part ii item 5 .
market for registrant 2019s common equity , related stockholder matters and issuer purchases of equity securities vornado 2019s common shares are traded on the new york stock exchange under the symbol 201cvno . 201d quarterly high and low sales prices of the common shares and dividends paid per share for the years ended december 31 , 2011 and 2010 were as follows : year ended year ended december 31 , 2011 december 31 , 2010 .

quarter | year ended december 31 2011 high | year ended december 31 2011 low | year ended december 31 2011 dividends | year ended december 31 2011 high | year ended december 31 2011 low | dividends
------- | -------------------------------- | ------------------------------- | ------------------------------------- | -------------------------------- | ------------------------------- | ---------
1st     | $ 93.53                          | $ 82.12                         | $ 0.69                                | $ 78.40                          | $ 61.25                         | $ 0.65
2nd     | 98.42                            | 86.85                           | 0.69                                  | 86.79                            | 70.06                           | 0.65
3rd     | 98.77                            | 72.85                           | 0.69                                  | 89.06                            | 68.59                           | 0.65
4th     | 84.30                            | 68.39                           | 0.69                                  | 91.67                            | 78.06                           | 0.65

as of february 1 , 2012 , there were 1230 holders of record of our common shares .
recent sales of unregistered securities during the fourth quarter of 2011 , we issued 20891 common shares upon the redemption of class a units of the operating partnership held by persons who received units , in private placements in earlier periods , in exchange for their interests in limited partnerships that owned real estate .
the common shares were issued without registration under the securities act of 1933 in reliance on section 4 ( 2 ) of that act .
information relating to compensation plans under which our equity securities are authorized for issuance is set forth under part iii , item 12 of this annual report on form 10-k and such information is incorporated by reference herein .
recent purchases of equity securities in december 2011 , we received 410783 vornado common shares at an average price of $ 76.36 per share as payment for the exercise of certain employee options.


stock performance graph the following graph sets forth the cumulative total shareholder return on our series a common stock , series b common stock and series c common stock as compared with the cumulative total return of the companies listed in the standard and poor 2019s 500 stock index ( 201cs&p 500 index 201d ) and a peer group of companies comprised of cbs corporation class b common stock , scripps network interactive , inc .
( acquired by the company in march 2018 ) , time warner , inc .
( acquired by at&t inc .
in june 2018 ) , twenty-first century fox , inc .
class a common stock ( news corporation class a common stock prior to june 2013 ) , viacom , inc .
class b common stock and the walt disney company .
the graph assumes $ 100 originally invested on december 31 , 2013 in each of our series a common stock , series b common stock and series c common stock , the s&p 500 index , and the stock of our peer group companies , including reinvestment of dividends , for the years ended december 31 , 2014 , 2015 , 2016 , 2017 and 2018 .
two peer companies , scripps networks interactive , inc .
and time warner , inc. , were acquired in 2018 .
the stock performance chart shows the peer group including scripps networks interactive , inc .
and time warner , inc .
and excluding both acquired companies for the entire five year period .
december 31 , december 31 , december 31 , december 31 , december 31 , december 31 .

                                     | december 312013 | december 312014 | december 312015 | december 312016 | december 312017 | december 312018
------------------------------------ | --------------- | --------------- | --------------- | --------------- | --------------- | ---------------
disca                                | $ 100.00        | $ 74.58         | $ 57.76         | $ 59.34         | $ 48.45         | $ 53.56
discb                                | $ 100.00        | $ 80.56         | $ 58.82         | $ 63.44         | $ 53.97         | $ 72.90
disck                                | $ 100.00        | $ 80.42         | $ 60.15         | $ 63.87         | $ 50.49         | $ 55.04
s&p 500                              | $ 100.00        | $ 111.39        | $ 110.58        | $ 121.13        | $ 144.65        | $ 135.63
peer group incl . acquired companies | $ 100.00        | $ 116.64        | $ 114.02        | $ 127.96        | $ 132.23        | $ 105.80
peer group ex . acquired companies   | $ 100.00        | $ 113.23        | $ 117.27        | $ 120.58        | $ 127.90        | $ 141.58

equity compensation plan information information regarding securities authorized for issuance under equity compensation plans will be set forth in our definitive proxy statement for our 2019 annual meeting of stockholders under the caption 201csecurities authorized for issuance under equity compensation plans , 201d which is incorporated herein by reference.


2018 a0form 10-k18 item 7 .
management 2019s discussion and analysis of financial condition and results of operations .
this management 2019s discussion and analysis of financial condition and results of operations should be read in conjunction with our discussion of cautionary statements and significant risks to the company 2019s business under item 1a .
risk factors of the 2018 form a010-k .
overview our sales and revenues for 2018 were $ 54.722 billion , a 20 a0percent increase from 2017 sales and revenues of $ 45.462 a0billion .
the increase was primarily due to higher sales volume , mostly due to improved demand across all regions and across the three primary segments .
profit per share for 2018 was $ 10.26 , compared to profit per share of $ 1.26 in 2017 .
profit was $ 6.147 billion in 2018 , compared with $ 754 million in 2017 .
the increase was primarily due to lower tax expense , higher sales volume , decreased restructuring costs and improved price realization .
the increase was partially offset by higher manufacturing costs and selling , general and administrative ( sg&a ) and research and development ( r&d ) expenses and lower profit from the financial products segment .
fourth-quarter 2018 sales and revenues were $ 14.342 billion , up $ 1.446 billion , or 11 percent , from $ 12.896 billion in the fourth quarter of 2017 .
fourth-quarter 2018 profit was $ 1.78 per share , compared with a loss of $ 2.18 per share in the fourth quarter of 2017 .
fourth-quarter 2018 profit was $ 1.048 billion , compared with a loss of $ 1.299 billion in 2017 .
highlights for 2018 include : zz sales and revenues in 2018 were $ 54.722 billion , up 20 a0percent from 2017 .
sales improved in all regions and across the three primary segments .
zz operating profit as a percent of sales and revenues was 15.2 a0percent in 2018 , compared with 9.8 percent in 2017 .
adjusted operating profit margin was 15.9 percent in 2018 , compared with 12.5 percent in 2017 .
zz profit was $ 10.26 per share for 2018 , and excluding the items in the table below , adjusted profit per share was $ 11.22 .
for 2017 profit was $ 1.26 per share , and excluding the items in the table below , adjusted profit per share was $ 6.88 .
zz in order for our results to be more meaningful to our readers , we have separately quantified the impact of several significant items: .

( millions of dollars )                      | full year 2018 profit before taxes | full year 2018 profitper share | full year 2018 profit before taxes | profitper share
-------------------------------------------- | ---------------------------------- | ------------------------------ | ---------------------------------- | ---------------
profit                                       | $ 7822                             | $ 10.26                        | $ 4082                             | $ 1.26
restructuring costs                          | 386                                | 0.50                           | 1256                               | 1.68
mark-to-market losses                        | 495                                | 0.64                           | 301                                | 0.26
deferred tax valuation allowance adjustments | 2014                               | -0.01 ( 0.01 )                 | 2014                               | -0.18 ( 0.18 )
u.s . tax reform impact                      | 2014                               | -0.17 ( 0.17 )                 | 2014                               | 3.95
gain on sale of equity investment            | 2014                               | 2014                           | -85 ( 85 )                         | -0.09 ( 0.09 )
adjusted profit                              | $ 8703                             | $ 11.22                        | $ 5554                             | $ 6.88

zz machinery , energy & transportation ( me&t ) operating cash flow for 2018 was about $ 6.3 billion , more than sufficient to cover capital expenditures and dividends .
me&t operating cash flow for 2017 was about $ 5.5 billion .
restructuring costs in recent years , we have incurred substantial restructuring costs to achieve a flexible and competitive cost structure .
during 2018 , we incurred $ 386 million of restructuring costs related to restructuring actions across the company .
during 2017 , we incurred $ 1.256 billion of restructuring costs with about half related to the closure of the facility in gosselies , belgium , and the remainder related to other restructuring actions across the company .
although we expect restructuring to continue as part of ongoing business activities , restructuring costs should be lower in 2019 than 2018 .
notes : zz glossary of terms included on pages 33-34 ; first occurrence of terms shown in bold italics .
zz information on non-gaap financial measures is included on pages 42-43.


operating/performance statistics railroad performance measures reported to the aar , as well as other performance measures , are included in the table below : 2010 2009 2008 % (  % ) change 2010 v 2009 % (  % ) change 2009 v 2008 .

                                         | 2010  | 2009  | 2008   | % (  % ) change 2010 v 2009 | % (  % ) change2009 v 2008
---------------------------------------- | ----- | ----- | ------ | --------------------------- | --------------------------
average train speed ( miles per hour )   | 26.2  | 27.3  | 23.5   | ( 4 ) % (  % )              | 16% ( 16 % )
average terminal dwell time ( hours )    | 25.4  | 24.8  | 24.9   | 2% ( 2 % )                  | -
average rail car inventory ( thousands ) | 274.4 | 283.1 | 300.7  | ( 3 ) % (  % )              | ( 6 ) % (  % )
gross ton-miles ( billions )             | 932.4 | 846.5 | 1020.4 | 10% ( 10 % )                | ( 17 ) % (  % )
revenue ton-miles ( billions )           | 520.4 | 479.2 | 562.6  | 9% ( 9 % )                  | ( 15 ) % (  % )
operating ratio                          | 70.6  | 76.1  | 77.4   | ( 5.5 ) pt                  | ( 1.3 ) pt
employees ( average )                    | 42884 | 43531 | 48242  | ( 1 ) % (  % )              | ( 10 ) % (  % )
customer satisfaction index              | 89    | 88    | 83     | 1 pt                        | 5 pt

average train speed 2013 average train speed is calculated by dividing train miles by hours operated on our main lines between terminals .
maintenance activities and weather disruptions , combined with higher volume levels , led to a 4% ( 4 % ) decrease in average train speed in 2010 compared to a record set in 2009 .
overall , we continued operating a fluid and efficient network during the year .
lower volume levels , ongoing network management initiatives , and productivity improvements contributed to a 16% ( 16 % ) improvement in average train speed in 2009 compared to 2008 .
average terminal dwell time 2013 average terminal dwell time is the average time that a rail car spends at our terminals .
lower average terminal dwell time improves asset utilization and service .
average terminal dwell time increased 2% ( 2 % ) in 2010 compared to 2009 , driven in part by our network plan to increase the length of numerous trains to improve overall efficiency , which resulted in higher terminal dwell time for some cars .
average terminal dwell time improved slightly in 2009 compared to 2008 due to lower volume levels combined with initiatives to expedite delivering rail cars to our interchange partners and customers .
average rail car inventory 2013 average rail car inventory is the daily average number of rail cars on our lines , including rail cars in storage .
lower average rail car inventory reduces congestion in our yards and sidings , which increases train speed , reduces average terminal dwell time , and improves rail car utilization .
average rail car inventory decreased 3% ( 3 % ) in 2010 compared to 2009 , while we handled 13% ( 13 % ) increases in carloads during the period compared to 2009 .
we maintained more freight cars off-line and retired a number of old freight cars , which drove the decreases .
average rail car inventory decreased 6% ( 6 % ) in 2009 compared to 2008 driven by a 16% ( 16 % ) decrease in volume .
in addition , as carloads decreased , we stored more freight cars off-line .
gross and revenue ton-miles 2013 gross ton-miles are calculated by multiplying the weight of loaded and empty freight cars by the number of miles hauled .
revenue ton-miles are calculated by multiplying the weight of freight by the number of tariff miles .
gross and revenue-ton-miles increased 10% ( 10 % ) and 9% ( 9 % ) in 2010 compared to 2009 due to a 13% ( 13 % ) increase in carloads .
commodity mix changes ( notably automotive shipments ) drove the variance in year-over-year growth between gross ton-miles , revenue ton-miles and carloads .
gross and revenue ton-miles decreased 17% ( 17 % ) and 15% ( 15 % ) in 2009 compared to 2008 due to a 16% ( 16 % ) decrease in carloads .
commodity mix changes ( notably automotive shipments , which were 30% ( 30 % ) lower in 2009 versus 2008 ) drove the difference in declines between gross ton-miles and revenue ton- miles .
operating ratio 2013 operating ratio is defined as our operating expenses as a percentage of operating revenue .
our operating ratio improved 5.5 points to 70.6% ( 70.6 % ) in 2010 and 1.3 points to 76.1% ( 76.1 % ) in 2009 .
efficiently leveraging volume increases , core pricing gains , and productivity initiatives drove the improvement in 2010 and more than offset the impact of higher fuel prices during the year .
core pricing gains , lower fuel prices , network management initiatives , and improved productivity drove the improvement in 2009 and more than offset the 16% ( 16 % ) volume decline .
employees 2013 employee levels were down 1% ( 1 % ) in 2010 compared to 2009 despite a 13% ( 13 % ) increase in volume levels .
we leveraged the additional volumes through network efficiencies and other productivity initiatives .
in addition , we successfully managed the growth of our full-time-equivalent train and engine force levels at a rate less than half of our carload growth in 2010 .
all other operating functions and


intel corporation notes to consolidated financial statements ( continued ) note 16 : other comprehensive income ( loss ) the changes in accumulated other comprehensive income ( loss ) by component and related tax effects for each period were as follows : ( in millions ) unrealized holding ( losses ) on available- for-sale investments deferred tax asset valuation allowance unrealized holding ( losses ) on derivatives service credits ( costs ) actuarial ( losses ) foreign currency translation adjustment total .

( in millions )                                                             | unrealized holding gains ( losses ) on available-for-sale investments | deferred tax asset valuation allowance | unrealized holding gains ( losses ) on derivatives | prior service credits ( costs ) | actuarial gains ( losses ) | foreign currency translation adjustment | total
--------------------------------------------------------------------------- | --------------------------------------------------------------------- | -------------------------------------- | -------------------------------------------------- | ------------------------------- | -------------------------- | --------------------------------------- | --------------
december 27 2014                                                            | $ 2459                                                                | $ 26                                   | $ -423 ( 423 )                                     | $ -47 ( 47 )                    | $ -1004 ( 1004 )           | $ -345 ( 345 )                          | $ 666
other comprehensive income ( loss ) before reclassifications                | -999 ( 999 )                                                          | 2014                                   | -298 ( 298 )                                       | -2 ( 2 )                        | 73                         | -187 ( 187 )                            | -1413 ( 1413 )
amounts reclassified out of accumulated other comprehensive income ( loss ) | -93 ( 93 )                                                            | 2014                                   | 522                                                | 10                              | 67                         | 2014                                    | 506
tax effects                                                                 | 382                                                                   | -18 ( 18 )                             | -67 ( 67 )                                         | -1 ( 1 )                        | -12 ( 12 )                 | 17                                      | 301
other comprehensive income ( loss )                                         | -710 ( 710 )                                                          | -18 ( 18 )                             | 157                                                | 7                               | 128                        | -170 ( 170 )                            | -606 ( 606 )
december 26 2015                                                            | 1749                                                                  | 8                                      | -266 ( 266 )                                       | -40 ( 40 )                      | -876 ( 876 )               | -515 ( 515 )                            | 60
other comprehensive income ( loss ) before reclassifications                | 1170                                                                  | 2014                                   | -26 ( 26 )                                         | 2014                            | -680 ( 680 )               | -4 ( 4 )                                | 460
amounts reclassified out of accumulated other comprehensive income ( loss ) | -530 ( 530 )                                                          | 2014                                   | 38                                                 | 2014                            | 170                        | 2014                                    | -322 ( 322 )
tax effects                                                                 | -225 ( 225 )                                                          | -8 ( 8 )                               | -5 ( 5 )                                           | 2014                            | 146                        | 2014                                    | -92 ( 92 )
other comprehensive income ( loss )                                         | 415                                                                   | -8 ( 8 )                               | 7                                                  | 2014                            | -364 ( 364 )               | -4 ( 4 )                                | 46
december 31 2016                                                            | $ 2164                                                                | $ 2014                                 | $ -259 ( 259 )                                     | $ -40 ( 40 )                    | $ -1240 ( 1240 )           | $ -519 ( 519 )                          | $ 106


our overall gross margin percentage decreased to 59.8% ( 59.8 % ) in 2013 from 62.1% ( 62.1 % ) in 2012 .
the decrease in the gross margin percentage was primarily due to the gross margin percentage decrease in pccg .
we derived most of our overall gross margin dollars in 2013 and 2012 from the sale of platforms in the pccg and dcg operating segments .
our net revenue for 2012 , which included 52 weeks , decreased by $ 658 million , or 1% ( 1 % ) , compared to 2011 , which included 53 weeks .
the pccg and dcg platform unit sales decreased 1% ( 1 % ) while average selling prices were unchanged .
additionally , lower netbook platform unit sales and multi-comm average selling prices , primarily discrete modems , contributed to the decrease .
these decreases were partially offset by our mcafee operating segment , which we acquired in the q1 2011 .
mcafee contributed $ 469 million of additional revenue in 2012 compared to 2011 .
our overall gross margin dollars for 2012 decreased by $ 606 million , or 2% ( 2 % ) , compared to 2011 .
the decrease was due in large part to $ 494 million of excess capacity charges , as well as lower revenue from the pccg and dcg platform .
to a lesser extent , approximately $ 390 million of higher unit costs on the pccg and dcg platform as well as lower netbook and multi-comm revenue contributed to the decrease .
the decrease was partially offset by $ 643 million of lower factory start-up costs as we transition from our 22nm process technology to r&d of our next- generation 14nm process technology , as well as $ 422 million of charges recorded in 2011 to repair and replace materials and systems impacted by a design issue related to our intel ae 6 series express chipset family .
the decrease was also partially offset by the two additional months of results from our acquisition of mcafee , which occurred on february 28 , 2011 , contributing approximately $ 334 million of additional gross margin dollars in 2012 compared to 2011 .
the amortization of acquisition-related intangibles resulted in a $ 557 million reduction to our overall gross margin dollars in 2012 , compared to $ 482 million in 2011 , primarily due to acquisitions completed in q1 2011 .
our overall gross margin percentage in 2012 was flat from 2011 as higher excess capacity charges and higher unit costs on the pccg and dcg platform were offset by lower factory start-up costs and no impact in 2012 for a design issue related to our intel 6 series express chipset family .
we derived a substantial majority of our overall gross margin dollars in 2012 and 2011 from the sale of platforms in the pccg and dcg operating segments .
pc client group the revenue and operating income for the pccg operating segment for each period were as follows: .

( in millions )  | 2013    | 2012    | 2011
---------------- | ------- | ------- | -------
net revenue      | $ 33039 | $ 34504 | $ 35624
operating income | $ 11827 | $ 13106 | $ 14840

net revenue for the pccg operating segment decreased by $ 1.5 billion , or 4% ( 4 % ) , in 2013 compared to 2012 .
pccg platform unit sales were down 3% ( 3 % ) primarily on softness in traditional pc demand during the first nine months of the year .
the decrease in revenue was driven by lower notebook and desktop platform unit sales which were down 4% ( 4 % ) and 2% ( 2 % ) , respectively .
pccg platform average selling prices were flat , with 6% ( 6 % ) higher desktop platform average selling prices offset by 4% ( 4 % ) lower notebook platform average selling prices .
operating income decreased by $ 1.3 billion , or 10% ( 10 % ) , in 2013 compared to 2012 , which was driven by $ 1.5 billion of lower gross margin , partially offset by $ 200 million of lower operating expenses .
the decrease in gross margin was driven by $ 1.5 billion of higher factory start-up costs primarily on our next-generation 14nm process technology as well as lower pccg platform revenue .
these decreases were partially offset by approximately $ 520 million of lower pccg platform unit costs , $ 260 million of lower excess capacity charges , and higher sell-through of previously non- qualified units .
net revenue for the pccg operating segment decreased by $ 1.1 billion , or 3% ( 3 % ) , in 2012 compared to 2011 .
pccg revenue was negatively impacted by the growth of tablets as these devices compete with pcs for consumer sales .
platform average selling prices and unit sales decreased 2% ( 2 % ) and 1% ( 1 % ) , respectively .
the decrease was driven by 6% ( 6 % ) lower notebook platform average selling prices and 5% ( 5 % ) lower desktop platform unit sales .
these decreases were partially offset by a 4% ( 4 % ) increase in desktop platform average selling prices and a 2% ( 2 % ) increase in notebook platform unit sales .
table of contents management 2019s discussion and analysis of financial condition and results of operations ( continued )


for purposes of determining entergy corporation's relative performance for the 2006-2008 period , the committee used the philadelphia utility index as the peer group .
based on market data and the recommendation of management , the committee compared entergy corporation's total shareholder return against the total shareholder return of the companies that comprised the philadelphia utility index .
based on a comparison of entergy corporation's performance relative to the philadelphia utility index as described above , the committee concluded that entergy corporation had exceeded the performance targets for the 2006-2008 performance cycle with entergy finishing in the first quartile which resulted in a payment of 250% ( 250 % ) of target ( the maximum amount payable ) .
each performance unit was then automatically converted into cash at the rate of $ 83.13 per unit , the closing price of entergy corporation common stock on the last trading day of the performance cycle ( december 31 , 2008 ) , plus dividend equivalents accrued over the three-year performance cycle .
see the 2008 option exercises and stock vested table for the amount paid to each of the named executive officers for the 2006-2008 performance unit cycle .
stock options the personnel committee and in the case of the named executive officers ( other than mr .
leonard , mr .
denault and mr .
smith ) , entergy's chief executive officer and the named executive officer's supervisor consider several factors in determining the amount of stock options it will grant under entergy's equity ownership plans to the named executive officers , including : individual performance ; prevailing market practice in stock option grants ; the targeted long-term value created by the use of stock options ; the number of participants eligible for stock options , and the resulting "burn rate" ( i.e. , the number of stock options authorized divided by the total number of shares outstanding ) to assess the potential dilutive effect ; and the committee's assessment of other elements of compensation provided to the named executive officer for stock option awards to the named executive officers ( other than mr .
leonard ) , the committee's assessment of individual performance of each named executive officer done in consultation with entergy corporation's chief executive officer is the most important factor in determining the number of options awarded .
the following table sets forth the number of stock options granted to each named executive officer in 2008 .
the exercise price for each option was $ 108.20 , which was the closing fair market value of entergy corporation common stock on the date of grant. .

named exeutive officer    | stock options
------------------------- | -------------
j . wayne leonard         | 175000
leo p . denault           | 50000
richard j . smith         | 35000
e . renae conley          | 15600
hugh t . mcdonald         | 7000
haley fisackerly          | 5000
joseph f . domino         | 7000
roderick k . west         | 8000
theodore h . bunting jr . | 18000
carolyn shanks            | 7000

the option grants awarded to the named executive officers ( other than mr .
leonard and mr .
lewis ) ranged in amount between 5000 and 50000 shares .
mr .
lewis did not receive any stock option awards in 2008 .
in the case of mr .
leonard , who received 175000 stock options , the committee took special note of his performance as entergy corporation's chief executive officer .
among other things , the committee noted that


exchanged installment notes totaling approximately $ 4.8 billion and approximately $ 400 million of inter- national paper promissory notes for interests in enti- ties formed to monetize the notes .
international paper determined that it was not the primary benefi- ciary of these entities , and therefore should not consolidate its investments in these entities .
during 2006 , these entities acquired an additional $ 4.8 bil- lion of international paper debt securities for cash , resulting in a total of approximately $ 5.2 billion of international paper debt obligations held by these entities at december 31 , 2006 .
since international paper has , and intends to affect , a legal right to offset its obligations under these debt instruments with its investments in the entities , international paper has offset $ 5.0 billion of interest in the entities against $ 5.0 billion of international paper debt obligations held by the entities as of december 31 , 2007 .
international paper also holds variable interests in two financing entities that were used to monetize long-term notes received from sales of forestlands in 2002 and 2001 .
see note 8 of the notes to consolidated financial statements in item 8 .
financial statements and supplementary data for a further discussion of these transactions .
capital resources outlook for 2008 international paper expects to be able to meet pro- jected capital expenditures , service existing debt and meet working capital and dividend requirements during 2008 through current cash balances and cash from operations , supplemented as required by its various existing credit facilities .
international paper has approximately $ 2.5 billion of committed bank credit agreements , which management believes is adequate to cover expected operating cash flow variability during our industry 2019s economic cycles .
the agreements generally provide for interest rates at a floating rate index plus a pre-determined margin dependent upon international paper 2019s credit rating .
the agreements include a $ 1.5 billion fully commit- ted revolving bank credit agreement that expires in march 2011 and has a facility fee of 0.10% ( 0.10 % ) payable quarterly .
these agreements also include up to $ 1.0 billion of available commercial paper-based financ- ings under a receivables securitization program that expires in october 2009 with a facility fee of 0.10% ( 0.10 % ) .
at december 31 , 2007 , there were no borrowings under either the bank credit agreements or receiv- ables securitization program .
the company will continue to rely upon debt and capital markets for the majority of any necessary long-term funding not provided by operating cash flows .
funding decisions will be guided by our capi- tal structure planning objectives .
the primary goals of the company 2019s capital structure planning are to maximize financial flexibility and preserve liquidity while reducing interest expense .
the majority of international paper 2019s debt is accessed through global public capital markets where we have a wide base of investors .
the company was in compliance with all its debt covenants at december 31 , 2007 .
principal financial covenants include maintenance of a minimum net worth , defined as the sum of common stock , paid-in capital and retained earnings , less treasury stock , plus any goodwill impairment charges , of $ 9 billion ; and a maximum total debt to capital ratio , defined as total debt divided by total debt plus net worth , of 60% ( 60 % ) .
maintaining an investment grade credit rating is an important element of international paper 2019s financing strategy .
at december 31 , 2007 , the company held long-term credit ratings of bbb ( stable outlook ) and baa3 ( stable outlook ) by standard & poor 2019s ( s&p ) and moody 2019s investor services ( moody 2019s ) , respectively .
the company currently has short-term credit ratings by s&p and moody 2019s of a-2 and p-3 , respectively .
contractual obligations for future payments under existing debt and lease commitments and purchase obligations at december 31 , 2007 , were as follows : in millions 2008 2009 2010 2011 2012 thereafter maturities of long-term debt ( a ) $ 267 $ 1300 $ 1069 $ 396 $ 532 $ 3056 debt obligations with right of offset ( b ) 2013 2013 2013 2013 2013 5000 .

in millions                                 | 2008   | 2009   | 2010   | 2011  | 2012  | thereafter
------------------------------------------- | ------ | ------ | ------ | ----- | ----- | ----------
maturities of long-term debt ( a )          | $ 267  | $ 1300 | $ 1069 | $ 396 | $ 532 | $ 3056
debt obligations with right of offset ( b ) | 2013   | 2013   | 2013   | 2013  | 2013  | 5000
lease obligations                           | 136    | 116    | 101    | 84    | 67    | 92
purchase obligations ( c )                  | 1953   | 294    | 261    | 235   | 212   | 1480
total ( d )                                 | $ 2356 | $ 1710 | $ 1431 | $ 715 | $ 811 | $ 9628

( a ) total debt includes scheduled principal payments only .
( b ) represents debt obligations borrowed from non-consolidated variable interest entities for which international paper has , and intends to affect , a legal right to offset these obligations with investments held in the entities .
accordingly , in its con- solidated balance sheet at december 31 , 2007 , international paper has offset approximately $ 5.0 billion of interests in the entities against this $ 5.0 billion of debt obligations held by the entities ( see note 8 in the accompanying consolidated financial statements ) .
( c ) includes $ 2.1 billion relating to fiber supply agreements entered into at the time of the transformation plan forestland sales .
( d ) not included in the above table are unrecognized tax benefits of approximately $ 280 million.


2022 timing of available information , including the performance of first lien positions , and 2022 limitations of available historical data .
pnc 2019s determination of the alll for non-impaired loans is sensitive to the risk grades assigned to commercial loans and loss rates for consumer loans .
there are several other qualitative and quantitative factors considered in determining the alll .
this sensitivity analysis does not necessarily reflect the nature and extent of future changes in the alll .
it is intended to provide insight into the impact of adverse changes to risk grades and loss rates only and does not imply any expectation of future deterioration in the risk ratings or loss rates .
given the current processes used , we believe the risk grades and loss rates currently assigned are appropriate .
in the hypothetical event that the aggregate weighted average commercial loan risk grades would experience a 1% ( 1 % ) deterioration , assuming all other variables remain constant , the allowance for commercial loans would increase by approximately $ 35 million as of december 31 , 2014 .
in the hypothetical event that consumer loss rates would increase by 10% ( 10 % ) , assuming all other variables remain constant , the allowance for consumer loans would increase by approximately $ 37 million at december 31 , 2014 .
purchased impaired loans are initially recorded at fair value and applicable accounting guidance prohibits the carry over or creation of valuation allowances at acquisition .
because the initial fair values of these loans already reflect a credit component , additional reserves are established when performance is expected to be worse than our expectations as of the acquisition date .
at december 31 , 2014 , we had established reserves of $ .9 billion for purchased impaired loans .
in addition , loans ( purchased impaired and non- impaired ) acquired after january 1 , 2009 were recorded at fair value .
no allowance for loan losses was carried over and no allowance was created at the date of acquisition .
see note 4 purchased loans in the notes to consolidated financial statements in item 8 of this report for additional information .
in determining the appropriateness of the alll , we make specific allocations to impaired loans and allocations to portfolios of commercial and consumer loans .
we also allocate reserves to provide coverage for probable losses incurred in the portfolio at the balance sheet date based upon current market conditions , which may not be reflected in historical loss data .
commercial lending is the largest category of credits and is sensitive to changes in assumptions and judgments underlying the determination of the alll .
we have allocated approximately $ 1.6 billion , or 47% ( 47 % ) , of the alll at december 31 , 2014 to the commercial lending category .
consumer lending allocations are made based on historical loss experience adjusted for recent activity .
approximately $ 1.7 billion , or 53% ( 53 % ) , of the alll at december 31 , 2014 has been allocated to these consumer lending categories .
in addition to the alll , we maintain an allowance for unfunded loan commitments and letters of credit .
we report this allowance as a liability on our consolidated balance sheet .
we maintain the allowance for unfunded loan commitments and letters of credit at a level we believe is appropriate to absorb estimated probable losses on these unfunded credit facilities .
we determine this amount using estimates of the probability of the ultimate funding and losses related to those credit exposures .
other than the estimation of the probability of funding , this methodology is very similar to the one we use for determining our alll .
we refer you to note 1 accounting policies and note 3 asset quality in the notes to consolidated financial statements in item 8 of this report for further information on certain key asset quality indicators that we use to evaluate our portfolios and establish the allowances .
table 41 : allowance for loan and lease losses .

dollars in millions                                                         | 2014           | 2013
--------------------------------------------------------------------------- | -------------- | ----------------
january 1                                                                   | $ 3609         | $ 4036
total net charge-offs ( a )                                                 | -531 ( 531 )   | -1077 ( 1077 )
provision for credit losses                                                 | 273            | 643
net change in allowance for unfunded loan commitments and letters of credit | -17 ( 17 )     | 8
other                                                                       | -3 ( 3 )       | -1 ( 1 )
december 31                                                                 | $ 3331         | $ 3609
net charge-offs to average loans ( for the year ended ) ( a )               | .27% ( .27 % ) | .57% ( .57 % )
allowance for loan and lease losses to total loans                          | 1.63           | 1.84
commercial lending net charge-offs                                          | $ -55 ( 55 )   | $ -249 ( 249 )
consumer lending net charge-offs ( a )                                      | -476 ( 476 )   | -828 ( 828 )
total net charge-offs                                                       | $ -531 ( 531 ) | $ -1077 ( 1077 )
net charge-offs to average loans ( for the year ended )                     |                |
commercial lending                                                          | .04% ( .04 % ) | .22% ( .22 % )
consumer lending ( a )                                                      | 0.62           | 1.07

( a ) includes charge-offs of $ 134 million taken pursuant to alignment with interagency guidance on practices for loans and lines of credit related to consumer lending in the first quarter of 2013 .
the provision for credit losses totaled $ 273 million for 2014 compared to $ 643 million for 2013 .
the primary drivers of the decrease to the provision were improved overall credit quality , including lower consumer loan delinquencies , and the increasing value of residential real estate which resulted in greater expected cash flows from our purchased impaired loans .
for 2014 , the provision for commercial lending credit losses increased by $ 64 million , or 178% ( 178 % ) , from 2013 primarily due to continued growth in the commercial book , paired with slowing of the reserve releases related to credit quality improvement .
the provision for consumer lending credit losses decreased $ 434 million , or 71% ( 71 % ) , from 2013 .
the pnc financial services group , inc .
2013 form 10-k 81


republic services , inc .
notes to consolidated financial statements 2014 ( continued ) the letters of credit use $ 909.4 million and $ 950.2 million as of december 31 , 2012 and 2011 , respectively , of availability under our credit facilities .
surety bonds expire on various dates through 2026 .
these financial instruments are issued in the normal course of business and are not debt .
because we currently have no liability for this financial assurance , it is not reflected in our consolidated balance sheets .
however , we have recorded capping , closure and post-closure obligations and self-insurance reserves as they are incurred .
the underlying financial assurance obligations , in excess of those already reflected in our consolidated balance sheets , would be recorded if it is probable that we would be unable to fulfill our related obligations .
we do not expect this to occur .
our restricted cash and marketable securities deposits include , among other things , restricted cash and marketable securities held for capital expenditures under certain debt facilities , and restricted cash and marketable securities pledged to regulatory agencies and governmental entities as financial guarantees of our performance related to our final capping , closure and post-closure obligations at our landfills .
the following table summarizes our restricted cash and marketable securities as of december 31: .

                                                | 2012    | 2011
----------------------------------------------- | ------- | -------
financing proceeds                              | $ 24.7  | $ 22.5
capping closure and post-closure obligations    | 54.8    | 54.9
self-insurance                                  | 81.3    | 75.2
other                                           | 3.4     | 37.0
total restricted cash and marketable securities | $ 164.2 | $ 189.6

we own a 19.9% ( 19.9 % ) interest in a company that , among other activities , issues financial surety bonds to secure capping , closure and post-closure obligations for companies operating in the solid waste industry .
we account for this investment under the cost method of accounting .
there have been no identified events or changes in circumstances that may have a significant adverse effect on the recoverability of the investment .
this investee company and the parent company of the investee had written surety bonds for us relating primarily to our landfill operations for capping , closure and post-closure , of which $ 1152.1 million was outstanding as of december 31 , 2012 .
our reimbursement obligations under these bonds are secured by an indemnity agreement with the investee and letters of credit totaling $ 23.4 million and $ 45.0 million as of december 31 , 2012 and 2011 .
off-balance sheet arrangements we have no off-balance sheet debt or similar obligations , other than operating leases and the financial assurances discussed above , which are not classified as debt .
we have no transactions or obligations with related parties that are not disclosed , consolidated into or reflected in our reported financial position or results of operations .
we have not guaranteed any third-party debt .
guarantees we enter into contracts in the normal course of business that include indemnification clauses .
indemnifications relating to known liabilities are recorded in the consolidated financial statements based on our best estimate of required future payments .
certain of these indemnifications relate to contingent events or occurrences , such as the imposition of additional taxes due to a change in the tax law or adverse interpretation of the tax law , and indemnifications made in divestiture agreements where we indemnify the buyer for liabilities that relate to our activities prior to the divestiture and that may become known in the future .
we do not believe that these contingent obligations will have a material effect on our consolidated financial position , results of operations or cash flows.


humana inc .
notes to consolidated financial statements 2014 ( continued ) value , or the excess of the market value over the exercise or purchase price , of stock options exercised and restricted stock awards vested during the period .
the actual tax benefit realized for the deductions taken on our tax returns from option exercises and restricted stock vesting totaled $ 16.3 million in 2009 , $ 16.9 million in 2008 , and $ 48.0 million in 2007 .
there was no capitalized stock-based compensation expense .
the stock plans provide that one restricted share is equivalent to 1.7 stock options .
at december 31 , 2009 , there were 12818855 shares reserved for stock award plans , including 4797304 shares of common stock available for future grants assuming all stock options or 2821944 shares available for future grants assuming all restricted shares .
stock options stock options are granted with an exercise price equal to the average market value of the underlying common stock on the date of grant .
our stock plans , as approved by the board of directors and stockholders , define average market value as the average of the highest and lowest stock prices reported by the new york stock exchange on a given date .
exercise provisions vary , but most options vest in whole or in part 1 to 3 years after grant and expire 7 to 10 years after grant .
upon grant , stock options are assigned a fair value based on the black-scholes valuation model .
compensation expense is recognized on a straight-line basis over the total requisite service period , generally the total vesting period , for the entire award .
for stock options granted on or after january 1 , 2010 to retirement eligible employees , the compensation expense is recognized on a straight-line basis over the shorter of the requisite service period or the period from the date of grant to an employee 2019s eligible retirement date .
the weighted-average fair value of each option granted during 2009 , 2008 , and 2007 is provided below .
the fair value was estimated on the date of grant using the black-scholes pricing model with the weighted-average assumptions indicated below: .

                                          | 2009             | 2008             | 2007
----------------------------------------- | ---------------- | ---------------- | ----------------
weighted-average fair value at grant date | $ 14.24          | $ 17.95          | $ 21.07
expected option life ( years )            | 4.6              | 5.1              | 4.8
expected volatility                       | 39.2% ( 39.2 % ) | 28.2% ( 28.2 % ) | 28.9% ( 28.9 % )
risk-free interest rate at grant date     | 1.9% ( 1.9 % )   | 2.9% ( 2.9 % )   | 4.5% ( 4.5 % )
dividend yield                            | none             | none             | none

when valuing employee stock options , we stratify the employee population into three homogenous groups that historically have exhibited similar exercise behaviors .
these groups are executive officers , directors , and all other employees .
we value the stock options based on the unique assumptions for each of these employee groups .
we calculate the expected term for our employee stock options based on historical employee exercise behavior and base the risk-free interest rate on a traded zero-coupon u.s .
treasury bond with a term substantially equal to the option 2019s expected term .
the volatility used to value employee stock options is based on historical volatility .
we calculate historical volatility using a simple-average calculation methodology based on daily price intervals as measured over the expected term of the option.


income tax liabilities tax liabilities related to unrecognized tax benefits as of 30 september 2018 were $ 233.6 .
these tax liabilities were excluded from the contractual obligations table as it is impractical to determine a cash impact by year given that payments will vary according to changes in tax laws , tax rates , and our operating results .
in addition , there are uncertainties in timing of the effective settlement of our uncertain tax positions with respective taxing authorities .
however , the contractual obligations table above includes our accrued liability of approximately $ 184 for deemed repatriation tax that is payable over eight years related to the tax act .
refer to note 22 , income taxes , to the consolidated financial statements for additional information .
obligation for future contribution to an equity affiliate on 19 april 2015 , a joint venture between air products and acwa holding entered into a 20-year oxygen and nitrogen supply agreement to supply saudi aramco 2019s oil refinery and power plant being built in jazan , saudi arabia .
air products owns 25% ( 25 % ) of the joint venture and guarantees the repayment of its share of an equity bridge loan .
in total , we expect to invest approximately $ 100 in this joint venture .
as of 30 september 2018 , we recorded a noncurrent liability of $ 94.4 for our obligation to make future equity contributions in 2020 based on our proportionate share of the advances received by the joint venture under the loan .
expected investment in joint venture on 12 august 2018 , air products entered an agreement to form a gasification/power joint venture ( "jv" ) with saudi aramco and acwa in jazan , saudi arabia .
air products will own at least 55% ( 55 % ) of the jv , with saudi aramco and acwa power owning the balance .
the jv will purchase the gasification assets , power block , and the associated utilities from saudi aramco for approximately $ 8 billion .
our expected investment has been excluded from the contractual obligations table above pending closing , which is currently expected in fiscal year 2020 .
the jv will own and operate the facility under a 25-year contract for a fixed monthly fee .
saudi aramco will supply feedstock to the jv , and the jv will produce power , hydrogen and other utilities for saudi aramco .
pension benefits the company and certain of its subsidiaries sponsor defined benefit pension plans and defined contribution plans that cover a substantial portion of its worldwide employees .
the principal defined benefit pension plans are the u.s .
salaried pension plan and the u.k .
pension plan .
these plans were closed to new participants in 2005 , after which defined contribution plans were offered to new employees .
the shift to defined contribution plans is expected to continue to reduce volatility of both plan expense and contributions .
the fair market value of plan assets for our defined benefit pension plans as of the 30 september 2018 measurement date decreased to $ 4273.1 from $ 4409.2 at the end of fiscal year 2017 .
the projected benefit obligation for these plans was $ 4583.3 and $ 5107.2 at the end of fiscal years 2018 and 2017 , respectively .
the net unfunded liability decreased $ 387.8 from $ 698.0 to $ 310.2 , primarily due to higher discount rates and favorable asset experience .
refer to note 16 , retirement benefits , to the consolidated financial statements for comprehensive and detailed disclosures on our postretirement benefits .
pension expense .

                                                                     | 2018           | 2017           | 2016
-------------------------------------------------------------------- | -------------- | -------------- | --------------
pension expense 2013 continuing operations                           | $ 91.8         | $ 72.0         | $ 55.8
settlements termination benefits and curtailments ( included above ) | 48.9           | 15.0           | 6.0
weighted average discount rate 2013 service cost                     | 3.2% ( 3.2 % ) | 2.9% ( 2.9 % ) | 4.1% ( 4.1 % )
weighted average discount rate 2013 interest cost                    | 2.9% ( 2.9 % ) | 2.5% ( 2.5 % ) | 3.4% ( 3.4 % )
weighted average expected rate of return on plan assets              | 6.9% ( 6.9 % ) | 7.4% ( 7.4 % ) | 7.5% ( 7.5 % )
weighted average expected rate of compensation increase              | 3.5% ( 3.5 % ) | 3.5% ( 3.5 % ) | 3.5% ( 3.5 % )


table of contents 3 .
bankruptcy settlement obligations as of december 31 , 2013 , the components of "claims and other bankruptcy settlement obligations" on american's consolidated balance sheet are as follows ( in millions ) : .

aag series a preferred stock  | $ 3329
----------------------------- | ------
single-dip equity obligations | 1246
labor-related deemed claim    | 849
total                         | $ 5424

as a mechanism for satisfying double-dip unsecured claims and a portion of single-dip unsecured claims , the plan of reorganization provided that such claimholders receive the mandatorily convertible aag series a preferred stock .
aag's series a preferred stock , while outstanding , votes and participates in accordance with the terms of the underlying certificate of designation .
one quarter of the shares of aag series a preferred stock is mandatorily convertible on each of the 30 th , 60th , 90th and 120th days after the effective date .
in addition , subject to certain limitations , holders of aag series a preferred stock may elect to convert up to 10 million shares of aag series a preferred stock during each 30-day period following the effective date thereby reducing the number of aag series a preferred stock to be converted on the 120 th day after the effective date .
the initial stated value of each share of aag series a preferred stock is $ 25.00 and accrues dividends at 6.25% ( 6.25 % ) per annum , calculated daily , while outstanding .
additionally , aag series a preferred stock converts to aag common stock based upon the volume weighted average price of the shares of aag common stock on the five trading days immediately preceding the conversion date , at a 3.5% ( 3.5 % ) fixed discount , subject to a conversion price floor of $ 10.875 per share and a conversion price cap of $ 33.8080 per share , below or above which the conversion rate remains fixed .
aag series a preferred stock embodies an unconditional obligation to transfer a variable number of shares based predominately on a fixed monetary amount known at inception , and , as such , it is not treated as equity of aag , but rather as a liability until such time that it is converted to aag common stock .
accordingly , american has reflected the amount of its claims satisfied through the issuance of the aag series a preferred stock as a liability included within the "bankruptcy settlement obligations" line on american 2019s consolidated balance sheets and will reflect such obligations as a liability until such time where they are satisfied through the issuance of aag common stock .
upon the satisfaction of these bankruptcy settlement obligations with aag common stock , the company will record an increase in additional paid-in capital through an intercompany equity transfer while derecognizing the related bankruptcy settlement obligation at that time .
as of february 19 , 2014 , approximately 107 million shares of aag series a preferred stock had been converted into an aggregate of 95 million shares of aag common stock .
the single-dip equity obligations , while outstanding , do not vote or participate in accordance with the terms of the plan .
these equity contract obligations , representing the amount of total single-dip unsecured creditor obligations not satisfied through the issuance of aag series a preferred stock at the effective date , represent an unconditional obligation to transfer a variable number of shares of aag common stock based predominantly on a fixed monetary amount known at inception , and , as such , are not treated as equity , but rather as liabilities until the 120 th day after emergence .
at the 120 th day after emergence , aag will issue a variable amount of aag common stock necessary to satisfy the obligation amount at emergence , plus accrued dividends of 12% ( 12 % ) per annum , calculated daily , through the 120 th day after emergence , based on the volume weighted average price of the shares of aag common stock , at a 3.5% ( 3.5 % ) discount , as specified in the plan and subject to there being a sufficient number of shares remaining for issuance to unsecured creditors under the plan .
in exchange for employees' contributions to the successful reorganization of aag , including agreeing to reductions in pay and benefits , aag and american agreed in the plan to provide each employee group a deemed claim which was used to provide a distribution of a portion of the equity of the reorganized entity to those employees .
each employee group received a deemed claim amount based upon a fixed percentage of the distributions to be made to general unsecured claimholders .
the fair value based on the expected number of shares to be distributed to satisfy this deemed claim was approximately $ 1.7 billion .
on the effective date , aag made an initial distribution of $ 595 million in common stock and american paid approximately $ 300 million in cash to cover payroll taxes related to the equity distribution .
as of december 31 , 2013 , the remaining liability to certain american labor groups and employees of $ 849 million is based upon the estimated fair value of the shares of aag common stock expected to be issued in satisfaction of such obligation , measured as if the obligation were settled using the trading price of aag common stock at december 31 , 2013 .
increases in the trading price of aag common stock after december 31 , 2013 , could cause a decrease in the fair value measurement of the remaining obligation , and vice-versa .
american will record this obligation at fair value primarily through the 120 th day after emergence , at which time the obligation will be materially settled.


american tower corporation and subsidiaries notes to consolidated financial statements 2014 ( continued ) 7 .
derivative financial instruments under the terms of the credit facility , the company is required to enter into interest rate protection agreements on at least 50% ( 50 % ) of its variable rate debt .
under these agreements , the company is exposed to credit risk to the extent that a counterparty fails to meet the terms of a contract .
such exposure is limited to the current value of the contract at the time the counterparty fails to perform .
the company believes its contracts as of december 31 , 2004 are with credit worthy institutions .
as of december 31 , 2004 , the company had two interest rate caps outstanding with an aggregate notional amount of $ 350.0 million ( each at an interest rate of 6.0% ( 6.0 % ) ) that expire in 2006 .
as of december 31 , 2003 , the company had three interest rate caps outstanding with an aggregate notional amount of $ 500.0 million ( each at a rate of 5.0% ( 5.0 % ) ) that expired in 2004 .
as of december 31 , 2004 and 2003 , there was no fair value associated with any of these interest rate caps .
during the year ended december 31 , 2003 , the company recorded an unrealized loss of approximately $ 0.3 million ( net of a tax benefit of approximately $ 0.2 million ) in other comprehensive loss for the change in fair value of cash flow hedges and reclassified $ 5.9 million ( net of a tax benefit of approximately $ 3.2 million ) into results of operations .
during the year ended december 31 , 2002 , the company recorded an unrealized loss of approximately $ 9.1 million ( net of a tax benefit of approximately $ 4.9 million ) in other comprehensive loss for the change in fair value of cash flow hedges and reclassified $ 19.5 million ( net of a tax benefit of approximately $ 10.5 million ) into results of operations .
hedge ineffectiveness resulted in a gain of approximately $ 1.0 million for the year ended december 31 , 2002 , which is recorded in other expense in the accompanying consolidated statement of operations .
the company records the changes in fair value of its derivative instruments that are not accounted for as hedges in other expense .
the company did not reclassify any derivative losses into its statement of operations for the year ended december 31 , 2004 and does not anticipate reclassifying any derivative losses into its statement of operations within the next twelve months , as there are no amounts included in other comprehensive loss as of december 31 , 2004 .
8 .
commitments and contingencies lease obligations 2014the company leases certain land , office and tower space under operating leases that expire over various terms .
many of the leases contain renewal options with specified increases in lease payments upon exercise of the renewal option .
escalation clauses present in operating leases , excluding those tied to cpi or other inflation-based indices , are straight-lined over the term of the lease .
( see note 1. ) future minimum rental payments under non-cancelable operating leases include payments for certain renewal periods at the company 2019s option because failure to renew could result in a loss of the applicable tower site and related revenues from tenant leases , thereby making it reasonably assured that the company will renew the lease .
such payments in effect at december 31 , 2004 are as follows ( in thousands ) : year ending december 31 .

2005       | $ 106116
---------- | ---------
2006       | 106319
2007       | 106095
2008       | 106191
2009       | 106214
thereafter | 1570111
total      | $ 2101046

aggregate rent expense ( including the effect of straight-line rent expense ) under operating leases for the years ended december 31 , 2004 , 2003 and 2002 approximated $ 118741000 , $ 113956000 , and $ 109644000 , respectively.


competitive supply aes 2019s competitive supply line of business consists of generating facilities that sell electricity directly to wholesale customers in competitive markets .
additionally , as compared to the contract generation segment discussed above , these generating facilities generally sell less than 75% ( 75 % ) of their output pursuant to long-term contracts with pre-determined pricing provisions and/or sell into power pools , under shorter-term contracts or into daily spot markets .
the prices paid for electricity under short-term contracts and in the spot markets are unpredictable and can be , and from time to time have been , volatile .
the results of operations of aes 2019s competitive supply business are also more sensitive to the impact of market fluctuations in the price of electricity , natural gas , coal and other raw materials .
in the united kingdom , txu europe entered administration in november 2002 and is no longer performing under its contracts with drax and barry .
as described in the footnotes and in other sections of the discussion and analysis of financial condition and results of operations , txu europe 2019s failure to perform under its contracts has had a material adverse effect on the results of operations of these businesses .
two aes competitive supply businesses , aes wolf hollow , l.p .
and granite ridge have fuel supply agreements with el paso merchant energy l.p .
an affiliate of el paso corp. , which has encountered financial difficulties .
the company does not believe the financial difficulties of el paso corp .
will have a material adverse effect on el paso merchant energy l.p . 2019s performance under the supply agreement ; however , there can be no assurance that a further deterioration in el paso corp 2019s financial condition will not have a material adverse effect on the ability of el paso merchant energy l.p .
to perform its obligations .
while el paso corp 2019s financial condition may not have a material adverse effect on el paso merchant energy , l.p .
at this time , it could lead to a default under the aes wolf hollow , l.p . 2019s fuel supply agreement , in which case aes wolf hollow , l.p . 2019s lenders may seek to declare a default under its credit agreements .
aes wolf hollow , l.p .
is working in concert with its lenders to explore options to avoid such a default .
the revenues from our facilities that distribute electricity to end-use customers are generally subject to regulation .
these businesses are generally required to obtain third party approval or confirmation of rate increases before they can be passed on to the customers through tariffs .
these businesses comprise the large utilities and growth distribution segments of the company .
revenues from contract generation and competitive supply are not regulated .
the distribution of revenues between the segments for the years ended december 31 , 2002 , 2001 and 2000 is as follows: .

                    | 2002         | 2001         | 2000
------------------- | ------------ | ------------ | ------------
large utilities     | 36% ( 36 % ) | 21% ( 21 % ) | 22% ( 22 % )
growth distribution | 14% ( 14 % ) | 21% ( 21 % ) | 21% ( 21 % )
contract generation | 29% ( 29 % ) | 32% ( 32 % ) | 27% ( 27 % )
competitive supply  | 21% ( 21 % ) | 26% ( 26 % ) | 30% ( 30 % )

development costs certain subsidiaries and affiliates of the company ( domestic and non-u.s. ) are in various stages of developing and constructing greenfield power plants , some but not all of which have signed long-term contracts or made similar arrangements for the sale of electricity .
successful completion depends upon overcoming substantial risks , including , but not limited to , risks relating to failures of siting , financing , construction , permitting , governmental approvals or the potential for termination of the power sales contract as a result of a failure to meet certain milestones .
as of december 31 , 2002 , capitalized costs for projects under development and in early stage construction were approximately $ 15 million and capitalized costs for projects under construction were approximately $ 3.2 billion .
the company believes


celanese corporation and subsidiaries notes to consolidated financial statements ( continued ) 2022 amend certain material agreements governing bcp crystal 2019s indebtedness ; 2022 change the business conducted by celanese holdings and its subsidiaries ; and 2022 enter into hedging agreements that restrict dividends from subsidiaries .
in addition , the senior credit facilities require bcp crystal to maintain the following financial covenants : a maximum total leverage ratio , a maximum bank debt leverage ratio , a minimum interest coverage ratio and maximum capital expenditures limitation .
the maximum consolidated net bank debt to adjusted ebitda ratio , as defined , previously required under the senior credit facilities , was eliminated when the company amended the facilities in january 2005 .
as of december 31 , 2005 , the company was in compliance with all of the financial covenants related to its debt agreements .
the maturation of the company 2019s debt , including short term borrowings , is as follows : ( in $ millions ) .

                 | total ( in$ millions )
---------------- | ----------------------
2006             | 155
2007             | 29
2008             | 22
2009             | 40
2010             | 28
thereafter ( 1 ) | 3163
total            | 3437

( 1 ) includes $ 2 million purchase accounting adjustment to assumed debt .
17 .
benefit obligations pension obligations .
pension obligations are established for benefits payable in the form of retirement , disability and surviving dependent pensions .
the benefits offered vary according to the legal , fiscal and economic conditions of each country .
the commitments result from participation in defined contribution and defined benefit plans , primarily in the u.s .
benefits are dependent on years of service and the employee 2019s compensation .
supplemental retirement benefits provided to certain employees are non-qualified for u.s .
tax purposes .
separate trusts have been established for some non-qualified plans .
defined benefit pension plans exist at certain locations in north america and europe .
as of december 31 , 2005 , the company 2019s u.s .
qualified pension plan represented greater than 85% ( 85 % ) and 75% ( 75 % ) of celanese 2019s pension plan assets and liabilities , respectively .
independent trusts or insurance companies administer the majority of these plans .
actuarial valuations for these plans are prepared annually .
the company sponsors various defined contribution plans in europe and north america covering certain employees .
employees may contribute to these plans and the company will match these contributions in varying amounts .
contributions to the defined contribution plans are based on specified percentages of employee contributions and they aggregated $ 12 million for the year ended decem- ber 31 , 2005 , $ 8 million for the nine months ended december 31 , 2004 , $ 3 million for the three months ended march 31 , 2004 and $ 11 million for the year ended december 31 , 2003 .
in connection with the acquisition of cag , the purchaser agreed to pre-fund $ 463 million of certain pension obligations .
during the nine months ended december 31 , 2004 , $ 409 million was pre-funded to the company 2019s pension plans .
the company contributed an additional $ 54 million to the non-qualified pension plan 2019s rabbi trusts in february 2005 .
in connection with the company 2019s acquisition of vinamul and acetex , the company assumed certain assets and obligations related to the acquired pension plans .
the company recorded liabilities of $ 128 million for these pension plans .
total pension assets acquired amounted to $ 85 million.


( 2 ) for purposes of calculating the ratio of earnings to fixed charges , earnings consist of earnings before income taxes minus income from equity investees plus fixed charges .
fixed charges consist of interest expense and the portion of rental expense we believe is representative of the interest component of rental expense .
( a ) for the years ended december 31 , 2010 and 2009 , earnings available for fixed charges were inadequate to cover fixed charges by $ 37.0 million and $ 461.2 million , respectively .
( 3 ) ebitda is defined as consolidated net income ( loss ) before interest expense , income tax expense ( benefit ) , depreciation , and amortization .
adjusted ebitda , which is a measure defined in our credit agreements , is calculated by adjusting ebitda for certain items of income and expense including ( but not limited to ) the following : ( a ) non-cash equity-based compensation ; ( b ) goodwill impairment charges ; ( c ) sponsor fees ; ( d ) certain consulting fees ; ( e ) debt-related legal and accounting costs ; ( f ) equity investment income and losses ; ( g ) certain severance and retention costs ; ( h ) gains and losses from the early extinguishment of debt ; ( i ) gains and losses from asset dispositions outside the ordinary course of business ; and ( j ) non-recurring , extraordinary or unusual gains or losses or expenses .
we have included a reconciliation of ebitda and adjusted ebitda in the table below .
both ebitda and adjusted ebitda are considered non-gaap financial measures .
generally , a non-gaap financial measure is a numerical measure of a company 2019s performance , financial position or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with gaap .
non-gaap measures used by the company may differ from similar measures used by other companies , even when similar terms are used to identify such measures .
we believe that ebitda and adjusted ebitda provide helpful information with respect to our operating performance and cash flows including our ability to meet our future debt service , capital expenditures and working capital requirements .
adjusted ebitda also provides helpful information as it is the primary measure used in certain financial covenants contained in our credit agreements .
the following unaudited table sets forth reconciliations of net income ( loss ) to ebitda and ebitda to adjusted ebitda for the periods presented: .

( in millions )                                        | years ended december 31 , 2013 | years ended december 31 , 2012 | years ended december 31 , 2011 | years ended december 31 , 2010 | years ended december 31 , 2009
------------------------------------------------------ | ------------------------------ | ------------------------------ | ------------------------------ | ------------------------------ | ------------------------------
net income ( loss )                                    | $ 132.8                        | $ 119.0                        | $ 17.1                         | $ -29.2 ( 29.2 )               | $ -373.4 ( 373.4 )
depreciation and amortization                          | 208.2                          | 210.2                          | 204.9                          | 209.4                          | 218.2
income tax expense ( benefit )                         | 62.7                           | 67.1                           | 11.2                           | -7.8 ( 7.8 )                   | -87.8 ( 87.8 )
interest expense net                                   | 250.1                          | 307.4                          | 324.2                          | 391.9                          | 431.7
ebitda                                                 | 653.8                          | 703.7                          | 557.4                          | 564.3                          | 188.7
non-cash equity-based compensation                     | 8.6                            | 22.1                           | 19.5                           | 11.5                           | 15.9
sponsor fees                                           | 2.5                            | 5.0                            | 5.0                            | 5.0                            | 5.0
consulting and debt-related professional fees          | 0.1                            | 0.6                            | 5.1                            | 15.1                           | 14.1
goodwill impairment                                    | 2014                           | 2014                           | 2014                           | 2014                           | 241.8
net loss ( gain ) on extinguishments of long-term debt | 64.0                           | 17.2                           | 118.9                          | -2.0 ( 2.0 )                   | 2014
litigation net ( i )                                   | -4.1 ( 4.1 )                   | 4.3                            | 2014                           | 2014                           | 2014
ipo- and secondary-offering related expenses           | 75.0                           | 2014                           | 2014                           | 2014                           | 2014
other adjustments ( ii )                               | 8.6                            | 13.7                           | 11.4                           | 7.9                            | -0.1 ( 0.1 )
adjusted ebitda                                        | $ 808.5                        | $ 766.6                        | $ 717.3                        | $ 601.8                        | $ 465.4

( i ) relates to unusual , non-recurring litigation matters .
( ii ) includes certain retention costs and equity investment income , certain severance costs in 2009 and a gain related to the sale of the informacast software and equipment in 2009.


from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors , including those we discuss under 201crisk factors 201d and elsewhere in this form 10-k .
you should read 201crisk factors 201d and 201cforward-looking statements . 201d executive overview general american water works company , inc .
( herein referred to as 201camerican water 201d or the 201ccompany 201d ) is the largest investor-owned united states water and wastewater utility company , as measured both by operating revenues and population served .
our approximately 6400 employees provide drinking water , wastewater and other water related services to an estimated 15 million people in 47 states and in one canadian province .
our primary business involves the ownership of water and wastewater utilities that provide water and wastewater services to residential , commercial , industrial and other customers .
our regulated businesses that provide these services are generally subject to economic regulation by state regulatory agencies in the states in which they operate .
the federal government and the states also regulate environmental , health and safety and water quality matters .
our regulated businesses provide services in 16 states and serve approximately 3.2 million customers based on the number of active service connections to our water and wastewater networks .
we report the results of these businesses in our regulated businesses segment .
we also provide services that are not subject to economic regulation by state regulatory agencies .
we report the results of these businesses in our market-based operations segment .
in 2014 , we continued the execution of our strategic goals .
our commitment to growth through investment in our regulated infrastructure and expansion of our regulated customer base and our market-based operations , combined with operational excellence led to continued improvement in regulated operating efficiency , improved performance of our market-based operations , and enabled us to provide increased value to our customers and investors .
during the year , we focused on growth , addressed regulatory lag , made more efficient use of capital and improved our regulated operation and maintenance ( 201co&m 201d ) efficiency ratio .
2014 financial results for the year ended december 31 , 2014 , we continued to increase net income , while making significant capital investment in our infrastructure and implementing operational efficiency improvements to keep customer rates affordable .
highlights of our 2014 operating results compared to 2013 and 2012 include: .

                                                        | 2014             | 2013             | 2012
------------------------------------------------------- | ---------------- | ---------------- | ----------------
income from continuing operations                       | $ 2.39           | $ 2.07           | $ 2.10
income ( loss ) from discontinued operations net of tax | $ -0.04 ( 0.04 ) | $ -0.01 ( 0.01 ) | $ -0.09 ( 0.09 )
diluted earnings per share                              | $ 2.35           | $ 2.06           | $ 2.01

continuing operations income from continuing operations included 4 cents per diluted share of costs resulting from the freedom industries chemical spill in west virginia in 2014 and included 14 cents per diluted share in 2013 related to a tender offer .
earnings from continuing operations , adjusted for these two items , increased 10% ( 10 % ) , or 22 cents per share , mainly due to favorable operating results from our regulated businesses segment due to higher revenues and lower operating expenses , partially offset by higher depreciation expenses .
also contributing to the overall increase in income from continuing operations was lower interest expense in 2014 compared to the same period in 2013.


table of contents primarily to certain undistributed foreign earnings for which no u.s .
taxes are provided because such earnings are intended to be indefinitely reinvested outside the u.s .
the lower effective tax rate in 2010 as compared to 2009 is due primarily to an increase in foreign earnings on which u.s .
income taxes have not been provided as such earnings are intended to be indefinitely reinvested outside the u.s .
as of september 25 , 2010 , the company had deferred tax assets arising from deductible temporary differences , tax losses , and tax credits of $ 2.4 billion , and deferred tax liabilities of $ 5.0 billion .
management believes it is more likely than not that forecasted income , including income that may be generated as a result of certain tax planning strategies , together with future reversals of existing taxable temporary differences , will be sufficient to fully recover the deferred tax assets .
the company will continue to evaluate the realizability of deferred tax assets quarterly by assessing the need for and amount of a valuation allowance .
the internal revenue service ( the 201cirs 201d ) has completed its field audit of the company 2019s federal income tax returns for the years 2004 through 2006 and proposed certain adjustments .
the company has contested certain of these adjustments through the irs appeals office .
the irs is currently examining the years 2007 through 2009 .
all irs audit issues for years prior to 2004 have been resolved .
during the third quarter of 2010 , the company reached a tax settlement with the irs for the years 2002 through 2003 .
in addition , the company is subject to audits by state , local , and foreign tax authorities .
management believes that adequate provision has been made for any adjustments that may result from tax examinations .
however , the outcome of tax audits cannot be predicted with certainty .
if any issues addressed in the company 2019s tax audits are resolved in a manner not consistent with management 2019s expectations , the company could be required to adjust its provision for income taxes in the period such resolution occurs .
liquidity and capital resources the following table presents selected financial information and statistics as of and for the three years ended september 25 , 2010 ( in millions ) : as of september 25 , 2010 , the company had $ 51 billion in cash , cash equivalents and marketable securities , an increase of $ 17 billion from september 26 , 2009 .
the principal component of this net increase was the cash generated by operating activities of $ 18.6 billion , which was partially offset by payments for acquisition of property , plant and equipment of $ 2 billion and payments made in connection with business acquisitions , net of cash acquired , of $ 638 million .
the company 2019s marketable securities investment portfolio is invested primarily in highly rated securities , generally with a minimum rating of single-a or equivalent .
as of september 25 , 2010 and september 26 , 2009 , $ 30.8 billion and $ 17.4 billion , respectively , of the company 2019s cash , cash equivalents and marketable securities were held by foreign subsidiaries and are generally based in u.s .
dollar-denominated holdings .
the company believes its existing balances of cash , cash equivalents and marketable securities will be sufficient to satisfy its working capital needs , capital asset purchases , outstanding commitments and other liquidity requirements associated with its existing operations over the next 12 months. .

                                                | 2010    | 2009    | 2008
----------------------------------------------- | ------- | ------- | -------
cash cash equivalents and marketable securities | $ 51011 | $ 33992 | $ 24490
accounts receivable net                         | $ 5510  | $ 3361  | $ 2422
inventories                                     | $ 1051  | $ 455   | $ 509
working capital                                 | $ 20956 | $ 20049 | $ 18645
annual operating cash flow                      | $ 18595 | $ 10159 | $ 9596


sales of unregistered securities not applicable .
repurchases of equity securities the following table provides information regarding our purchases of our equity securities during the period from october 1 , 2017 to december 31 , 2017 .
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 ( orapproximate dollar value ) of shares ( or units ) that may yet be purchasedunder the plans orprograms3
--------------- | --------------------------------------------- | ----------------------------------------- | ------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------
october 1 - 31  | 1231868                                       | $ 20.74                                   | 1230394                                                                                | $ 214001430
november 1 - 30 | 1723139                                       | $ 18.89                                   | 1722246                                                                                | $ 181474975
december 1 - 31 | 1295639                                       | $ 20.25                                   | 1285000                                                                                | $ 155459545
total           | 4250646                                       | $ 19.84                                   | 4237640                                                                                |

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 1474 withheld shares in october 2017 , 893 withheld shares in november 2017 and 10639 withheld shares in december 2017 , for a total of 13006 withheld shares during the three-month period .
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 share 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 share repurchase program .
3 in february 2017 , 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 201c2017 share repurchase program 201d ) .
on february 14 , 2018 , 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 2017 share repurchase program .
there is no expiration date associated with the share repurchase programs.


item 2 : properties information concerning applied 2019s properties is set forth below: .

( square feet in thousands ) | united states | other countries | total
---------------------------- | ------------- | --------------- | -----
owned                        | 4530          | 2417            | 6947
leased                       | 1037          | 1341            | 2378
total                        | 5567          | 3758            | 9325

because of the interrelation of applied 2019s operations , properties within a country may be shared by the segments operating within that country .
the company 2019s headquarters offices are in santa clara , california .
products in semiconductor systems are manufactured in santa clara , california ; austin , texas ; gloucester , massachusetts ; kalispell , montana ; rehovot , israel ; and singapore .
remanufactured equipment products in the applied global services segment are produced primarily in austin , texas .
products in the display and adjacent markets segment are manufactured in alzenau , germany and tainan , taiwan .
other products are manufactured in treviso , italy .
applied also owns and leases offices , plants and warehouse locations in many locations throughout the world , including in europe , japan , north america ( principally the united states ) , israel , china , india , korea , southeast asia and taiwan .
these facilities are principally used for manufacturing ; research , development and engineering ; and marketing , sales and customer support .
applied also owns a total of approximately 269 acres of buildable land in montana , texas , california , israel and italy that could accommodate additional building space .
applied considers the properties that it owns or leases as adequate to meet its current and future requirements .
applied regularly assesses the size , capability and location of its global infrastructure and periodically makes adjustments based on these assessments.


the impairment tests performed for intangible assets as of july 31 , 2013 , 2012 and 2011 indicated no impairment charges were required .
estimated amortization expense for finite-lived intangible assets for each of the five succeeding years is as follows : ( in millions ) .

year | amount
---- | ------
2014 | $ 156
2015 | 126
2016 | 91
2017 | 74
2018 | 24

indefinite-lived acquired management contracts in july 2013 , in connection with the credit suisse etf transaction , the company acquired $ 231 million of indefinite-lived management contracts .
in march 2012 , in connection with the claymore transaction , the company acquired $ 163 million of indefinite-lived etp management contracts .
finite-lived acquired management contracts in october 2013 , in connection with the mgpa transaction , the company acquired $ 29 million of finite-lived management contracts with a weighted-average estimated useful life of approximately eight years .
in september 2012 , in connection with the srpep transaction , the company acquired $ 40 million of finite- lived management contracts with a weighted-average estimated useful life of approximately 10 years .
11 .
other assets at march 31 , 2013 , blackrock held an approximately one- third economic equity interest in private national mortgage acceptance company , llc ( 201cpnmac 201d ) , which is accounted for as an equity method investment and is included in other assets on the consolidated statements of financial condition .
on may 8 , 2013 , pennymac became the sole managing member of pnmac in connection with an initial public offering of pennymac ( the 201cpennymac ipo 201d ) .
as a result of the pennymac ipo , blackrock recorded a noncash , nonoperating pre-tax gain of $ 39 million related to the carrying value of its equity method investment .
subsequent to the pennymac ipo , the company contributed 6.1 million units of its investment to a new donor advised fund ( the 201ccharitable contribution 201d ) .
the fair value of the charitable contribution was $ 124 million and is included in general and administration expenses on the consolidated statements of income .
in connection with the charitable contribution , the company also recorded a noncash , nonoperating pre-tax gain of $ 80 million related to the contributed investment and a tax benefit of approximately $ 48 million .
the carrying value and fair value of the company 2019s remaining interest ( approximately 20% ( 20 % ) or 16 million shares and units ) was approximately $ 127 million and $ 273 million , respectively , at december 31 , 2013 .
the fair value of the company 2019s interest reflected the pennymac stock price at december 31 , 2013 ( level 1 input ) .
12 .
borrowings short-term borrowings the carrying value of short-term borrowings at december 31 , 2012 included $ 100 million under the 2012 revolving credit facility .
2013 revolving credit facility .
in march 2011 , the company entered into a five-year $ 3.5 billion unsecured revolving credit facility ( the 201c2011 credit facility 201d ) .
in march 2012 , the 2011 credit facility was amended to extend the maturity date by one year to march 2017 and in april 2012 the amount of the aggregate commitment was increased to $ 3.785 billion ( the 201c2012 credit facility 201d ) .
in march 2013 , the company 2019s credit facility was amended to extend the maturity date by one year to march 2018 and the amount of the aggregate commitment was increased to $ 3.990 billion ( the 201c2013 credit facility 201d ) .
the 2013 credit facility permits the company to request up to an additional $ 1.0 billion of borrowing capacity , subject to lender credit approval , increasing the overall size of the 2013 credit facility to an aggregate principal amount not to exceed $ 4.990 billion .
interest on borrowings outstanding accrues at a rate based on the applicable london interbank offered rate plus a spread .
the 2013 credit facility requires the company not to exceed a maximum leverage ratio ( ratio of net debt to earnings before interest , taxes , depreciation and amortization , where net debt equals total debt less unrestricted cash ) of 3 to 1 , which was satisfied with a ratio of less than 1 to 1 at december 31 , 2013 .
the 2013 credit facility provides back- up liquidity , funds ongoing working capital for general corporate purposes and funds various investment opportunities .
at december 31 , 2013 , the company had no amount outstanding under the 2013 credit facility .
commercial paper program .
on october 14 , 2009 , blackrock established a commercial paper program ( the 201ccp program 201d ) under which the company could issue unsecured commercial paper notes ( the 201ccp notes 201d ) on a private placement basis up to a maximum aggregate amount outstanding at any time of $ 3.0 billion .
on may 13 , 2011 , blackrock increased the maximum aggregate amount that may be borrowed under the cp program to $ 3.5 billion .
on may 17 , 2012 , blackrock increased the maximum aggregate amount to $ 3.785 billion .
in april 2013 , blackrock increased the maximum aggregate amount for which the company could issue unsecured cp notes on a private-placement basis up to a maximum aggregate amount outstanding at any time of $ 3.990 billion .
the commercial paper program is currently supported by the 2013 credit facility .
at december 31 , 2013 and 2012 , blackrock had no cp notes outstanding.