abiomed , inc .
and subsidiaries notes to consolidated financial statements 2014 ( continued ) note 14 .
income taxes ( continued ) on april 1 , 2007 , the company adopted financial interpretation fin no .
48 , accounting for uncertainty in income taxes 2014an interpretation of fasb statement no .
109 ( 201cfin no .
48 201d ) , which clarifies the accounting for uncertainty in income taxes recognized in an enterprise 2019s financial statements in accordance with fasb statement no .
109 , accounting for income taxes .
fin no .
48 prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return .
fin no .
48 also provides guidance on derecognition , classification , interest and penalties , accounting in interim periods , disclosure , and transition and defines the criteria that must be met for the benefits of a tax position to be recognized .
as a result of its adoption of fin no .
48 , the company recorded the cumulative effect of the change in accounting principle of $ 0.3 million as a decrease to opening retained earnings and an increase to other long-term liabilities as of april 1 , 2007 .
this adjustment related to state nexus for failure to file tax returns in various states for the years ended march 31 , 2003 , 2004 , and 2005 .
the company initiated a voluntary disclosure plan , which it completed in fiscal year 2009 .
the company elected to recognize interest and/or penalties related to income tax matters in income tax expense in its consolidated statements of operations .
as of march 31 , 2009 , the company had remitted all outstanding amounts owed to each of the states in connection with the outstanding taxes owed at march 31 , 2008 .
as such , the company had no fin no .
48 liability at march 31 , 2009 .
on a quarterly basis , the company accrues for the effects of uncertain tax positions and the related potential penalties and interest .
it is reasonably possible that the amount of the unrecognized tax benefit with respect to certain of the unrecognized tax positions will increase or decrease during the next 12 months ; however , it is not expected that the change will have a significant effect on the company 2019s results of operations or financial position .
a reconciliation of the beginning and ending balance of unrecognized tax benefits , excluding accrued interest recorded at march 31 , 2009 ( in thousands ) is as follows: .

balance at march 31 2008                                                          | $ 168
--------------------------------------------------------------------------------- | ------------
reductions for tax positions for closing of the applicable statute of limitations | -168 ( 168 )
balance at march 31 2009                                                          | $ 2014

the company and its subsidiaries are subject to u.s .
federal income tax , as well as income tax of multiple state and foreign jurisdictions .
the company has accumulated significant losses since its inception in 1981 .
all tax years remain subject to examination by major tax jurisdictions , including the federal government and the commonwealth of massachusetts .
however , since the company has net operating loss and tax credit carry forwards which may be utilized in future years to offset taxable income , those years may also be subject to review by relevant taxing authorities if the carry forwards are utilized .
note 15 .
commitments and contingencies the company 2019s acquisition of impella provided that abiomed was required to make contingent payments to impella 2019s former shareholders as follows : 2022 upon fda approval of the impella 2.5 device , a payment of $ 5583333 2022 upon fda approval of the impella 5.0 device , a payment of $ 5583333 , and 2022 upon the sale of 1000 units of impella 2019s products worldwide , a payment of $ 5583334 .
the two milestones related to sales and fda approval of the impella 2.5 device were achieved and paid prior to march 31 , 2009 .
in april 2009 , the company received fda 510 ( k ) clearance of its impella 5.0 product , triggering an obligation to pay the milestone related to the impella 5.0 device .
in may 2009 , the company paid $ 1.8 million of this final milestone in cash and elected to pay the remaining amount through the issuance of approximately 664612 shares of common stock.


us in a position to handle demand changes .
we will also continue utilizing industrial engineering techniques to improve productivity .
2022 fuel prices 2013 uncertainty about the economy makes fuel price projections difficult , and we could see volatile fuel prices during the year , as they are sensitive to global and u.s .
domestic demand , refining capacity , geopolitical events , weather conditions and other factors .
to reduce the impact of fuel price on earnings , we will continue to seek recovery from our customers through our fuel surcharge programs and to expand our fuel conservation efforts .
2022 capital plan 2013 in 2011 , we plan to make total capital investments of approximately $ 3.2 billion , including expenditures for positive train control ( ptc ) , which may be revised if business conditions warrant or if new laws or regulations affect our ability to generate sufficient returns on these investments .
( see further discussion in this item 7 under liquidity and capital resources 2013 capital plan. ) 2022 positive train control 2013 in response to a legislative mandate to implement ptc by the end of 2015 , we expect to spend approximately $ 250 million during 2011 on developing ptc .
we currently estimate that ptc will cost us approximately $ 1.4 billion to implement by the end of 2015 , in accordance with rules issued by the federal railroad administration ( fra ) .
this includes costs for installing the new system along our tracks , upgrading locomotives to work with the new system , and adding digital data communication equipment so all the parts of the system can communicate with each other .
during 2011 , we plan to begin testing the technology to evaluate its effectiveness .
2022 financial expectations 2013 we remain cautious about economic conditions , but anticipate volume to increase from 2010 levels .
in addition , we expect volume , price , and productivity gains to offset expected higher costs for fuel , labor inflation , depreciation , casualty costs , and property taxes to drive operating ratio improvement .
results of operations operating revenues millions 2010 2009 2008 % (  % ) change 2010 v 2009 % (  % ) change 2009 v 2008 .

millions         | 2010    | 2009    | 2008    | % (  % ) change 2010 v 2009 | % (  % ) change 2009 v 2008
---------------- | ------- | ------- | ------- | --------------------------- | ---------------------------
freight revenues | $ 16069 | $ 13373 | $ 17118 | 20% ( 20 % )                | ( 22 ) % (  % )
other revenues   | 896     | 770     | 852     | 16                          | -10 ( 10 )
total            | $ 16965 | $ 14143 | $ 17970 | 20% ( 20 % )                | ( 21 ) % (  % )

freight revenues are revenues generated by transporting freight or other materials from our six commodity groups .
freight revenues vary with volume ( carloads ) and average revenue per car ( arc ) .
changes in price , traffic mix and fuel surcharges drive arc .
we provide some of our customers with contractual incentives for meeting or exceeding specified cumulative volumes or shipping to and from specific locations , which we record as a reduction to freight revenues based on the actual or projected future shipments .
we recognize freight revenues as freight moves from origin to destination .
we allocate freight revenues between reporting periods based on the relative transit time in each reporting period and recognize expenses as we incur them .
other revenues include revenues earned by our subsidiaries , revenues from our commuter rail operations , and accessorial revenues , which we earn when customers retain equipment owned or controlled by us or when we perform additional services such as switching or storage .
we recognize other revenues as we perform services or meet contractual obligations .
freight revenues and volume levels for all six commodity groups increased during 2010 as a result of economic improvement in many market sectors .
we experienced particularly strong volume growth in automotive , intermodal , and industrial products shipments .
core pricing gains and higher fuel surcharges also increased freight revenues and drove a 6% ( 6 % ) improvement in arc .
freight revenues and volume levels for all six commodity groups decreased during 2009 , reflecting continued economic weakness .
we experienced the largest volume declines in automotive and industrial


equity compensation plan information the plan documents for the plans described in the footnotes below are included as exhibits to this form 10-k , and are incorporated herein by reference in their entirety .
the following table provides information as of dec .
31 , 2006 regarding the number of shares of ppg common stock that may be issued under ppg 2019s equity compensation plans .
plan category securities exercise of outstanding options , warrants and rights weighted- average exercise price of outstanding warrants and rights number of securities remaining available for future issuance under equity compensation ( excluding securities reflected in column ( a ) ) equity compensation plans approved by security holders ( 1 ) 9413216 $ 58.35 10265556 equity compensation plans not approved by security holders ( 2 ) , ( 3 ) 2089300 $ 70.00 2014 .

plan category                                                          | numberof securities to be issued upon exercise of outstanding options warrants and rights ( a ) | weighted- average exercise price of outstanding options warrants and rights ( b ) | number of securities remaining available for future issuance under equity compensation plans ( excluding securities reflected in column ( a ) ) ( c )
---------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------
equity compensation plans approved by security holders ( 1 )           | 9413216                                                                                | $ 58.35                                                                           | 10265556
equity compensation plans not approved by security holders ( 2 ) ( 3 ) | 2089300                                                                                | $ 70.00                                                                           | 2014
total                                                                  | 11502516                                                                                | $ 60.57                                                                           | 10265556

( 1 ) equity compensation plans approved by security holders include the ppg industries , inc .
stock plan , the ppg omnibus plan , the ppg industries , inc .
executive officers 2019 long term incentive plan , and the ppg industries inc .
long term incentive plan .
( 2 ) equity compensation plans not approved by security holders include the ppg industries , inc .
challenge 2000 stock plan .
this plan is a broad- based stock option plan under which the company granted to substantially all active employees of the company and its majority owned subsidiaries on july 1 , 1998 , the option to purchase 100 shares of the company 2019s common stock at its then fair market value of $ 70.00 per share .
options became exercisable on july 1 , 2003 , and expire on june 30 , 2008 .
there were 2089300 shares issuable upon exercise of options outstanding under this plan as of dec .
31 , 2006 .
( 3 ) excluded from the information presented here are common stock equivalents held under the ppg industries , inc .
deferred compensation plan , the ppg industries , inc .
deferred compensation plan for directors and the ppg industries , inc .
directors 2019 common stock plan , none of which are equity compensation plans .
as supplemental information , there were 491168 common stock equivalents held under such plans as of dec .
31 , 2006 .
item 6 .
selected financial data the information required by item 6 regarding the selected financial data for the five years ended dec .
31 , 2006 is included in exhibit 99.2 filed with this form 10-k and is incorporated herein by reference .
this information is also reported in the eleven-year digest on page 72 of the annual report under the captions net sales , income ( loss ) before accounting changes , cumulative effect of accounting changes , net income ( loss ) , earnings ( loss ) per common share before accounting changes , cumulative effect of accounting changes on earnings ( loss ) per common share , earnings ( loss ) per common share , earnings ( loss ) per common share 2013 assuming dilution , dividends per share , total assets and long-term debt for the years 2002 through 2006 .
item 7 .
management 2019s discussion and analysis of financial condition and results of operations performance in 2006 compared with 2005 performance overview our sales increased 8% ( 8 % ) to $ 11.0 billion in 2006 compared to $ 10.2 billion in 2005 .
sales increased 4% ( 4 % ) due to the impact of acquisitions , 2% ( 2 % ) due to increased volumes , and 2% ( 2 % ) due to increased selling prices .
cost of sales as a percentage of sales increased slightly to 63.7% ( 63.7 % ) compared to 63.5% ( 63.5 % ) in 2005 .
selling , general and administrative expense increased slightly as a percentage of sales to 17.9% ( 17.9 % ) compared to 17.4% ( 17.4 % ) in 2005 .
these costs increased primarily due to higher expenses related to store expansions in our architectural coatings operating segment and increased advertising to promote growth in our optical products operating segment .
other charges decreased $ 81 million in 2006 .
other charges in 2006 included pretax charges of $ 185 million for estimated environmental remediation costs at sites in new jersey and $ 42 million for legal settlements offset in part by pretax earnings of $ 44 million for insurance recoveries related to the marvin legal settlement and to hurricane rita .
other charges in 2005 included pretax charges of $ 132 million related to the marvin legal settlement net of related insurance recoveries of $ 18 million , $ 61 million for the federal glass class action antitrust legal settlement , $ 34 million of direct costs related to the impact of hurricanes rita and katrina , $ 27 million for an asset impairment charge in our fine chemicals operating segment and $ 19 million for debt refinancing costs .
other earnings increased $ 30 million in 2006 due to higher equity earnings , primarily from our asian fiber glass joint ventures , and higher royalty income .
net income and earnings per share 2013 assuming dilution for 2006 were $ 711 million and $ 4.27 , respectively , compared to $ 596 million and $ 3.49 , respectively , for 2005 .
net income in 2006 included aftertax charges of $ 106 million , or 64 cents a share , for estimated environmental remediation costs at sites in new jersey and louisiana in the third quarter ; $ 26 million , or 15 cents a share , for legal settlements ; $ 23 million , or 14 cents a share for business restructuring ; $ 17 million , or 10 cents a share , to reflect the net increase in the current value of the company 2019s obligation relating to asbestos claims under the ppg settlement arrangement ; and aftertax earnings of $ 24 million , or 14 cents a share for insurance recoveries .
net income in 2005 included aftertax charges of $ 117 million , or 68 cents a share for legal settlements net of insurance ; $ 21 million , or 12 cents a share for direct costs related to the impact of hurricanes katrina and rita ; $ 17 million , or 10 cents a share , related to an asset impairment charge related to our fine chemicals operating segment ; $ 12 million , or 7 cents a share , for debt refinancing cost ; and $ 13 million , or 8 cents a share , to reflect the net increase in the current 2006 ppg annual report and form 10-k 19 4282_txt to be issued options , number of


equity in net earnings of affiliated companies equity income from the m-i swaco joint venture in 2010 represents eight months of equity income through the closing of the smith transaction .
interest expense interest expense of $ 298 million in 2011 increased by $ 91 million compared to 2010 primarily due to the $ 4.6 billion of long-term debt that schlumberger issued during 2011 .
interest expense of $ 207 million in 2010 decreased by $ 14 million compared to 2009 primarily due to a decline in the weighted average borrowing rates , from 3.9% ( 3.9 % ) to 3.2% ( 3.2 % ) .
research & engineering and general & administrative expenses , as a percentage of revenue , were as follows: .

                         | 2011           | 2010           | 2009
------------------------ | -------------- | -------------- | --------------
research & engineering   | 2.7% ( 2.7 % ) | 3.3% ( 3.3 % ) | 3.5% ( 3.5 % )
general & administrative | 1.1% ( 1.1 % ) | 1.1% ( 1.1 % ) | 1.1% ( 1.1 % )

although research & engineering decreased as a percentage of revenue in 2011 as compared to 2010 and in 2010 compared to 2009 , it has increased in absolute dollars by $ 154 million and $ 117 million , respectively .
these increases in absolute dollars were driven in large part by the impact of the smith acquisition .
income taxes the schlumberger effective tax rate was 24.4% ( 24.4 % ) in 2011 , 17.3% ( 17.3 % ) in 2010 , and 19.6% ( 19.6 % ) in 2009 .
the schlumberger effective tax rate is sensitive to the geographic mix of earnings .
when the percentage of pretax earnings generated outside of north america increases , the schlumberger effective tax rate will generally decrease .
conversely , when the percentage of pretax earnings generated outside of north america decreases , the schlumberger effective tax rate will generally increase .
the effective tax rate for both 2011 and 2010 was impacted by the charges and credits described in note 3 to the consolidated financial statements .
excluding the impact of these charges and credits , the effective tax rate in 2011 was 24.0% ( 24.0 % ) compared to 20.6% ( 20.6 % ) in 2010 .
this increase in the effective tax rate , excluding the impact of the charges and credits , was primarily attributable to the fact that schlumberger generated a larger proportion of its pretax earnings in north america in 2011 as compared to 2010 as a result of improved market conditions and the effect of a full year 2019s activity from the acquired smith businesses .
the effective tax rate for 2009 was also impacted by the charges and credits described in note 3 to the consolidated financial statements , but to a much lesser extent .
excluding charges and credits , the effective tax rate in 2010 was 20.6% ( 20.6 % ) compared to 19.2% ( 19.2 % ) in 2009 .
this increase is largely attributable to the geographic mix of earnings as well as the inclusion of four months 2019 results from the acquisition of smith , which served to increase the schlumberger effective tax charges and credits schlumberger recorded significant charges and credits in continuing operations during 2011 , 2010 and 2009 .
these charges and credits , which are summarized below , are more fully described in note 3 to the consolidated financial statements.


notes to consolidated financial statements 2014 ( continued ) these acquisitions have been recorded using the purchase method of accounting , and accordingly , the purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair value as of the date of acquisition .
the operating results of each acquisition are included in our consolidated statements of income from the dates of each acquisition .
fiscal 2008 during fiscal 2008 , we acquired a portfolio of merchants that process discover transactions and the rights to process discover transactions for our existing and new merchants .
as a result of this acquisition , we will now process discover transactions similarly to how we currently process visa and mastercard transactions .
the purpose of this acquisition was to offer merchants a single point of contact for discover , visa and mastercard card processing .
during fiscal 2008 , we acquired a majority of the assets of euroenvios money transfer , s.a .
and euroenvios conecta , s.l. , which we collectively refer to as lfs spain .
lfs spain consisted of two privately- held corporations engaged in money transmittal and ancillary services from spain to settlement locations primarily in latin america .
the purpose of the acquisition was to further our strategy of expanding our customer base and market share by opening additional branch locations .
during fiscal 2008 , we acquired a series of money transfer branch locations in the united states .
the purpose of these acquisitions was to increase the market presence of our dolex-branded money transfer offering .
the following table summarizes the preliminary purchase price allocations of these business acquisitions ( in thousands ) : .

                                          | total
----------------------------------------- | --------------
goodwill                                  | $ 13536
customer-related intangible assets        | 4091
contract-based intangible assets          | 1031
property and equipment                    | 267
other current assets                      | 502
total assets acquired                     | 19427
current liabilities                       | -2347 ( 2347 )
minority interest in equity of subsidiary | -486 ( 486 )
net assets acquired                       | $ 16594

the customer-related intangible assets have amortization periods of up to 14 years .
the contract-based intangible assets have amortization periods of 3 to 10 years .
these business acquisitions were not significant to our consolidated financial statements and accordingly , we have not provided pro forma information relating to these acquisitions .
in addition , during fiscal 2008 , we acquired a customer list and long-term merchant referral agreement in our canadian merchant services channel for $ 1.7 million .
the value assigned to the customer list of $ 0.1 million was expensed immediately .
the remaining value was assigned to the merchant referral agreement and is being amortized on a straight-line basis over its useful life of 10 years.


9 .
lease commitments the company leases certain land , facilities , equipment and software under various operating leases that expire at various dates through 2057 .
the lease agreements frequently include renewal and escalation clauses and require the company to pay taxes , insurance and maintenance costs .
total rental expense under operating leases was approximatelya $ 92.3 million in fiscal 2019 , $ 84.9 million in fiscal 2018 and $ 58.8 million in fiscal 2017 .
the following is a schedule of futureff minimum rental payments required under long-term operating leases at november 2 , 2019 : operating fiscal years leases .

fiscal years | operating leases
------------ | ----------------
2020         | $ 79789
2021         | 67993
2022         | 40338
2023         | 37673
2024         | 32757
later years  | 190171
total        | $ 448721

10 .
commitments and contingencies from time to time , in the ordinary course of the company 2019s business , various claims , charges and litigation are asserted or commenced against the company arising from , or related to , among other things , contractual matters , patents , trademarks , personal injury , environmental matters , product liability , insurance coverage , employment or employment benefits .
as to such claims and litigation , the company can give no assurance that it will prevail .
the company does not believe that any current legal matters will have a material adverse effect on the company 2019s financial position , results of operations or cash flows .
11 .
retirement plans the company and its subsidiaries have various savings and retirement plans covering substantially all employees .
defined contribution plans the company maintains a defined contribution plan for the benefit of its eligible u.s .
employees .
this plan provides for company contributions of up to 5% ( 5 % ) of each participant 2019s total eligible compensation .
in addition , the company contributes an amount equal to each participant 2019s pre-tax contribution , if any , up to a maximum of 3% ( 3 % ) of each participant 2019s total eligible compensation .
the total expense related to the defined contribution plans for u.s .
employees was $ 47.7 million in fiscal 2019 , $ 41.4 million in fiscal 2018 and $ 35.8 million in fiscal 2017 .
non-qualified deferred compensation plan the deferred compensation plan ( dcp ) allows certain members of management and other highly-compensated employees and non-employee directors to defer receipt of all or any portion of their compensation .
the dcp was established to provide participants with the opportunity to defer receiving all or a portion of their compensation , which includes salary , bonus , commissions and director fees .
under the dcp , the company provides all participants ( other than non-employee directors ) with company contributions equal to 8% ( 8 % ) of eligible deferred contributions .
the dcp is a non-qualified plan that is maintained in a rabbi trust .
the fair value of the investments held in the rabbi trust are presented separately as deferred compensation plan investments , with the current portion of the investment included in prepaid expenses and other current assets in the consolidated balance sheets .
see note 2j , fair value , for further information on these investments .
the deferred compensation obligation represents dcp participant accumulated deferrals and earnings thereon since the inception of the dcp net of withdrawals .
the deferred compensation obligation is presented separately as deferred compensation plan liability , with the current portion of the obligation in accrued liabilities in the consolidated balance sheets .
the company 2019s liability under the dcp is an unsecured general obligation of the company .
analog devices , inc .
notes to consolidated financial statements 2014 ( continued )


management 2019s discussion and analysis we believe our credit ratings are primarily based on the credit rating agencies 2019 assessment of : 2030 our liquidity , market , credit and operational risk management practices ; 2030 the level and variability of our earnings ; 2030 our capital base ; 2030 our franchise , reputation and management ; 2030 our corporate governance ; and 2030 the external operating environment , including the assumed level of government support .
certain of the firm 2019s derivatives have been transacted under bilateral agreements with counterparties who may require us to post collateral or terminate the transactions based on changes in our credit ratings .
we assess the impact of these bilateral agreements by determining the collateral or termination payments that would occur assuming a downgrade by all rating agencies .
a downgrade by any one rating agency , depending on the agency 2019s relative ratings of the firm at the time of the downgrade , may have an impact which is comparable to the impact of a downgrade by all rating agencies .
we allocate a portion of our gce to ensure we would be able to make the additional collateral or termination payments that may be required in the event of a two-notch reduction in our long-term credit ratings , as well as collateral that has not been called by counterparties , but is available to them .
the table below presents the additional collateral or termination payments that could have been called at the reporting date by counterparties in the event of a one-notch and two-notch downgrade in our credit ratings. .

in millions                                                             | as of december 2012 | as of december 2011
----------------------------------------------------------------------- | ------------------- | -------------------
additional collateral or termination payments for a one-notch downgrade | $ 1534              | $ 1303
additional collateral or termination payments for a two-notch downgrade | 2500                | 2183

in millions 2012 2011 additional collateral or termination payments for a one-notch downgrade $ 1534 $ 1303 additional collateral or termination payments for a two-notch downgrade 2500 2183 cash flows as a global financial institution , our cash flows are complex and bear little relation to our net earnings and net assets .
consequently , we believe that traditional cash flow analysis is less meaningful in evaluating our liquidity position than the excess liquidity and asset-liability management policies described above .
cash flow analysis may , however , be helpful in highlighting certain macro trends and strategic initiatives in our businesses .
year ended december 2012 .
our cash and cash equivalents increased by $ 16.66 billion to $ 72.67 billion at the end of 2012 .
we generated $ 9.14 billion in net cash from operating and investing activities .
we generated $ 7.52 billion in net cash from financing activities from an increase in bank deposits , partially offset by net repayments of unsecured and secured long-term borrowings .
year ended december 2011 .
our cash and cash equivalents increased by $ 16.22 billion to $ 56.01 billion at the end of 2011 .
we generated $ 23.13 billion in net cash from operating and investing activities .
we used net cash of $ 6.91 billion for financing activities , primarily for repurchases of our series g preferred stock and common stock , partially offset by an increase in bank deposits .
year ended december 2010 .
our cash and cash equivalents increased by $ 1.50 billion to $ 39.79 billion at the end of 2010 .
we generated $ 7.84 billion in net cash from financing activities primarily from net proceeds from issuances of short-term secured financings .
we used net cash of $ 6.34 billion for operating and investing activities , primarily to fund an increase in securities purchased under agreements to resell and an increase in cash and securities segregated for regulatory and other purposes , partially offset by cash generated from a decrease in securities borrowed .
goldman sachs 2012 annual report 87


intermodal 2013 decreased volumes and fuel surcharges reduced freight revenue from intermodal shipments in 2009 versus 2008 .
volume from international traffic decreased 24% ( 24 % ) in 2009 compared to 2008 , reflecting economic conditions , continued weak imports from asia , and diversions to non-uprr served ports .
additionally , continued weakness in the domestic housing and automotive sectors translated into weak demand in large sectors of the international intermodal market , which also contributed to the volume decline .
conversely , domestic traffic increased 8% ( 8 % ) in 2009 compared to 2008 .
a new contract with hub group , inc. , which included additional shipments , was executed in the second quarter of 2009 and more than offset the impact of weak market conditions in the second half of 2009 .
price increases and fuel surcharges generated higher revenue in 2008 , partially offset by lower volume levels .
international traffic declined 11% ( 11 % ) in 2008 , reflecting continued softening of imports from china and the loss of a customer contract .
notably , the peak intermodal shipping season , which usually starts in the third quarter , was particularly weak in 2008 .
additionally , continued weakness in domestic housing and automotive sectors translated into weak demand in large sectors of the international intermodal market , which also contributed to lower volumes .
domestic traffic declined 3% ( 3 % ) in 2008 due to the loss of a customer contract and lower volumes from less-than-truckload shippers .
additionally , the flood-related embargo on traffic in the midwest during the second quarter hindered intermodal volume levels in 2008 .
mexico business 2013 each of our commodity groups include revenue from shipments to and from mexico .
revenue from mexico business decreased 26% ( 26 % ) in 2009 versus 2008 to $ 1.2 billion .
volume declined in five of our six commodity groups , down 19% ( 19 % ) in 2009 , driven by 32% ( 32 % ) and 24% ( 24 % ) reductions in industrial products and automotive shipments , respectively .
conversely , energy shipments increased 9% ( 9 % ) in 2009 versus 2008 , partially offsetting these declines .
revenue from mexico business increased 13% ( 13 % ) to $ 1.6 billion in 2008 compared to 2007 .
price improvements and fuel surcharges contributed to these increases , partially offset by a 4% ( 4 % ) decline in volume in 2008 compared to 2007 .
operating expenses millions of dollars 2009 2008 2007 % (  % ) change 2009 v 2008 % (  % ) change 2008 v 2007 .

millions of dollars              | 2009    | 2008    | 2007    | % (  % ) change 2009 v 2008 | % (  % ) change 2008 v 2007
-------------------------------- | ------- | ------- | ------- | --------------------------- | ---------------------------
compensation and benefits        | $ 4063  | $ 4457  | $ 4526  | ( 9 ) % (  % )              | ( 2 ) % (  % )
fuel                             | 1763    | 3983    | 3104    | -56 ( 56 )                  | 28
purchased services and materials | 1614    | 1902    | 1856    | -15 ( 15 )                  | 2
depreciation                     | 1444    | 1387    | 1321    | 4                           | 5
equipment and other rents        | 1180    | 1326    | 1368    | -11 ( 11 )                  | -3 ( 3 )
other                            | 687     | 840     | 733     | -18 ( 18 )                  | 15
total                            | $ 10751 | $ 13895 | $ 12908 | ( 23 ) % (  % )             | 8% ( 8 % )

2009 intermodal revenue international domestic


entergy new orleans , inc .
management 2019s financial discussion and analysis the volume/weather variance is primarily due to an increase in electricity usage in the residential and commercial sectors due in part to a 4% ( 4 % ) increase in the average number of residential customers and a 3% ( 3 % ) increase in the average number of commercial customers , partially offset by the effect of less favorable weather on residential sales .
gross operating revenues gross operating revenues decreased primarily due to : a decrease of $ 16.2 million in electric fuel cost recovery revenues due to lower fuel rates ; a decrease of $ 15.4 million in gross gas revenues primarily due to lower fuel cost recovery revenues as a result of lower fuel rates and the effect of milder weather ; and formula rate plan decreases effective october 2010 and october 2011 , as discussed above .
the decrease was partially offset by an increase in gross wholesale revenue due to increased sales to affiliated customers and more favorable volume/weather , as discussed above .
2010 compared to 2009 net revenue consists of operating revenues net of : 1 ) fuel , fuel-related expenses , and gas purchased for resale , 2 ) purchased power expenses , and 3 ) other regulatory charges ( credits ) .
following is an analysis of the change in net revenue comparing 2010 to 2009 .
amount ( in millions ) .

                                    | amount ( in millions )
----------------------------------- | ----------------------
2009 net revenue                    | $ 243.0
volume/weather                      | 17.0
net gas revenue                     | 14.2
effect of 2009 rate case settlement | -6.6 ( 6.6 )
other                               | 5.3
2010 net revenue                    | $ 272.9

the volume/weather variance is primarily due to an increase of 348 gwh , or 7% ( 7 % ) , in billed retail electricity usage primarily due to more favorable weather compared to last year .
the net gas revenue variance is primarily due to more favorable weather compared to last year , along with the recognition of a gas regulatory asset associated with the settlement of entergy new orleans 2019s electric and gas formula rate plans .
see note 2 to the financial statements for further discussion of the formula rate plan settlement .
the effect of 2009 rate case settlement variance results from the april 2009 settlement of entergy new orleans 2019s rate case , and includes the effects of realigning non-fuel costs associated with the operation of grand gulf from the fuel adjustment clause to electric base rates effective june 2009 .
see note 2 to the financial statements for further discussion of the rate case settlement .
other income statement variances 2011 compared to 2010 other operation and maintenance expenses decreased primarily due to the deferral in 2011 of $ 13.4 million of 2010 michoud plant maintenance costs pursuant to the settlement of entergy new orleans 2019s 2010 test year formula rate plan filing approved by the city council in september 2011 and a decrease of $ 8.0 million in fossil- fueled generation expenses due to higher plant outage costs in 2010 due to a greater scope of work at the michoud plant .
see note 2 to the financial statements for more discussion of the 2010 test year formula rate plan filing.


financial assurance we must provide financial assurance to governmental agencies and a variety of other entities under applicable environmental regulations relating to our landfill operations for capping , closure and post-closure costs , and related to our performance under certain collection , landfill and transfer station contracts .
we satisfy these financial assurance requirements by providing surety bonds , letters of credit , or insurance policies ( financial assurance instruments ) , or trust deposits , which are included in restricted cash and marketable securities and other assets in our consolidated balance sheets .
the amount of the financial assurance requirements for capping , closure and post-closure costs is determined by applicable state environmental regulations .
the financial assurance requirements for capping , closure and post-closure costs may be associated with a portion of the landfill or the entire landfill .
generally , states require a third-party engineering specialist to determine the estimated capping , closure and post-closure costs that are used to determine the required amount of financial assurance for a landfill .
the amount of financial assurance required can , and generally will , differ from the obligation determined and recorded under u.s .
gaap .
the amount of the financial assurance requirements related to contract performance varies by contract .
additionally , we must provide financial assurance for our insurance program and collateral for certain performance obligations .
we do not expect a material increase in financial assurance requirements during 2016 , although the mix of financial assurance instruments may change .
these financial assurance instruments are issued in the normal course of business and are not considered indebtedness .
because we currently have no liability for the financial assurance instruments , they are not reflected in our consolidated balance sheets ; however , we record capping , closure and post-closure liabilities and insurance liabilities as they are incurred .
off-balance sheet arrangements we have no off-balance sheet debt or similar obligations , other than operating leases and financial assurances , 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 .
free cash flow we define free cash flow , which is not a measure determined in accordance with u.s .
gaap , as cash provided by operating activities less purchases of property and equipment , plus proceeds from sales of property and equipment , as presented in our consolidated statements of cash flows .
the following table calculates our free cash flow for the years ended december 31 , 2015 , 2014 and 2013 ( in millions of dollars ) : .

                                              | 2015             | 2014             | 2013
--------------------------------------------- | ---------------- | ---------------- | ----------------
cash provided by operating activities         | $ 1679.7         | $ 1529.8         | $ 1548.2
purchases of property and equipment           | -945.6 ( 945.6 ) | -862.5 ( 862.5 ) | -880.8 ( 880.8 )
proceeds from sales of property and equipment | 21.2             | 35.7             | 23.9
free cash flow                                | $ 755.3          | $ 703.0          | $ 691.3

for a discussion of the changes in the components of free cash flow , see our discussion regarding cash flows provided by operating activities and cash flows used in investing activities contained elsewhere in this management 2019s discussion and analysis of financial condition and results of operations.


performance graph the following graph shows a five-year comparison of the cumulative total return on our common stock , the nasdaq composite index , the s&p 500 index and the s&p 500 information technology index from april 24 , 2009 through april 25 , 2014 .
the past performance of our common stock is not indicative of the future performance of our common stock .
comparison of 5 year cumulative total return* among netapp , inc. , the nasdaq composite index , the s&p 500 index and the s&p 500 information technology index .

                               | 4/09     | 4/10     | 4/11     | 4/12     | 4/13     | 4/14
------------------------------ | -------- | -------- | -------- | -------- | -------- | --------
netapp inc .                   | $ 100.00 | $ 189.45 | $ 284.75 | $ 212.19 | $ 190.66 | $ 197.58
nasdaq composite               | 100.00   | 144.63   | 170.44   | 182.57   | 202.25   | 253.22
s&p 500                        | 100.00   | 138.84   | 162.75   | 170.49   | 199.29   | 240.02
s&p 500 information technology | 100.00   | 143.49   | 162.37   | 186.06   | 189.18   | 236.12

we believe that a number of factors may cause the market price of our common stock to fluctuate significantly .
see 201citem 1a .
risk factors . 201d sale of unregistered securities


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 , news corporation class a common stock , scripps network interactive , inc. , time warner , inc. , viacom , inc .
class b common stock and the walt disney company .
the graph assumes $ 100 originally invested on september 18 , 2008 , the date upon which our common stock began trading , 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 period september 18 , 2008 through december 31 , 2008 and the years ended december 31 , 2009 , 2010 and 2011 .
of cash on hand , cash generated by operations , borrowings under our revolving credit facility and future financing transactions .
under the program , management is authorized to purchase shares from time to time through open market purchases or privately negotiated transactions at prevailing prices as permitted by securities laws and other legal requirements , and subject to stock price , business conditions , market conditions and other factors .
the repurchase program does not have an expiration date .
the above repurchases were funded using cash on hand .
there were no repurchases of our series a common stock or series b common stock during the three months ended december 31 , 2011 .
december 31 , december 31 , december 31 , december 31 .

           | december 31 2008 | december 31 2009 | december 31 2010 | december 31 2011
---------- | ---------------- | ---------------- | ---------------- | ----------------
disca      | $ 102.53         | $ 222.09         | $ 301.96         | $ 296.67
discb      | $ 78.53          | $ 162.82         | $ 225.95         | $ 217.56
disck      | $ 83.69          | $ 165.75         | $ 229.31         | $ 235.63
s&p 500    | $ 74.86          | $ 92.42          | $ 104.24         | $ 104.23
peer group | $ 68.79          | $ 100.70         | $ 121.35         | $ 138.19


gain or loss on ownership change in map results from contributions to map of certain environmental capital expenditures and leased property acquisitions funded by marathon and ashland .
in accordance with map 2019s limited liability company agreement , in certain instances , environmental capital expenditures and acquisitions of leased properties are funded by the original contributor of the assets , but no change in ownership interest may result from these contributions .
an excess of ashland funded improvements over marathon funded improvements results in a net gain and an excess of marathon funded improvements over ashland funded improvements results in a net loss .
cost of revenues increased by $ 5.822 billion in 2004 from 2003 and by $ 6.040 billion in 2003 from 2002 .
the increases are primarily in the rm&t segment and result from higher acquisition costs for crude oil , refined products , refinery charge and blend feedstocks and increased manufacturing expenses .
selling , general and administrative expenses increased by $ 105 million in 2004 from 2003 and by $ 97 million in 2003 from 2002 .
the increase in 2004 was primarily due to increased stock-based compensation and higher costs associated with business transformation and outsourcing .
our 2004 results were also impacted by start-up costs associated with the lng project in equatorial guinea and the increased cost of complying with governmental regulations .
the increase in 2003 was primarily due to increased employee benefit expenses ( caused by increased pension expense resulting from changes in actuarial assumptions and a decrease in realized returns on plan assets ) and other employee related costs .
additionally , during 2003 , we recorded a charge of $ 24 million related to organizational and business process changes .
inventory market valuation reserve ( 2018 2018imv 2019 2019 ) is established to reduce the cost basis of inventories to current market value .
generally , we will establish an imv reserve when crude oil prices fall below $ 22 per barrel .
the 2002 results of operations include credits to income from operations of $ 71 million , reversing the imv reserve at december 31 , 2001 .
net interest and other financial costs decreased by $ 25 million in 2004 from 2003 and by $ 82 million in 2003 from 2002 .
the decrease in 2004 is primarily due to an increase in interest income .
the decrease in 2003 is primarily due to an increase in capitalized interest related to increased long-term construction projects , the favorable effect of interest rate swaps , the favorable effect of a reduction in interest on tax deficiencies and increased interest income on investments .
additionally , included in net interest and other financing costs are foreign currency gains of $ 9 million , $ 13 million and $ 8 million for 2004 , 2003 and 2002 .
loss from early extinguishment of debt in 2002 was attributable to the retirement of $ 337 million aggregate principal amount of debt , resulting in a loss of $ 53 million .
minority interest in income of map , which represents ashland 2019s 38 percent ownership interest , increased by $ 230 million in 2004 from 2003 and by $ 129 million in 2003 from 2002 .
map income was higher in 2004 compared to 2003 and in 2003 compared to 2002 as discussed below in the rm&t segment .
minority interest in loss of equatorial guinea lng holdings limited , which represents gepetrol 2019s 25 percent ownership interest , was $ 7 million in 2004 , primarily resulting from gepetrol 2019s share of start-up costs associated with the lng project in equatorial guinea .
provision for income taxes increased by $ 143 million in 2004 from 2003 and by $ 215 million in 2003 from 2002 , primarily due to $ 388 million and $ 720 million increases in income before income taxes .
the effective tax rate for 2004 was 36.6 percent compared to 36.6 percent and 42.1 percent for 2003 and 2002 .
the higher rate in 2002 was due to the united kingdom enactment of a supplementary 10 percent tax on profits from the north sea oil and gas production , retroactively effective to april 17 , 2002 .
in 2002 , we recognized a one-time noncash deferred tax adjustment of $ 61 million as a result of the rate increase .
the following is an analysis of the effective tax rate for the periods presented: .

                                                              | 2004             | 2003             | 2002
------------------------------------------------------------- | ---------------- | ---------------- | ----------------
statutory tax rate                                            | 35.0% ( 35.0 % ) | 35.0% ( 35.0 % ) | 35.0% ( 35.0 % )
effects of foreign operations ( a )                           | 1.3              | -0.4 ( 0.4 )     | 5.6
state and local income taxes after federal income tax effects | 1.6              | 2.2              | 3.9
other federal tax effects                                     | -1.3 ( 1.3 )     | -0.2 ( 0.2 )     | -2.4 ( 2.4 )
effective tax rate                                            | 36.6% ( 36.6 % ) | 36.6% ( 36.6 % ) | 42.1% ( 42.1 % )

( a ) the deferred tax effect related to the enactment of a supplemental tax in the u.k .
increased the effective tax rate 7.0 percent in


notes to the consolidated financial statements union pacific corporation and subsidiary companies for purposes of this report , unless the context otherwise requires , all references herein to the 201ccorporation 201d , 201ccompany 201d , 201cupc 201d , 201cwe 201d , 201cus 201d , and 201cour 201d mean union pacific corporation and its subsidiaries , including union pacific railroad company , which will be separately referred to herein as 201cuprr 201d or the 201crailroad 201d .
1 .
nature of operations operations and segmentation 2013 we are a class i railroad operating in the u.s .
our network includes 31974 route miles , linking pacific coast and gulf coast ports with the midwest and eastern u.s .
gateways and providing several corridors to key mexican gateways .
we own 26012 miles and operate on the remainder pursuant to trackage rights or leases .
we serve the western two-thirds of the country and maintain coordinated schedules with other rail carriers for the handling of freight to and from the atlantic coast , the pacific coast , the southeast , the southwest , canada , and mexico .
export and import traffic is moved through gulf coast and pacific coast ports and across the mexican and canadian borders .
the railroad , along with its subsidiaries and rail affiliates , is our one reportable operating segment .
although we provide and review revenue by commodity group , we analyze the net financial results of the railroad as one segment due to the integrated nature of our rail network .
the following table provides freight revenue by commodity group : millions 2014 2013 2012 .

millions                | 2014    | 2013    | 2012
----------------------- | ------- | ------- | -------
agricultural products   | $ 3777  | $ 3276  | $ 3280
automotive              | 2103    | 2077    | 1807
chemicals               | 3664    | 3501    | 3238
coal                    | 4127    | 3978    | 3912
industrial products     | 4400    | 3822    | 3494
intermodal              | 4489    | 4030    | 3955
total freight revenues  | $ 22560 | $ 20684 | $ 19686
other revenues          | 1428    | 1279    | 1240
total operatingrevenues | $ 23988 | $ 21963 | $ 20926

although our revenues are principally derived from customers domiciled in the u.s. , the ultimate points of origination or destination for some products transported by us are outside the u.s .
each of our commodity groups includes revenue from shipments to and from mexico .
included in the above table are revenues from our mexico business which amounted to $ 2.3 billion in 2014 , $ 2.1 billion in 2013 , and $ 1.9 billion in 2012 .
basis of presentation 2013 the consolidated financial statements are presented in accordance with accounting principles generally accepted in the u.s .
( gaap ) as codified in the financial accounting standards board ( fasb ) accounting standards codification ( asc ) .
2 .
significant accounting policies principles of consolidation 2013 the consolidated financial statements include the accounts of union pacific corporation and all of its subsidiaries .
investments in affiliated companies ( 20% ( 20 % ) to 50% ( 50 % ) owned ) are accounted for using the equity method of accounting .
all intercompany transactions are eliminated .
we currently have no less than majority-owned investments that require consolidation under variable interest entity requirements .
cash and cash equivalents 2013 cash equivalents consist of investments with original maturities of three months or less .
accounts receivable 2013 accounts receivable includes receivables reduced by an allowance for doubtful accounts .
the allowance is based upon historical losses , credit worthiness of customers , and current economic conditions .
receivables not expected to be collected in one year and the associated allowances are classified as other assets in our consolidated statements of financial position.


management 2019s discussion and analysis 126 jpmorgan chase & co./2014 annual report while useful as a current view of credit exposure , the net fair value of the derivative receivables does not capture the potential future variability of that credit exposure .
to capture the potential future variability of credit exposure , the firm calculates , on a client-by-client basis , three measures of potential derivatives-related credit loss : peak , derivative risk equivalent ( 201cdre 201d ) , and average exposure ( 201cavg 201d ) .
these measures all incorporate netting and collateral benefits , where applicable .
peak exposure to a counterparty is an extreme measure of exposure calculated at a 97.5% ( 97.5 % ) confidence level .
dre exposure is a measure that expresses the risk of derivative exposure on a basis intended to be equivalent to the risk of loan exposures .
the measurement is done by equating the unexpected loss in a derivative counterparty exposure ( which takes into consideration both the loss volatility and the credit rating of the counterparty ) with the unexpected loss in a loan exposure ( which takes into consideration only the credit rating of the counterparty ) .
dre is a less extreme measure of potential credit loss than peak and is the primary measure used by the firm for credit approval of derivative transactions .
finally , avg is a measure of the expected fair value of the firm 2019s derivative receivables at future time periods , including the benefit of collateral .
avg exposure over the total life of the derivative contract is used as the primary metric for pricing purposes and is used to calculate credit capital and the cva , as further described below .
the three year avg exposure was $ 37.5 billion and $ 35.4 billion at december 31 , 2014 and 2013 , respectively , compared with derivative receivables , net of all collateral , of $ 59.4 billion and $ 51.3 billion at december 31 , 2014 and 2013 , respectively .
the fair value of the firm 2019s derivative receivables incorporates an adjustment , the cva , to reflect the credit quality of counterparties .
the cva is based on the firm 2019s avg to a counterparty and the counterparty 2019s credit spread in the credit derivatives market .
the primary components of changes in cva are credit spreads , new deal activity or unwinds , and changes in the underlying market environment .
the firm believes that active risk management is essential to controlling the dynamic credit risk in the derivatives portfolio .
in addition , the firm 2019s risk management process takes into consideration the potential impact of wrong-way risk , which is broadly defined as the potential for increased correlation between the firm 2019s exposure to a counterparty ( avg ) and the counterparty 2019s credit quality .
many factors may influence the nature and magnitude of these correlations over time .
to the extent that these correlations are identified , the firm may adjust the cva associated with that counterparty 2019s avg .
the firm risk manages exposure to changes in cva by entering into credit derivative transactions , as well as interest rate , foreign exchange , equity and commodity derivative transactions .
the accompanying graph shows exposure profiles to the firm 2019s current derivatives portfolio over the next 10 years as calculated by the dre and avg metrics .
the two measures generally show that exposure will decline after the first year , if no new trades are added to the portfolio .
the following table summarizes the ratings profile by derivative counterparty of the firm 2019s derivative receivables , including credit derivatives , net of other liquid securities collateral , for the dates indicated .
the ratings scale is based on the firm 2019s internal ratings , which generally correspond to the ratings as defined by s&p and moody 2019s .
ratings profile of derivative receivables rating equivalent 2014 2013 ( a ) december 31 , ( in millions , except ratios ) exposure net of all collateral % (  % ) of exposure net of all collateral exposure net of all collateral % (  % ) of exposure net of all collateral .

rating equivalent december 31 ( in millions except ratios ) | rating equivalent exposure net of all collateral | rating equivalent % (  % ) of exposure net of all collateral | exposure net of all collateral | % (  % ) of exposure net of all collateral
----------------------------------------------------------- | ------------------------------------------------ | ------------------------------------------------------------ | ------------------------------ | ------------------------------------------
aaa/aaa to aa-/aa3                                          | $ 19202                                          | 32% ( 32 % )                                                 | $ 12953                        | 25% ( 25 % )
a+/a1 to a-/a3                                              | 13940                                            | 24                                                           | 12930                          | 25
bbb+/baa1 to bbb-/baa3                                      | 19008                                            | 32                                                           | 15220                          | 30
bb+/ba1 to b-/b3                                            | 6384                                             | 11                                                           | 6806                           | 13
ccc+/caa1 and below                                         | 837                                              | 1                                                            | 3415                           | 7
total                                                       | $ 59371                                          | 100% ( 100 % )                                               | $ 51324                        | 100% ( 100 % )

( a ) the prior period amounts have been revised to conform with the current period presentation.


royal caribbean cruises ltd .
79 notes to the consolidated financial statements in 2012 , we determined the implied fair value of good- will for the pullmantur reporting unit was $ 145.5 mil- lion and recognized an impairment charge of $ 319.2 million based on a probability-weighted discounted cash flow model further discussed below .
this impair- ment charge was recognized in earnings during the fourth quarter of 2012 and is reported within impair- ment of pullmantur related assets within our consoli- dated statements of comprehensive income ( loss ) .
during the fourth quarter of 2014 , we performed a qualitative assessment of whether it was more-likely- than-not that our royal caribbean international reporting unit 2019s fair value was less than its carrying amount before applying the two-step goodwill impair- ment test .
the qualitative analysis included assessing the impact of certain factors such as general economic conditions , limitations on accessing capital , changes in forecasted operating results , changes in fuel prices and fluctuations in foreign exchange rates .
based on our qualitative assessment , we concluded that it was more-likely-than-not that the estimated fair value of the royal caribbean international reporting unit exceeded its carrying value and thus , we did not pro- ceed to the two-step goodwill impairment test .
no indicators of impairment exist primarily because the reporting unit 2019s fair value has consistently exceeded its carrying value by a significant margin , its financial performance has been solid in the face of mixed economic environments and forecasts of operating results generated by the reporting unit appear suffi- cient to support its carrying value .
we also performed our annual impairment review of goodwill for pullmantur 2019s reporting unit during the fourth quarter of 2014 .
we did not perform a quali- tative assessment but instead proceeded directly to the two-step goodwill impairment test .
we estimated the fair value of the pullmantur reporting unit using a probability-weighted discounted cash flow model .
the principal assumptions used in the discounted cash flow model are projected operating results , weighted- average cost of capital , and terminal value .
signifi- cantly impacting these assumptions are the transfer of vessels from our other cruise brands to pullmantur .
the discounted cash flow model used our 2015 pro- jected operating results as a base .
to that base , we added future years 2019 cash flows assuming multiple rev- enue and expense scenarios that reflect the impact of different global economic environments beyond 2015 on pullmantur 2019s reporting unit .
we assigned a probability to each revenue and expense scenario .
we discounted the projected cash flows using rates specific to pullmantur 2019s reporting unit based on its weighted-average cost of capital .
based on the probability-weighted discounted cash flows , we deter- mined the fair value of the pullmantur reporting unit exceeded its carrying value by approximately 52% ( 52 % ) resulting in no impairment to pullmantur 2019s goodwill .
pullmantur is a brand targeted primarily at the spanish , portuguese and latin american markets , with an increasing focus on latin america .
the persistent economic instability in these markets has created sig- nificant uncertainties in forecasting operating results and future cash flows used in our impairment analyses .
we continue to monitor economic events in these markets for their potential impact on pullmantur 2019s business and valuation .
further , the estimation of fair value utilizing discounted expected future cash flows includes numerous uncertainties which require our significant judgment when making assumptions of expected revenues , operating costs , marketing , sell- ing and administrative expenses , interest rates , ship additions and retirements as well as assumptions regarding the cruise vacation industry 2019s competitive environment and general economic and business conditions , among other factors .
if there are changes to the projected future cash flows used in the impairment analyses , especially in net yields or if certain transfers of vessels from our other cruise brands to the pullmantur fleet do not take place , it is possible that an impairment charge of pullmantur 2019s reporting unit 2019s goodwill may be required .
of these factors , the planned transfers of vessels to the pullmantur fleet is most significant to the projected future cash flows .
if the transfers do not occur , we will likely fail step one of the impairment test .
note 4 .
intangible assets intangible assets are reported in other assets in our consolidated balance sheets and consist of the follow- ing ( in thousands ) : .

                                                                           | 2014             | 2013
-------------------------------------------------------------------------- | ---------------- | --------
indefinite-life intangible asset 2014pullmantur trademarks and trade names | $ 214112         | $ 204866
foreign currency translation adjustment                                    | -26074 ( 26074 ) | 9246
total                                                                      | $ 188038         | $ 214112

during the fourth quarter of 2014 , 2013 and 2012 , we performed the annual impairment review of pullmantur 2019s trademarks and trade names using a discounted cash flow model and the relief-from-royalty method to compare the fair value of these indefinite-lived intan- gible assets to its carrying value .
the royalty rate used is based on comparable royalty agreements in the tourism and hospitality industry .
we used a dis- count rate comparable to the rate used in valuing the pullmantur reporting unit in our goodwill impairment test .
based on the results of our testing , we did not


shareowner return performance graph the following performance graph and related information shall not be deemed 201csoliciting material 201d or to be 201cfiled 201d with the sec , nor shall such information be incorporated by reference into any future filing under the securities act of 1933 or securities exchange act of 1934 , each as amended , except to the extent that the company specifically incorporates such information by reference into such filing .
the following graph shows a five year comparison of cumulative total shareowners 2019 returns for our class b common stock , the standard & poor 2019s 500 index , and the dow jones transportation average .
the comparison of the total cumulative return on investment , which is the change in the quarterly stock price plus reinvested dividends for each of the quarterly periods , assumes that $ 100 was invested on december 31 , 2008 in the standard & poor 2019s 500 index , the dow jones transportation average , and our class b common stock. .

                                 | 12/31/2008 | 12/31/2009 | 12/31/2010 | 12/31/2011 | 12/31/2012 | 12/31/2013
-------------------------------- | ---------- | ---------- | ---------- | ---------- | ---------- | ----------
united parcel service inc .      | $ 100.00   | $ 107.75   | $ 140.39   | $ 145.84   | $ 151.44   | $ 221.91
standard & poor 2019s 500 index  | $ 100.00   | $ 126.45   | $ 145.49   | $ 148.55   | $ 172.30   | $ 228.09
dow jones transportation average | $ 100.00   | $ 118.59   | $ 150.30   | $ 150.31   | $ 161.56   | $ 228.42


the activity related to the restructuring liability for 2004 is as follows ( in thousands ) : non-operating items interest income increased $ 1.7 million to $ 12.0 million in 2005 from $ 10.3 million in 2004 .
the increase was mainly the result of higher returns on invested funds .
interest expense decreased $ 1.0 million , or 5% ( 5 % ) , to $ 17.3 million in 2005 from $ 18.3 million in 2004 as a result of the exchange of newly issued stock for a portion of our outstanding convertible debt in the second half of 2005 .
in addition , as a result of the issuance during 2005 of common stock in exchange for convertible subordinated notes , we recorded a non- cash charge of $ 48.2 million .
this charge related to the incremental shares issued in the transactions over the number of shares that would have been issued upon the conversion of the notes under their original terms .
liquidity and capital resources we have incurred operating losses since our inception and historically have financed our operations principally through public and private offerings of our equity and debt securities , strategic collaborative agreements that include research and/or development funding , development milestones and royalties on the sales of products , investment income and proceeds from the issuance of stock under our employee benefit programs .
at december 31 , 2006 , we had cash , cash equivalents and marketable securities of $ 761.8 million , which was an increase of $ 354.2 million from $ 407.5 million at december 31 , 2005 .
the increase was primarily a result of : 2022 $ 313.7 million in net proceeds from our september 2006 public offering of common stock ; 2022 $ 165.0 million from an up-front payment we received in connection with signing the janssen agreement ; 2022 $ 52.4 million from the issuance of common stock under our employee benefit plans ; and 2022 $ 30.0 million from the sale of shares of altus pharmaceuticals inc .
common stock and warrants to purchase altus common stock .
these cash inflows were partially offset by the significant cash expenditures we made in 2006 related to research and development expenses and sales , general and administrative expenses .
capital expenditures for property and equipment during 2006 were $ 32.4 million .
at december 31 , 2006 , we had $ 42.1 million in aggregate principal amount of the 2007 notes and $ 59.6 million in aggregate principal amount of the 2011 notes outstanding .
the 2007 notes are due in september 2007 and are convertible into common stock at the option of the holder at a price equal to $ 92.26 per share , subject to adjustment under certain circumstances .
in february 2007 , we announced that we will redeem our 2011 notes on march 5 , 2007 .
the 2011 notes are convertible into shares of our common stock at the option of the holder at a price equal to $ 14.94 per share .
we expect the holders of the 2011 notes will elect to convert their notes into stock , in which case we will issue approximately 4.0 million .
we will be required to repay any 2011 notes that are not converted at the rate of $ 1003.19 per $ 1000 principal amount , which includes principal and interest that will accrue to the redemption date .
liability as of december 31 , payments in 2004 cash received from sublease , net of operating costs in 2004 additional charge in liability as of december 31 , lease restructuring liability and other operating lease liability $ 69526 $ ( 31550 ) $ 293 $ 17574 $ 55843 .

                                                                  | liability as of december 31 2003 | cash payments in 2004 | cash received from sublease net of operating costs in 2004 | additional charge in 2004 | liability as of december 31 2004
----------------------------------------------------------------- | -------------------------------- | --------------------- | ---------------------------------------------------------- | ------------------------- | --------------------------------
lease restructuring liability and other operating lease liability | $ 69526                          | $ -31550 ( 31550 )    | $ 293                                                      | $ 17574                   | $ 55843

the activity related to the restructuring liability for 2004 is as follows ( in thousands ) : non-operating items interest income increased $ 1.7 million to $ 12.0 million in 2005 from $ 10.3 million in 2004 .
the increase was mainly the result of higher returns on invested funds .
interest expense decreased $ 1.0 million , or 5% ( 5 % ) , to $ 17.3 million in 2005 from $ 18.3 million in 2004 as a result of the exchange of newly issued stock for a portion of our outstanding convertible debt in the second half of 2005 .
in addition , as a result of the issuance during 2005 of common stock in exchange for convertible subordinated notes , we recorded a non- cash charge of $ 48.2 million .
this charge related to the incremental shares issued in the transactions over the number of shares that would have been issued upon the conversion of the notes under their original terms .
liquidity and capital resources we have incurred operating losses since our inception and historically have financed our operations principally through public and private offerings of our equity and debt securities , strategic collaborative agreements that include research and/or development funding , development milestones and royalties on the sales of products , investment income and proceeds from the issuance of stock under our employee benefit programs .
at december 31 , 2006 , we had cash , cash equivalents and marketable securities of $ 761.8 million , which was an increase of $ 354.2 million from $ 407.5 million at december 31 , 2005 .
the increase was primarily a result of : 2022 $ 313.7 million in net proceeds from our september 2006 public offering of common stock ; 2022 $ 165.0 million from an up-front payment we received in connection with signing the janssen agreement ; 2022 $ 52.4 million from the issuance of common stock under our employee benefit plans ; and 2022 $ 30.0 million from the sale of shares of altus pharmaceuticals inc .
common stock and warrants to purchase altus common stock .
these cash inflows were partially offset by the significant cash expenditures we made in 2006 related to research and development expenses and sales , general and administrative expenses .
capital expenditures for property and equipment during 2006 were $ 32.4 million .
at december 31 , 2006 , we had $ 42.1 million in aggregate principal amount of the 2007 notes and $ 59.6 million in aggregate principal amount of the 2011 notes outstanding .
the 2007 notes are due in september 2007 and are convertible into common stock at the option of the holder at a price equal to $ 92.26 per share , subject to adjustment under certain circumstances .
in february 2007 , we announced that we will redeem our 2011 notes on march 5 , 2007 .
the 2011 notes are convertible into shares of our common stock at the option of the holder at a price equal to $ 14.94 per share .
we expect the holders of the 2011 notes will elect to convert their notes into stock , in which case we will issue approximately 4.0 million .
we will be required to repay any 2011 notes that are not converted at the rate of $ 1003.19 per $ 1000 principal amount , which includes principal and interest that will accrue to the redemption date .
liability as of december 31 , payments in 2004 cash received from sublease , net of operating costs in 2004 additional charge in liability as of december 31 , lease restructuring liability and other operating lease liability $ 69526 $ ( 31550 ) $ 293 $ 17574 $ 55843


management 2019s discussion and analysis supplemental financial information and disclosures income tax matters effective tax rate from continuing operations .

                                                | 2017             | 2016             | 2015
----------------------------------------------- | ---------------- | ---------------- | ----------------
u.s . gaap                                      | 40.1% ( 40.1 % ) | 30.8% ( 30.8 % ) | 25.9% ( 25.9 % )
adjusted effective income taxrate 2014non-gaap1 | 30.8% ( 30.8 % ) | 31.6% ( 31.6 % ) | 32.3% ( 32.3 % )

adjusted effective income tax rate 2014 non-gaap1 30.8% ( 30.8 % ) 31.6% ( 31.6 % ) 32.3% ( 32.3 % ) 1 .
beginning in 2017 , income tax consequences associated with employee share-based awards are recognized in provision for income taxes in the income statements but are excluded from the intermittent net discrete tax provisions ( benefits ) adjustment as we anticipate conversion activity each year .
see note 2 to the financial statements on the adoption of the accounting update improvements to employee share-based payment accounting .
for 2015 , adjusted effective income tax rate also excludes dva .
for further information on non-gaap measures , see 201cselected non-gaap financial information 201d herein .
the effective tax rate from continuing operations for 2017 included an intermittent net discrete tax provision of $ 968 million , primarily related to the impact of the tax act , partially offset by net discrete tax benefits primarily associ- ated with the remeasurement of reserves and related interest due to new information regarding the status of multi-year irs tax examinations .
the tax act , enacted on december 22 , 2017 , significantly revised u.s .
corporate income tax law by , among other things , reducing the corporate income tax rate to 21% ( 21 % ) , and implementing a modified territorial tax system that includes a one-time transition tax on deemed repatriated earnings of non-u.s .
subsidiaries ; imposes a minimum tax on global intangible low-taxed income ( 201cgilti 201d ) and an alternative base erosion and anti-abuse tax ( 201cbeat 201d ) on u.s .
corpora- tions that make deductible payments to non-u.s .
related persons in excess of specified amounts ; and broadens the tax base by partially or wholly eliminating tax deductions for certain historically deductible expenses ( e.g. , fdic premiums and executive compensation ) .
we recorded an approximate $ 1.2 billion net discrete tax provision as a result of the enactment of the tax act , primarily from the remeasurement of certain deferred tax assets using the lower enacted corporate tax rate .
this provi- sion incorporates the best available information as of the enactment date as well as assumptions made based upon our current interpretation of the tax act .
our estimates may change as we receive additional clarification and implementa- tion guidance from the u.s .
treasury department and as the interpretation of the tax act evolves over time .
the ultimate impact of the income tax effects of the tax act will be deter- mined in connection with the preparation of our u.s .
consoli- dated federal income tax return .
taking into account our current assumptions , estimates and interpretations related to the tax act and other factors , we expect our effective tax rate from continuing operations for 2018 to be approximately 22% ( 22 % ) to 25% ( 25 % ) , depending on factors such as the geographic mix of earnings and employee share- based awards ( see 201cforward-looking statements 201d ) .
subsequent to the release of the firm 2019s 2017 earnings on january 18 , 2018 , certain estimates related to the net discrete tax provision associated with the enactment of the tax act were revised , resulting in a $ 43 million increase in the provi- sion for income taxes and a reallocation of impacts among segments .
this decreased diluted eps and diluted eps from continuing operations by $ 0.03 and $ 0.02 in the fourth quarter and year ended december 31 , 2017 , respectively .
on a business segment basis , the change resulted in an $ 89 million increase in provision for income taxes for wealth management , a $ 45 million decrease for institutional securi- ties , and a $ 1 million decrease for investment management .
the effective tax rate from continuing operations for 2016 included intermittent net discrete tax benefits of $ 68 million , primarily related to the remeasurement of reserves and related interest due to new information regarding the status of multi- year irs tax examinations , partially offset by adjustments for other tax matters .
the effective tax rate from continuing operations for 2015 included intermittent net discrete tax benefits of $ 564 million , primarily associated with the repatriation of non-u.s .
earn- ings at a cost lower than originally estimated due to an internal restructuring to simplify the legal entity organization in the u.k .
u.s .
bank subsidiaries we provide loans to a variety of customers , from large corpo- rate and institutional clients to high net worth individuals , primarily through our u.s .
bank subsidiaries , morgan stanley bank n.a .
( 201cmsbna 201d ) and morgan stanley private bank , national association ( 201cmspbna 201d ) ( collectively , 201cu.s .
bank subsidiaries 201d ) .
the lending activities in the institutional securities business segment primarily include loans and lending commitments to corporate clients .
the lending activ- ities in the wealth management business segment primarily include securities-based lending that allows clients to borrow december 2017 form 10-k 52


on may 20 , 2015 , aon plc issued $ 600 million of 4.750% ( 4.750 % ) senior notes due may 2045 .
the 4.750% ( 4.750 % ) notes due may 2045 are fully and unconditionally guaranteed by aon corporation .
we used the proceeds of the issuance for general corporate purposes .
on september 30 , 2015 , $ 600 million of 3.50% ( 3.50 % ) senior notes issued by aon corporation matured and were repaid .
on november 13 , 2015 , aon plc issued $ 400 million of 2.80% ( 2.80 % ) senior notes due march 2021 .
the 2.80% ( 2.80 % ) notes due march 2021 are fully and unconditionally guaranteed by aon corporation .
we used the proceeds of the issuance for general corporate purposes .
credit facilities as of december 31 , 2015 , we had two committed credit facilities outstanding : our $ 400 million u.s .
credit facility expiring in march 2017 ( the "2017 facility" ) and $ 900 million multi-currency u.s .
credit facility expiring in february 2020 ( the "2020 facility" ) .
the 2020 facility was entered into on february 2 , 2015 and replaced the previous 20ac650 million european credit facility .
each of these facilities is intended to support our commercial paper obligations and our general working capital needs .
in addition , each of these facilities includes customary representations , warranties and covenants , including financial covenants that require us to maintain specified ratios of adjusted consolidated ebitda to consolidated interest expense and consolidated debt to adjusted consolidated ebitda , tested quarterly .
at december 31 , 2015 , we did not have borrowings under either the 2017 facility or the 2020 facility , and we were in compliance with the financial covenants and all other covenants contained therein during the twelve months ended december 31 , 2015 .
effective february 2 , 2016 , the 2020 facility terms were extended for 1 year and will expire in february 2021 our total debt-to-ebitda ratio at december 31 , 2015 and 2014 , is calculated as follows: .

years ended december 31,          | 2015 | 2014
--------------------------------- | ---- | ----
net income                        | 1422 | 1431
interest expense                  | 273  | 255
income taxes                      | 267  | 334
depreciation of fixed assets      | 229  | 242
amortization of intangible assets | 314  | 352
total ebitda                      | 2505 | 2614
total debt                        | 5737 | 5582
total debt-to-ebitda ratio        | 2.3  | 2.1

we use ebitda , as defined by our financial covenants , as a non-gaap measure .
this supplemental information related to ebitda represents a measure not in accordance with u.s .
gaap and should be viewed in addition to , not instead of , our consolidated financial statements and notes thereto .
shelf registration statement on september 3 , 2015 , we filed a shelf registration statement with the sec , registering the offer and sale from time to time of an indeterminate amount of , among other securities , debt securities , preference shares , class a ordinary shares and convertible securities .
our ability to access the market as a source of liquidity is dependent on investor demand , market conditions and other factors.


morgan stanley notes to consolidated financial statements 2014 ( continued ) lending commitments .
primary lending commitments are those that are originated by the company whereas secondary lending commitments are purchased from third parties in the market .
the commitments include lending commitments that are made to investment grade and non-investment grade companies in connection with corporate lending and other business activities .
commitments for secured lending transactions .
secured lending commitments are extended by the company to companies and are secured by real estate or other physical assets of the borrower .
loans made under these arrangements typically are at variable rates and generally provide for over-collateralization based upon the creditworthiness of the borrower .
forward starting reverse repurchase agreements .
the company has entered into forward starting securities purchased under agreements to resell ( agreements that have a trade date at or prior to december 31 , 2013 and settle subsequent to period-end ) that are primarily secured by collateral from u.s .
government agency securities and other sovereign government obligations .
commercial and residential mortgage-related commitments .
the company enters into forward purchase contracts involving residential mortgage loans , residential mortgage lending commitments to individuals and residential home equity lines of credit .
in addition , the company enters into commitments to originate commercial and residential mortgage loans .
underwriting commitments .
the company provides underwriting commitments in connection with its capital raising sources to a diverse group of corporate and other institutional clients .
other lending commitments .
other commitments generally include commercial lending commitments to small businesses and commitments related to securities-based lending activities in connection with the company 2019s wealth management business segment .
the company sponsors several non-consolidated investment funds for third-party investors where the company typically acts as general partner of , and investment advisor to , these funds and typically commits to invest a minority of the capital of such funds , with subscribing third-party investors contributing the majority .
the company 2019s employees , including its senior officers , as well as the company 2019s directors , may participate on the same terms and conditions as other investors in certain of these funds that the company forms primarily for client investment , except that the company may waive or lower applicable fees and charges for its employees .
the company has contractual capital commitments , guarantees , lending facilities and counterparty arrangements with respect to these investment funds .
premises and equipment .
the company has non-cancelable operating leases covering premises and equipment ( excluding commodities operating leases , shown separately ) .
at december 31 , 2013 , future minimum rental commitments under such leases ( net of subleases , principally on office rentals ) were as follows ( dollars in millions ) : year ended operating premises leases .

year ended | operating premises leases
---------- | -------------------------
2014       | $ 672
2015       | 656
2016       | 621
2017       | 554
2018       | 481
thereafter | 2712


other off-balance sheet commitments lease commitments the company leases various equipment and facilities , including retail space , under noncancelable operating lease arrangements .
the company does not currently utilize any other off-balance sheet financing arrangements .
the major facility leases are typically for terms not exceeding 10 years and generally provide renewal options for terms not exceeding five additional years .
leases for retail space are for terms ranging from five to 20 years , the majority of which are for 10 years , and often contain multi-year renewal options .
as of september 29 , 2012 , the company 2019s total future minimum lease payments under noncancelable operating leases were $ 4.4 billion , of which $ 3.1 billion related to leases for retail space .
rent expense under all operating leases , including both cancelable and noncancelable leases , was $ 488 million , $ 338 million and $ 271 million in 2012 , 2011 and 2010 , respectively .
future minimum lease payments under noncancelable operating leases having remaining terms in excess of one year as of september 29 , 2012 , are as follows ( in millions ) : .

2013                         | $ 516
---------------------------- | ------
2014                         | 556
2015                         | 542
2016                         | 513
2017                         | 486
thereafter                   | 1801
total minimum lease payments | $ 4414

other commitments as of september 29 , 2012 , the company had outstanding off-balance sheet third-party manufacturing commitments and component purchase commitments of $ 21.1 billion .
in addition to the off-balance sheet commitments mentioned above , the company had outstanding obligations of $ 988 million as of september 29 , 2012 , which were comprised mainly of commitments to acquire capital assets , including product tooling and manufacturing process equipment , and commitments related to advertising , research and development , internet and telecommunications services and other obligations .
contingencies the company is subject to various legal proceedings and claims that have arisen in the ordinary course of business and have not been fully adjudicated , certain of which are discussed in part i , item 3 of this form 10-k under the heading 201clegal proceedings 201d and in part i , item 1a of this form 10-k under the heading 201crisk factors . 201d in the opinion of management , there was not at least a reasonable possibility the company may have incurred a material loss , or a material loss in excess of a recorded accrual , with respect to loss contingencies .
however , the outcome of litigation is inherently uncertain .
therefore , although management considers the likelihood of such an outcome to be remote , if one or more of these legal matters were resolved against the company in a reporting period for amounts in excess of management 2019s expectations , the company 2019s consolidated financial statements for that reporting period could be materially adversely affected .
apple inc .
vs samsung electronics co. , ltd , et al .
on august 24 , 2012 , a jury returned a verdict awarding the company $ 1.05 billion in its lawsuit against samsung electronics and affiliated parties in the united states district court , northern district of california , san jose division .
because the award is subject to entry of final judgment and may be subject to appeal , the company has not recognized the award in its consolidated financial statements for the year ended september 29 , 2012.


the following table summarizes the short-term borrowing activity for awcc for the years ended december 31: .

                                                        | 2017             | 2016
------------------------------------------------------- | ---------------- | ----------------
average borrowings                                      | $ 779            | $ 850
maximum borrowings outstanding                          | 1135             | 1016
weighted average interest rates computed on daily basis | 1.24% ( 1.24 % ) | 0.78% ( 0.78 % )
weighted average interest rates as of december 31       | 1.61% ( 1.61 % ) | 0.98% ( 0.98 % )

the credit facility requires the company to maintain a ratio of consolidated debt to consolidated capitalization of not more than 0.70 to 1.00 .
the ratio as of december 31 , 2017 was 0.59 to 1.00 .
none of the company 2019s borrowings are subject to default or prepayment as a result of a downgrading of securities , although such a downgrading could increase fees and interest charges under the company 2019s credit facility .
as part of the normal course of business , the company routinely enters contracts for the purchase and sale of water , energy , fuels and other services .
these contracts either contain express provisions or otherwise permit the company and its counterparties to demand adequate assurance of future performance when there are reasonable grounds for doing so .
in accordance with the contracts and applicable contract law , if the company is downgraded by a credit rating agency , especially if such downgrade is to a level below investment grade , it is possible that a counterparty would attempt to rely on such a downgrade as a basis for making a demand for adequate assurance of future performance .
depending on the company 2019s net position with the counterparty , the demand could be for the posting of collateral .
in the absence of expressly agreed provisions that specify the collateral that must be provided , the obligation to supply the collateral requested will be a function of the facts and circumstances of the company 2019s situation at the time of the demand .
if the company can reasonably claim that it is willing and financially able to perform its obligations , it may be possible that no collateral would need to be posted or that only an amount equal to two or three months of future payments should be sufficient .
the company does not expect to post any collateral which will have a material adverse impact on the company 2019s results of operations , financial position or cash flows .
note 12 : general taxes the following table summarizes the components of general tax expense for the years ended december 31 : 2017 2016 2015 gross receipts and franchise .
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$ 110 $ 106 $ 99 property and capital stock .
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105 106 98 payroll .
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31 32 31 other general .
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13 14 15 total general taxes .
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$ 259 $ 258 $ 243