs its annual test for impairment of goodwill in may of each year .
the company is required to perform a periodic assessment between annual tests in certain circumstances .
the company has performed its annual test of goodwill as of may 1 , 2006 and has determined there was no impairment of goodwill during 2006 .
the company allocated $ 15.8 million of the purchase price to in-process research and development projects .
in-process research and development ( ipr&d ) represents the valuation of acquired , to-be- completed research projects .
at the acquisition date , cyvera 2019s ongoing research and development initiatives were primarily involved with the development of its veracode technology and the beadxpress reader .
these two projects were approximately 50% ( 50 % ) and 25% ( 25 % ) complete at the date of acquisition , respectively .
as of december 31 , 2006 , these two projects were approximately 90% ( 90 % ) and 80% ( 80 % ) complete , respectively .
the value assigned to purchased ipr&d was determined by estimating the costs to develop the acquired technology into commercially viable products , estimating the resulting net cash flows from the projects , and discounting the net cash flows to their present value .
the revenue projections used to value the ipr&d were , in some cases , reduced based on the probability of developing a new technology , and considered the relevant market sizes and growth factors , expected trends in technology , and the nature and expected timing of new product introductions by the company and its competitors .
the resulting net cash flows from such projects are based on the company 2019s estimates of cost of sales , operating expenses , and income taxes from such projects .
the rates utilized to discount the net cash flows to their present value were based on estimated cost of capital calculations .
due to the nature of the forecast and the risks associated with the projected growth and profitability of the developmental projects , discount rates of 30% ( 30 % ) were considered appropriate for the ipr&d .
the company believes that these discount rates were commensurate with the projects 2019stage of development and the uncertainties in the economic estimates described above .
if these projects are not successfully developed , the sales and profitability of the combined company may be adversely affected in future periods .
the company believes that the foregoing assumptions used in the ipr&d analysis were reasonable at the time of the acquisition .
no assurance can be given , however , that the underlying assumptions used to estimate expected project sales , development costs or profitability , or the events associated with such projects , will transpire as estimated .
at the date of acquisition , the development of these projects had not yet reached technological feasibility , and the research and development in progress had no alternative future uses .
accordingly , these costs were charged to expense in the second quarter of 2005 .
the following unaudited pro forma information shows the results of the company 2019s operations for the years ended january 1 , 2006 and january 2 , 2005 as though the acquisition had occurred as of the beginning of the periods presented ( in thousands , except per share data ) : year ended january 1 , year ended january 2 .

                                     | year ended january 1 2006 | year ended january 2 2005
------------------------------------ | ------------------------- | -------------------------
revenue                              | $ 73501                   | $ 50583
net loss                             | -6234 ( 6234 )            | -9965 ( 9965 )
net loss per share basic and diluted | -0.15 ( 0.15 )            | -0.27 ( 0.27 )

illumina , inc .
notes to consolidated financial statements 2014 ( continued )


tissue pulp due to strong market demand , partic- ularly from asia .
average sales price realizations improved significantly in 2007 , principally reflecting higher average prices for softwood , hardwood and fluff pulp .
operating earnings in 2007 were $ 104 mil- lion compared with $ 48 million in 2006 and $ 37 mil- lion in 2005 .
the benefits from higher sales price realizations were partially offset by increased input costs for energy , chemicals and freight .
entering the first quarter of 2008 , demand for market pulp remains strong , and average sales price realiza- tions should increase slightly .
however , input costs for energy , chemicals and freight are expected to be higher , and increased spending is anticipated for planned mill maintenance outages .
industrial packaging demand for industrial packaging products is closely correlated with non-durable industrial goods pro- duction , as well as with demand for processed foods , poultry , meat and agricultural products .
in addition to prices and volumes , major factors affecting the profitability of industrial packaging are raw material and energy costs , freight costs , manufacturing effi- ciency and product mix .
industrial packaging net sales for 2007 increased 6% ( 6 % ) to $ 5.2 billion compared with $ 4.9 bil- lion in 2006 , and 13% ( 13 % ) compared with $ 4.6 billion in 2005 .
operating profits in 2007 were 26% ( 26 % ) higher than in 2006 and more than double 2005 earnings .
bene- fits from improved price realizations ( $ 147 million ) , sales volume increases net of increased lack of order downtime ( $ 3 million ) , a more favorable mix ( $ 31 million ) , strong mill and converting operations ( $ 33 million ) and other costs ( $ 47 million ) were partially offset by the effects of higher raw material costs ( $ 76 million ) and higher freight costs ( $ 18 million ) .
in addition , a gain of $ 13 million was recognized in 2006 related to a sale of property in spain and costs of $ 52 million were incurred in 2007 related to the conversion of the paper machine at pensacola to production of lightweight linerboard .
the segment took 165000 tons of downtime in 2007 which included 16000 tons of market-related downtime compared with 135000 tons of downtime in 2006 of which none was market-related .
industrial packaging in millions 2007 2006 2005 .

in millions      | 2007   | 2006   | 2005
---------------- | ------ | ------ | ------
sales            | $ 5245 | $ 4925 | $ 4625
operating profit | $ 501  | $ 399  | $ 219

north american industrial packaging net sales for 2007 were $ 3.9 billion , compared with $ 3.7 billion in 2006 and $ 3.6 billion in 2005 .
operating profits in 2007 were $ 407 million , up from $ 327 mil- lion in 2006 and $ 170 million in 2005 .
containerboard shipments were higher in 2007 compared with 2006 , including production from the paper machine at pensacola that was converted to lightweight linerboard during 2007 .
average sales price realizations were significantly higher than in 2006 reflecting price increases announced early in 2006 and in the third quarter of 2007 .
margins improved reflecting stronger export demand .
manu- facturing performance was strong , although costs associated with planned mill maintenance outages were higher due to timing of outages .
raw material costs for wood , energy , chemicals and recycled fiber increased significantly .
operating results for 2007 were also unfavorably impacted by $ 52 million of costs associated with the conversion and startup of the pensacola paper machine .
u.s .
converting sales volumes were slightly lower in 2007 compared with 2006 reflecting softer customer box demand .
earnings improvement in 2007 bene- fited from the realization of box price increases announced in early 2006 and late 2007 .
favorable manufacturing operations and higher sales prices for waste fiber more than offset significantly higher raw material and freight costs .
looking ahead to the first quarter of 2008 , sales volumes are expected to increase slightly , and results should benefit from a full-quarter impact of the price increases announced in the third quarter of 2007 .
however , additional mill maintenance outages are planned for the first quarter , and freight and input costs are expected to rise , particularly for wood and energy .
manufacturing operations should be favorable compared with the fourth quarter .
european industrial packaging net sales for 2007 were $ 1.1 billion , up from $ 1.0 billion in 2006 and $ 880 million in 2005 .
sales volumes were about flat as early stronger demand in the industrial segment weakened in the second half of the year .
operating profits in 2007 were $ 88 million compared with $ 69 million in 2006 and $ 53 million in 2005 .
sales margins improved reflecting increased sales prices for boxes .
conversion costs were favorable as the result of manufacturing improvement programs .
entering the first quarter of 2008 , sales volumes should be strong seasonally across all regions as the winter fruit and vegetable season continues .
profit margins , however , are expected to be somewhat lower.


notes to consolidated financial statements ( continued ) note 2 2014financial instruments ( continued ) covered by collateral , third-party flooring arrangements , or credit insurance are outstanding with the company 2019s distribution and retail channel partners .
one customer accounted for approximately 11% ( 11 % ) of trade receivables as of september 29 , 2007 , while no customers accounted for more than 10% ( 10 % ) of trade receivables as of september 30 , 2006 .
the following table summarizes the activity in the allowance for doubtful accounts ( in millions ) : september 29 , september 30 , september 24 , 2007 2006 2005 .

                              | september 29 2007 | september 30 2006 | september 24 2005
----------------------------- | ----------------- | ----------------- | -----------------
beginning allowance balance   | $ 52              | $ 46              | $ 47
charged to costs and expenses | 12                | 17                | 8
deductions                    | -17 ( 17 )        | -11 ( 11 )        | -9 ( 9 )
ending allowance balance      | $ 47              | $ 52              | $ 46

vendor non-trade receivables the company has non-trade receivables from certain of its manufacturing vendors resulting from the sale of raw material components to these manufacturing vendors who manufacture sub-assemblies or assemble final products for the company .
the company purchases these raw material components directly from suppliers .
these non-trade receivables , which are included in the consolidated balance sheets in other current assets , totaled $ 2.4 billion and $ 1.6 billion as of september 29 , 2007 and september 30 , 2006 , respectively .
the company does not reflect the sale of these components in net sales and does not recognize any profits on these sales until the products are sold through to the end customer at which time the profit is recognized as a reduction of cost of sales .
derivative financial instruments the company uses derivatives to partially offset its business exposure to foreign exchange risk .
foreign currency forward and option contracts are used to offset the foreign exchange risk on certain existing assets and liabilities and to hedge the foreign exchange risk on expected future cash flows on certain forecasted revenue and cost of sales .
the company 2019s accounting policies for these instruments are based on whether the instruments are designated as hedge or non-hedge instruments .
the company records all derivatives on the balance sheet at fair value.