29 annual report 2012 duke realty corporation | | those indirect costs not allocated to or absorbed by these operations are charged to general and administrative expenses .
we regularly review our total overhead cost structure relative to our leasing , development and construction volume and adjust the level of total overhead , generally through changes in our level of staffing in various functional departments , as necessary in order to control overall general and administrative expense .
general and administrative expenses increased from $ 43.1 million in 2011 to $ 46.4 million in 2012 .
the following table sets forth the factors that led to the increase in general and administrative expenses from 2011 to 2012 ( in millions ) : .

general and administrative expenses - 2011                                             | $ 43.1
-------------------------------------------------------------------------------------- | --------------
reduction to overall pool of overhead costs ( 1 )                                      | -11.0 ( 11.0 )
increased absorption of costs by wholly-owned development and leasing activities ( 2 ) | -14.7 ( 14.7 )
reduced allocation of costs to service operations and rental operations ( 3 )          | 29.0
general and administrative expenses - 2012                                             | $ 46.4

( 1 ) we reduced our total pool of overhead costs , through staff reductions and other measures , as the result of changes in our product mix and anticipated future levels of third-party construction , leasing , management and other operational activities .
( 2 ) we increased our focus on development of wholly-owned properties , and also significantly increased our leasing activity during 2012 , which resulted in an increased absorption of overhead costs .
we capitalized $ 30.4 million and $ 20.0 million of our total overhead costs to leasing and development , respectively , for consolidated properties during 2012 , compared to capitalizing $ 25.3 million and $ 10.4 million of such costs , respectively , for 2011 .
combined overhead costs capitalized to leasing and development totaled 31.1% ( 31.1 % ) and 20.6% ( 20.6 % ) of our overall pool of overhead costs for 2012 and 2011 , respectively .
( 3 ) the reduction in the allocation of overhead costs to service operations and rental operations resulted from reduced volumes of third-party construction projects as well as due to reducing our overall investment in office properties , which are more management intensive .
interest expense interest expense allocable to continuing operations increased from $ 220.5 million in 2011 to $ 245.2 million in 2012 .
we had $ 47.4 million of interest expense allocated to discontinued operations in 2011 , associated with the properties that were disposed of during 2011 , compared to the allocation of only $ 3.1 million of interest expense to discontinued operations for 2012 .
total interest expense , combined for continuing and discontinued operations , decreased from $ 267.8 million in 2011 to $ 248.3 million in 2012 .
the reduction in total interest expense was primarily the result of a lower weighted average borrowing rate in 2012 , due to refinancing some higher rate bonds in 2011 and 2012 , as well as a slight decrease in our average level of borrowings compared to 2011 .
also , due to an increase in properties under development from 2011 , which met the criteria for capitalization of interest and were financed in part by common equity issuances during 2012 , a $ 5.0 million increase in capitalized interest also contributed to the decrease in total interest expense in 2012 .
acquisition-related activity during 2012 , we recognized approximately $ 4.2 million in acquisition costs , compared to $ 2.3 million of such costs in 2011 .
the increase from 2011 to 2012 is the result of acquiring a higher volume of medical office properties , where a higher level of acquisition costs are incurred than other property types , in 2012 .
during 2011 , we also recognized a $ 1.1 million gain related to the acquisition of a building from one of our 50%-owned unconsolidated joint ventures .
discontinued operations subject to certain criteria , the results of operations for properties sold during the year to unrelated parties , or classified as held-for-sale at the end of the period , are required to be classified as discontinued operations .
the property specific components of earnings that are classified as discontinued operations include rental revenues , rental expenses , real estate taxes , allocated interest expense and depreciation expense , as well as the net gain or loss on the disposition of properties .
the operations of 150 buildings are currently classified as discontinued operations .
these 150 buildings consist of 114 office , 30 industrial , four retail , and two medical office properties .
as a result , we classified operating losses , before gain on sales , of $ 1.5 million , $ 1.8 million and $ 7.1 million in discontinued operations for the years ended december 31 , 2012 , 2011 and 2010 , respectively .
of these properties , 28 were sold during 2012 , 101 properties were sold during 2011 and 19 properties were sold during 2010 .
the gains on disposal of these properties of $ 13.5 million , $ 100.9 million and $ 33.1 million for the years ended december 31 , 2012 , 2011 and


our international networks segment also owns and operates the following regional television networks , which reached the following number of subscribers and viewers via pay and fta or broadcast networks , respectively , as of december 31 , 2017 : television service international subscribers/viewers ( millions ) .

                                | television service | internationalsubscribers/viewers ( millions )
------------------------------- | ------------------ | ---------------------------------------------
quest                           | fta                | 66
dsport                          | fta                | 43
nordic broadcast networks ( a ) | broadcast          | 34
quest red                       | fta                | 27
giallo                          | fta                | 25
frisbee                         | fta                | 25
focus                           | fta                | 25
k2                              | fta                | 25
nove                            | fta                | 25
discovery hd world              | pay                | 17
dkiss                           | pay                | 15
shed                            | pay                | 12
discovery hd theater            | pay                | 11
discovery history               | pay                | 10
discovery civilization          | pay                | 8
discovery world                 | pay                | 6
discovery en espanol ( u.s. )   | pay                | 6
discovery familia ( u.s. )      | pay                | 6
discovery historia              | pay                | 6

( a ) number of subscribers corresponds to the sum of the subscribers to each of the nordic broadcast networks in sweden , norway , finland and denmark subject to retransmission agreements with pay-tv providers .
the nordic broadcast networks include kanal 5 , kanal 9 , and kanal 11 in sweden , tv norge , max , fem and vox in norway , tv 5 , kutonen , and frii in finland , and kanal 4 , kanal 5 , 6'eren , and canal 9 in denmark .
similar to u.s .
networks , a significant source of revenue for international networks relates to fees charged to operators who distribute our linear networks .
such operators primarily include cable and dth satellite service providers , internet protocol television ( "iptv" ) and over-the-top operators ( "ott" ) .
international television markets vary in their stages of development .
some markets , such as the u.k. , are more advanced digital television markets , while others remain in the analog environment with varying degrees of investment from operators to expand channel capacity or convert to digital technologies .
common practice in international markets results in long-term contractual distribution relationships with terms generally shorter than similar customers in the u.s .
distribution revenue for our international networks segment is largely dependent on the number of subscribers that receive our networks or content , the rates negotiated in the distributor agreements , and the market demand for the content that we provide .
the other significant source of revenue for international networks relates to advertising sold on our television networks and across other distribution platforms , similar to u.s .
networks .
advertising revenue is dependent upon a number of factors , including the development of pay and fta television markets , the number of subscribers to and viewers of our channels , viewership demographics , the popularity of our programming , and our ability to sell commercial time over all media platforms .
in certain markets , our advertising sales business operates with in-house sales teams , while we rely on external sales representation services in other markets .
during 2017 , distribution , advertising and other revenues were 57% ( 57 % ) , 41% ( 41 % ) and 2% ( 2 % ) , respectively , of total net revenues for this segment .
while the company has traditionally operated cable networks , in recent years an increasing portion of the company's international advertising revenue is generated by fta or broadcast networks , unlike u.s .
networks .
during 2017 , fta or broadcast networks generated 54% ( 54 % ) of international networks' advertising revenue and pay-tv networks generated 46% ( 46 % ) of international networks' advertising revenue .
international networks' largest cost is content expense for localized programming disseminated via more than 400 unique distribution feeds .
while our international networks segment maximizes the use of programming from u.s .
networks , we also develop local programming that is tailored to individual market preferences and license the rights to air films , television series and sporting events from third parties .
international networks amortizes the cost of capitalized content rights based on the proportion of current estimated revenues relative to the estimated remaining total lifetime revenues , which results in either an accelerated method or a straight-line method over the estimated useful lives of the content of up to five years .
content acquired from u.s .
networks and content developed locally airing on the same network is amortized similarly , as amortization rates vary by network .
more than half of international networks' content is amortized using an accelerated amortization method , while the remainder is amortized on a straight-line basis .
the costs for multi-year sports programming arrangements are expensed when the event is broadcast based on the estimated relative value of each component of the arrangement .
while international networks and u.s .
networks have similarities with respect to the nature of operations , the generation of revenue and the categories of expense , international networks have a lower segment margin due to lower economies of scale from being in over 220 markets requiring additional cost for localization to satisfy market variations .
international networks also include sports and fta broadcast channels , which drive higher costs from sports rights and production and investment in broad entertainment programming for broadcast networks .
on june 23 , 2016 , the u.k .
held a referendum in which voters approved an exit from the european union ( 201ce.u . 201d ) , commonly referred to as 201cbrexit . 201d after a preliminary phase of negotiations towards the end of 2017 , the u.k .
government and the e.u .
will in 2018 negotiate the main principles of the u.k . 2019s future relationship with the e.u. , as well as a transitional period .
brexit may have an adverse impact on advertising , subscribers , distributors and employees , as described in item 1a , risk factors , below .
we continue to monitor the situation and plan for potential effects to our distribution and licensing agreements , unusual foreign currency exchange rate fluctuations , and changes to the legal and regulatory landscape .
education and other education and other generated revenues of $ 158 million during 2017 , which represented 2% ( 2 % ) of our total consolidated revenues .
education is comprised of curriculum-based product and service offerings and generates revenues primarily from subscriptions charged to k-12 schools for access to an online suite of curriculum-based vod tools , professional development services , digital textbooks and , to a lesser extent , student assessments and publication of hard copy curriculum-based content .
other is comprised of our wholly-owned production studio , which provides services to our u.s .
networks and international networks segments at cost .
on february 26 , 2018 , the company announced the planned sale of a controlling equity stake in its education business in the first half of 2018 , to francisco partners for cash of $ 120 million .
no loss is expected upon sale .
the company will retain an equity interest .
additionally , the company will have ongoing license agreements which are considered to be at fair value .
as of december 31 , 2017 , the company determined that the education business did not meet the held for sale criteria , as defined in gaap as management had not committed to a plan to sell the assets .
on april 28 , 2017 , the company sold raw and betty to all3media .
all3media is a u.k .
based television , film and digital production and distribution company .
the company owns 50% ( 50 % ) of all3media and accounts for its investment in all3media under the equity method of accounting .
raw and betty were components of the studios operating segment reported with education and other .
on november 12 , 2015 , we paid $ 195 million to acquire 5 million shares , or approximately 3% ( 3 % ) , of lions gate entertainment corp .
( "lionsgate" ) , an entertainment company involved in the production of movies and television which is accounted for as an available-for-sale ( "afs" ) security .
during 2016 , we determined that the decline in value of our investment in lionsgate is other- than-temporary in nature and , as such , the cost basis was adjusted to the fair value of the investment as of september 30 , 2016 .
( see note 4 to the accompanying consolidated financial statements. ) content development our content development strategy is designed to increase viewership , maintain innovation and quality leadership , and provide value for our network distributors and advertising customers .
our content is sourced from a wide range of third-party producers , which include some of the world 2019s leading nonfiction production companies , as well as independent producers and wholly-owned production studios .
our production arrangements fall into three categories : produced , coproduced and licensed .
produced content includes content that we engage third parties or wholly owned production studios to develop and produce .
we retain editorial control and own most or all of the rights , in exchange for paying all development and production costs .
production of digital-first content such as virtual reality and short-form video is typically done through wholly-owned production studios .
coproduced content refers to program rights on which we have collaborated with third parties to finance and develop either because at times world-wide rights are not available for acquisition or we save costs by collaborating with third parties .
licensed content is comprised of films or


discussion and analysis of financial condition and results of operations 2014liquidity and capital resources 2014 factors affecting sources of liquidity . 201d recent sales of unregistered securities during the year ended december 31 , 2005 , we issued an aggregate of 4670335 shares of our class a common stock upon conversion of $ 57.1 million principal amount of our 3.25% ( 3.25 % ) notes .
pursuant to the terms of the indenture , the holders of the 3.25% ( 3.25 % ) notes received 81.808 shares of class a common stock for every $ 1000 principal amount of notes converted .
the shares were issued to the noteholders in reliance on the exemption from registration set forth in section 3 ( a ) ( 9 ) of the securities act of 1933 , as amended .
no underwriters were engaged in connection with such issuances .
in connection with the conversion , we paid such holders an aggregate of $ 4.9 million , calculated based on the accrued and unpaid interest on the notes and the discounted value of the future interest payments on the notes .
subsequent to december 31 , 2005 , we issued shares of class a common stock upon conversions of additional 3.25% ( 3.25 % ) notes , as set forth in item 9b of this annual report under the caption 201cother information . 201d during the year ended december 31 , 2005 , we issued an aggregate of 398412 shares of our class a common stock upon exercises of 55729 warrants assumed in our merger with spectrasite , inc .
in august 2005 , in connection with our merger with spectrasite , inc. , we assumed approximately 1.0 million warrants to purchase shares of spectrasite , inc .
common stock .
upon completion of the merger , each warrant to purchase shares of spectrasite , inc .
common stock automatically converted into a warrant to purchase 7.15 shares of class a common stock at an exercise price of $ 32 per warrant .
net proceeds from these warrant exercises were approximately $ 1.8 million .
the shares of class a common stock issued to the warrantholders upon exercise of the warrants were issued in reliance on the exemption from registration set forth in section 3 ( a ) ( 9 ) of the securities act of 1933 , as amended .
no underwriters were engaged in connection with such issuances .
subsequent to december 31 , 2005 , we issued shares of class a common stock upon exercises of additional warrants , as set forth in item 9b of this annual report under the caption 201cother information . 201d issuer purchases of equity securities in november 2005 , we announced that our board of directors had approved a stock repurchase program pursuant to which we intend to repurchase up to $ 750.0 million of our class a common stock through december 2006 .
during the fourth quarter of 2005 , we repurchased 2836519 shares of our class a common stock for an aggregate of $ 76.6 million pursuant to our stock repurchase program , as follows : period total number of shares purchased ( 1 ) average price paid per share total number of shares purchased as part of publicly announced plans or programs ( 1 ) approximate dollar value of shares that may yet be purchased under the plans or programs ( in millions ) .

period                 | total number of shares purchased ( 1 ) | average price paid per share | total number of shares purchased as part of publicly announced plans or programs ( 1 ) | approximate dollar value of shares that may yet be purchased under the plans or programs ( in millions )
---------------------- | -------------------------------------- | ---------------------------- | -------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------
11/17/05 2013 11/30/05 | 874306                                 | $ 26.25                      | 874306                                                                                | $ 727.0
12/1/05 2013 12/31/05  | 1962213                                | $ 27.29                      | 1962213                                                                                | $ 673.4
total fourth quarter   | 2836519                                | $ 26.97                      | 2836519                                                                                | $ 673.4

( 1 ) all issuer repurchases were made pursuant to the stock repurchase program publicly announced in november 2005 .
pursuant to the program , we intend to repurchase up to $ 750.0 million of our class a common stock during the period november 2005 through december 2006 .
under the program , our management is authorized to purchase shares from time to time in open market purchases or privately negotiated transactions at prevailing prices as permitted by securities laws and other legal requirements , and subject to market conditions and other factors .
to facilitate repurchases , we entered into a trading plan under rule 10b5-1 of the securities exchange act of 1934 , which allows us to repurchase shares during periods when we otherwise might be prevented from doing so under insider trading laws or because of self- imposed trading blackout periods .
the program may be discontinued at any time .
since december 31 , 2005 , we have continued to repurchase shares of our class a common stock pursuant to our stock repurchase program .
between january 1 , 2006 and march 9 , 2006 , we repurchased 3.9 million shares of class a common stock for an aggregate of $ 117.4 million pursuant to the stock repurchase program.


guarantees to third parties .
we have , however , issued guar- antees and comfort letters of $ 171 million for the debt and other obligations of unconsolidated affiliates , primarily for cpw .
in addition , off-balance sheet arrangements are gener- ally limited to the future payments under noncancelable operating leases , which totaled $ 408 million at may 28 , at may 28 , 2006 , we had invested in four variable interest entities ( vies ) .
we are the primary beneficiary ( pb ) of general mills capital , inc .
( gm capital ) , a subsidiary that we consolidate as set forth in note eight to the consoli- dated financial statements appearing on pages 43 and 44 in item eight of this report .
we also have an interest in a contract manufacturer at our former facility in geneva , illi- nois .
even though we are the pb , we have not consolidated this entity because it is not material to our results of oper- ations , financial condition , or liquidity at may 28 , 2006 .
this entity had property and equipment of $ 50 million and long-term debt of $ 50 million at may 28 , 2006 .
we are not the pb of the remaining two vies .
our maximum exposure to loss from these vies is limited to the $ 150 million minority interest in gm capital , the contract manufactur- er 2019s debt and our $ 6 million of equity investments in the two remaining vies .
the following table summarizes our future estimated cash payments under existing contractual obligations , including payments due by period .
the majority of the purchase obligations represent commitments for raw mate- rial and packaging to be utilized in the normal course of business and for consumer-directed marketing commit- ments that support our brands .
the net fair value of our interest rate and equity swaps was $ 159 million at may 28 , 2006 , based on market values as of that date .
future changes in market values will impact the amount of cash ultimately paid or received to settle those instruments in the future .
other long-term obligations primarily consist of income taxes , accrued compensation and benefits , and miscella- neous liabilities .
we are unable to estimate the timing of the payments for these items .
we do not have significant statutory or contractual funding requirements for our defined-benefit retirement and other postretirement benefit plans .
further information on these plans , including our expected contributions for fiscal 2007 , is set forth in note thirteen to the consolidated financial statements appearing on pages 47 through 50 in item eight of this report .
in millions , payments due by fiscal year total 2007 2008-09 2010-11 2012 and thereafter .

in millionspayments dueby fiscal year | total  | 2007   | 2008-09 | 2010-11 | 2012 andthereafter
------------------------------------- | ------ | ------ | ------- | ------- | ------------------
long-term debt                        | $ 4546 | $ 2131 | $ 971   | $ 55    | $ 1389
accrued interest                      | 152    | 152    | 2013    | 2013    | 2013
operating leases                      | 408    | 92     | 142     | 89      | 85
purchaseobligations                   | 2351   | 2068   | 144     | 75      | 64
total                                 | $ 7457 | $ 4443 | $ 1257  | $ 219   | $ 1538

significant accounting estimates for a complete description of our significant accounting policies , please see note one to the consolidated financial statements appearing on pages 35 through 37 in item eight of this report .
our significant accounting estimates are those that have meaningful impact on the reporting of our financial condition and results of operations .
these poli- cies include our accounting for trade and consumer promotion activities ; goodwill and other intangible asset impairments ; income taxes ; and pension and other postretirement benefits .
trade and consumer promotion activities we report sales net of certain coupon and trade promotion costs .
the consumer coupon costs recorded as a reduction of sales are based on the estimated redemption value of those coupons , as determined by historical patterns of coupon redemption and consideration of current market conditions such as competitive activity in those product categories .
the trade promotion costs include payments to customers to perform merchandising activities on our behalf , such as advertising or in-store displays , discounts to our list prices to lower retail shelf prices , and payments to gain distribution of new products .
the cost of these activi- ties is recognized as the related revenue is recorded , which generally precedes the actual cash expenditure .
the recog- nition of these costs requires estimation of customer participation and performance levels .
these estimates are made based on the quantity of customer sales , the timing and forecasted costs of promotional activities , and other factors .
differences between estimated expenses and actual costs are normally insignificant and are recognized as a change in management estimate in a subsequent period .
our accrued trade and consumer promotion liability was $ 339 million as of may 28 , 2006 , and $ 283 million as of may 29 , 2005 .
our unit volume in the last week of each quarter is consis- tently higher than the average for the preceding weeks of the quarter .
in comparison to the average daily shipments in the first 12 weeks of a quarter , the final week of each quarter has approximately two to four days 2019 worth of incre- mental shipments ( based on a five-day week ) , reflecting increased promotional activity at the end of the quarter .
this increased activity includes promotions to assure that our customers have sufficient inventory on hand to support major marketing events or increased seasonal demand early in the next quarter , as well as promotions intended to help achieve interim unit volume targets .
if , due to quarter-end promotions or other reasons , our customers purchase more product in any reporting period than end-consumer demand will require in future periods , our sales level in future reporting periods could be adversely affected.


five-year performance comparison 2013 the following graph provides an indicator of cumulative total shareholder returns for the corporation as compared to the peer group index ( described above ) , the dj trans , and the s&p 500 .
the graph assumes that $ 100 was invested in the common stock of union pacific corporation and each index on december 31 , 2012 and that all dividends were reinvested .
the information below is historical in nature and is not necessarily indicative of future performance .
purchases of equity securities 2013 during 2017 , we repurchased 37122405 shares of our common stock at an average price of $ 110.50 .
the following table presents common stock repurchases during each month for the fourth quarter of 2017 : period total number of shares purchased [a] average price paid per share total number of shares purchased as part of a publicly announced plan or program [b] maximum number of shares remaining under the plan or program [b] .

period                   | total number of shares purchased [a] | average price paid per share | total number of shares purchased as part of a publicly announcedplan or program [b] | maximum number of shares remaining under the plan or program [b]
------------------------ | ------------------------------------ | ---------------------------- | ----------------------------------------------------------------------------------- | ----------------------------------------------------------------
oct . 1 through oct . 31 | 3831636                              | $ 113.61                     | 3800000                                                                             | 89078662
nov . 1 through nov . 30 | 3005225                              | 117.07                       | 2937410                                                                             | 86141252
dec . 1 through dec . 31 | 2718319                              | 130.76                       | 2494100                                                                             | 83647152
total                    | 9555180                              | $ 119.58                     | 9231510                                                                             | n/a

[a] total number of shares purchased during the quarter includes approximately 323670 shares delivered or attested to upc by employees to pay stock option exercise prices , satisfy excess tax withholding obligations for stock option exercises or vesting of retention units , and pay withholding obligations for vesting of retention shares .
[b] effective january 1 , 2017 , our board of directors authorized the repurchase of up to 120 million shares of our common stock by december 31 , 2020 .
these repurchases may be made on the open market or through other transactions .
our management has sole discretion with respect to determining the timing and amount of these transactions.


disclosure of , the issuance of certain types of guarantees .
the adoption of fasb interpretation no .
45 did not have a signif- icant impact on the net income or equity of the company .
in january 2003 , fasb interpretation no .
46 , 201cconsolidation of variable interest entities , an interpretation of arb 51 , 201d was issued .
the primary objectives of this interpretation , as amended , are to provide guidance on the identification and consolidation of variable interest entities , or vies , which are entities for which control is achieved through means other than through voting rights .
the company has completed an analysis of this interpretation and has determined that it does not have any vies .
4 .
acquisitions family health plan , inc .
effective january 1 , 2004 , the company commenced opera- tions in ohio through the acquisition from family health plan , inc .
of certain medicaid-related assets for a purchase price of approximately $ 6800 .
the cost to acquire the medicaid-related assets will be allocated to the assets acquired and liabilities assumed according to estimated fair values .
hmo blue texas effective august 1 , 2003 , the company acquired certain medicaid-related contract rights of hmo blue texas in the san antonio , texas market for $ 1045 .
the purchase price was allocated to acquired contracts , which are being amor- tized on a straight-line basis over a period of five years , the expected period of benefit .
group practice affiliates during 2003 , the company acquired a 100% ( 100 % ) ownership interest in group practice affiliates , llc , a behavioral healthcare services company ( 63.7% ( 63.7 % ) in march 2003 and 36.3% ( 36.3 % ) in august 2003 ) .
the consolidated financial state- ments include the results of operations of gpa since march 1 , 2003 .
the company paid $ 1800 for its purchase of gpa .
the cost to acquire the ownership interest has been allocated to the assets acquired and liabilities assumed according to estimated fair values and is subject to adjustment when additional information concerning asset and liability valuations are finalized .
the preliminary allocation has resulted in goodwill of approximately $ 3895 .
the goodwill is not amortized and is not deductible for tax purposes .
pro forma disclosures related to the acquisition have been excluded as immaterial .
scriptassist in march 2003 , the company purchased contract and name rights of scriptassist , llc ( scriptassist ) , a medication com- pliance company .
the purchase price of $ 563 was allocated to acquired contracts , which are being amortized on a straight-line basis over a period of five years , the expected period of benefit .
the investor group who held membership interests in scriptassist included one of the company 2019s executive officers .
university health plans , inc .
on december 1 , 2002 , the company purchased 80% ( 80 % ) of the outstanding capital stock of university health plans , inc .
( uhp ) in new jersey .
in october 2003 , the company exercised its option to purchase the remaining 20% ( 20 % ) of the outstanding capital stock .
centene paid a total purchase price of $ 13258 .
the results of operations for uhp are included in the consolidated financial statements since december 1 , 2002 .
the acquisition of uhp resulted in identified intangible assets of $ 3800 , representing purchased contract rights and provider network .
the intangibles are being amortized over a ten-year period .
goodwill of $ 7940 is not amortized and is not deductible for tax purposes .
changes during 2003 to the preliminary purchase price allocation primarily consisted of the purchase of the remaining 20% ( 20 % ) of the outstanding stock and the recognition of intangible assets and related deferred tax liabilities .
the following unaudited pro forma information presents the results of operations of centene and subsidiaries as if the uhp acquisition described above had occurred as of january 1 , 2001 .
these pro forma results may not necessar- ily reflect the actual results of operations that would have been achieved , nor are they necessarily indicative of future results of operations. .

                                  | 2002     | 2001
--------------------------------- | -------- | --------
revenue                           | $ 567048 | $ 395155
net earnings                      | 25869    | 11573
diluted earnings per common share | 1.48     | 1.00

diluted earnings per common share 1.48 1.00 texas universities health plan in june 2002 , the company purchased schip contracts in three texas service areas .
the cash purchase price of $ 595 was recorded as purchased contract rights , which are being amortized on a straight-line basis over five years , the expected period of benefit .
bankers reserve in march 2002 , the company acquired bankers reserve life insurance company of wisconsin for a cash purchase price of $ 3527 .
the company allocated the purchase price to net tangible and identifiable intangible assets based on their fair value .
centene allocated $ 479 to identifiable intangible assets , representing the value assigned to acquired licenses , which are being amortized on a straight-line basis over a notes to consolidated financial statements ( continued ) centene corporation and subsidiaries


table of contents valero energy corporation and subsidiaries notes to consolidated financial statements ( continued ) commodity price risk we are exposed to market risks related to the volatility in the price of crude oil , refined products ( primarily gasoline and distillate ) , grain ( primarily corn ) , and natural gas used in our operations .
to reduce the impact of price volatility on our results of operations and cash flows , we use commodity derivative instruments , including futures , swaps , and options .
we use the futures markets for the available liquidity , which provides greater flexibility in transacting our hedging and trading operations .
we use swaps primarily to manage our price exposure .
our positions in commodity derivative instruments are monitored and managed on a daily basis by a risk control group to ensure compliance with our stated risk management policy that has been approved by our board of directors .
for risk management purposes , we use fair value hedges , cash flow hedges , and economic hedges .
in addition to the use of derivative instruments to manage commodity price risk , we also enter into certain commodity derivative instruments for trading purposes .
our objective for entering into each type of hedge or trading derivative is described below .
fair value hedges fair value hedges are used to hedge price volatility in certain refining inventories and firm commitments to purchase inventories .
the level of activity for our fair value hedges is based on the level of our operating inventories , and generally represents the amount by which our inventories differ from our previous year-end lifo inventory levels .
as of december 31 , 2012 , we had the following outstanding commodity derivative instruments that were entered into to hedge crude oil and refined product inventories and commodity derivative instruments related to the physical purchase of crude oil and refined products at a fixed price .
the information presents the notional volume of outstanding contracts by type of instrument and year of maturity ( volumes in thousands of barrels ) .
notional contract volumes by year of maturity derivative instrument 2013 .

derivative instrument           | notionalcontractvolumes byyear ofmaturity 2013
------------------------------- | ----------------------------------------------
crude oil and refined products: |
futures 2013 long               | 1052
futures 2013 short              | 4857
physical contracts - long       | 3805


mandatorily redeemable securities of subsidiary trusts total mandatorily redeemable securities of subsidiary trusts ( trust preferred securities ) , which qualify as tier 1 capital , were $ 23.899 billion at december 31 , 2008 , as compared to $ 23.594 billion at december 31 , 2007 .
in 2008 , citigroup did not issue any new enhanced trust preferred securities .
the frb issued a final rule , with an effective date of april 11 , 2005 , which retains trust preferred securities in tier 1 capital of bank holding companies , but with stricter quantitative limits and clearer qualitative standards .
under the rule , after a five-year transition period , the aggregate amount of trust preferred securities and certain other restricted core capital elements included in tier 1 capital of internationally active banking organizations , such as citigroup , would be limited to 15% ( 15 % ) of total core capital elements , net of goodwill , less any associated deferred tax liability .
the amount of trust preferred securities and certain other elements in excess of the limit could be included in tier 2 capital , subject to restrictions .
at december 31 , 2008 , citigroup had approximately 11.8% ( 11.8 % ) against the limit .
the company expects to be within restricted core capital limits prior to the implementation date of march 31 , 2009 .
the frb permits additional securities , such as the equity units sold to adia , to be included in tier 1 capital up to 25% ( 25 % ) ( including the restricted core capital elements in the 15% ( 15 % ) limit ) of total core capital elements , net of goodwill less any associated deferred tax liability .
at december 31 , 2008 , citigroup had approximately 16.1% ( 16.1 % ) against the limit .
the frb granted interim capital relief for the impact of adopting sfas 158 at december 31 , 2008 and december 31 , 2007 .
the frb and the ffiec may propose amendments to , and issue interpretations of , risk-based capital guidelines and reporting instructions .
these may affect reported capital ratios and net risk-weighted assets .
capital resources of citigroup 2019s depository institutions citigroup 2019s subsidiary depository institutions in the united states are subject to risk-based capital guidelines issued by their respective primary federal bank regulatory agencies , which are similar to the frb 2019s guidelines .
to be 201cwell capitalized 201d under federal bank regulatory agency definitions , citigroup 2019s depository institutions must have a tier 1 capital ratio of at least 6% ( 6 % ) , a total capital ( tier 1 + tier 2 capital ) ratio of at least 10% ( 10 % ) and a leverage ratio of at least 5% ( 5 % ) , and not be subject to a regulatory directive to meet and maintain higher capital levels .
at december 31 , 2008 , all of citigroup 2019s subsidiary depository institutions were 201cwell capitalized 201d under the federal regulatory agencies 2019 definitions , including citigroup 2019s primary depository institution , citibank , n.a. , as noted in the following table : citibank , n.a .
components of capital and ratios under regulatory guidelines in billions of dollars at year end 2008 2007 .

in billions of dollars at year end        | 2008             | 2007
----------------------------------------- | ---------------- | ----------------
tier 1 capital                            | $ 71.0           | $ 82.0
total capital ( tier 1 and tier 2 )       | 108.4            | 121.6
tier 1 capital ratio                      | 9.94% ( 9.94 % ) | 8.98% ( 8.98 % )
total capital ratio ( tier 1 and tier 2 ) | 15.18            | 13.33
leverage ratio ( 1 )                      | 5.82             | 6.65

leverage ratio ( 1 ) 5.82 6.65 ( 1 ) tier 1 capital divided by adjusted average assets .
citibank , n.a .
had a net loss for 2008 amounting to $ 6.2 billion .
during 2008 , citibank , n.a .
received contributions from its parent company of $ 6.1 billion .
citibank , n.a .
did not issue any additional subordinated notes in 2008 .
total subordinated notes issued to citicorp holdings inc .
that were outstanding at december 31 , 2008 and december 31 , 2007 and included in citibank , n.a . 2019s tier 2 capital , amounted to $ 28.2 billion .
citibank , n.a .
received an additional $ 14.3 billion in capital contribution from its parent company in january 2009 .
the impact of this contribution is not reflected in the table above .
the substantial events in 2008 impacting the capital of citigroup , and the potential future events discussed on page 94 under 201ccitigroup regulatory capital ratios , 201d also affected , or could affect , citibank , n.a.


table of contents adobe inc .
notes to consolidated financial statements ( continued ) certain states and foreign jurisdictions to fully utilize available tax credits and other attributes .
the deferred tax assets are offset by a valuation allowance to the extent it is more likely than not that they are not expected to be realized .
we provide u.s .
income taxes on the earnings of foreign subsidiaries unless the subsidiaries 2019 earnings are considered permanently reinvested outside the united states or are exempted from taxation as a result of the new territorial tax system .
to the extent that the foreign earnings previously treated as permanently reinvested are repatriated , the related u.s .
tax liability may be reduced by any foreign income taxes paid on these earnings .
as of november 30 , 2018 , the cumulative amount of earnings upon which u.s .
income taxes have not been provided is approximately $ 275 million .
the unrecognized deferred tax liability for these earnings is approximately $ 57.8 million .
as of november 30 , 2018 , we have net operating loss carryforwards of approximately $ 881.1 million for federal and $ 349.7 million for state .
we also have federal , state and foreign tax credit carryforwards of approximately $ 8.8 million , $ 189.9 million and $ 14.9 million , respectively .
the net operating loss carryforward assets and tax credits will expire in various years from fiscal 2019 through 2036 .
the state tax credit carryforwards and a portion of the federal net operating loss carryforwards can be carried forward indefinitely .
the net operating loss carryforward assets and certain credits are reduced by the valuation allowance and are subject to an annual limitation under internal revenue code section 382 , the carrying amount of which are expected to be fully realized .
as of november 30 , 2018 , a valuation allowance of $ 174.5 million has been established for certain deferred tax assets related to certain state and foreign assets .
for fiscal 2018 , the total change in the valuation allowance was $ 80.9 million .
accounting for uncertainty in income taxes during fiscal 2018 and 2017 , our aggregate changes in our total gross amount of unrecognized tax benefits are summarized as follows ( in thousands ) : .

                                                                             | 2018             | 2017
---------------------------------------------------------------------------- | ---------------- | ----------------
beginning balance                                                            | $ 172945         | $ 178413
gross increases in unrecognized tax benefits 2013 prior year tax positions   | 16191            | 3680
gross decreases in unrecognized tax benefits 2013 prior year tax positions   | -4000 ( 4000 )   | -30166 ( 30166 )
gross increases in unrecognized tax benefits 2013 current year tax positions | 60721            | 24927
settlements with taxing authorities                                          | 2014             | -3876 ( 3876 )
lapse of statute of limitations                                              | -45922 ( 45922 ) | -8819 ( 8819 )
foreign exchange gains and losses                                            | -3783 ( 3783 )   | 8786
ending balance                                                               | $ 196152         | $ 172945

the combined amount of accrued interest and penalties related to tax positions taken on our tax returns were approximately $ 24.6 million and $ 23.6 million for fiscal 2018 and 2017 , respectively .
these amounts were included in long-term income taxes payable in their respective years .
we file income tax returns in the united states on a federal basis and in many u.s .
state and foreign jurisdictions .
we are subject to the continual examination of our income tax returns by the irs and other domestic and foreign tax authorities .
our major tax jurisdictions are ireland , california and the united states .
for ireland , california and the united states , the earliest fiscal years open for examination are 2008 , 2014 and 2015 , respectively .
we regularly assess the likelihood of outcomes resulting from these examinations to determine the adequacy of our provision for income taxes and have reserved for potential adjustments that may result from these examinations .
we believe such estimates to be reasonable ; however , there can be no assurance that the final determination of any of these examinations will not have an adverse effect on our operating results and financial position .
the timing of the resolution of income tax examinations is highly uncertain as are the amounts and timing of tax payments that are part of any audit settlement process .
these events could cause large fluctuations in the balance of short-term and long- term assets , liabilities and income taxes payable .
we believe that within the next 12 months , it is reasonably possible that either certain audits will conclude or statutes of limitations on certain income tax examination periods will expire , or both .
given the uncertainties described above , we can only determine a range of estimated potential effect in underlying unrecognized tax benefits ranging from $ 0 to approximately $ 45 million.


transfer agent and registrar for common stock the transfer agent and registrar for our common stock is : computershare shareowner services llc 480 washington boulevard 29th floor jersey city , new jersey 07310 telephone : ( 877 ) 363-6398 sales of unregistered securities not applicable .
repurchase of equity securities the following table provides information regarding our purchases of our equity securities during the period from october 1 , 2015 to december 31 , 2015 .
total number of shares ( or units ) purchased 1 average price paid per share ( or unit ) 2 total number of shares ( or units ) purchased as part of publicly announced plans or programs 3 maximum number ( or approximate dollar value ) of shares ( or units ) that may yet be purchased under the plans or programs 3 .

                | total number ofshares ( or units ) purchased1 | average price paidper share ( or unit ) 2 | total number ofshares ( or units ) purchased as part ofpublicly announcedplans or programs3 | maximum number ( or approximate dollar value ) of shares ( or units ) that may yet be purchased under the plans or programs3
--------------- | --------------------------------------------- | ----------------------------------------- | ------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------
october 1 - 31  | 2140511                                       | $ 20.54                                   | 2139507                                                                                | $ 227368014
november 1 - 30 | 1126378                                       | $ 22.95                                   | 1124601                                                                                | $ 201557625
december 1 - 31 | 1881992                                       | $ 22.97                                   | 1872650                                                                                | $ 158553178
total           | 5148881                                       | $ 21.96                                   | 5136758                                                                                |

1 included shares of our common stock , par value $ 0.10 per share , withheld under the terms of grants under employee stock-based compensation plans to offset tax withholding obligations that occurred upon vesting and release of restricted shares ( the 201cwithheld shares 201d ) .
we repurchased 1004 withheld shares in october 2015 , 1777 withheld shares in november 2015 and 9342 withheld shares in december 2015 .
2 the average price per share for each of the months in the fiscal quarter and for the three-month period was calculated by dividing the sum of the applicable period of the aggregate value of the tax withholding obligations and the aggregate amount we paid for shares acquired under our stock repurchase program , described in note 5 to the consolidated financial statements , by the sum of the number of withheld shares and the number of shares acquired in our stock repurchase program .
3 in february 2015 , the board authorized a share repurchase program to repurchase from time to time up to $ 300.0 million , excluding fees , of our common stock ( the 201c2015 share repurchase program 201d ) .
on february 12 , 2016 , we announced that our board had approved a new share repurchase program to repurchase from time to time up to $ 300.0 million , excluding fees , of our common stock .
the new authorization is in addition to any amounts remaining for repurchase under the 2015 share repurchase program .
there is no expiration date associated with the share repurchase programs.


entergy texas , inc .
and subsidiaries management 2019s financial discussion and analysis in addition to the contractual obligations given above , entergy texas expects to contribute approximately $ 17 million to its qualified pension plans and approximately $ 3.2 million to other postretirement health care and life insurance plans in 2017 , although the 2017 required pension contributions will be known with more certainty when the january 1 , 2017 valuations are completed , which is expected by april 1 , 2017 .
see 201ccritical accounting estimates - qualified pension and other postretirement benefits 201d below for a discussion of qualified pension and other postretirement benefits funding .
also in addition to the contractual obligations , entergy texas has $ 15.6 million of unrecognized tax benefits and interest net of unused tax attributes and payments for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties in the timing of effective settlement of tax positions .
see note 3 to the financial statements for additional information regarding unrecognized tax benefits .
in addition to routine capital spending to maintain operations , the planned capital investment estimate for entergy texas includes specific investments such as the montgomery county power station discussed below ; transmission projects to enhance reliability , reduce congestion , and enable economic growth ; distribution spending to enhance reliability and improve service to customers , including initial investment to support advanced metering ; system improvements ; and other investments .
estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements , environmental compliance , business opportunities , market volatility , economic trends , business restructuring , changes in project plans , and the ability to access capital .
management provides more information on long-term debt in note 5 to the financial statements .
as discussed above in 201ccapital structure , 201d entergy texas routinely evaluates its ability to pay dividends to entergy corporation from its earnings .
sources of capital entergy texas 2019s sources to meet its capital requirements include : 2022 internally generated funds ; 2022 cash on hand ; 2022 debt or preferred stock issuances ; and 2022 bank financing under new or existing facilities .
entergy texas may refinance , redeem , or otherwise retire debt prior to maturity , to the extent market conditions and interest and dividend rates are favorable .
all debt and common and preferred stock issuances by entergy texas require prior regulatory approval .
debt issuances are also subject to issuance tests set forth in its bond indenture and other agreements .
entergy texas has sufficient capacity under these tests to meet its foreseeable capital needs .
entergy texas 2019s receivables from or ( payables to ) the money pool were as follows as of december 31 for each of the following years. .

2016             | 2015             | 2014             | 2013
---------------- | ---------------- | ---------------- | ----------------
( in thousands ) | ( in thousands ) | ( in thousands ) | ( in thousands )
$ 681            | ( $ 22068 )      | $ 306            | $ 6287

see note 4 to the financial statements for a description of the money pool .
entergy texas has a credit facility in the amount of $ 150 million scheduled to expire in august 2021 .
the credit facility allows entergy texas to issue letters of credit against 50% ( 50 % ) of the borrowing capacity of the facility .
as of december 31 , 2016 , there were no cash borrowings and $ 4.7 million of letters of credit outstanding under the credit facility .
in addition , entergy texas is a party to an uncommitted letter of credit facility as a means to post collateral


increased by $ 105.6 million , or 3.4% ( 3.4 % ) , from 2006 to 2007 .
the following table reflects the components of our revenue growth for the years ended december 31 , 2008 , 2007 and 2006: .

                                       | 2008             | 2007           | 2006
-------------------------------------- | ---------------- | -------------- | --------------
core price                             | 4.0% ( 4.0 % )   | 4.2% ( 4.2 % ) | 3.4% ( 3.4 % )
fuel surcharges                        | 1.8              | .2             | 1.1
environmental fees                     | .4               | .2             | .4
recycling commodities                  | .1               | .9             | -.1 ( .1 )
total price                            | 6.3              | 5.5            | 4.8
core volume ( 1 )                      | -3.9 ( 3.9 )     | -1.5 ( 1.5 )   | 2.4
non-core volume                        | .1               | -.1 ( .1 )     | 2014
total volume                           | -3.8 ( 3.8 )     | -1.6 ( 1.6 )   | 2.4
total internal growth                  | 2.5              | 3.9            | 7.2
acquisitions net of divestitures ( 2 ) | 13.4             | -.5 ( .5 )     | -.1 ( .1 )
taxes ( 3 )                            | .1               | 2014           | .1
total revenue growth                   | 16.0% ( 16.0 % ) | 3.4% ( 3.4 % ) | 7.2% ( 7.2 % )

( 1 ) core volume growth for the year ended december 31 , 2006 includes .8% ( .8 % ) associated with hauling waste from the city of toronto to one of our landfills in michigan .
this hauling service is provided to the city at a rate that approximates our cost .
( 2 ) includes the impact of the acquisition of allied in december 2008 .
( 3 ) represents new taxes levied on landfill volumes in certain states that are passed on to customers .
25aa 2008 : during the year ended december 31 , 2008 , our core revenue growth continued to benefit from a broad-based pricing initiative .
in addition , 14.7% ( 14.7 % ) of our revenue growth is due to our acquisition of allied in december 2008 .
revenue growth also benefited from higher fuel surcharges and environmental fees .
however , during 2008 we experienced lower prices for commodities .
we also experienced a decrease in core volumes primarily due to lower commercial and industrial collection volumes and lower landfill volumes resulting from the slowdown in the economy .
we expect to continue to experience lower volumes until economic conditions improve .
25aa 2007 : during the year ended december 31 , 2007 , our revenue growth from core pricing continued to benefit from a broad-based pricing initiative .
our revenue growth also benefited from higher prices for commodities .
however , we experienced a decrease in core volume growth primarily due to lower industrial collection and landfill volumes resulting from the slowdown in residential construction .
25aa 2006 : during the year ended december 31 , 2006 , our revenue growth continued to benefit from our broad-based pricing initiative .
we experienced core volume growth in our collection and landfill lines of business .
this core volume growth was partially offset by hurricane clean-up efforts that took place during the fourth quarter of 2005 .
25aa 2009 outlook : we anticipate internal revenue from core operations to decrease approximately 4.0% ( 4.0 % ) during 2009 .
this decrease is the expected net of growth in core pricing of approximately 4.0% ( 4.0 % ) and an expected decrease in volume of approximately 8.0% ( 8.0 % ) .
our projections assume no deterioration or improvement in the overall economy from that experienced during the fourth quarter of 2008 .
however , our internal growth may remain flat or may decline in 2009 depending on economic conditions and our success in implementing pricing initiatives .
cost of operations .
cost of operations was $ 2.4 billion , $ 2.0 billion and $ 1.9 billion , or , as a percentage of revenue , 65.6% ( 65.6 % ) , 63.1% ( 63.1 % ) and 62.7% ( 62.7 % ) , for the years ended december 31 , 2008 , 2007 and 2006 , respectively .
the increase in cost of operations in aggregate dollars for the year ended december 31 , 2008 versus the comparable 2007 period is primarily a result of our acquisition of allied in december 2008 .
the remaining increase in cost of operations in aggregate dollars and the increase as a percentage of revenue is primarily due to charges we recorded during 2008 of $ 98.0 million related to estimated costs to comply with f&os issued by the oepa and the aoc issued by the epa in response to environmental conditions at our countywide facility in ohio , $ 21.9 million related to environmental conditions at our closed disposal facility %%transmsg*** transmitting job : p14076 pcn : 048000000 ***%%pcmsg|46 |00044|yes|no|02/28/2009 17:08|0|0|page is valid , no graphics -- color : d|


entergy corporation and subsidiaries notes to financial statements liability to $ 60 million , and recorded the $ 2.7 million difference as a credit to interest expense .
the $ 60 million remaining liability was eliminated upon payment of the cash portion of the purchase price .
as of december 31 , 2016 , entergy louisiana , in connection with the waterford 3 lease obligation , had a future minimum lease payment ( reflecting an interest rate of 8.09% ( 8.09 % ) ) of $ 57.5 million , including $ 2.3 million in interest , due january 2017 that is recorded as long-term debt .
in february 2017 the leases were terminated and the leased assets were conveyed to entergy louisiana .
grand gulf lease obligations in 1988 , in two separate but substantially identical transactions , system energy sold and leased back undivided ownership interests in grand gulf for the aggregate sum of $ 500 million .
the initial term of the leases expired in july 2015 .
system energy renewed the leases for fair market value with renewal terms expiring in july 2036 .
at the end of the new lease renewal terms , system energy has the option to repurchase the leased interests in grand gulf or renew the leases at fair market value .
in the event that system energy does not renew or purchase the interests , system energy would surrender such interests and their associated entitlement of grand gulf 2019s capacity and energy .
system energy is required to report the sale-leaseback as a financing transaction in its financial statements .
for financial reporting purposes , system energy expenses the interest portion of the lease obligation and the plant depreciation .
however , operating revenues include the recovery of the lease payments because the transactions are accounted for as a sale and leaseback for ratemaking purposes .
consistent with a recommendation contained in a ferc audit report , system energy initially recorded as a net regulatory asset the difference between the recovery of the lease payments and the amounts expensed for interest and depreciation and continues to record this difference as a regulatory asset or liability on an ongoing basis , resulting in a zero net balance for the regulatory asset at the end of the lease term .
the amount was a net regulatory liability of $ 55.6 million and $ 55.6 million as of december 31 , 2016 and 2015 , respectively .
as of december 31 , 2016 , system energy , in connection with the grand gulf sale and leaseback transactions , had future minimum lease payments ( reflecting an implicit rate of 5.13% ( 5.13 % ) ) that are recorded as long-term debt , as follows : amount ( in thousands ) .

                                            | amount ( in thousands )
------------------------------------------- | -----------------------
2017                                        | $ 17188
2018                                        | 17188
2019                                        | 17188
2020                                        | 17188
2021                                        | 17188
years thereafter                            | 257812
total                                       | 343752
less : amount representing interest         | 309393
present value of net minimum lease payments | $ 34359


note 17 .
accumulated other comprehensive losses : pmi's accumulated other comprehensive losses , net of taxes , consisted of the following: .

( losses ) earnings ( in millions )          | ( losses ) earnings 2017 | ( losses ) earnings 2016 | 2015
-------------------------------------------- | ------------------------ | ------------------------ | ----------------
currency translation adjustments             | $ -5761 ( 5761 )         | $ -6091 ( 6091 )         | $ -6129 ( 6129 )
pension and other benefits                   | -2816 ( 2816 )           | -3565 ( 3565 )           | -3332 ( 3332 )
derivatives accounted for as hedges          | 42                       | 97                       | 59
total accumulated other comprehensive losses | $ -8535 ( 8535 )         | $ -9559 ( 9559 )         | $ -9402 ( 9402 )

reclassifications from other comprehensive earnings the movements in accumulated other comprehensive losses and the related tax impact , for each of the components above , that are due to current period activity and reclassifications to the income statement are shown on the consolidated statements of comprehensive earnings for the years ended december 31 , 2017 , 2016 , and 2015 .
for the years ended december 31 , 2017 , 2016 , and 2015 , $ 2 million , $ ( 5 ) million and $ 1 million of net currency translation adjustment gains/ ( losses ) were transferred from other comprehensive earnings to marketing , administration and research costs in the consolidated statements of earnings , respectively , upon liquidation of subsidiaries .
for additional information , see note 13 .
benefit plans and note 15 .
financial instruments for disclosures related to pmi's pension and other benefits and derivative financial instruments .
note 18 .
contingencies : tobacco-related litigation legal proceedings covering a wide range of matters are pending or threatened against us , and/or our subsidiaries , and/or our indemnitees in various jurisdictions .
our indemnitees include distributors , licensees and others that have been named as parties in certain cases and that we have agreed to defend , as well as to pay costs and some or all of judgments , if any , that may be entered against them .
pursuant to the terms of the distribution agreement between altria group , inc .
( "altria" ) and pmi , pmi will indemnify altria and philip morris usa inc .
( "pm usa" ) , a u.s .
tobacco subsidiary of altria , for tobacco product claims based in substantial part on products manufactured by pmi or contract manufactured for pmi by pm usa , and pm usa will indemnify pmi for tobacco product claims based in substantial part on products manufactured by pm usa , excluding tobacco products contract manufactured for pmi .
it is possible that there could be adverse developments in pending cases against us and our subsidiaries .
an unfavorable outcome or settlement of pending tobacco-related litigation could encourage the commencement of additional litigation .
damages claimed in some of the tobacco-related litigation are significant and , in certain cases in brazil , canada and nigeria , range into the billions of u.s .
dollars .
the variability in pleadings in multiple jurisdictions , together with the actual experience of management in litigating claims , demonstrate that the monetary relief that may be specified in a lawsuit bears little relevance to the ultimate outcome .
much of the tobacco-related litigation is in its early stages , and litigation is subject to uncertainty .
however , as discussed below , we have to date been largely successful in defending tobacco-related litigation .
we and our subsidiaries record provisions in the consolidated financial statements for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated .
at the present time , while it is reasonably possible that an unfavorable outcome in a case may occur , after assessing the information available to it ( i ) management has not concluded that it is probable that a loss has been incurred in any of the pending tobacco-related cases ; ( ii ) management is unable to estimate the possible loss or range of loss for any of the pending tobacco-related cases ; and ( iii ) accordingly , no estimated loss has been accrued in the consolidated financial statements for unfavorable outcomes in these cases , if any .
legal defense costs are expensed as incurred.


hologic , inc .
notes to consolidated financial statements ( continued ) ( in thousands , except per share data ) determination of the measurement date for the market price of acquirer securities issued in a purchase business combination .
the components and allocation of the purchase price , consists of the following approximate amounts: .

net tangible assets acquired as of july 13 2006 | $ 800
----------------------------------------------- | --------
in-process research and development             | 10200
developed technology and know how               | 39500
customer relationship                           | 15700
trade name                                      | 3300
order backlog                                   | 800
deferred income taxes                           | 4400
goodwill                                        | 145900
estimated purchase price                        | $ 220600

the company has begun to assess and formulate a plan to restructure certain of r2 2019s historical activities .
as of the acquisition date the company recorded a liability of approximately $ 798 in accordance with eitf issue no .
95-3 , recognition of liabilities in connection with a purchase business combination , related to the termination of certain employees and loss related to the abandonment of certain lease space under this plan of which approximately $ 46 has been paid as of september 30 , 2006 .
the company believes this plan will be finalized within one year from the acquisition date and will record any additional liabilities at such time resulting in an increase to goodwill .
the final purchase price allocations will be completed within one year of the acquisition and any adjustments are not expected to have a material impact on the company 2019s financial position or results of operation .
as part of the purchase price allocation , all intangible assets that were a part of the acquisition were identified and valued .
it was determined that only customer relationships , trademarks and developed technology had separately identifiable values .
customer relationships represent r2 2019s strong active customer base , dominant market position and strong partnership with several large companies .
trademarks represent the r2 product names that the company intends to continue to use .
developed technology represents currently marketable purchased products that the company continues to resell as well as utilize to enhance and incorporate into the company 2019s existing products .
the estimated $ 10200 of purchase price allocated to in-process research and development projects primarily related to r2s digital cad products .
the projects are expected to add direct digital algorithm capabilities as well as a new platform technology to analyze images and breast density measurement .
the project is approximately 20% ( 20 % ) complete and the company expects to spend approximately $ 3100 over the year to complete .
the deferred income tax asset relates to the tax effect of acquired net operating loss carry forwards that the company believes are realizable partially offset by acquired identifiable intangible assets , and fair value adjustments to acquired inventory as such amounts are not deductible for tax purposes .
acquisition of suros surgical systems , inc .
on july 27 , 2006 , the company completed the acquisition of suros surgical systems , inc. , pursuant to an agreement and plan of merger dated april 17 , 2006 .
the results of operations for suros have been included in the company 2019s consolidated financial statements from the date of acquisition as part of its mammography business segment .
suros surgical , located in indianapolis , indiana , develops , manufactures and sells minimally invasive interventional breast biopsy technology and products for biopsy , tissue removal and biopsy site marking.


notes to the consolidated financial statements union pacific corporation and subsidiary companies for purposes of this report , unless the context otherwise requires , all references herein to the 201ccorporation 201d , 201ccompany 201d , 201cupc 201d , 201cwe 201d , 201cus 201d , and 201cour 201d mean union pacific corporation and its subsidiaries , including union pacific railroad company , which will be separately referred to herein as 201cuprr 201d or the 201crailroad 201d .
1 .
nature of operations operations and segmentation 2013 we are a class i railroad operating in the u.s .
our network includes 32084 route miles , linking pacific coast and gulf coast ports with the midwest and eastern u.s .
gateways and providing several corridors to key mexican gateways .
we own 26064 miles and operate on the remainder pursuant to trackage rights or leases .
we serve the western two-thirds of the country and maintain coordinated schedules with other rail carriers for the handling of freight to and from the atlantic coast , the pacific coast , the southeast , the southwest , canada , and mexico .
export and import traffic is moved through gulf coast and pacific coast ports and across the mexican and canadian borders .
the railroad , along with its subsidiaries and rail affiliates , is our one reportable operating segment .
although we provide and analyze revenue by commodity group , we treat the financial results of the railroad as one segment due to the integrated nature of our rail network .
the following table provides freight revenue by commodity group: .

millions                 | 2015    | 2014    | 2013
------------------------ | ------- | ------- | -------
agricultural products    | $ 3581  | $ 3777  | $ 3276
automotive               | 2154    | 2103    | 2077
chemicals                | 3543    | 3664    | 3501
coal                     | 3237    | 4127    | 3978
industrial products      | 3808    | 4400    | 3822
intermodal               | 4074    | 4489    | 4030
total freight revenues   | $ 20397 | $ 22560 | $ 20684
other revenues           | 1416    | 1428    | 1279
total operating revenues | $ 21813 | $ 23988 | $ 21963

although our revenues are principally derived from customers domiciled in the u.s. , the ultimate points of origination or destination for some products transported by us are outside the u.s .
each of our commodity groups includes revenue from shipments to and from mexico .
included in the above table are freight revenues from our mexico business which amounted to $ 2.2 billion in 2015 , $ 2.3 billion in 2014 , and $ 2.1 billion in 2013 .
basis of presentation 2013 the consolidated financial statements are presented in accordance with accounting principles generally accepted in the u.s .
( gaap ) as codified in the financial accounting standards board ( fasb ) accounting standards codification ( asc ) .
certain prior period amounts in the statement of cash flows and income tax footnote have been aggregated or disaggregated further to conform to the current period financial presentation .
2 .
significant accounting policies principles of consolidation 2013 the consolidated financial statements include the accounts of union pacific corporation and all of its subsidiaries .
investments in affiliated companies ( 20% ( 20 % ) to 50% ( 50 % ) owned ) are accounted for using the equity method of accounting .
all intercompany transactions are eliminated .
we currently have no less than majority-owned investments that require consolidation under variable interest entity requirements .
cash and cash equivalents 2013 cash equivalents consist of investments with original maturities of three months or less .
accounts receivable 2013 accounts receivable includes receivables reduced by an allowance for doubtful accounts .
the allowance is based upon historical losses , credit worthiness of customers , and current


adobe systems incorporated notes to consolidated financial statements ( continued ) we review our goodwill for impairment annually , or more frequently , if facts and circumstances warrant a review .
we completed our annual impairment test in the second quarter of fiscal 2013 .
we elected to use the step 1 quantitative assessment for our three reporting units 2014digital media , digital marketing and print and publishing 2014and determined that there was no impairment of goodwill .
there is no significant risk of material goodwill impairment in any of our reporting units , based upon the results of our annual goodwill impairment test .
we amortize intangible assets with finite lives over their estimated useful lives and review them for impairment whenever an impairment indicator exists .
we continually monitor events and changes in circumstances that could indicate carrying amounts of our long-lived assets , including our intangible assets may not be recoverable .
when such events or changes in circumstances occur , we assess recoverability by determining whether the carrying value of such assets will be recovered through the undiscounted expected future cash flows .
if the future undiscounted cash flows are less than the carrying amount of these assets , we recognize an impairment loss based on any excess of the carrying amount over the fair value of the assets .
we did not recognize any intangible asset impairment charges in fiscal 2013 , 2012 or 2011 .
our intangible assets are amortized over their estimated useful lives of 1 to 14 years .
amortization is based on the pattern in which the economic benefits of the intangible asset will be consumed or on a straight-line basis when the consumption pattern is not apparent .
the weighted average useful lives of our intangible assets were as follows : weighted average useful life ( years ) .

                                     | weighted averageuseful life ( years )
------------------------------------ | -------------------------------------
purchased technology                 | 6
customer contracts and relationships | 10
trademarks                           | 8
acquired rights to use technology    | 8
localization                         | 1
other intangibles                    | 3

software development costs capitalization of software development costs for software to be sold , leased , or otherwise marketed begins upon the establishment of technological feasibility , which is generally the completion of a working prototype that has been certified as having no critical bugs and is a release candidate .
amortization begins once the software is ready for its intended use , generally based on the pattern in which the economic benefits will be consumed .
to date , software development costs incurred between completion of a working prototype and general availability of the related product have not been material .
internal use software we capitalize costs associated with customized internal-use software systems that have reached the application development stage .
such capitalized costs include external direct costs utilized in developing or obtaining the applications and payroll and payroll-related expenses for employees , who are directly associated with the development of the applications .
capitalization of such costs begins when the preliminary project stage is complete and ceases at the point in which the project is substantially complete and is ready for its intended purpose .
income taxes we use the asset and liability method of accounting for income taxes .
under this method , income tax expense is recognized for the amount of taxes payable or refundable for the current year .
in addition , deferred tax assets and liabilities are recognized for expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities , and for operating losses and tax credit carryforwards .
we record a valuation allowance to reduce deferred tax assets to an amount for which realization is more likely than not.


note 18 2013 earnings per share ( eps ) basic eps is calculated by dividing net earnings attributable to allegion plc by the weighted-average number of ordinary shares outstanding for the applicable period .
diluted eps is calculated after adjusting the denominator of the basic eps calculation for the effect of all potentially dilutive ordinary shares , which in the company 2019s case , includes shares issuable under share-based compensation plans .
the following table summarizes the weighted-average number of ordinary shares outstanding for basic and diluted earnings per share calculations: .

in millions                                 | 2018 | 2017 | 2016
------------------------------------------- | ---- | ---- | ----
weighted-average number of basic shares     | 95.0 | 95.1 | 95.8
shares issuable under incentive stock plans | 0.7  | 0.9  | 1.1
weighted-average number of diluted shares   | 95.7 | 96.0 | 96.9

at december 31 , 2018 , 0.1 million stock options were excluded from the computation of weighted-average diluted shares outstanding because the effect of including these shares would have been anti-dilutive .
note 19 2013 net revenues net revenues are recognized based on the satisfaction of performance obligations under the terms of a contract .
a performance obligation is a promise in a contract to transfer control of a distinct product or to provide a service , or a bundle of products or services , to a customer , and is the unit of account under asc 606 .
the company has two principal revenue streams , tangible product sales and services .
approximately 99% ( 99 % ) of consolidated net revenues involve contracts with a single performance obligation , which is the transfer of control of a product or bundle of products to a customer .
transfer of control typically occurs when goods are shipped from the company's facilities or at other predetermined control transfer points ( for instance , destination terms ) .
net revenues are measured as the amount of consideration expected to be received in exchange for transferring control of the products and takes into account variable consideration , such as sales incentive programs including discounts and volume rebates .
the existence of these programs does not preclude revenue recognition but does require the company's best estimate of the variable consideration to be made based on expected activity , as these items are reserved for as a deduction to net revenues over time based on the company's historical rates of providing these incentives and annual forecasted sales volumes .
the company also offers a standard warranty with most product sales and the value of such warranty is included in the contractual price .
the corresponding cost of the warranty obligation is accrued as a liability ( see note 20 ) .
the company's remaining net revenues involve services , including installation and consulting .
unlike the single performance obligation to ship a product or bundle of products , the service revenue stream delays revenue recognition until the service performance obligations are satisfied .
in some instances , customer acceptance provisions are included in sales arrangements to give the buyer the ability to ensure the service meets the criteria established in the order .
in these instances , revenue recognition is deferred until the performance obligations are satisfied , which could include acceptance terms specified in the arrangement being fulfilled through customer acceptance or a demonstration that established criteria have been satisfied .
during the year ended december 31 , 2018 , no adjustments related to performance obligations satisfied in previous periods were recorded .
upon adoption of asc 606 , the company used the practical expedients to omit the disclosure of remaining performance obligations for contracts with an original expected duration of one year or less and for contracts where the company has the right to invoice for performance completed to date .
the transaction price is not adjusted for the effects of a significant financing component , as the time period between control transfer of goods and services is less than one year .
sales , value-added and other similar taxes collected by the company are excluded from net revenues .
the company has also elected to account for shipping and handling activities that occur after control of the related goods transfers as fulfillment activities instead of performance obligations .
these activities are included in cost of goods sold in the consolidated statements of comprehensive income .
the company 2019s payment terms are generally consistent with the industries in which their businesses operate .
the following table shows the company's net revenues for the years ended december 31 , based on the two principal revenue streams , tangible product sales and services , disaggregated by business segment .
net revenues are shown by tangible product sales and services , as contract terms , conditions and economic factors affecting the nature , amount , timing and uncertainty around revenue recognition and cash flows are substantially similar within each of the two principal revenue streams:


2022 international .
in general , our international markets are less advanced with respect to the current technologies deployed for wireless services .
as a result , demand for our communications sites is driven by continued voice network investments , new market entrants and initial 3g data network deployments .
for example , in india , nationwide voice networks continue to be deployed as wireless service providers are beginning their initial investments in 3g data networks , as a result of recent spectrum auctions .
in mexico and brazil , where nationwide voice networks have been deployed , some incumbent wireless service providers continue to invest in their 3g data networks , and recent spectrum auctions have enabled other incumbent wireless service providers and new market entrants to begin their initial investments in 3g data networks .
in markets such as chile and peru , recent spectrum auctions have attracted new market entrants , who are expected to begin their investment in deploying nationwide voice and 3g data networks .
we believe demand for our tower sites will continue in our international markets as wireless service providers seek to remain competitive by increasing the coverage of their networks while also investing in next generation data networks .
rental and management operations new site revenue growth .
during the year ended december 31 , 2010 , we grew our portfolio of communications sites through acquisitions and construction activities , including the acquisition and construction of approximately 7800 sites .
we continue to evaluate opportunities to acquire larger communications site portfolios , both domestically and internationally , that we believe we can effectively integrate into our existing portfolio. .

new sites ( acquired or constructed ) | 2010 | 2009 | 2008
------------------------------------- | ---- | ---- | ----
domestic                              | 947  | 528  | 160
international ( 1 )                   | 6865 | 3022 | 801

( 1 ) the majority of sites acquired or constructed internationally during 2010 and 2009 were in india and our newly launched operations in chile , colombia and peru .
network development services segment revenue growth .
as we continue to focus on growing our rental and management operations , we anticipate that our network development services revenue will continue to represent a small percentage of our total revenues .
through our network development services segment , we offer tower-related services , including site acquisition , zoning and permitting services and structural analysis services , which primarily support our site leasing business and the addition of new tenants and equipment on our sites .
rental and management operations expenses .
our rental and management operations expenses include our direct site level expenses and consist primarily of ground rent , property taxes , repairs and maintenance and utilities .
these segment level expenses exclude all segment and corporate level selling , general , administrative and development expenses , which are aggregated into one line item entitled selling , general , administrative and development expense .
in general , our rental and management segment level selling , general and administrative expenses do not significantly increase as a result of adding incremental tenants to our legacy sites and typically increase only modestly year-over-year .
as a result , leasing additional space to new tenants on our legacy sites provides significant incremental cash flow .
in geographic areas where we have recently launched operations or are focused on materially expanding our site footprint , we may incur additional segment level selling , general and administrative expenses as we increase our presence in these areas .
our profit margin growth is therefore positively impacted by the addition of new tenants to our legacy sites and can be temporarily diluted by our development activities .
reit election .
as we review our tax strategy and assess the utilization of our federal and state nols , we are actively considering an election to a reit for u.s .
federal and , where applicable , state income tax purposes .
we may make the determination to elect reit status for the taxable year beginning january 1 , 2012 , as early as the second half of 2011 , subject to the approval of our board of directors , although there is no certainty as to the timing of a reit election or whether we will make a reit election at all.


the discount rate assumption was determined for the pension and postretirement benefit plans independently .
at year-end 2011 , the company began using an approach that approximates the process of settlement of obligations tailored to the plans 2019 expected cash flows by matching the plans 2019 cash flows to the coupons and expected maturity values of individually selected bonds .
the yield curve was developed for a universe containing the majority of u.s.-issued aa-graded corporate bonds , all of which were non callable ( or callable with make-whole provisions ) .
historically , for each plan , the discount rate was developed as the level equivalent rate that would produce the same present value as that using spot rates aligned with the projected benefit payments .
the expected long-term rate of return on plan assets is based on historical and projected rates of return , prior to administrative and investment management fees , for current and planned asset classes in the plans 2019 investment portfolios .
assumed projected rates of return for each of the plans 2019 projected asset classes were selected after analyzing historical experience and future expectations of the returns and volatility of the various asset classes .
based on the target asset allocation for each asset class , the overall expected rate of return for the portfolio was developed , adjusted for historical and expected experience of active portfolio management results compared to the benchmark returns and for the effect of expenses paid from plan assets .
the company 2019s pension expense increases as the expected return on assets decreases .
in the determination of year end 2014 projected benefit plan obligations , the company adopted a new table based on the society of actuaries rp 2014 mortality table including a generational bb-2d projection scale .
the adoption resulted in a significant increase to pension and other postretirement benefit plans 2019 projected benefit obligations .
assumed health care cost trend rates have a significant effect on the amounts reported for the other postretirement benefit plans .
the health care cost trend rate is based on historical rates and expected market conditions .
a one-percentage-point change in assumed health care cost trend rates would have the following effects : one-percentage-point increase one-percentage-point decrease effect on total of service and interest cost components .
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$ 5943 $ ( 4887 ) effect on other postretirement benefit obligation .
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$ 105967 $ ( 86179 ) .

                                                        | one-percentage-point increase | one-percentage-point decrease
------------------------------------------------------- | ----------------------------- | -----------------------------
effect on total of service and interest cost components | $ 5943                        | $ -4887 ( 4887 )
effect on other postretirement benefit obligation       | $ 105967                      | $ -86179 ( 86179 )

the discount rate assumption was determined for the pension and postretirement benefit plans independently .
at year-end 2011 , the company began using an approach that approximates the process of settlement of obligations tailored to the plans 2019 expected cash flows by matching the plans 2019 cash flows to the coupons and expected maturity values of individually selected bonds .
the yield curve was developed for a universe containing the majority of u.s.-issued aa-graded corporate bonds , all of which were non callable ( or callable with make-whole provisions ) .
historically , for each plan , the discount rate was developed as the level equivalent rate that would produce the same present value as that using spot rates aligned with the projected benefit payments .
the expected long-term rate of return on plan assets is based on historical and projected rates of return , prior to administrative and investment management fees , for current and planned asset classes in the plans 2019 investment portfolios .
assumed projected rates of return for each of the plans 2019 projected asset classes were selected after analyzing historical experience and future expectations of the returns and volatility of the various asset classes .
based on the target asset allocation for each asset class , the overall expected rate of return for the portfolio was developed , adjusted for historical and expected experience of active portfolio management results compared to the benchmark returns and for the effect of expenses paid from plan assets .
the company 2019s pension expense increases as the expected return on assets decreases .
in the determination of year end 2014 projected benefit plan obligations , the company adopted a new table based on the society of actuaries rp 2014 mortality table including a generational bb-2d projection scale .
the adoption resulted in a significant increase to pension and other postretirement benefit plans 2019 projected benefit obligations .
assumed health care cost trend rates have a significant effect on the amounts reported for the other postretirement benefit plans .
the health care cost trend rate is based on historical rates and expected market conditions .
a one-percentage-point change in assumed health care cost trend rates would have the following effects : one-percentage-point increase one-percentage-point decrease effect on total of service and interest cost components .
.
.
.
.
.
.
.
.
.
.
.
.
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.
$ 5943 $ ( 4887 ) effect on other postretirement benefit obligation .
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$ 105967 $ ( 86179 )


the aes corporation notes to consolidated financial statements 2014 ( continued ) december 31 , 2011 , 2010 , and 2009 the preliminary allocation of the purchase price to the fair value of assets acquired and liabilities assumed is as follows ( in millions ) : .

cash                                      | $ 116
----------------------------------------- | --------------
accounts receivable                       | 278
inventory                                 | 124
other current assets                      | 41
property plant and equipment              | 2549
intangible assets subject to amortization | 166
intangible assets 2014indefinite-lived    | 5
regulatory assets                         | 201
other noncurrent assets                   | 58
current liabilities                       | -401 ( 401 )
non-recourse debt                         | -1255 ( 1255 )
deferred taxes                            | -558 ( 558 )
regulatory liabilities                    | -117 ( 117 )
other noncurrent liabilities              | -195 ( 195 )
redeemable preferred stock                | -18 ( 18 )
net identifiable assets acquired          | 994
goodwill                                  | 2489
net assets acquired                       | $ 3483

at december 31 , 2011 , the assets acquired and liabilities assumed in the acquisition were recorded at provisional amounts based on the preliminary purchase price allocation .
the company is in the process of obtaining additional information to identify and measure all assets acquired and liabilities assumed in the acquisition within the measurement period , which could be up to one year from the date of acquisition .
such provisional amounts will be retrospectively adjusted to reflect any new information about facts and circumstances that existed at the acquisition date that , if known , would have affected the measurement of these amounts .
additionally , key input assumptions and their sensitivity to the valuation of assets acquired and liabilities assumed are currently being reviewed by management .
it is likely that the value of the generation business related property , plant and equipment , the intangible asset related to the electric security plan with its regulated customers and long-term coal contracts , the 4.9% ( 4.9 % ) equity ownership interest in the ohio valley electric corporation , and deferred taxes could change as the valuation process is finalized .
dpler , dpl 2019s wholly-owned competitive retail electric service ( 201ccres 201d ) provider , will also likely have changes in its initial purchase price allocation for the valuation of its intangible assets for the trade name , and customer relationships and contracts .
as noted in the table above , the preliminary purchase price allocation has resulted in the recognition of $ 2.5 billion of goodwill .
factors primarily contributing to a price in excess of the fair value of the net tangible and intangible assets include , but are not limited to : the ability to expand the u.s .
utility platform in the mid-west market , the ability to capitalize on utility management experience gained from ipl , enhanced ability to negotiate with suppliers of fuel and energy , the ability to capture value associated with aes 2019 u.s .
tax position , a well- positioned generating fleet , the ability of dpl to leverage its assembled workforce to take advantage of growth opportunities , etc .
our ability to realize the benefit of dpl 2019s goodwill depends on the realization of expected benefits resulting from a successful integration of dpl into aes 2019 existing operations and our ability to respond to the changes in the ohio utility market .
for example , utilities in ohio continue to face downward pressure on operating margins due to the evolving regulatory environment , which is moving towards a market-based competitive pricing mechanism .
at the same time , the declining energy prices are also reducing operating