taxes.
 if group or bermuda subsidiaries become subject to u. s.
 income tax ; could be material adverse effect on company 2019s financial condition , results of operations cash flows.
 united kingdom.
 bermuda re 2019s uk branch conducts business in uk is subject to taxation in uk.
 bermuda re believes it has operated will continue to operate its bermuda operation in manner not cause them to subject to uk taxation.
 if bermuda re 2019s bermuda operations become subject to uk income tax could be material adverse impact on company 2019s financial condition , results of operations cash flow.
 available information company 2019s annual reports on form 10-k , quarterly reports on form 10-q , current reports on form 8-k proxy state- ments amendments to reports are available free of charge through company 2019s internet website at http://www. everestre. com as soon after reports electronically filed with securities and exchange commission ( 201csec 201d ).
 t e m 1 a.
 r i s k f a c t o r s in addition to other information in report  following risk factors should be considered when evaluating investment in our securities.
 if circumstances contemplated by individual risk factors materialize , our business , finan- cial condition results of operations could be materially adversely affected trading price of common shares could decline significantly.
 r i s our results could be adversely affected by catastrophic events.
 we are exposed to unpredictable catastrophic events , including weather-related other natural catastrophes  acts of terrorism.
 any material reduction in operating results caused by one or more catastrophes could inhibit our ability to pay dividends or to meet interest and principal payment obligations.
define catastrophe as event causes pre-tax loss on property exposures before reinsurance of at least $ 5. 0 million , before corporate level rein- surance and taxes.
 effective for third quarter 2005 , industrial risk losses excluded from catastrophe losses  with prior periods adjusted for comparison purposes.
 illustration during past five calendar years  pre-tax catastrophe losses , net of contract specific reinsurance before cessions under corporate reinsurance programs, were as follows:.
 losses from future catastrophic events could exceed projections.
 use projections of possible losses from future catastrophic events of varying types and magnitudes as strategic under- writing tool.
 use loss projections to estimate potential catastrophe losses in certain geographic areas decide on purchase of retrocessional coverage or other actions to limit extent potential losses in geographic area.
 loss projections are approximations reliant on mix of quantitative and qualitative processes actual losses may exceed projections by material amount.
 focus on potential losses generated by any single event as of evaluation and monitoring of aggre- gate exposure to catastrophic events.
 employ various techniques to estimate loss from any single catastrophic event in various geographical areas.
 techniques range from non-modeled deterministic approaches tracking aggregate limits applying historic dam- age factors 2014to modeled approaches scientifically measure catastrophe risks using sophisticated monte carlo simulation techniques provide insights into frequency severity of expected losses probabilistic basis.
 if loss reserves inadequate to meet actual losses net income reduced or could incur loss.
 required to maintain reserves to cover estimated ultimate liability of losses and loss adjustment expenses for both reported and unreported claims incurred.
reserves are estimates of we believe settlement adminis- tration of claims cost based on facts circumstances known to us.
 in setting reserves for reinsurance liabilities , we rely on claim data by ceding companies brokers employ actuarial statistical projections.
 information received from ceding companies not always timely or accurate, can contribute to inaccuracies in 81790fin_a 4/13/07 11:08 am page 23 http://www. everestre. com

calendar year | calendar year |
------------- | ------------- | -------
2006          | $ 287.9       | million
2005          | $ 1485.7      | million
2004          | $ 390.0       | million
2003          | $ 35.0        | million
2002          | $ 30.0        | million


notes to consolidated financial statements continued ) note 3 2014financial instruments continued ) accounts receivable trade receivables company distributes products through third-party distributors resellers directly to certain education  consumer commercial customers.
 company generally not require collateral from customers ; company will require collateral in certain instances to limit credit risk.
 when possible company to limit credit risk on trade receivables with credit insurance for certain customers in latin america europe asia australia by arranging with third- party financing companies to provide flooring arrangements loan and lease programs to company 2019s direct customers.
 credit-financing arrangements directly between third-party financing company and end customer.
 company not assume recourse or credit risk sharing related to these arrangements.
 considerable trade receivables not covered by collateral third-party flooring arrangements or credit insurance outstanding with company 2019s distribution and retail channel partners.
 no customer accounted for more than 10% ( 10 % ) of trade receivables as of september 30 , 2006 or september 24 , 2005.
 following table summarizes activity in allowance for doubtful accounts ( in millions ) : september 30 , september 24 , september 25.
 ( a ) represents amounts written off against allowance net of recoveries.
 vendor non-trade receivables company has non-trade receivables from manufacturing vendors from sale of raw material components to manufacturing vendors manufacture sub-assemblies final products for company.
 company purchases raw material components directly from suppliers.
 these non-trade receivables included in consolidated balance sheets other current assets totaled $ 1. 6 billion and $ 417 million as of september 30 , 2006 and september 24 , 2005 respectively.
company not reflect sale of components in net sales and not recognize profits on sales until products sold through to end customer profit recognized as a reduction of cost of sales.
 derivative financial instruments company uses derivatives to partially offset business exposure to foreign exchange risk.
 foreign currency forward and option contracts used to offset foreign exchange risk on certain existing assets and liabilities and to hedge foreign exchange risk on expected future cash flows on certain forecasted revenue and cost of sales.
 from company enters into interest rate derivative agreements to modify interest rate profile of certain investments and debt.
 company 2019s accounting policies for these instruments based on instruments hedge or non-hedge instruments.
 company records all derivatives on balance sheet at fair value.

| september 30 2006 | september 24 2005 | september 25 2004
----------------------------- | ----------------- | ----------------- | -----------------
beginning allowance balance   | $ 46              | $ 47              | $ 49
charged to costs and expenses | 17                | 8                 | 3
deductions ( a )              | -11 ( 11 )        | -9 ( 9 )          | -5 ( 5 )
ending allowance balance      | $ 52              | $ 46              | $ 47


organizational structure key enabler of republic way operating model organizational structure fosters high performance culture by maintaining 360-degree accountability full profit and loss responsibility with local management supported by functional structure provide subject matter expertise.
 structure allows us to advantage of scale by coordinating functionally across all markets empowering local management to respond to unique market dynamics.
 senior management evaluates  oversees manages financial performance of operations through two field groups , referred group 1 and group 2.
 group 1 primarily consists of geographic areas in western united states, and group 2 of geographic areas in southeastern and mid-western united states eastern seaboard of united states.
 each field group organized into several areas each area contains multiple business units or operating locations.
 each field groups all areas provide collection , transfer , recycling landfill services.
 see note 14 , segment reporting , to consolidated financial statements in item 8 of form 10-k for further discussion of operating segments.
 through this operating model  rolled out productivity and cost control initiatives to deliver best service to customers in efficient environmentally sound way.
 fleet automation approximately 75% ( 75 % ) of residential routes converted to automated single-driver trucks.
 converting residential routes to automated service reduce labor costs  improve driver productivity  decrease emissions create safer work environment for employees.
 communities using automated vehicles have higher participation rates in recycling programs complementing initiative to expand recycling capabilities.
 fleet conversion to compressed natural gas ( cng ) approximately 20% ( 20 % ) of fleet operates on natural gas.
 expect to continue gradual fleet conversion to cng as part of ordinary annual fleet replacement process.
 believe gradual fleet conversion is most prudent approach to realizing full value of previous fleet investments.
13% ( ) of replacement vehicle purchases during 2018 were cng vehicles.
 we believe using cng vehicles provides competitive advantage in communities with strict clean emission initiatives protecting environment.
 upfront capital costs higher using cng reduces fleet operating costs through lower fuel expenses.
 as of december 31 , 2018  we operated 37 cng fueling stations.
 standardized maintenance industry trade publication operate seventh largest vocational fleet in united states.
 as of december 31 , 2018  average fleet age in years by line of business was : approximate number of vehicles approximate average age.
 onefleet standardized vehicle maintenance program enables us to use best practices for fleet management  truck care maintenance.
 through standardization of core functions believe we can minimize variability

| approximate number of vehicles | approximate average age
--------------- | ------------------------------ | -----------------------
residential     | 7000                           | 7.5
small-container | 4700                           | 7.0
large-container | 4300                           | 8.8
total           | 16000                          | 7.7


"distribution date" ).
 until distribution date ( or earlier redemption or expiration of rights ) , rights traded with only with common stock.
 until right exercised  right not entitle holder to rights as a stockholder.
 if any person or group becomes acquiring person , each holder of right , other than rights beneficially owned by acquiring person will right to receive upon exercise and payment of purchase price number of shares of common stock having market value of two times purchase price and if company acquired in business combination transaction or 50% ( 50 % ) or more of assets are sold , each holder of right right to receive upon exercise and payment of purchase price number of shares of common stock of acquiring company at time of transaction market value of two times purchase price.
 after any person becomes acquiring person and prior to acquisition by person or group of 50% ( 50 % ) or more of outstanding common stock , board of directors company may cause rights ( other than rights owned by person or group ) to be exchanged  in or in part for common stock or junior preferred shares  at exchange rate of one share of common stock per right or one half of one-hundredth of a junior preferred share per right.
 prior to acquisition by person or group of beneficial ownership of 15% ( 15 % ) or more of outstanding common stock , board of directors company may redeem rights at price of $ 0. 01 per right.
 rights have anti-takeover effects  cause substantial dilution to person or group attempts to acquire significant interest in vertex on terms not approved by board of directors.
 common stock reserved for future issuance at december 31 , 2005 , company has reserved shares of common stock for future issuance under all equity compensation plans as follows ( shares in thousands ) : o.
significant revenue arrangements company has formed strategic collaborations with pharmaceutical companies other organizations in areas drug discovery , development  commercialization.
 research , development commercialization agreements provide company financial support other valuable resources for research programs for development of clinical drug candidates , marketing and sales of products.
 collaborative research , development commercialization agreements in company's collaborative research  development commercialization programs company seeks to discover , develop commercialize pharmaceutical products with supported by company's collaborators.
 collaborative research development arrangements may provide research funding over initial contract period with renewal and termination options.

common stock under stock and option plans    | 17739
-------------------------------------------- | -----
common stock under the vertex purchase plan  | 842
common stock under the vertex 401 ( k ) plan | 270
total                                        | 18851


hologic , inc.
 notes to consolidated financial statements ( continued ) ( in thousands  except per share data ) company 2019s consolidated financial statements from date of acquisition part of other business segment.
 company concluded acquisition of aeg not represent a material business combination no pro forma financial information provided.
 aeg specializes in manufacture of photoconductor materials for in electro photographic applications including for coating of company 2019s digital detectors.
 acquisition of aeg allows company to control over critical step in detector manufacturing process 2013 efficiently manage supply chain improve manufacturing margins.
 combination of companies should facilitate manufacturing efficiencies accelerate research and development of new detector products.
 aeg was privately held group of companies headquartered in warstein , germany, with manufacturing operations in germany , china united states.
 aggregate purchase price for aeg was approximately $ 31300 ( subject to adjustment ) of eur $ 24100 in cash and 110 shares of hologic common stock valued at $ 5300, approximately $ 1900 for acquisition related fees and expenses.
 company determined fair value of shares issued in connection with acquisition in accordance with eitf issue no.
 99-12 , determination of measurement date for market price of acquirer securities issued in purchase business combination.
 110 shares subject to contingent put options holders have option to resell shares to company during period one year following completion acquisition if closing price of company 2019s stock falls remains below threshold price.
 repurchase price would be closing price of company 2019s common stock on date of exercise.
 company 2019s maximum aggregate obligation under these put options would be approximately $ 4100 if put option exercised for all shares covered by options and closing price of common stock on date of exercise equaled maximum threshold price permitting exercise of option.
no shares subject to put option as of september 30 , 2006 as company 2019s stock price in excess of minimum value.
 acquisition provides for one-year earn out of eur 1700 ( approximately $ 2000 usd ) payable in cash if aeg calendar year 2006 earnings , exceeds pre-determined amount.
 company considered provision of eitf issue no.
 95-8 , accounting for contingent consideration paid to shareholders of acquired enterprise in purchase business combination , concluded contingent consideration represents additional purchase price.
 result , goodwill increased by amount of additional consideration , if any, when it becomes due and payable.
 components and allocation of purchase price  consists of following approximate amounts:.
 purchase price allocation above revised from included in company 2019s form 10-q for period ended june 24 , 2006 , to decrease net tangible asset acquired and increased deferred income tax liability with corresponding increase to goodwill for both.
 decrease to net tangible assets primarily

net tangible assets acquired as of may 2 2006 | $ 23700
--------------------------------------------- | --------------
in-process research and development           | 600
developed technology and know how             | 1900
customer relationship                         | 800
trade name                                    | 400
deferred income taxes                         | -3000 ( 3000 )
goodwill                                      | 6900
estimated purchase price                      | $ 31300


item 7a.
 quantitative and qualitative disclosures about market risk ( amounts in millions ) normal course business exposed to market risks related to interest rates foreign currency rates certain balance sheet items.
 use derivative instruments established guidelines policies to manage these risks.
 derivative instruments in hedging activities viewed as risk management tools not used for trading or speculative purposes.
 interest rates exposure to market risk for changes in interest rates relates primarily to fair market value cash flows of debt obligations.
 majority of debt ( approximately 91% ( 91 % ) and 86% ( 86 % ) as of december 31, 2014 and 2013  ) bears interest at fixed rates.
 have debt with variable interest rates 10% ( 10 % ) increase or decrease in interest rates not material to interest expense or cash flows.
 fair market value of debt sensitive to changes in interest rates impact of 10% ( 10 % ) change in interest rates summarized below.
 increase/ ( decrease ) in fair market value as of december 31 , 10% ( 10 % ) increase in interest rates 10 % ) decrease in interest rates.
 used interest rate swaps for risk management purposes to manage exposure to changes in interest rates.
 interest rate swaps outstanding as of december 31 , 2014.
 had $ 1667. 2 of cash , cash equivalents marketable securities as of december 31, 2014 generally invest in conservative  short-term bank deposits or securities.
 interest income from investments subject to domestic and foreign interest rate movements.
 during 2014 and 2013  had interest income of $ 27. 4 and $ 24. 7 , respectively.
 based on 2014 results 100-basis-point increase or decrease in interest rates would affect interest income by approximately $ 16. 7  assuming all cash cash equivalents marketable securities impacted same balances remain constant from year-end 2014 levels.
foreign currency rates subject to translation transaction risks related to changes in foreign currency exchange rates.
 report revenues expenses in.
 dollars changes in exchange rates may positively or negatively affect consolidated revenues and expenses ( expressed in.
 dollars ) from foreign operations.
 primary foreign currencies impacted results during 2014 included argentine peso australian dollar brazilian real british pound sterling.
 based on 2014 exchange rates operating results if u.
 dollar strengthen or weaken by 10% ( 10 % ) estimate operating income would decrease or increase approximately 4% ( 4 % ) assuming all currencies impacted same international revenue and expenses remain constant at 2014 levels.
 functional currency of foreign operations is generally respective local currency.
 assets and liabilities translated at exchange rates in effect at balance sheet date revenues and expenses translated at average exchange rates during period presented.
 resulting translation adjustments recorded as component of accumulated other comprehensive loss  net of tax in stockholders 2019 equity section of consolidated balance sheets.
 foreign subsidiaries generally collect revenues pay expenses in functional currency  mitigating transaction risk.
 certain subsidiaries may enter into transactions in currencies other than functional currency.
 assets and liabilities denominated in currencies other than functional currency susceptible to movements in foreign currency until final settlement.
 currency transaction gains or losses from transactions in currencies other than functional currency included in office and general expenses.
 not entered into material amount of foreign currency forward exchange contracts or other derivative financial instruments to hedge effects of potential adverse fluctuations in foreign currency exchange rates.

as of december 31, | increase/ ( decrease ) in fair market value 10% ( 10 % ) increasein interest rates | increase/ ( decrease ) in fair market value 10% ( 10 % ) decreasein interest rates
------------------ | ---------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------
2014               | $ -35.5 ( 35.5 )                                                                   | $ 36.6
2013               | -26.9 ( 26.9 )                                                                     | 27.9


analog devices , inc.
 notes to consolidated financial statements 2014 total intrinsic value of options exercised (.
 difference between market price at exercise and price paid by employee to exercise options ) during fiscal 2016 , 2015 and 2014 was $ 46. 6 million , $ 99. 2 million $ 130. 6 million  respectively total proceeds received company from exercise options during fiscal 2016  2015 2014 was $ 61. 5 million , $ 122. 6 million $ 200. 1 million  respectively.
 summary of company 2019s restricted stock unit award activity as of october 29, 2016 changes during fiscal year ended presented below : restricted stock units outstanding ( in thousands ) weighted- average grant- date fair value per share.
 as of october 29 , 2016  $ 112. 3 million of total unrecognized compensation cost related to unvested share- based awards stock options and restricted stock units.
 cost expected to be recognized over period of 1. 4 years.
 total grant-date fair value of shares vested during fiscal 2016 , 2015 2014 was approximately $ 62. 8 million , $ 65. 6 million and $ 57. 4 million , respectively.
 common stock repurchases company 2019s common stock repurchase program in place since august 2004.
 board of directors authorized company to repurchase $ 6. 2 billion of company 2019s common stock under program.
 company may repurchase outstanding shares common stock in open market and through privately negotiated transactions.
 unless terminated by resolution board of directors repurchase program will expire when company repurchased all shares authorized under program.
 as of october 29 , 2016  company had repurchased total of approximately 147. 0 million shares of common stock for approximately $ 5. 4 billion under program.
 additional $ 792.5 million remains available for repurchase of shares under current authorized program.
 repurchased shares are held as authorized but unissued shares of common stock.
 result of company's planned acquisition of linear technology corporation  see note 6  acquisitions company temporarily suspended common stock repurchase plan in third quarter of 2016.
 company also  from time to time repurchases shares in settlement of employee minimum tax withholding obligations due upon vesting of restricted stock units or exercise of stock options.
 withholding amount based on employees minimum statutory withholding requirement.
 future common stock repurchases dependent upon factors  including company's financial performance  outlook  liquidity and amount of cash company has available in united states.
 preferred stock company has 471934 authorized shares of $ 1. 00 par value preferred stock , none is issued or outstanding.
 board of directors authorized to fix designations  relative rights preferences and limitations on preferred stock at time of issuance.

| restrictedstock unitsoutstanding ( in thousands ) | weighted-average grant-date fair valueper share
----------------------------------------------------- | ------------------------------------------------- | -----------------------------------------------
restricted stock units outstanding at october 31 2015 | 2698                                              | $ 47.59
units granted                                         | 1099                                              | $ 51.59
restrictions lapsed                                   | -905 ( 905 )                                      | $ 44.30
forfeited                                             | -202 ( 202 )                                      | $ 50.34
restricted stock units outstanding at october 29 2016 | 2690                                              | $ 50.11


710 asphalt-paving contractors  government entities ( states  counties cities townships ) asphalt roofing shingle manufacturers.
 we produce asphalt cements  polymerized asphalt  asphalt emulsions industrial asphalts.
 retail marketing ssa , our wholly-owned subsidiary  sells gasoline merchandise through owned operated retail outlets under speedway ae superamerica ae brands.
 diesel fuel also sold at these outlets.
 ssa retail outlets offer wide variety of merchandise prepared foods  beverages non-food items significant proprietary items.
 as of december 31 , 2008  ssa had 1617 retail outlets in nine states.
 sales of refined products through retail outlets accounted for 15 percent of refined product sales volumes in 2008.
 revenues from sales non-petroleum merchandise through retail outlets totaled $ 2838 million in 2008 $ 2796 million in 2007 $ 2706 million in 2006.
 demand for gasoline seasonal in majority of ssa markets highest demand during summer driving season.
 profit levels from sale of merchandise services less volatile than profit levels from retail sale of gasoline diesel fuel.
 in october 2008  sold interest in pilot travel centers llc ( 201cptc 201d ) , operator of travel centers in united states.
 pipeline transportation own system of pipelines through marathon pipe line llc ( 201cmpl 201d ) ohio river pipe line llc ( 201corpl 201d )  wholly-owned subsidiaries.
 pipeline systems transport crude oil refined products in midwest gulf coast regions to refineries terminals other pipeline systems.
mpl and orpl wholly-owned interest common carrier systems consist 1815 miles of crude oil lines 1826 miles refined product lines 34 systems in 11 states.
 mpl common carrier pipeline network is one of largest petroleum pipeline systems in united states on total barrels delivered.
 pipeline systems subject to state federal energy regulatory commission regulations guidelines including published tariffs for transportation of crude oil and refined products.
 third parties generated 11 percent of crude oil and refined product shipments on mpl and orpl common carrier pipelines in 2008.
 mpl pipelines transported volumes shown in for last three years.
 pipeline barrels handled ( thousands of barrels per day ) 2008 2007 2006.
 own 176 miles of private crude oil pipelines 850 miles of private refined products pipelines lease 217 miles of common carrier refined product pipelines.
 partial ownership interests in several pipeline companies approximately 780 miles of crude oil pipelines 3000 miles of refined products pipelines including 800 miles operated by mpl.
 mpl operates most of private pipelines 985 miles of crude oil 160 miles of natural gas pipelines owned by e&p segment.
 major refined product lines include cardinal products pipeline and wabash pipeline.
 cardinal products pipeline delivers refined products from kenova  west virginia to columbus , ohio.
 wabash pipeline delivers product from robinson , illinois to various terminals in chicago , illinois.
 other significant refined product pipelines owned and operated by mpl extend from robinson , illinois to louisville  kentucky ; garyville , louisiana to zachary , louisiana texas city  texas to pasadena , texas.

( thousands of barrels per day ) | 2008 | 2007 | 2006
-------------------------------- | ---- | ---- | ----
crude oil trunk lines            | 1405 | 1451 | 1437
refined products trunk lines     | 960  | 1049 | 1101
total                            | 2365 | 2500 | 2538


backlog applied manufactures systems to meet demand represented by order backlog customer commitments.
 backlog consists of : ( 1 ) orders for written authorizations accepted assigned shipment dates within next 12 months  or shipment occurred but revenue not recognized ; ( 2 ) contractual service revenue and maintenance fees earned within next 12 months.
 backlog by reportable segment as of october 25 , 2015 and october 26 , 2014 was follows : 2015 2014 ( in millions , except percentages ).
 applied 2019s backlog on date not indicative of actual sales for future periods  due to potential for customer changes in delivery schedules or order cancellations.
 customers may delay delivery products or cancel orders prior to shipment  subject to possible cancellation penalties.
 delays in delivery schedules or reduction of backlog during period could have adverse effect on applied 2019s business results of operations.
 manufacturing , raw materials supplies applied 2019s manufacturing activities consist primarily of assembly , test integration of proprietary commercial parts , components subassemblies to manufacture systems.
 applied implemented distributed manufacturing model manufacturing supply chain activities conducted in various countries including germany  israel  italy singapore taiwan  united states other countries in asia.
 applied uses numerous vendors  including contract manufacturers, to supply parts assembly services for manufacture support of products including some systems completed at customer sites.
 applied efforts to assure parts available from multiple qualified suppliers not always possible.
 some key parts may be obtained from single supplier or limited group of suppliers.
 applied seeks to reduce costs lower risks of manufacturing service interruptions by selecting qualifying alternate suppliers for key parts ; monitoring financial condition of key suppliers maintaining appropriate inventories of key parts qualifying new parts timely basis ensuring quality and performance of parts.

| 2015   | 2014           |        | ( in millions except percentages )
---------------------------------- | ------ | -------------- | ------ | ----------------------------------
silicon systems                    | $ 1720 | 55% ( 55 % )   | $ 1400 | 48% ( 48 % )
applied global services            | 812    | 26% ( 26 % )   | 775    | 27% ( 27 % )
display                            | 525    | 16% ( 16 % )   | 593    | 20% ( 20 % )
energy and environmental solutions | 85     | 3% ( 3 % )     | 149    | 5% ( 5 % )
total                              | $ 3142 | 100% ( 100 % ) | $ 2917 | 100% ( 100 % )


cases ; ( ii ) management unable to estimate possible loss or range of loss from unfavorable outcome in pending tobacco-related cases ; and ( iii ) accordingly , management not provided amounts in consolidated financial statements for unfavorable outcomes , if.
 legal defense costs expensed as incurred.
 altria group , inc.
 and its subsidiaries achieved substantial success in managing litigation.
 nevertheless litigation subject to uncertainty and significant challenges remain.
 possible that consolidated results of operations , cash flows or financial position of altria group , inc. or one its subsidiaries, could be materially affected in particular fiscal quarter or fiscal year by unfavorable outcome or settlement of pending litigation.
 altria group , inc.
 and each its subsidiaries as defendant believe  each advised by counsel cases, that it has valid defenses to litigation against it, valid bases for appeal of adverse verdicts.
 each companies defended , and will continue to defend  vigorously against litigation challenges.
 altria group , inc.
 and its subsidiaries may enter into settlement discussions in particular cases if believe in best interests of altria group , inc.
 to.
 overview of altria group , inc.
pm usa tobacco-related litigation types number of cases : claims related to tobacco products fall within categories : ( i ) smoking and health cases alleging personal injury brought on behalf of individual plaintiffs ; ( ii ) smoking and health cases primarily alleging personal injury or seeking court- supervised programs for ongoing medical monitoring brought on behalf of class of individual plaintiffs  including cases aggregated claims of individual plaintiffs tried in single proceeding ; ( iii ) health care cost recovery cases by governmental domestic foreign ) plaintiffs seeking reimbursement for health care expenditures caused by cigarette smoking disgorgement of profits ; ( iv ) class action suits alleging terms 201clights 201d 201cultra lights 201d deceptive unfair trade practices  common law statutory fraud  unjust enrichment  breach of warranty violations of racketeer influenced corrupt organizations act ( 201crico 201d ) ; ( v ) other tobacco- related litigation described below.
 plaintiffs 2019 theories of recovery defenses raised in pending smoking and health , health care cost recovery 201clights/ultra lights 201d cases discussed below.
 table below lists number of certain tobacco-related cases pending in united states against pm usa  altria group , inc.
 as of december 31 , 2014 , december 31 , 2013 december 31 , 2012.
 type of case number of cases pending of december 31 , 2014 2013 december 2012 individual smoking and health cases ( 1 ) 67 67 77 smoking and health class actions aggregated claims litigation ( 2 ) 5 6 7 health care cost recovery actions ( 3 ) 1 1 1.
( 1 ) not include 2558 cases by flight attendants seeking compensatory damages for personal injuries caused by exposure to environmental tobacco smoke ( 201d ).
 flight attendants allege members of ets smoking and health class action in florida settled in 1997.
 terms of court-approved settlement allow class members to file individual lawsuits seeking compensatory damages prohibit from seeking punitive damages.
 not include individual smoking and health cases by or behalf of plaintiffs in florida state and federal courts following decertification of engle case ( discussed in smoking health litigation - engle class action ).
 ( 2 ) includes as one case 600 civil actions ( 346 were actions against pm usa ) tried in single proceeding in west virginia ( re tobacco litigation ).
 west virginia supreme court of appeals ruled united states constitution did not preclude trial in two phases.
 issues related to defendants 2019 conduct and whether punitive damages permissible tried in first phase.
 trial in first phase began in april 2013.
 in may 2013  jury returned verdict in favor of defendants on claims for design defect  negligence  failure to warn  breach of warranty and concealment declined to find defendants 2019 conduct warranted punitive damages.
 plaintiffs prevailed on claim that ventilated filter cigarettes should have included use instructions for period 1964 - 1969.
 second phase  will consist of individual trials to determine liability and compensatory damages on claim only.
 in august 2013  trial court denied all post-trial motions.
 trial court entered final judgment in october 2013 in november 2013 plaintiffs filed notice of appeal to west virginia supreme court of appeals.
 on november 3 , 2014 west virginia supreme court of appeals affirmed final judgment.
plaintiffs filed petition rehearing west virginia supreme court appeals court denied january 8  2015.
 ( 3 see health care cost recovery litigation federal government 2019s lawsuit below.
 altria group , inc.
 subsidiaries notes consolidated financial statements altria_mdc_2014form10k_nolinks_crops. pdf 68 2/25/15 5:56 pm

type of case                                                            | number of casespending as ofdecember 31 2014 | number of casespending as ofdecember 31 2013 | number of casespending as ofdecember 31 2012
----------------------------------------------------------------------- | -------------------------------------------- | -------------------------------------------- | --------------------------------------------
individual smoking and health cases ( 1 )                               | 67                                           | 67                                           | 77
smoking and health class actions and aggregated claims litigation ( 2 ) | 5                                            | 6                                            | 7
health care cost recovery actions ( 3 )                                 | 1                                            | 1                                            | 1
201clights/ultra lights 201d class actions                              | 12                                           | 15                                           | 14


notes to consolidated financial statements continued ) 72 snap-on incorporated following reconciliation of beginning and ending unrecognized tax benefits : ( amounts in millions ).
 of $ 18. 7 million of unrecognized tax benefits at end of 2007 , approximately $ 16. 2 million impact effective income tax rate if recognized.
 interest and penalties related to unrecognized tax benefits recorded in income tax expense.
 during years ended december 29 , 2007 , december 30 , 2006 december 31, 2005  company recognized approximately $ 1. 2 million , $ 0. 5 million ( $ 0. 5 ) million in net interest expense ( benefit ).
 company provided for approximately $ 3. 4 million , $ 2. 2 million  $ 1. 7 million of accrued interest related to unrecognized tax benefits at end of fiscal year 2007 , 2006 2005 .
 during next 12 months company not anticipate significant changes to total amount unrecognized tax benefits other than accrual of additional interest expense similar to prior year 2019s expense.
 few exceptions snap-on no longer subject to.
 federal and state/local income tax examinations by tax for years prior to 2003 snap no longer subject to non-u. s.
 income tax examinations by tax authorities for years prior to 2001.
 undistributed earnings of all non-u.
 subsidiaries totaled $ 338. 5 million , $ 247. 4 million $ 173. 6 million at end of fiscal 2007 , 2006 2005 .
 snap-on not provided deferred taxes on these undistributed earnings considers undistributed earnings permanently invested.
 determination of unrecognized deferred income tax liability related earnings not practicable.
 american jobs creation act of 2004 ( 201d ) created one-time tax incentive for.
corporations repatriate foreign earnings by providing tax deduction of 85% ( 85 % ) of qualifying dividends received from foreign affiliates.
 under snap-on repatriated $ 93 million qualifying dividends in 2005 resulted in additional income tax expense of $ 3. 3 million for year.
 note 9 : short-term and long-term debt as of december 29 , 2007 was $ 517. 9 million ; no commercial paper outstanding at december 29 , 2007.
 as of december 30 , 2006  notes payable long-term debt was $ 549. 2 million  including $ 314. 9 million of commercial paper.
 snap-on presented $ 300 million of december 30 , 2006 , outstanding commercial paper as 201clong-term debt on accompanying december 30, 2006  consolidated balance sheet.
 january 12 , 2007 snap-on sold $ 300 million of unsecured notes $ 150 million of floating rate notes mature on january 12 , 2010 $ 150 million fixed rate notes mature on january 15 , 2017.
 interest on floating rate notes accrues rate equal to three-month london interbank offer rate plus 0. 13% (. ) per year payable quarterly.
 interest on fixed rate notes accrues rate 5. 50% (. % ) per year payable semi-annually.
 snap-on used proceeds from sale of notes net of $ 1. 5 million transaction costs to repay commercial paper obligations finance acquisition of business solutions.
 january 12 , 2007 company terminated $ 250 million bridge credit agreement snap-on established prior to acquisition business solutions.

( amounts in millions )                                  | amount
-------------------------------------------------------- | ------------
unrecognized tax benefits as of december 31 2006         | $ 21.3
gross increases 2013 tax positions in prior periods      | 0.5
gross decreases 2013 tax positions in prior periods      | -0.4 ( 0.4 )
gross increases 2013 tax positions in the current period | 0.5
settlements with taxing authorities                      | -3.0 ( 3.0 )
lapsing of statutes of limitations                       | -0.2 ( 0.2 )
unrecognized tax benefits as of december 29 2007         | $ 18.7


proportional free cash flow non-gaap measure ) define as cash flows from operating activities less maintenance capital expenditures including non-recoverable environmental capital expenditures ) adjusted for estimated impact of noncontrolling interests.
 proportionate share of cash flows and related adjustments attributable to noncontrolling interests in subsidiaries comprise proportional adjustment factor in reconciliation below.
 company adoption of accounting guidance for service concession arrangements effective january 1, 2015  capital expenditures related to service concession assets classified as investing activities on consolidated statement cash flows now classified as operating activities.
 see note 1 2014general and summary of significant accounting policies of form 10-k for further information on adoption guidance.
 in quarter ended march 31 , 2015  company changed definition of proportional free cash flow to exclude cash flows for capital expenditures related to service concession assets now classified within net cash by operating activities on consolidated statement of cash flows.
 proportional adjustment factor for these capital expenditures presented in reconciliation below.
 exclude environmental capital expenditures expected to be recovered through regulatory , contractual or other mechanisms.
 example of recoverable environmental capital expenditures is ipl's investment in mats-related environmental upgrades recovered through tracker.
 see item 1. 2014us sbu 2014ipl 2014environmental matters for details of investments.
 gaap measure most comparable to proportional free cash flow is cash flows from operating activities.
 proportional free cash flow better reflects business performance company measures cash generated by business after funding of maintenance capital expenditures available for investing or repaying debt or other purposes.
 factors in determination include impact of noncontrolling interests  where aes consolidates results of subsidiary not wholly-owned by company.
 presentation of free cash flow has material limitations.
proportional free cash flow not as alternative to cash from operating activities determined in accordance with gaap.
 cash flow not represent our cash flow for discretionary payments excludes certain payments required or committed debt service requirements dividend payments.
 definition of proportional free cash flow may not comparable to similarly titled measures other companies.
 calculation of proportional free cash flow ( in millions ) 2015 2014 2013 2015/2014change 2014/2013 change.
 1 service concession asset expenditures excluded from proportional free cash flow non-gaap metric.
 proportional adjustment factor  proportional maintenance capital expenditures net reinsurance proceeds non-recoverable environmental capital expenditures calculated by multiplying percentage owned by noncontrolling interests for each entity by corresponding consolidated cash flow metric totaled to resulting figures.
 for example parent company a owns 20% ( 20 % ) of subsidiary company b  consolidated subsidiary.
 subsidiary company b has 80% ( 80 % ) noncontrolling interest.
 consolidated net cash flow from operating activities of $ 100 from subsidiary b proportional adjustment factor for subsidiary b would equal $ 80 ( or $ 100 x 80% ( 80 % ) ).
 company calculates proportional adjustment factor for each consolidated business sums amounts to determine total proportional adjustment factor in reconciliation.
 proportional adjustment factor may differ from proportion of income attributable to noncontrolling interests as result of non-cash items impact income but not cash and aes' ownership interest in subsidiary where such items occur.
 ( 3 ) includes proportional adjustment amount for service concession asset expenditures of $ 84 million for year ended december 31 , 2015.
 company adopted service concession accounting effective january 1 , 2015.
excludes ipl's proportional recoverable environmental capital expenditures $ 205 million  $ 163 million $ 110 million for years december 31  2015  2014 2013  respectively.

calculation of proportional free cash flow ( in millions )                             | 2015         | 2014         | 2013         | 2015/2014 change | 2014/2013 change
-------------------------------------------------------------------------------------- | ------------ | ------------ | ------------ | ---------------- | ----------------
net cash provided by operating activities                                              | $ 2134       | $ 1791       | $ 2715       | $ 343            | $ -924 ( 924 )
add : capital expenditures related to service concession assets ( 1 )                  | 165          | 2014         | 2014         | 165              | 2014
adjusted operating cash flow                                                           | 2299         | 1791         | 2715         | 508              | -924 ( 924 )
less : proportional adjustment factor on operating cash activities ( 2 ) ( 3 )         | -558 ( 558 ) | -359 ( 359 ) | -834 ( 834 ) | -199 ( 199 )     | 475
proportional adjusted operating cash flow                                              | 1741         | 1432         | 1881         | 309              | -449 ( 449 )
less : proportional maintenance capital expenditures net of reinsurance proceeds ( 2 ) | -449 ( 449 ) | -485 ( 485 ) | -535 ( 535 ) | 36               | 50
less : proportional non-recoverable environmental capital expenditures ( 2 ) ( 4 )     | -51 ( 51 )   | -56 ( 56 )   | -75 ( 75 )   | 5                | 19
proportional free cash flow                                                            | $ 1241       | $ 891        | $ 1271       | $ 350            | $ -380 ( 380 )


9.
 junior subordinated debt securities payable provisions issued march 29 , 2004 , holdings elected redeem $ 329897 thousand of 6. 2% ( 6. 2 % ) junior subordinated debt securities outstanding on may 24 , 2013.
 result early redemption company incurred pre-tax expense of $ 7282 thousand related to immediate amortization of remaining capitalized issuance costs on trust preferred securities.
 interest expense incurred junior subordinated debt securities is follows for periods indicated:.
 holdings considered mechanisms obligations relating trust preferred securities constituted full unconditional guarantee by holdings of capital trust ii 2019s payment obligations trust preferred securities.
 10.
 reinsurance and trust agreements certain subsidiaries of group have established trust agreements  use company 2019s investments as collateral  security for assumed losses payable to certain non-affiliated ceding companies.
 at december 31 , 2014  total amount on deposit in trust accounts was $ 322285 thousand.
 on april 24 , 2014 , company entered two collateralized reinsurance agreements with kilimanjaro re limited ( 201ckilimanjaro 201d ), bermuda based special purpose reinsurer  provide company catastrophe reinsurance coverage.
 agreements are multi-year reinsurance contracts cover specified named storm and earthquake events.
 first agreement provides up to $ 250000 thousand of reinsurance coverage from named storms in specified states of southeastern united states.
second agreement provides $ 200000 thousand reinsurance coverage from named storms in specified states southeast mid-atlantic northeast regions united states puerto rico reinsurance coverage from earthquakes in specified states southeast mid-atlantic northeast west regions united states  puerto rico british columbia.
 on november 18 , 2014  company entered collateralized reinsurance agreement with kilimanjaro re to provide company catastrophe reinsurance coverage.
 agreement is multi-year reinsurance contract covers specified earthquake events.
 agreement provides up to $ 500000 thousand reinsurance coverage from earthquakes in united states  puerto rico canada.
 kilimanjaro financed property catastrophe reinsurance coverage by issuing catastrophe bonds to unrelated external investors.
 april 24 , 2014  kilimanjaro issued $ 450000 thousand of variable rate notes ( 201cseries 2014-1 notes 201d ).
 november 18 , 2014 kilimanjaro issued $ 500000 thousand of variable rate notes ( 201cseries 2014-2 notes 201d ).
 proceeds from issuance of series 2014-1 notes and series 2014-2 notes held in reinsurance trust duration reinsurance agreements invested solely in us government money market funds with rating of at least 201caaam 201d by standard & poor 2019s.

( dollars in thousands )  | years ended december 31 , 2014 | years ended december 31 , 2013 | years ended december 31 , 2012
------------------------- | ------------------------------ | ------------------------------ | ------------------------------
interest expense incurred | $ -                            | $ 8181                         | $ 20454


pro forma financial information consolidated condensed financial results operations presented as if acquisition of valves & controls business occurred october 1 , 2015.
 pro forma information presented for informational purposes only not indicative of results operations acquisition occurred that time.
 pro forma results for 2016 adjusted to include first year acquisition accounting charges related to inventory and backlog of $ 122 in 2017.
 pro forma 2016 results include acquisition costs of $ 52  2017 pro forma results adjusted to exclude these charges.
 october 2, 2017 company sold residential storage business for $ 200 in cash subject to post-closing adjustments expects to recognize loss of approximately $ 40 in 2018 due to income taxes from nondeductible goodwill.
 company expects to realize approximately $ 140 in after-tax cash proceeds from sale.
 business sales of $ 298 pretax earnings of $ 15 in 2017 leader in home organization and storage systems reported tools & home products segment.
 assets and liabilities classified as held-for-sale as of september 30 , 2017.
 company acquired six businesses in 2016 four in automation solutions two in climate technologies.
 total cash paid for businesses was $ 132 , net of cash acquired.
 annualized sales for businesses approximately $ 51 in 2016.
 company recognized goodwill of $ 83 ( $ 27 expected be tax deductible ) other identifiable intangible assets of $ 50 , primarily customer relationships and intellectual property weighted-average life of nine years.
 company completed eight acquisitions in 2015  seven in automation solutions one in tools & home products combined annualized sales of approximately $ 115.
 total cash paid for all businesses was $ 324 , net of cash acquired.
company recognized goodwill $ 178 ( $ 42 expected tax deductible ) other intangible assets $ 128  primarily customer relationships intellectual property weighted-average life approximately ten years.
 january 2015  company completed sale of mechanical power transmission solutions business for $ 1. 4 billion  recognized pretax gain transaction $ 939 ( $ 532 after-tax , $ 0. 78 per share ).
 assets liabilities sold : current assets  $ 182 ( accounts receivable inventories other current assets ) ; other assets  $ 374 ( property , plant equipment goodwill other noncurrent assets ) ; accrued expenses  $ 56 ( accounts payable  other current liabilities ) ; other liabilities , $ 41.
 proceeds from divestiture used for share repurchase.
 business previously reported in former industrial automation segment  had partial year sales 2015 $ 189 related pretax earnings $ 21.
 power transmission solutions designs manufactures market-leading couplings  bearings  conveying components gearing drive components provides supporting services solutions.
 september 30 , 2015 company sold intermetro commercial storage business for $ 411 in cash recognized pretax gain transaction $ 100 ( $ 79 after-tax , $ 0. 12 per share ).
 business had annual sales $ 288 pretax earnings $ 42 in 2015 reported in former commercial & residential solutions segment.
 assets liabilities sold : current assets  $ 62 ( accounts receivable  inventories  other current assets ) ; other assets , $ 292 ( property , plant and equipment  goodwill  other noncurrent assets ) ; current liabilities , $ 34 ( accounts payable , other current liabilities ) ; other liabilities , $ 9.
intermetro is leading manufacturer supplier of storage transport products in food service , commercial products health care industries.
 results of operations of acquired businesses discussed included in company 2019s consolidated results of operations since dates of acquisition.
 ( 4 ) discontinued operations in 2017 , company completed announced strategic actions to streamline portfolio drive growth in core businesses.
 on november 30 , 2016 , company completed sale of network power systems business for $ 4. 0 billion in cash retained subordinated interest in distributions , contingent upon equity holders receiving threshold return on initial investment.
 this business comprised former network power segment.
 on january 31 , 2017 , company completed sale of power generation , motors drives business for approximately $ 1. 2 billion , subject to post-closing

| 2016    | 2017
----------------------------------------------------------- | ------- | -----
net sales                                                   | $ 16201 | 16112
net earnings from continuing operations common stockholders | $ 1482  | 1692
diluted earnings per share from continuing operations       | $ 2.28  | 2.62


american tower corporation subsidiaries notes to consolidated financial statements 2014 continued description of company 2019s reporting units results of related transitional impairment testing : verestar 2014verestar was single segment reporting unit until december 2002 , company committed plan to dispose of verestar.
 company recorded impairment charge of $ 189. 3 million relating to impairment of goodwill in this reporting unit.
 fair value reporting unit determined based on independent third party appraisal.
 network development services 2014as of january 1 , 2002  reporting units in company 2019s network development services segment included kline , specialty constructors , galaxy , mts components flash technologies.
 company estimated fair value of reporting units utilizing future discounted cash flows market information value each reporting unit on january 1 , 2002.
 company recorded impairment charge of $ 387. 8 million for year ended december 31 , 2002 related to impairment of goodwill within these reporting units.
 charge included full impairment for all goodwill reporting units except kline  for only partial impairment recorded.
 assets of all reporting units sold as of december 31 , 2003  except for kline and tower construction services unit  sold in march and november 2004 .
 rental and management 2014the company obtained independent third party appraisal of rental and management reporting unit contains goodwill determined goodwill not impaired.
 company 2019s other intangible assets subject to amortization consist of following as of december 31 , ( in thousands ) :.
 company amortizes intangible assets over periods from three to fifteen years.
 amortization of intangible assets for years ended december 31 , 2004 and 2003 aggregated approximately $ 97. 8 million and $ 94.6 million  ( excluding amortization of deferred financing costs included in interest expense ).
 company expects to record amortization expense of approximately $ 97. 8 million , $ 95. 9 million , $ 92. 0 million , $ 90. 5 million and $ 88. 8 million  for years ended december 31 , 2005 , 2006  2007  2008 2009 .
 5.
 notes receivable in 2000  company loaned tv azteca .
.
 tv azteca ) owner of major national television network in mexico , $ 119. 8 million.
 loan  initially bore interest at 12. 87% ( 12. 87 % ) payable quarterly discounted by company fair value interest rate at date of loan 14. 25% ( 14. 25 % ).
 loan amended effective january 1 , 2003 to increase original interest rate to 13. 11% ( 13. 11 % ).
 as of december 31 , 2004  and 2003 , approximately $ 119. 8 million undiscounted ( $ 108. 2 million discounted ) loan outstanding included in notes receivable and other long-term assets in consolidated balance sheets.
 term of loan is seventy years ; loan may be prepaid by tv

| 2004               | 2003
------------------------------------------------------- | ------------------ | ------------------
acquired customer base and network location intangibles | $ 1369607          | $ 1299521
deferred financing costs                                | 89736              | 111484
acquired licenses and other intangibles                 | 43404              | 43125
total                                                   | 1502747            | 1454130
less accumulated amortization                           | -517444 ( 517444 ) | -434381 ( 434381 )
other intangible assets net                             | $ 985303           | $ 1019749


notes to consolidated financial statements 2014 table summarizes changes in non-vested restricted stock awards for year ended may 31 , 2009 ( share awards in thousands ) : share awards weighted average grant-date fair value.
 fair value of share awards in years ended may 31 , 2008 and 2007 was $ 38 and $ 45 ,.
 total fair value of share awards vested during years ended may 31 , 2009 , 2008 2007 was $ 6. 2 million , $ 4. 1 million $ 1. 7 million .
 recognized compensation expense for restricted stock of $ 9. 0 million , $ 5. 7 million  $ 2. 7 million in years ended may 31 , 2009 , 2008 2007.
 as of may 31 , 2009 $ 23. 5 million of total unrecognized compensation cost related to unvested restricted stock awards expected to be recognized over period of 2. 9 years.
 employee stock purchase plan sale of 2. 4 million shares of common stock authorized.
 employees may designate up to $ 25000 or 20% ( % ) of annual compensation for purchase of stock.
 price for shares purchased under plan is 85% ( 85 % ) of market value on last day of quarterly purchase period.
 as of may 31 , 2009  0. 8 million shares issued under plan 1. 6 million shares reserved for future issuance.
 weighted average grant-date fair value of each designated share purchased under plan was $ 6, $ 6 and $ 8 in years ended may 31 , 2009 , 2008 2007.
 values represent fair value of 15% ( 15 % ) discount.
 note 12 2014segment information during fiscal 2009  began assessing operating performance using new segment structure.
made change result of june 30 , 2008 acquisition of 51% ( 51 % ) of hsbc merchant services llp in united kingdom  addition anticipated future international expansion.
 beginning with quarter ended august 31 , 2008  reportable segments defined as north america merchant services , international merchant services  money transfer.
 following tables reflect changes reportable segments for fiscal years 2009 , 2008 2007.

| share awards | weighted average grant-date fair value
------------------------- | ------------ | --------------------------------------
non-vested at may 31 2007 | 278          | $ 37
granted                   | 400          | 38
vested                    | -136 ( 136 ) | 30
forfeited                 | -24 ( 24 )   | 40
non-vested at may 31 2008 | 518          | 39
granted                   | 430          | 43
vested                    | -159 ( 159 ) | 39
forfeited                 | -27 ( 27 )   | 41
non-vested at may 31 2009 | 762          | 42


2015  $ 82 million provision recapture recorded for purchased impaired loans compared to $ 91 million provision recapture 2014.
 charge-offs specifically for commercial loans greater than defined threshold ) 2015 were $ 12 million compared to $ 42 million 2014.
 december 31 , 2015 and december 31 2014 alll on total purchased impaired loans was $. 3 billion and $. 9 billion  respectively.
 decline in alll primarily due to change in derecognition policy.
 for purchased impaired loan pools where allowance recognized increases in net present value cash flows result in provision recapture of previously recorded alll applicable/or reclassification from non-accretable difference to accretable yield  recognized prospectively.
 individual loan transactions where final dispositions occurred result in removal of loans from applicable pools for cash flow estimation purposes.
 cash flow re- estimation process completed quarterly to evaluate appropriateness of alll associated with purchased impaired loans.
 activity for accretable yield during 2015 and 2014 follows : table 66 : purchased impaired loans 2013 accretable yield.
 note 5 allowances for loan and lease losses and unfunded loan commitments letters of credit allowance for loan and lease losses maintain alll at levels appropriate to absorb estimated probable credit losses incurred in portfolios as balance sheet date.
 use two main portfolio segments 2013 commercial lending and consumer lending 2013 develop and document alll under separate methodologies for each segments as discussed in note 1 accounting policies.
 rollforward of alll and associated loan data follows.
 pnc financial services group , inc.
 2013 form 10-k 141

in millions                                             | 2015         | 2014
------------------------------------------------------- | ------------ | ------------
january 1                                               | $ 1558       | $ 2055
accretion ( including excess cash recoveries )          | -466 ( 466 ) | -587 ( 587 )
net reclassifications to accretable from non-accretable | 226          | 208
disposals                                               | -68 ( 68 )   | -118 ( 118 )
december 31                                             | $ 1250       | $ 1558


performance graph graph compares cumulative total shareholder return on pmi's common stock with cumulative total return for same period of pmi's peer group and s&p 500 index.
 graph assumes investment of $ 100 as of december 31 , 2012 in pmi common stock ( at prices quoted on new york stock exchange ) and each indices as of market close and reinvestment of dividends on quarterly basis.
 date pmi pmi peer group ( 1 ) s&p 500 index.
 ( 1 ) pmi peer group in graph is same as used in prior year , except reynolds american inc.
 removed following acquisition by british american tobacco p.
 on july 25 , 2017.
 pmi peer group established based on review of four characteristics : global presence ; focus on consumer products ; net revenues and market capitalization of similar size to pmi.
 review considered primary international tobacco companies.
 result of review following companies constitute pmi peer group : altria group , inc. anheuser-busch inbev sa/nv , british american tobacco p. coca-cola company , colgate-palmolive co. diageo plc , heineken n. v. imperial brands plc  japan tobacco inc. johnson & johnson, kimberly-clark corporation  kraft-heinz company  mcdonald's corp. mondel z international , inc. nestl e9 s. pepsico , inc. procter & gamble company  roche holding ag  unilever nv and plc.
 : figures are rounded to nearest $ 0. 10.

date             | pmi      | pmi peer group ( 1 ) | s&p 500 index
---------------- | -------- | -------------------- | -------------
december 31 2012 | $ 100.00 | $ 100.00             | $ 100.00
december 31 2013 | $ 108.50 | $ 122.80             | $ 132.40
december 31 2014 | $ 106.20 | $ 132.50             | $ 150.50
december 31 2015 | $ 120.40 | $ 143.50             | $ 152.60
december 31 2016 | $ 130.80 | $ 145.60             | $ 170.80
december 31 2017 | $ 156.80 | $ 172.70             | $ 208.10


table of contents hologic , inc.
 notes to consolidated financial statements ( continued ) ( in thousands , except per share data ) acquisition provides for up to two annual earn-out payments not to exceed $ 15000 in aggregate based on biolucent 2019s achievement of certain revenue targets.
 company considered provision of eitf 95-8 , concluded contingent consideration represents additional purchase price.
 goodwill increased by amount additional consideration , if any earned.
 as of september 26 , 2009  company not recorded amounts for these potential earn-outs.
 allocation of purchase price based upon estimates of fair value of assets acquired and liabilities assumed as of september 18 , 2007.
 components and allocation of purchase price consisted of following approximate amounts:.
 purchase price allocation all intangible assets part of acquisition were identified and valued.
 determined only customer relationship , trade name and developed technology had separately identifiable values.
 fair value of these intangible assets determined through application of income approach.
 customer relationship represented large customer base expected to purchase disposable mammopad product on regular basis.
 trade name represented biolucent product name company intended to continue to use.
 developed technology represented currently marketable purchased products company continues to sell utilize enhance incorporate into company 2019s existing products.
 deferred income tax liability relates to tax effect of acquired identifiable intangible assets and fair value adjustments to acquired inventory such amounts not deductible for tax purposes partially offset by acquired net operating loss carryforwards of approximately $ 2400.
.
 sale of gestiva on january 16 , 2008  company entered into definitive agreement agreed to sell full u. s.
world-wide rights to gestiva to k-v pharmaceutical company upon approval of pending gestiva new drug application ( 201cgestiva nda 201d ) by fda for purchase price of $ 82000.
 company received $ 9500 of purchase price in fiscal 2008  balance due upon final approval of gestiva nda by fda on or before february 19 , 2010 production of quantity of gestiva suitable to enable commercial launch of product.
 either party right to terminate agreement if fda approval not obtained by february 19 , 2010.
 company agreed to continue efforts to obtain fda approval of nda for gestiva arrangement.
 all costs incurred in these efforts reimbursed by k-v pharmaceutical recorded as credit against research and development expenses.
 during fiscal 2009 and 2008  reimbursed costs were not material.
 company recorded $ 9500 as deferred gain within current liabilities in consolidated balance sheet.
 company expects gain will be recognized upon closing of transaction following final fda approval of gestiva nda or if agreement terminated.
 company cannot assure it will to obtain requisite fda approval , transaction will be completed or receive balance of purchase price.
 if k-v pharmaceutical terminates agreement of breach by company of material representation , warranty , covenant or agreement  company required to return funds previously received expenses reimbursed by k-v.
 source : hologic inc , 10-k , november 24 , 2009 powered by morningstar ae document research 2120 information contained herein may not be copied , adapted or distributed and not warranted to be accurate , complete or timely.
 user assumes all risks for any damages or losses arising from use of this information  except to extent such damages or losses cannot be limited or excluded by applicable law.
past financial performance no guarantee future results.

net tangible assets acquired as of september 18 2007 | $ 2800
---------------------------------------------------- | --------------
developed technology and know how                    | 12300
customer relationship                                | 17000
trade name                                           | 2800
deferred income tax liabilities net                  | -9500 ( 9500 )
goodwill                                             | 47800
final purchase price                                 | $ 73200


revenues include $ 3. 8 billion 2017 $ 739 million 2016 related to sale rrps mainly driven by japan.
 net revenue include excise taxes billed customers.
 excluding excise taxes net revenues for rrps were $ 3. 6 billion 2017 $ 733 million 2016.
 some jurisdictions including japan not responsible for collecting excise taxes.
 2017 approximately $ 0. 9 billion of $ 3. 6 billion rrp net revenues excluding excise taxes from iqos devices accessories.
 excise taxes on products increased by $ 1. 1 billion due to 2022 higher excise taxes changes retail prices tax rates ( $ 4. 6 billion ) offset by 2022 favorable currency ( $ 1. 9 billion ) 2022 lower excise taxes from volume/mix ( $ 1. 6 billion ).
 cost of sales ; marketing  administration research costs operating income as follows : years ended december 31 .
 cost of sales increased by $ 1. 0 billion due to 2022 higher cost of sales volume/mix ( $ 1. 1 billion ) offset by 2022 lower manufacturing costs ( $ 36 million ) 2022 favorable currency ( $ 30 million ).
 marketing , administration research costs increased by $ 320 million due to 2022 higher expenses ( $ 570 million increased investment behind reduced-risk products in european union asia ) offset by 2022 favorable currency ( $ 250 million ).
 operating income increased by $ 688 million due to 2022 price increases ( $ 1. 4 billion ) offset by 2022 higher marketing  administration research costs ( $ 570 million ) 2022 unfavorable currency ( $ 157 million ).
 interest expense  net of $ 914 million increased by $ 23 million due to unfavorably currency higher average debt levels offset by higher interest income.
 effective tax rate increased by 12.8 percentage points to 40. 7% ( 40. 7 % ).
 2017 effective tax rate unfavorably impacted by $ 1. 6 billion due to tax cuts and jobs act.
 for further details, see item 8 , note 11.
 income taxes to consolidated financial statements.
 continuing to evaluate impact tax cuts and jobs act on tax liability.
 based current interpretation of tax cuts jobs act  estimate 2018 effective tax rate be approximately 28% ( 28 % ), subject to future regulatory developments and earnings mix by taxing jurisdiction.
 regularly examined by tax authorities around world currently under examination in jurisdictions.
 possible that within next 12 months certain tax examinations will close could result in change in unrecognized tax benefits related interest and penalties.
 estimate of possible change cannot be made.
 net earnings attributable to pmi of $ 6. 0 billion decreased by $ 932 million ( 13. 4% ( 13. 4 % ) ).
 decrease due primarily to higher effective tax rate partly offset by higher operating income.
 diluted and basic eps of $ 3. 88 decreased by 13. 4% ( 13. 4 % ).
 excluding

( in millions )                             | for the years ended december 31 , 2017 | for the years ended december 31 , 2016 | for the years ended december 31 , $ | % (  % )
------------------------------------------- | -------------------------------------- | -------------------------------------- | ----------------------------------- | ----------------
cost of sales                               | $ 10432                                | $ 9391                                 | $ 1041                              | 11.1% ( 11.1 % )
marketing administration and research costs | 6725                                   | 6405                                   | 320                                 | 5.0% ( 5.0 % )
operating income                            | 11503                                  | 10815                                  | 688                                 | 6.4% ( 6.4 % )


14.
 capital stock shares outstanding.
 table presents information capital stock:.
 cme group has no shares of preferred stock issued outstanding.
 associated trading rights.
 members of cme , cbot  nymex comex own or lease trading rights entitle to access open outcry trading  discounts on trading fees right to vote on certain exchange matters provided by rules of exchange cme group 2019s subsidiaries 2019 organizational documents.
 each class of cme group class b common stock associated with membership in specific division for trading at cme.
 cme trading right is separate asset not part of evidenced by associated share of class b common stock cme group.
 class b common stock cme group intended to ensure class b shareholders cme retain rights representation on board of directors approval rights core rights described.
 trading rights at cbot evidenced by class b memberships cbot nymex by class a memberships comex by comex division memberships.
 members of cbot  nymex comex have rights to elect members board of directors not entitled to receive dividends or other distributions on memberships or trading permits.
 core rights.
 holders of cme group class b common shares have right to approve changes in specified rights relating to trading privileges at cme associated with shares.
 core rights relate primarily to trading right protections  trading fee protections membership benefit protections.
 votes on changes to core rights weighted by class.
 each class of class b common stock has following number of votes on matters relating to core rights : class b-1 , six votes per share ; class b-2 , two votes per share class b-3  one vote per share class b-4  1/6th of one vote per share.
approval of majority of votes by holders of shares of class b common stock required to approve changes to core rights.
 holders of shares class a common stock not right to vote on changes to core rights.
 voting rights.
 with exception of matters reserved to holders cme group class b common stock holders cme group common stock vote together on all matters for vote common shareholders required.
 each holder of shares class a or class b common stock cme group has one vote per share.
 transfer restrictions.
 each class of cme group class b common stock subject to transfer restrictions in certificate of incorporation cme group.
 transfer restrictions prohibit sale or transfer of shares of class b common stock separate from sale associated trading rights.
 election of directors.
 cme group board of directors currently comprised of 20 members.
 holders of class b-1 , class b-2 and class b-3 common stock right to elect six directors  three elected by class b-1 shareholders two by class b-2 shareholders and one elected by class b-3 shareholders.
 remaining directors elected by class a and class b shareholders voting as single class.

( in thousands )                                         | december 31 , 2017 | december 31 , 2016
-------------------------------------------------------- | ------------------ | ------------------
class a common stock authorized                          | 1000000            | 1000000
class a common stock issued and outstanding              | 339235             | 338240
class b-1 common stock authorized issued and outstanding | 0.6                | 0.6
class b-2 common stock authorized issued and outstanding | 0.8                | 0.8
class b-3 common stock authorized issued and outstanding | 1.3                | 1.3
class b-4 common stock authorized issued and outstanding | 0.4                | 0.4


c effective january 1 , 2019  assets transferred from products pipelines business segment to natural gas pipelines business segment.
 effective january 1 , 2019  small number of terminals transferred between products pipelines and terminals business segments.
 competition our products pipelines 2019 pipeline operations compete against proprietary pipelines owned by major oil companies , other independent products pipelines , trucking and marine transportation firms ( for short-haul movements products railcars.
 products pipelines 2019 terminal operations compete with proprietary terminals owned by major oil companies and other independent terminal operators transmix operations compete with refineries owned by major oil companies and independent transmix facilities.
 terminals our terminals business segment includes operations of refined petroleum product , crude oil , chemical , ethanol other liquid terminal facilities ( other products pipelines ) and all petroleum coke , metal and ores facilities.
 terminals located throughout u. s.
 in portions of canada.
 believe location of facilities and ability to provide flexibility to customers help attract new and retain existing customers provide expansion opportunities.
 classify terminal operations based on handling of liquids or dry-bulk material products.
 terminals 2019 marine operations include jones act-qualified product tankers provide marine transportation of crude oil , condensate and refined petroleum products between.
 ports.
 summarizes terminals business segment assets  as of december 31 , 2018 : number capacity ( mmbbl ).
 effective january 1 , 2019  small number of terminals transferred between terminals and products pipelines business segments.
 we one of largest independent operators of liquids terminals in north america based on barrels of liquids terminaling capacity.
liquids terminals compete with publicly or privately independent liquids terminals  terminals owned by oil  chemical pipeline refining companies.
 bulk terminals compete with independent terminal operators  terminals owned by producers distributors of bulk commodities stevedoring companies industrial companies opting not to outsource terminaling services.
 in some locations competitors are smaller independent operators with lower cost structures.
 jones act-qualified product tankers compete with other jones act qualified vessel fleets.
 co2 business segment produces  transports markets co2 for in enhanced oil recovery projects flooding for recovering crude oil from mature oil fields.
 co2 pipelines related assets allow us to market complete package of co2 supply transportation services to customers.
 hold ownership interests in oil-producing fields own crude oil pipeline all in permian basin region of west texas.

| number | capacity ( mmbbl )
----------------------- | ------ | ------------------
liquids terminals ( a ) | 52     | 89.6
bulk terminals          | 34     | 2014
jones act tankers       | 16     | 5.3


underlying exposure.
 for derivative contracts designated qualify as cash fl ow hedges effective portion of gains and losses on contracts reported as component of other comprehensive income reclassifi ed into earnings in same period hedged transaction affects earnings.
 hedge ineffectiveness recognized in earnings.
 derivative contracts not designated as hedging instruments recorded at fair value with gain or loss recognized in current earnings during period of change.
 may enter into foreign currency forward and option contracts to reduce effect of uctuating currency exchange rates ( principally euro british pound japanese yen ).
 foreign currency derivatives used for hedging put in place using same or like currencies and duration as underlying exposures.
 forward contracts used to manage exposures from subsidiary trade and loan payables and receivables denominated in foreign currencies.
 contracts recorded at fair value with gain or loss recognized in other 2014net.
 purchased option contracts used to hedge anticipated foreign currency transactions primarily intercompany inventory activities expected to occur within next year.
 contracts designated as cash fl ow hedges of future transactions impact on earnings included in cost of sales.
 may enter into foreign currency forward contracts and currency swaps as fair value hedges of fi commitments.
 forward and option contracts have maturities not exceeding 12 months.
 normal business operations exposed to uctuations in interest rates.
 uctuations can vary costs of fi nancing  investing operating.
 address portion of risks through controlled program of risk management includes use of derivative fi nancial instruments.
 objective of controlling risks is to limit impact of fl uctuations in interest rates on earnings.
 primary interest rate risk exposure results from changes in short-term.
 dollar interest rates.
manage interest rate exposures we strive to achieve acceptable balance between fi xed and fl oating rate debt investment positions may enter into interest rate swaps or collars to maintain balance.
 interest rate swaps collars convert fi xed- rate debt or investments to fl oating rate designated as fair value hedges of underlying instruments.
 interest rate swaps collars convert fl oating rate debt investments to fi xed rate designated as cash fl ow hedg- es.
 interest expense on debt adjusted to include payments under swap agreements.
 goodwill and other intangibles : goodwill not amortized.
 all other intangibles from acquisitions research alliances have fi nite lives amortized over estimated useful lives from 5 to 20 years using straight-line method.
 weighted-average amortization period for developed product technology is approximately 12 years.
 amortization expense for 2008 , 2007  2006 was $ 193. 4 million , $ 172. 8 million  $ 7. 6 million before tax.
 estimated amortization expense for each fi ve succeeding years approximates $ 280 million before tax per year.
 all amortization expense included in cost of sales.
 see note 3 for discussion of goodwill and other intangibles acquired in 2008 and 2007.
 goodwill other intangible assets at december 31 as follows.
 goodwill other intangibles reviewed to assess recoverability annually when impairment indicators present.
 no signifi cant impairments occurred carrying value of goodwill or other intangible assets in 2008 , 2007  2006.
 property and equipment : property and equipment stated on basis of cost.
 provisions for depreciation of buildings equipment computed by straight-line method at rates based on estimated useful lives ( 12 to 50 years for buildings 3 to 18 years for equipment ).
review carrying value of long-lived assets for potential impairment periodic basis whenever events or changes in circumstances indicate

| 2008             | 2007
--------------------------------------- | ---------------- | ----------------
goodwill                                | $ 1167.5         | $ 745.7
developed product technology 2014 gross | 3035.4           | 1767.5
less accumulated amortization           | -346.6 ( 346.6 ) | -162.6 ( 162.6 )
developed product technology 2014 net   | 2688.8           | 1604.9
other intangibles 2014 gross            | 243.2            | 142.8
less accumulated amortization           | -45.4 ( 45.4 )   | -38.0 ( 38.0 )
other intangibles 2014 net              | 197.8            | 104.8
total intangibles 2014 net              | $ 4054.1         | $ 2455.4


notes to consolidated financial statements 2013 ( continued ) ( amounts in millions  except per share amounts ) guarantees guaranteed certain obligations of subsidiaries principally to operating leases and uncommitted lines of credit subsidiaries.
 amount of parent company guarantees on lease obligations was $ 829. 2 and $ 857. 3 as of december 31 , 2017 and 2016  respectively parent company guarantees relating to uncommitted lines of credit was $ 491. 0 and $ 395. 6 as of december 31 , 2017 and 2016 .
 in of non-payment by applicable subsidiary of obligations covered by guarantee we obligated to pay amounts covered by guarantee.
 as of december 31 , 2017 no material assets pledged as security for parent company guarantees.
 contingent acquisition obligations table details estimated future contingent acquisition obligations payable in cash as of december 31.
 entered into certain acquisitions contain redeemable noncontrolling interests and call options with similar terms and conditions.
 estimated amounts paid in event exercise at earliest exercise date.
 certain redeemable noncontrolling interests exercisable at discretion of noncontrolling equity owners as of december 31 , 2017.
 estimated payments of $ 24. 8 included within total payments expected to in 2018  continue to carried forward into 2019 or beyond until exercised or expired.
 redeemable noncontrolling interests included in table at current exercise price payable in cash not at applicable redemption value accordance with authoritative guidance for classification measurement of redeemable securities.
 majority of payments contingent upon achieving projected operating performance targets and satisfying other conditions in related agreements subject to revision in accordance with terms respective agreements.
 see note 4 for further information payment structure of acquisitions.
legal matters in normal course of business , we involved in various legal proceedings  subject to investigations , inspections  audits  inquiries similar actions by governmental authorities.
 types of allegations in with legal proceedings vary in can include claims related to contract , employment  tax intellectual property matters.
 we evaluate all cases each reporting period record liabilities for losses from legal proceedings when we determine probable outcome in legal proceeding be unfavorable and amount  potential range  of loss can be reasonably estimated.
 in certain cases , we cannot reasonably estimate potential loss because  for example litigation is in early stages.
 any outcome related to litigation or governmental proceedings we involved cannot be predicted with certainty , management believes outcome of these matters  individually aggregate will not have material adverse effect on our financial condition , results of operations or cash flows.
 previously disclosed on april 10 , 2015 , federal judge in brazil authorized search of records of agency 2019s offices in s e3o paulo and brasilia  in connection with ongoing investigation by brazilian authorities involving payments potentially connected to local government contracts.
 company had previously investigated matter taken remedial and disciplinary actions.
 company in process of concluding a settlement related to matters with government agencies.
 company confirmed one of its standalone domestic agencies contacted by department of justice antitrust division for documents regarding video production practices cooperating with government.

| 2018   | 2019   | 2020   | 2021   | 2022   | thereafter | total
--------------------------------------------------------------------- | ------ | ------ | ------ | ------ | ------ | ---------- | -------
deferred acquisition payments                                         | $ 41.9 | $ 27.5 | $ 16.1 | $ 24.4 | $ 4.8  | $ 6.3      | $ 121.0
redeemable noncontrolling interests and call options with affiliates1 | 37.1   | 26.4   | 62.9   | 10.3   | 6.6    | 4.1        | 147.4
total contingent acquisition payments                                 | $ 79.0 | $ 53.9 | $ 79.0 | $ 34.7 | $ 11.4 | $ 10.4     | $ 268.4


expense net increased $ 0. 8 million to $ 7. 2 million in 2015 from $ 6. 4 million 2014.
 increase due to higher net losses on foreign currency exchange rate changes on transactions in foreign currencies foreign currency derivative financial instruments 2015.
 provision for income taxes increased $ 19. 9 million to $ 154. 1 million in 2015 from $ 134. 2 million in 2014.
 effective tax rate was 39. 9% (. 9 % ) in 2015 compared to 39. 2% ( 39. 2 % ) in 2014.
 tax rate 2015 higher 2014 due to increased non-deductible costs connected fitness acquisitions in 2015.
 year ended december 31 2014 compared to 2013 net revenues increased $ 752. 3 million  or 32. 3% (. ) to $ 3084. 4 million in 2014 from $ 2332. 1 million in 2013.
 net revenues by product category summarized.
 increase net sales driven by 2022 apparel unit sales growth new offerings lines training golf 2022 footwear unit sales growth by running basketball.
 license revenues increased $ 13. 3 million  or 24. 7% ( 24. 7 % )  to $ 67. 2 million in 2014 from $ 53. 9 million in 2013.
 increase in license revenues result of increased distribution unit volume growth by licensees.
 connected fitness revenue increased $ 18. 1 million to $ 19. 2 million in 2014 from $ 1. 1 million in 2013 due to full year of revenue from connected fitness business 2014 gross profit increased $ 375. 5 million to $ 1512. 2 million in 2014 from $ 1136. 7 million in 2013.
 gross profit as percentage of net revenues increased 30 basis points to 49. 0% ( 49. 0 % ) in 2014 compared to 48. 7% ( 48. 7 % ) in 2013.
increase in gross margin percentage driven by : 2022 approximate 20 basis point increase by decreased sales mix of excess inventory through factory house outlet stores ; and 2022 approximate 20 basis point increase higher duty costs recorded prior year on certain products imported in previous years.
 increases partially offset by : 2022 10 basis point decrease by unfavorable foreign currency exchange rate fluctuations.

( in thousands )   | year ended december 31 , 2014 | year ended december 31 , 2013 | year ended december 31 , $ change | year ended december 31 , % (  % ) change
------------------ | ----------------------------- | ----------------------------- | --------------------------------- | ----------------------------------------
apparel            | $ 2291520                     | $ 1762150                     | $ 529370                          | 30.0% ( 30.0 % )
footwear           | 430987                        | 298825                        | 132162                            | 44.2
accessories        | 275409                        | 216098                        | 59311                             | 27.4
total net sales    | 2997916                       | 2277073                       | 720843                            | 31.7
license revenues   | 67229                         | 53910                         | 13319                             | 24.7
connected fitness  | 19225                         | 1068                          | 18157                             | 1700.1
total net revenues | $ 3084370                     | $ 2332051                     | $ 752319                          | 32.3% ( 32.3 % )


2006 plan prior to december 5 , 2008 became fully vested nonforfeitable upon closing acquisition.
 awards may be granted under 2006 plan as amended restated after december 5, 2008 only to employees and consultants of allied waste industries , inc.
 subsidiaries not employed by republic services , inc.
 prior to date.
 at december 31 , 2010  approximately 15. 3 million shares of common stock reserved for future grants under 2006 plan.
 stock options use binomial option-pricing model to value stock option grants.
 recognize compensation expense on straight-line basis over requisite service period for each separately vesting portion of award or to employee 2019s retirement eligible date.
 expected volatility based on weighted average of recent one-year volatility and historical rolling average volatility of stock over expected life of option.
 risk-free interest rate based on federal reserve rates for bonds with maturity dates equal to expected term of option.
 use historical data to estimate future option exercises  forfeitures expected life of options.
 separate groups of employees similar historical exercise behavior considered separately for valuation purposes.
 weighted-average estimated fair values of stock options granted during years ended december 31, 2010 , 2009 and 2008 were $ 5. 28 , $ 3. 79 $ 4. 36 per option  calculated using weighted-average assumptions:.
 republic services , inc.
 notes to consolidated financial statements continued

| 2010             | 2009             | 2008
----------------------------- | ---------------- | ---------------- | ----------------
expected volatility           | 28.6% ( 28.6 % ) | 28.7% ( 28.7 % ) | 27.3% ( 27.3 % )
risk-free interest rate       | 2.4% ( 2.4 % )   | 1.4% ( 1.4 % )   | 1.7% ( 1.7 % )
dividend yield                | 2.9% ( 2.9 % )   | 3.1% ( 3.1 % )   | 2.9% ( 2.9 % )
expected life ( in years )    | 4.3              | 4.2              | 4.2
contractual life ( in years ) | 7                | 7                | 7
expected forfeiture rate      | 3.0% ( 3.0 % )   | 3.0% ( 3.0 % )   | 3.0% ( 3.0 % )


notes to consolidated financial statements for years ended february 3 , 2006 january 28, 2005 january 30 , 2004  gross realized gains and losses on sales of available-for-sale securities not mate- rial.
 cost of securities sold based upon specific identification method.
 merchandise inventories stated at lower of cost or market with cost determined using retail last-in , first-out ( ) method.
 excess of current cost over lifo cost was approximately $ 5. 8 million at february 3, 2006 and $ 6. 3 million at january 28 , 2005.
 current cost deter- mined using retail first-in , first-out method.
 lifo reserves decreased $ 0. 5 million and $ 0. 2 million in 2005 and 2004 increased $ 0. 7 million in 2003.
 costs associated with warehousing and distribu- tion capitalized into inventory.
 in 2005  company expanded number of inven- tory departments for gross profit calculation from 10 to 23.
 impact of change in estimate on company consolidated 2005 results operations was estimated reduction of gross profit and corre sponding decrease to inventory  at cost  of $ 5. 2 million.
 store pre-opening costs related to new store openings construction periods expensed as incurred.
 property and equipment recorded at cost.
 company provides for depreciation and amortization on straight-line basis over estimated useful lives:.
 improvements of leased properties amortized over shorter of life of applicable lease term or estimated useful life of asset.
 impairment of long-lived assets when indicators present company evaluates carrying value of long-lived assets goodwill in relation to operating perform- ance future cash flows or appraised values of underlying assets.
company may adjust net book value of underlying assets based cash flow analysis to book value may consid- er appraised values.
 assets to be disposed of adjusted to fair value less cost to sell if less than book value.
 company recorded impairment charges of approximately $ 0. 5 million and $ 0. 6 million in 2004 and 2003  $ 4. 7 million prior to 2003 to reduce carrying value of homerville , georgia dc ( sold in 2004 ).
 company also recorded impair- ment charges of approximately $ 0. 6 million in 2005 and $ 0. 2 million in each 2004 and 2003 to reduce carrying value of certain stores 2019 assets due to negative sales trends and cash flows at locations.
 charges included in sg&a expense.
 other assets assets consist primarily of long-term invest- ments , debt issuance costs amortized over life of related obligations , utility and security deposits  life insurance policies goodwill.
 vendor rebates company records vendor rebates  new store allowances , volume purchase rebates promotional allowances  when realized.
 rebates recorded as reduction to inventory purchases  at cost reducing cost of goods sold as prescribed by emerging issues task force ( 201ceitf 201d ) issue no.
 02-16 , 201caccounting by customer ( including reseller ) for certain consideration received from vendor 201d.
 rent expense expense recognized over term of lease.
 company records minimum rental expense on straight-line basis over base , non-cancelable lease term commencing on date company takes physical possession of property from landlord includes period prior to store opening to make necessary leasehold improvements and install store fixtures.
a lease contains predetermined fixed escalation of minimum rent , company recognizes related rent expense on straight-line basis and records difference between recognized rental expense and amounts payable under lease as deferred rent.
 company also receives tenant allowances , recorded in deferred incentive rent amortized as reduction to rent expense over term of lease.
 difference between calculated expense and amounts actually paid reflected as a liability in accrued expenses and other in consolidated balance sheets totaled approximately $ 25. 0 million

land improvements                | 20
-------------------------------- | -----
buildings                        | 39-40
furniture fixtures and equipment | 3-10