McKESSON CORPORATION FINANCIAL NOTES (Continued) 86 The following table represents a reconciliation of Level 3 plan assets held during the years ended March 31, 2012 and 2011:


| 2010 2009 2008 | Cost of revenues | Research and development | Selling and marketing | General and administrative | Restructuring charge | $34,160 |


| Years Ended December 31, | 2009 | (in millions, except percentages) | Revenues | Net investment income | Other revenues | Total revenues | Banking and deposit interest expense | Total net revenues | Expenses | Distribution expenses | Interest and debt expense | General and administrative expense | Total expenses | Pretax loss |


| (In Millions) | 2003 net revenue | Volume/weather | Net wholesale revenue | Summer capacity charges | Price applied to unbilled sales | Fuel recovery revenues | Other | 2004 net revenue |


| Years Ended December 31, | 2010 | (In millions) | Investment return | Separate account balances | Net investment gain (loss) | Expense | In-force/Persistency | Policyholder dividends and other | Total |


Valuation Adjustments on Derivatives The Corporation records credit risk valuation adjustments on derivatives in order to properly reflect the credit quality of the counterparties and its own credit quality.
The Corporation calculates valuation adjustments on derivatives based on a modeled expected exposure that incorporates current market risk factors.
The exposure also takes into consideration credit mitigants such as enforceable master netting agreements and collateral.
CDS spread data is used to estimate the default probabilities and severities that are applied to the exposures.
Where no observable credit default data is available for counterparties, the Corporation uses proxies and other market data to estimate default probabilities and severity.
Valuation adjustments on derivatives are affected by changes in market spreads, non-credit related market factors such as interest rate and currency changes that affect the expected exposure, and other factors like changes in collateral arrangements and partial payments.
Credit spreads and non-credit factors can move independently.
For example, for an interest rate swap, changes in interest rates may increase the expected exposure, which would increase the counterparty credit valuation adjustment (CVA).
Independently, counterparty credit spreads may tighten, which would result in an offsetting decrease to CVA.
The Corporation early adopted, retrospective to January 1, 2015, the provision of new accounting guidance issued in January 2016 that requires the Corporation to record unrealized DVA resulting from changes in the Corporations own credit spreads on liabilities accounted for under the fair value option in accumulated OCI.
This new accounting guidance had no impact on the accounting for DVA on derivatives.
For additional information, see New Accounting Pronouncements in Note 1  Summary of Significant Accounting Principles.
In 2014, the Corporation implemented a funding valuation adjustment (FVA) into valuation estimates primarily to include funding costs on uncollateralized derivatives and derivatives where the Corporation is not permitted to use the collateral it receives.
The change in estimate resulted in a net pretax FVA charge of $497 million, at the time of implementation, including a charge of $632 million related to funding costs, partially offset by a funding benefit of $135 million, both related to derivative asset exposures.
The net FVA charge was recorded as a reduction to sales and trading revenue in Global Markets.
The Corporation calculates this valuation adjustment based on modeled expected exposure profiles discounted for the funding risk premium inherent in these derivatives.
FVA related to derivative assets and liabilities is the effect of funding costs on the fair value of these derivatives.
The Corporation enters into risk management activities to offset market driven exposures.
The Corporation often hedges the counterparty spread risk in CVA with CDS.
The Corporation hedges other market risks in both CVA and DVA primarily with currency and interest rate swaps.
In certain instances, the net-of-hedge amounts in the table below move in the same direction as the gross amount or may move in the opposite direction.
This is a consequence of the complex interaction of the risks being hedged resulting in limitations in the ability to perfectly hedge all of the market exposures at all times.
The table below presents CVA, DVA and FVA gains (losses) on derivatives, which are recorded in trading account profits, on a gross and net of hedge basis for 2015, 2014 and 2013.
CVA gains reduce the cumulative CVA thereby increasing the derivative assets balance.
DVA gains increase the cumulative DVA thereby decreasing the derivative liabilities balance.
CVA and DVA losses have the opposite impact.
FVA gains related to derivative assets reduce the cumulative FVA thereby increasing the derivative assets balance.
FVA gains related to derivative liabilities increase the cumulative FVA thereby decreasing the derivative liabilities balance.


| Year Ended December 31, | 2007 | Common stock shares issued | Shares at beginning of period | Exercise of common stock options | Restricted stock awards, net of forfeitures | Shares at end of period | Treasury stock | Shares at beginning of period | Shares repurchased | Rabbi trust shares sold | Shares at end of period | Accumulated Other Comprehensive Loss | Oil and Gas Cash Flow Hedges | (in thousands) | December 31, 2004 | Cash flow hedges | Realized amounts reclassified into earnings | Unrealized amounts reclassified into earnings | Unrealized change in fair value | Net change in minimum pension liability and other | December 31, 2005 | Cash flow hedges | Realized amounts reclassified into earnings | Unrealized amounts reclassified into earnings | Unrealized change in fair value | Net change in minimum pension liability and other | Adoption of SFAS 158 | December 31, 2006 | Cash flow hedges | Realized amounts reclassified into earnings | Unrealized change in fair value | Net change in other | December 31, 2007 |


| 2005 2006 2007 2008 2009 | Non-Utility Nuclear: | Percent of capacity sold forward: | Bundled capacity and energy contracts | Capacity contracts | Total | Planned net MW in operation | Average capacity contract price per kW per month | Blended Capacity and Energy (based on revenues) | % of planned generation and capacity sold forward | Average contract revenue per MWh |


| Twelve Months Ended | (millions of dollars) | Operating revenues | Purchased power | Net revenues | Operations and maintenance | Depreciation and amortization | Taxes, other than income taxes | Electric operating income |


| 2008 2007 | Commercial Mortgage Pass-Through Certificates, Series 2007-1 | Revolving credit facility | Term loan | 7.25% senior subordinated notes | 7.50% senior notes | 7.125% senior notes | 7.00% senior notes | 5.0% convertible notes | 3.25% convertible notes | 3.00% convertible notes | Other convertible notes | Notes payable and capital leases | Total | Less current portion of long-term obligations | Long-term obligations |


| At or for the year ended December 31 | Dollars in millions, except as noted | BALANCESHEETHIGHLIGHTS | Assets | Loans | Allowance for loan and lease losses | Interest-earning deposits with banks | Investment securities | Loans held for sale | Goodwill and other intangible assets | Equity investments (c) | Noninterest-bearing deposits | Interest-bearing deposits | Total deposits | Borrowed funds (d) | Shareholders’ equity | Common shareholders’ equity | ASSETSUNDERADMINISTRATION(billions) | Discretionary assets under management (e) | Nondiscretionary assets under management | Total assets under administration | SELECTEDRATIOS | From continuing operations | Noninterest income to total revenue | Efficiency | From net income | Net interest margin (f) | Return on | Average common shareholders’ equity | Average assets | Loans to deposits | Dividend payout | Tier 1 risk-based | Tier 1 common | Common shareholders’ equity to total assets | Average common shareholders’ equity to average assets | SELECTEDSTATISTICS | Employees | Retail Banking branches | ATMs | Residential mortgage servicing portfolio (billions) | Commercial mortgage servicing portfolio (billions) |


| Years Ended September 30, | 2003* | Interest income: | QSI | Corporate and other segments | Interest expense | Net realized gains on investments: | QSI | Corporate | Other-than-temporary losses on marketable securities | Other-than-temporary losses on other investments | Losses on derivative instruments | Minority interest in income of consolidatedsubsidiaries | Equity in losses of investees | $-8 |


| As of December | $ in millions | Total assets | Unsecured long-term borrowings | Total shareholders’ equity | Leverage ratio | Debt to equity ratio |


| December 31, (in millions) 2012 2011 | Nonaccrual loans(b) | Home equity – senior lien | Home equity – junior lien | Prime mortgage, including option ARMs | Subprime mortgage | Auto | Business banking | Student and other | Total nonaccrual loans | Assets acquired in loan satisfactions | Real estate owned | Other | Total assets acquired in loan satisfactions | Total nonperforming assets |


In October 2003, we expanded our private equity investment management services in emerging markets when we acquired all of the remaining outstanding shares of Darby Overseas Investments, Ltd.  and all of the remaining outstanding limited partnership interests of Darby Overseas Partners, L. P.  (collectively,
“Darby”), in which we previously held a partial interest.
Darby, based in Washington, D. C. , sponsors and manages funds for institutional investors and high net-worth individuals that invest primarily in emerging markets through private equity, private debt and infrastructure investment transactions, including regional and specialized sector funds.
In July 2006, we expanded our business in Brazil when we completed the purchase of all of the remaining interests in a Brazilian investment management company, Bradesco Templeton Asset Management Ltda.
, in which we previously held a partial interest.
The company has been renamed Franklin Templeton Investimentos (Brasil) Ltda.
and provides investment management services.
In January 2011, we acquired all of the outstanding shares of a specialty United Kingdom (“U.
K. ”) equity manager, Rensburg Fund Management Limited (“Rensburg”).
Rensburg has been renamed Franklin Templeton Fund Management Limited and serves as a U. K. -based equity manager.
In July 2011, we expanded our business in Australia when we acquired all of the outstanding shares of a specialty Australian equity manager, Balanced Equity Management Pty.
Limited, which provides investment management services.
In November 2012, we acquired approximately 69% of the equity of K2 Advisors Holdings LLC (“K2”), a hedge funds solutions provider, and agreed to acquire K2’s remaining equity interests over a multi-year period beginning in 2017.
As of September 30, 2017, we owned approximately 83% of K2’s equity.
OUR INVESTMENT MANAGEMENT BUSINESS We are committed to providing active investment management and strategic advice.
Through our SIPs, we serve a variety of retail, institutional and high net-worth clients in regions and jurisdictions worldwide.
We derive our revenues and net income from providing investment management and related services to our SIPs and the sub-advised products that we service.
Our investment management fees, which represent the majority of our revenues, depend to a large extent on the level and mix of our AUM and the types of services provided.
Sales and distribution fees, also a significant source of our revenues, consist of sales charges and commissions derived from sales and distribution of our SIPs.
Our business is conducted through our subsidiaries, including those registered with the U. S.  Securities and Exchange Commission (the “SEC”) as investment advisers under the Investment Advisers Act of 1940 (the “Advisers Act”), subsidiaries registered as investment adviser equivalents in jurisdictions including Australia, Brazil, Canada, Hong Kong, India, Japan, Luxembourg, Malaysia, Mexico, Singapore, South Korea, The Bahamas, the United Arab Emirates, the U. K. , and certain other subsidiaries.
AUM by Investment Objective We offer a broad product mix under our equity, multi-asset/balanced, fixed income and cash management investment objectives and solutions.
Our fees for providing investment management services are generally based on a percentage of the market value of AUM in the accounts that we advise, the investment objectives of the accounts and the types of services that we provide for the accounts.
As of September 30, 2017, AUM by investment objective on a worldwide basis was as follows:


The purchased power capacity variance is due to changes in the purchased power capacity costs included in the calculation in 2007 compared to 2006 used to bill generation costs between Entergy Texas and Entergy Gulf States Louisiana.
The securitization transition charge variance is due to the issuance of securitization bonds.
As discussed above, in June 2007, EGSRF I, a company wholly-owned and consolidated by Entergy Texas, issued securitization bonds and with the proceeds purchased from Entergy Texas the transition property, which is the right to recover from customers through a transition charge amounts sufficient to service the securitization bonds.
See Note 5 to the financial statements herein for details of the securitization bond issuance.
The volume/weather variance is due to increased electricity usage on billed retail sales, including the effects of more favorable weather in 2007 compared to the same period in 2006.
The increase is also due to an increase in usage during the unbilled sales period.
Retail electricity usage increased a total of 139 GWh in all sectors.
See "Critical Accounting Estimates" below and Note 1 to the financial statements for further discussion of the accounting for unbilled revenues.
The transmission revenue variance is due to an increase in rates effective June 2007 and new transmission customers in late 2006.
The base revenue variance is due to the transition to competition rider that began in March 2006.
Refer to Note 2 to the financial statements for further discussion of the rate increase.


| Pension Benefits | U.S. Plans | 2013 | Weighted-average discount rate | Weighted-average rate of increase in compensation levels |


| Shares (in thousands) Weighted- Average Grant Date Fair Value | Non-vested at December 31, 2006: | Issued | Released (vested) | Canceled | Non-vested at December 31, 2007: |


| 2013 2012 2011 | Expected life (years) | Risk-free interest rate | Expected volatility | Expected dividend yield | Remaining | Number of | Shares | Outstanding at December 31, 2010 | Granted | Canceled | Exercised | Outstanding at December 31, 2011 | Granted | Canceled | Exercised | Outstanding at December 31, 2012 | Granted | Canceled | Exercised | Outstanding at December 31, 2013 | Exercisable at December 31, 2013 |


| Year Ended December 31 2016 2015 2014 | (In millions) | Revenues: | Other revenue, primarily operating | Net investment income | Total | Expenses: | Operating | Interest | Total | Income before income tax | Income tax expense | Amounts attributable to noncontrolling interests | Net income attributable to Loews Corporation |


Notes to Consolidated Financial Statements (continued) As of 2012 year end there was $10.2 million of unrecognized compensation cost related to non-vested stock option compensation arrangements that is expected to be recognized as a charge to earnings over a weighted-average period of 1.8 years.
Performance Awards Performance awards, which are granted as performance share units and performance-based RSUs, are earned and expensed using the fair value of the award over a contractual term of three years based on the companys performance.
Vesting of the performance awards is dependent upon performance relative to pre-defined goals for revenue growth and return on net assets for the applicable performance period.
For performance achieved above a certain level, the recipient may earn additional shares of stock, not to exceed 100% of the number of performance awards initially granted.
The performance share units have a three year performance period based on the results of the consolidated financial metrics of the company.
The performance-based RSUs have a one year performance period based on the results of the consolidated financial metrics of the company followed by a two year cliff vesting schedule.
The fair value of performance awards is calculated using the market value of a share of Snap-ons common stock on the date of grant.
The weighted-average grant date fair value of performance awards granted during 2012, 2011 and 2010 was $60.00, $55.97 and $41.01, respectively.
Vested performance share units approximated 213,000 shares as of 2012 year end and 54,208 shares as of 2011 year end; there were no vested performance share units as of 2010 year end.
Performance share units of 53,990 shares were paid out in 2012; no performance share units were paid out in 2011 or 2010.
Earned performance share units are generally paid out following the conclusion of the applicable performance period upon approval by the Organization and Executive Compensation Committee of the companys Board of Directors (the Board).
Based on the companys 2012 performance, 95,047 RSUs granted in 2012 were earned; assuming continued employment, these RSUs will vest at the end of fiscal 2014.
Based on the companys 2011 performance, 159,970 RSUs granted in 2011 were earned; assuming continued employment, these RSUs will vest at the end of fiscal 2013.
Based on the companys 2010 performance, 169,921 RSUs granted in 2010 were earned; these RSUs vested as of fiscal 2012 year end and were paid out shortly thereafter.
As a result of employee retirements, 2,706 of the RSUs earned in 2010 vested pursuant to the terms of the related award agreements and were paid out in the first quarter of 2011.


| As of Change | December 31,2016 | (In millions) | Cash, cash equivalents and short-term investments | Net working capital |


| 2017 2016 2015 | Balance at beginning of year | Gross increases in prior period tax positions | Gross decreases in prior period tax positions | Gross increases in current period tax positions | Decreases related to settlements with tax authorities | Decreases from the expiration of statute of limitations | Balance at end of year |


| 2016 $36.7 | 2017 | 2018 | 2019 | 2020 | Thereafter | Total |


AMERICAN TOWER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Mexico LitigationOne of the Companys subsidiaries, SpectraSite Communications, Inc.  (SCI), is involved in a lawsuit brought in Mexico against a former Mexican subsidiary of SCI (the subsidiary of SCI was sold in 2002, prior to the Companys merger with SCIs parent in 2005).
The lawsuit concerns a terminated tower construction contract and related agreements with a wireless carrier in Mexico.
The primary issue for the Company is whether SCI itself can be found liable to the Mexican carrier.
The trial and lower appellate courts initially found that SCI had no such liability in part because Mexican courts do not have the necessary jurisdiction over SCI.
Following several decisions by Mexican appellate courts, including the Supreme Court of Mexico, and related appeals by both parties, an intermediate appellate court issued a new decision that would, if enforceable, reimpose liability on SCI in September 2010.
In its decision, the intermediate appellate court identified potential damages of approximately $6.7 million, and on October 14, 2010, the Company filed a new constitutional appeal to again dispute the decision.
As a result, at this stage of the proceeding, the Company is unable to determine whether the liability imposed on SCI by the September 2010 decision will survive or to estimate its share, if any, of that potential liability if the decision survives the pending appeal.
XCEL LitigationOn June 3, 2010, Horse-Shoe Capital (Horse-Shoe), a company formed under the laws of the Republic of Mauritius, filed a complaint in the Supreme Court of the State of New York, New York County, with respect to Horse-Shoes sale of XCEL to American Tower Mauritius (AT Mauritius), the Companys wholly-owned subsidiary formed under the laws of the Republic of Mauritius.
The complaint names AT Mauritius, ATI and the Company as defendants, and the dispute concerns the timing and amount of distributions to be made by AT Mauritius to Horse-Shoe from a $7.5 million holdback escrow account and a $15.7 million tax escrow account, each established by the transaction agreements at closing.
The complaint seeks release of the entire holdback escrow account, plus an additional $2.8 million, as well as the release of approximately $12.0 million of the tax escrow account.
The complaint also seeks punitive damages in excess of $69.0 million.
The Company filed an answer to the complaint in August 2010, disputing both the amounts alleged to be owed under the escrow agreements as well as the timing of the escrow distributions.
The Company also asserted in its answer that the demand for punitive damages is meritless.
The parties have filed cross-motions for summary judgment concerning the release of the tax escrow account and in January 2011 the court granted the Companys motion for summary judgment, finding no obligation for the Company to release the disputed portion of the tax escrow until 2013.
Other claims are pending.
The Company is vigorously defending the lawsuit.


NOTE 9.
ACQUISITIONS For each of the acquisitions described below, the results of operations and the estimated fair value of the assets acquired and liabilities assumed have been included in Cadence’s Consolidated Financial Statements from the date of the acquisition.
Comparative pro forma financial information for all 2007, 2006 and 2005 acquisitions have not been presented because the results of operations were not material to Cadence’s Consolidated Financial Statements.2007 Acquisitions During 2007, Cadence acquired Invarium, Inc. , a San Jose-based developer of advanced lithography-modeling and pattern-synthesis technology, and Clear Shape Technologies, Inc. , a San Jose-based design for manufacturing technology company specializing in design-side solutions to minimize yield loss for advanced semiconductor integrated circuits.
Cadence acquired these two companies for an aggregate purchase price of $75.5 million, which included the payment of cash, the fair value of assumed options and acquisition costs.
The $45.7 million of goodwill recorded in connection with these acquisitions is not expected to be deductible for income tax purposes.
Prior to acquiring Clear Shape Technologies, Inc. , Cadence had an investment of $2.0 million in the company, representing a 12% ownership interest, which had been accounted for under the cost method of accounting.
In accordance with SFAS No.141, “Business Combinations,” Cadence accounted for this acquisition as a step acquisition.
Subsequent adjustments to the purchase price of these acquired companies are included in the “Other” line of the changes of goodwill table in Note 10 below.2006 Acquisition In March 2006, Cadence acquired a company for an aggregate initial purchase price of $25.8 million, which included the payment of cash, the fair value of assumed options and acquisition costs.
The preliminary allocation of the purchase price was recorded as $17.4 million of goodwill, $9.4 million of identifiable intangible assets and $(1.0) million of net liabilities.
The $17.4 million of goodwill recorded in connection with this acquisition is not expected to be deductible for income tax purposes.
Subsequent adjustments to the purchase price of this acquired company are included in the “Other” line of the changes of goodwill table in Note 10 below.


Non-GAAP Financial MeasureFunds From Operations (FFO) We believe


Income from Operations Income from operations increased by $110.7 million, or 45.8%, for the year ended December 31, 2009 compared to 2008 primarily attributable to the alternative fuel mixture tax credit of $168.4 million described in Note 15 to the consolidated financial statements.
Excluding the alternative fuel mixture tax credit, income from operations decreased $57.8 million for full year 2009, which was primarily attributable to decreased sales prices of corrugated products and containerboard ($67.4 million), lower sales volume ($52.5 million) and increased labor and fringe benefit costs ($8.0 million), partially offset by decreased costs of energy ($24.5 million), transportation ($23.7 million), recycled fiber ($18.9 million) and wood fiber costs ($3.5 million).


| Year ended December 31, 2008 2007 | (in millions) | Loans: | Beginning balance at January 1, | Cumulative effect of change inaccounting principles(a) | Beginning balance at January 1, adjusted | Gross charge-offs | Gross recoveries | Net charge-offs | Provision for loan losses: | Provision excluding accounting conformity | Accounting conformity(b) | Total provision for loan losses | Acquired allowance resulting fromWashington Mutualtransaction | Other | Ending balance at December 31 | Components: | Asset-specific | Formula-based | Total allowance for loan losses | Lending-related commitments: | Beginning balance at January 1, | Provision for lending-related commitments | Provision excluding accounting conformity | Accounting conformity(b) | Total provision for lending-relatedcommitments | Acquired allowance resulting fromWashington Mutualtransaction | Other | Ending balance at December 31 | Components: | Asset-specific | Formula-based | Total allowance forlending-related commitments | Total allowance for credit losses | Allowance for loan losses to loans | Allowance for loan losses to loansexcludingpurchased credit-impaired loans | Net charge-off rates | Net charge-off rates excluding purchasedcredit-impaired loans |


PART II Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock is listed on Nasdaq under the ticker symbol KHC.
At June 5, 2019, there were approximately 49,000 holders of record of our common stock.
See Equity and Dividends in Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations, for a discussion of cash dividends declared on our common stock.


(1) Represents the total contract/notional amount of the derivatives outstanding and includes both short and long positions.
The table above presents the contract/notional amounts and credit risk amounts at December 31, 2007 and 2006 of all the Corporations derivative positions.
These derivative positions are primarily executed in the over-the-counter market.
The credit risk amounts take into consideration the effects of legally enforceable master netting agreements, and on an aggregate basis have been reduced by the cash collateral applied against derivative assets.
At December 31, 2007 and 2006, the cash collateral applied against derivative assets on the Consolidated Balance Sheet was $12.8 billion and $7.3 billion.
In addition, at December 31, 2007 and 2006, the cash collateral placed against derivative liabilities was $10.0 billion and $6.5 billion.
ALM Activities Interest rate contracts and foreign exchange contracts are utilized in the Corporations ALM activities.
The Corporation maintains an overall interest rate risk management strategy that incorporates the use of interest rate contracts to minimize significant fluctuations in earnings that are caused by interest rate volatility.
The Corporations goal is to manage interest rate sensitivity so that movements in interest rates do not significantly adversely affect net interest income.
As a result of interest rate fluctuations, hedged fixed-rate assets and liabilities appreciate or depreciate in market value.
Gains or losses on the derivative instruments that are linked to the hedged fixed-rate assets and liabilities are expected to substantially offset this unrealized appreciation or depreciation.
Interest income and interest expense on hedged variable-rate assets and liabilities increase or decrease as a result of interest rate fluctuations.
Gains and losses on the derivative instruments that are linked to these hedged assets and liabilities are expected to substantially offset this variability in earnings.
Interest rate contracts, which are generally non-leveraged generic interest rate and basis swaps, options and futures, allow the Corporation to manage its interest rate risk position.
Non-leveraged generic interest rate swaps involve the exchange of fixed-rate and variable-rate interest payments based on the contractual underlying notional amount.
Basis swaps involve the exchange of interest payments based on the contractual underlying notional amounts, where both the pay rate and the receive rate are floating rates based on different indices.
Option products primarily consist of caps, floors and swaptions.
Futures contracts used for the Corporations ALM activities are primarily index futures providing for cash payments based upon the movements of an underlying rate index.
The Corporation uses foreign currency contracts to manage the foreign exchange risk associated with certain foreign currency-denominated assets and liabilities, as well as the Corporations investments in foreign subsidiaries.
Foreign exchange contracts, which include spot and forward contracts, represent agreements to exchange the currency of one country for the currency of another country at an agreed-upon price on an agreedupon settlement date.
Exposure to loss on these contracts will increase or decrease over their respective lives as currency exchange and interest rates fluctuate.
Fair Value, Cash Flow and Net Investment Hedges The Corporation uses various types of interest rate and foreign exchange derivative contracts to protect against changes in the fair value of its assets and liabilities due to fluctuations in interest rates and exchange rates (fair value hedges).
The Corporation also uses these types of contracts to protect against changes in the cash flows of its assets and liabilities, and other forecasted transactions (cash flow hedges).
During the next 12 months, net losses on derivative instruments included in accumulated OCI of approximately $1.3 billion ($820 million net-of-tax) are expected to be reclassified into earnings.
These net losses reclassified into earnings are expected to impact net interest income related to the respective hedged items.


The following table presents the full range of imputed forward rates for U. S. Treasury Strips that was used in the binomial lattice model over the contractual term of all Stock Options granted in the period.


| (In millions) North America EMEA Latin America APAC Total | 2017 Net Sales | Volume – Units | Price/mix-1 | Total organic change (non-U.S. GAAP) | Acquisition | Total constant dollar change (non-U.S. GAAP) | Foreign currency translation | Total change (U.S. GAAP) | 2018 Net Sales |


The principal components of EOG's rollforward of valuation allowances for deferred tax assets were as follows (in thousands):
(1) Increase in valuation allowance related to the generation of tax net operating losses and other deferred tax assets.
(2) Decrease in valuation allowance associated with adjustments to certain deferred tax assets and their related allowance.
(3) Represents dispositions/revisions/foreign exchange rate variances and the effect of statutory income tax rate changes.
The balance of unrecognized tax benefits at December 31, 2016, was $36 million, of which $2 million may potentially have an earnings impact.
EOG records interest and penalties related to unrecognized tax benefits to its income tax provision.
Currently, $2 million of interest has been recognized in the Consolidated Statements of Income and Comprehensive Income.
EOG does not anticipate that the amount of the unrecognized tax benefits will significantly change during the next twelve months.
EOG and its subsidiaries file income tax returns and are subject to tax audits in the United States and various state, local and foreign jurisdictions.
EOG's earliest open tax years in its principal jurisdictions are as follows: United States federal (2011), Canada (2012), United Kingdom (2015), Trinidad (2010) and China (2008).
EOG's foreign subsidiaries' undistributed earnings of approximately $2 billion at December 31, 2016, are no longer considered to be permanently reinvested outside the United States and, accordingly, EOG has cumulatively recorded $280 million of United States federal, foreign and state deferred income taxes.
EOG changed its permanent reinvestment assertion in 2014.
In 2016, EOG's alternative minimum tax (AMT) credits were reduced by $21 million mostly as a result of carry-back claims and certain elections.
Remaining AMT credits of $758 million, resulting from AMT paid in prior years, will be carried forward indefinitely until they are used to offset regular income taxes in future periods.
The ability of EOG to utilize these AMT credit carryforwards to reduce federal income taxes may become subject to various limitations under the Internal Revenue Code.
Such limitations may arise if certain ownership changes (as defined for income tax purposes) were to occur.
As of December 31, 2016, EOG had state income tax net operating losses (NOLs) being carried forward of approximately $1.6 billion, which, if unused, expire between 2017 and 2035.
During 2016, EOG's United Kingdom subsidiary incurred a tax NOL of approximately $38 million which, along with prior years' NOLs of $740 million, will be carried forward indefinitely.
As described above, these NOLs have been evaluated for the likelihood of future utilization, and valuation allowances have been established for the portion of these deferred tax assets that do not meet the "more likely than not" threshold.7.


2017 Compared to 2016.
Revenue in 2017 decreased by $86.3 million compared to 2016.
In 2017, advertising revenue decreased by 6% compared to 2016.
The substantial majority of our advertising revenue was generated from our owned and operated platform.
Advertising revenue generated from the sale of our advertising products on our owned and operated platform in 2017 was $1.90 billion as compared to $1.99 billion in 2016.
Advertising revenue generated from the sale of our advertising products placed on third-party publishers’ websites, applications and other offerings in 2017 was $211.2 million as compared to $260.2 million in 2016.
The decrease in advertising revenue from the sale of our advertising products placed on third-party publishers’ websites, applications and other offerings in 2017 was driven by significantly lower contribution from TellApart (which was deprecated in 2017), which was offset by strong performance from Twitter Audience Platform.
TellApart revenue was $44.6 million in 2017, mainly in the first half of 2017, compared to $126.4 million in 2016.
The overall decrease in advertising revenue was primarily attributable to a 52% decrease in cost per ad engagement offset by a 96% increase in the number of ad engagements in 2017 compared to 2016.
The decrease in cost per ad engagement reflects a higher mix of video ad engagements (which have overall lower cost per ad engagement compared to other ad formats) and lower cost per ad engagement across the majority of ad formats compared to the fourth quarter of 2016.
The increase in ad engagements was driven by a continuing mix shift toward video ad impressions as well as higher clickthrough rates.
Advertising revenue continued to be driven by strong growth in our video ad formats offset by declines in traditional Promoted Tweet and direct response ad formats.
In 2017, data licensing and other revenue increased by 18% compared to 2016.
A majority of the increase was attributable to growth in data licensing fees from the offering of data products.
Cost of Revenue Cost of revenue includes infrastructure costs, other direct costs including content costs, amortization of acquired intangible assets and amortization of capitalized labor costs for internally developed software, allocated facilities costs, as well as traffic acquisition costs, or TAC.
Infrastructure costs consist primarily of data center costs related to our co-located facilities, which include lease and hosting costs, related support and maintenance costs and energy and bandwidth costs; as well as depreciation of servers and networking equipment; and personnel-related costs, including salaries, benefits and stock-based compensation, for our operations teams.
TAC consists of costs we incur with third parties in connection with the sale to advertisers of our advertising products that we place on third-party publishers’ websites, applications or other offerings collectively resulting from acquisitions, and from our organically-built advertising network, Twitter Audience Platform.
Certain of the elements of our cost of revenue are fixed, and cannot be reduced in the near term.


Tables of Contents 7.
Current Liabilities Short-Term Debt Short-term debt at July 31, 2016 included $500 million of 5.75% senior unsecured notes due on March 15, 2017, less the unamortized discount.
During the third quarter of fiscal 2017 we repaid those notes when they became due using cash from operations.
We paid $29 million in cash for interest on the notes during each of the twelve months ended July 31, 2017, July 31, 2016, and July 31, 2015.
On February 1, 2016 we entered into a master credit agreement with certain institutional lenders for a five-year credit facility in an aggregate principal amount of $1.5 billion.
The master credit agreement includes a $500 million unsecured term loan and a $1 billion unsecured revolving credit facility.
At July 31, 2017, $488 million was outstanding under the term loan, of which $50 million was classified as short-term debt.
See Note 8, “Long-Term Obligations and Commitments – Long-Term Debt,” for more information regarding the term loan.
Unsecured Revolving Credit Facilities The master credit agreement we entered into on February 1, 2016 includes a $1 billion unsecured revolving credit facility that will expire on February 1, 2021.
Under the master credit agreement we may, subject to certain customary conditions, on one or more occasions increase commitments under the revolving credit facility in an amount not to exceed $250 million in the aggregate and may extend the maturity date up to two times.
Advances under the revolving credit facility accrue interest at rates that are equal to, at our election, either Bank of America's alternate base rate plus a margin that ranges from 0.0% to 0.5% or the London Interbank Offered Rate (LIBOR) plus a margin that ranges from 0.9% to 1.5%.
Actual margins under either election will be based on our senior debt credit ratings.
The master credit agreement includes customary affirmative and negative covenants, including financial covenants that require us to maintain a ratio of total debt to annual earnings before interest, taxes, depreciation and amortization (EBITDA) of not greater than 3.25 to 1.00 as of any date and a ratio of annual EBITDA to annual interest expense of not less than 3.00 to 1.00 as of the last day of each fiscal quarter.
We remained in compliance with these covenants at all times during the fiscal year ended July 31, 2017.
During the twelve months ended July 31, 2017 we borrowed and repaid $150 million under this revolving credit facility and at July 31, 2017 no amounts were outstanding.
We paid $1 million in cash for interest on the revolving credit facility during the twelve months ended July 31, 2017 and $2 million in cash for interest on revolving credit facilities during the twelve months ended July 31, 2016.


| Period Rent Obligations Sublease Rental Income Net Rent | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 and thereafter | Total |


| MAIN PRODUCTS HOW THEY’RE USED | softwood lumber | engineered lumber– solid section– I-Joists | structural panels– oriented strand board (OSB)– plywood– veneer | other products | hardwood lumber and plywood | 2006 | Softwood lumber | Plywood | Veneer | Composite panels | Oriented strand board | Hardwood lumber | Engineered I-Joists | Engineered solid section | Logs | Other products | $7,902 | 2006 | Softwood lumber – board feet | Plywood – square feet (3/8”) | Veneer – square feet (3/8”) | Composite panels – square feet (3/4”) | Oriented strand board – square feet (3/8”) | Hardwood lumber – board feet | Engineered I-Joists – lineal feet | Engineered solid section – cubic feet | Logs – cunits (in thousands) |


On December 22, 2017, President Trump signed the 2017 Tax Legislation which included a reduction in the corporate tax rate from 35% to 21%.
For Citizens, this required a revaluation of the Companys net deferred tax liability with a corresponding adjustment to current tax expense, and resulted in a $331 million net tax benefit.
Included in this net tax benefit was $145 million of expense related to the revaluation of the Companys deferred tax assets associated with unrealized losses in AOCI.
FASB standards in-place at December 31, 2017 required the Company to revalue all deferred taxes, including those related to balances in AOCI, through current tax expense.
As a result, the Companys unrealized loss balance in AOCI was not revalued to reflect the new corporate tax rate.
This impact, commonly referred to as the stranded tax effect, was taken under consideration by FASB in January 2018 to address concerns primarily raised by banking institutions, including distortion of net income and regulatory capital.
In February 2018, to address the stranded tax effect, FASB issued ASU 2018-02, Income StatementReporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which provides entities the election to reclassify the difference between the new and old


Post-retirement Benefit Plans Prior to the BGI Transaction, the Company had requirements to deliver post-retirement medical benefits to a closed population based in the United Kingdom and through the BGI Transaction, the Company assumed a post-retirement benefit plan to a closed population of former BGI employees in the United Kingdom.
For the years ended December 31, 2010, 2009 and 2008, expenses and unfunded obligations for these benefits were immaterial to the Companys consolidated financial statements.
In addition, through the BGI Transaction, the Company assumed a requirement to deliver post-retirement medical benefits to a


| June 30, | 2013 | (in millions) | Balance Sheet Data | Cash and cash equivalents | Securities clearing receivables(b) | Total current assets | Property, plant and equipment, net | Total assets | Securities clearing payables(b) | Total current liabilities | Long-term debt | Total liabilities | Total stockholders’ equity |


Facility Notes and Bonds We have entered into agreements with certain municipalities to finance the construction of, or improvements to, facilities that support our U. S.  Domestic Package and Supply Chain & Freight operations in the United States.
These facilities are located around airport properties in Louisville, Kentucky; Dallas, Texas; and Philadelphia, Pennsylvania.
Under these arrangements, we enter into a lease or loan agreement that covers the debt service obligations on the bonds issued by the municipalities, as follows: ?
Bonds with a principal balance of $149 million issued by the Louisville Regional Airport Authority associated with our Worldport facility in Louisville, Kentucky.
The bonds, which are due in January 2029, bear interest at a variable rate, and the average interest rates for 2017 and 2016 were 0.83% and 0.37%, respectively.  ?
Bonds with a principal balance of $42 million and due in November 2036 issued by the Louisville Regional Airport Authority associated with our air freight facility in Louisville, Kentucky.
The bonds bear interest at a variable rate, and the average interest rates for 2017 and 2016 were 0.80% and 0.36%, respectively.  ?
Bonds with a principal balance of $29 million issued by the Dallas / Fort Worth International Airport Facility Improvement Corporation associated with our Dallas, Texas airport facilities.
The bonds are due in May 2032 and bear interest at a variable rate, however the variable cash flows on the obligation have been swapped to a fixed 5.11%.  ?
In September 2015, we entered into an agreement with the Delaware County, Pennsylvania Industrial Development Authority, associated with our Philadelphia, Pennsylvania airport facilities, for bonds issued with a principal balance of $100 million.
These bonds, which are due September 2045, bear interest at a variable rate.
The average interest rate for 2017 and 2016 was 0.78% and 0.40%, respectively.


Phoenix, USA.
Gold production increased 14% due to higher mill grades, and higher leach placement from mining in the Brooks pit at Lone Tree.
Copper pounds produced decreased 21% primarily due to lower copper leach placement and lower mill grade and throughput.
Costs applicable to sales per ounce increased 7% primarily due to a higher co-product allocation of costs to gold, partially offset by higher ounces sold.
Costs applicable to sales per pound decreased 22% due to a lower co-product allocation of costs to copper and lower leaching costs as a result of lower acid consumption.
Depreciation and amortization per ounce decreased 10% due to lower amortization rates.
Depreciation and amortization per pound decreased 30% primarily due to lower amortization rates and a lower co-product allocation of depreciation and amortization to copper.
All-in sustaining costs per ounce increased 9% primarily due to higher costs applicable to sales per ounce and higher sustaining capital spend.
All-in sustaining costs per pound decreased 20% primarily due to lower costs applicable to sales per pound.


| Year Ended December 31, | 2014 | (In thousands, except per share data) | Statements of Operations Data: | Revenues: | Rental and management | Network development services | Total operating revenues | Operating expenses: | Cost of operations (exclusive of items shown separately below) | Rental and management-1 | Network development services-2 | Depreciation, amortization and accretion | Selling, general, administrative and development expense-3 | Other operating expenses | Total operating expenses | Operating income | Interest income, TV Azteca, net | Interest income | Interest expense | Loss on retirement of long-term obligations | Other (expense) income(4) | Income from continuing operations before income taxes and income on equity method investments | Income tax provision | Income on equity method investments | Income from continuing operations | Income from discontinued operations, net | Net income | Net loss (income) attributable to noncontrolling interest | Net income attributable to American Tower Corporation stockholders | Dividends declared on preferred stock | Net income attributable to American Tower Corporation common stockholders | Net income per common share amounts: | Basic net income attributable to American Tower Corporation common stockholders-5 | Diluted net income attributable to American Tower Corporation common stockholders-5 | Weighted average common shares outstanding:-5 | Basic | Diluted | Distribution declared per common share | Distribution declared per preferred share | Other Operating Data: | Ratio of earnings to fixed charges-6 | Ratio of earnings to combined fixed charges and preferred stock dividends-6 |


| 2008 2007 | In millions of dollarsat year end | Commercial paper | Citigroup Funding Inc. | Other Citigroup subsidiaries | $29,125 | Other borrowings | Total |


| Non-vested Shares Number of Shares Weighted-Average Grant-Date Fair Value | Non-vested at September 29, 2012 | Granted | Vested | Forfeited | Non-vested at September 28, 2013 |


| Year ended December 31, | 2009 | U.S. GAAP results: | Revenues | Benefits and expenses | Income (loss) from continuing operations before income taxes and equity in earnings of operating joint ventures |


| Pension benefits Other postretirement benefits (gross benefit payments, including prescription drug benefits) Amount of Medicare Part D subsidy receipts | (in millions) | Year ending December 31: | 2011 | 2012 | 2013 | 2014 | 2015 | 2016-2020 |


| 2007 High Low | Quarter ended March 31 | Quarter ended June 30 | Quarter ended September 30 | Quarter ended December 31 | 2006 | Quarter ended March 31 | Quarter ended June 30 | Quarter ended September 30 | Quarter ended December 31 |


Other Risk Management Derivatives Other risk management derivatives are used by the Corporation to reduce certain risk exposures.
These derivatives are not qualifying accounting hedges because either they did not qualify for or were not designated as accounting hedges.
The table below presents gains (losses) on these derivatives for 2014, 2013 and 2012.
These gains (losses) are largely offset by the income or expense that is recorded on the hedged item.
The change in the impact of interest rate and foreign currency risk on ALM activities was primarily driven by decreasing interest rates and foreign currency weakening against the U. S.  Dollar throughout 2014 compared to strengthening during 2013.


NOTE 5 RESTRUCTURING AND OTHER CHARGES This footnote discusses restructuring and other charges recorded for each of the three years included in the period ended December 31, 2009.
It


The following table summarizes information about stock options outstanding at December 31, 2001 (in thousands of shares):
THE AES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) DECEMBER 31, 2010, 2009, AND 2008 (1) Amortized cost approximated fair value at December 31, 2010 and 2009, with the exception of certain common stock investments with a cost basis of $6 million carried at their fair value of $7 million and $16 million at December 31, 2010 and 2009, respectively.
(2) Unsecured debentures are instruments similar to certificates of deposit that are held primarily by our subsidiaries in Brazil.
The unsecured debentures and certificates of deposit included here do not qualify as cash equivalents and meet the definition of a security under the relevant guidance and are therefore classified as available-for-sale securities.
(3) Held-to-maturity securities are carried at amortized cost and not measured at fair value on a recurring basis.
These investments consist primarily of certificates of deposit and government debt securities.
The amortized cost approximated fair value of the held-to-maturity securities at December 31, 2009.
As of December 31, 2010, all available-for-sale debt securities had stated maturities less than one year, with the exception of $42 million of auction rate securities and variable rate demand notes held by IPL, a subsidiary of the Company in Indiana.
These securities, classified as other debt securities in the table above, had stated maturities of greater than ten years.
During the second quarter of 2009, three of the Company’s generation businesses in the Dominican Republic exchanged $110 million of accounts receivable due from the government-owned distribution companies in the Dominican Republic for sovereign bonds of the same amount.
The bonds, which were classified as available-for-sale securities, were adjusted to fair value when acquired.
During the second and third quarters of 2009, the Company used a portion of the bonds with a carrying value of $31 million to settle third-party liabilities and sold the remaining bonds.
As of December 31, 2009, all of the sovereign bonds had been sold or transferred.
The following table summarizes the pre-tax gains and losses related to available-for-sale securities for the years ended December 31, 2010, 2009 and 2008.
There were no realized gains or losses on trading securities and there were no realized losses on the sale of available-for-sale securities.
There was no other-than-temporary impairment of marketable securities recognized in earnings or other comprehensive income for the years ended December 31, 2010, 2009 or 2008.


| Options Weighted-   Average   Exercise Price | Outstanding at January 2, 2005 | Granted | Exercised | Cancelled | Outstanding at January 1, 2006 | Granted | Exercised | Cancelled | Outstanding at December 31, 2006 | Options assumed through business combination | Granted | Exercised | Cancelled | Outstanding at December 30, 2007 |


| Years ended December 31, 2018 2017 2016 | Commercial Airplanes | Defense, Space & Security | Global Services | Boeing Capital | Segment Operating Profit | Pension FAS/CAS service cost adjustment | Postretirement FAS/CAS service cost adjustment | Unallocated items, eliminations and other | Earnings from operations (GAAP) | FAS/CAS service cost adjustment * | Core operating earnings (Non-GAAP) ** |


| 2005 2004 2003 | (in thousands, except per share results) | Net income, as reported | Add: Stock-based employee compensation expense included in reported net income, net of related tax | Deduct: Total stock-based employee compensation expense determined under the fair value based method for all awards, net of relatedtax | Adjusted net income | Earnings per common share: | Basic, as reported | Basic, pro forma | Diluted, as reported | Diluted, pro forma |


Although the principal amount is not due until the date given in the tables above, Entergy Louisiana Investment Recovery Funding expects to make principal payments on the bonds over the next five years in the amounts of $21.7 million for 2017, $22.3 million for 2018, $22.7 million for 2019, $23.2 million for 2020, and $11 million for 2021.
With the proceeds, Entergy Louisiana Investment Recovery Funding purchased from Entergy Louisiana the investment recovery property, which is the right to recover from customers through an investment recovery charge amounts sufficient to service the bonds.
In accordance with the financing order, Entergy Louisiana will apply the proceeds it received from the sale of the investment recovery property as a reimbursement for previously-incurred investment recovery costs.
The investment recovery property is reflected as a regulatory asset on the consolidated Entergy Louisiana balance sheet.
The creditors of Entergy Louisiana do not have recourse to the assets or revenues of Entergy Louisiana Investment Recovery Funding, including the investment recovery property, and the creditors of Entergy Louisiana Investment Recovery Funding do not have recourse to the assets or revenues of Entergy Louisiana.
Entergy Louisiana has no payment obligations to Entergy Louisiana Investment Recovery Funding except to remit investment recovery charge collections.


PRODUCT TYPE AND INVESTMENT STYLE Component changes in AUM by product type and investment style for 2017 are presented below.


| $ millions Total Q4 2011 Q3 2011 Q2 2011 Q1 2011 | Net income attributable to common shareholders | Net income attributable to Consolidated Investment Products | Tax expense | Amortization/depreciation | Interest expense | Share-based compensation expense | Unrealized gains and losses from investments, net* | EBITDA** | Adjusted debt** | Leverage ratio (Debt/EBITDA - maximum 3.25:1.00) | Interest coverage (EBITDA/Interest Expense - minimum 4.00:1.00) |


Contingencies: The Company is involved in various investigations, claims and legal proceedings that arise in the ordinary course of business including alleged infringement of intellectual property rights, commercial disputes, labor and employment matters, tax audits and other matters.
The Company reviews the status of these matters, assesses its financial exposure and records a related accrual if the potential loss from an investigation, claim or legal proceeding is probable and the amount is reasonably estimable.
Significant judgment is involved in the determination of probability and in the determination of whether an exposure is reasonably estimable.
As a result of the uncertainties involved in making these estimates, the Company may have to revise its estimates as facts and circumstances change.
The revision of these estimates could have a material impact on the Companys financial position and results of operations.
Stock-based Compensation: The Company grants options and other stock awards to employees and directors under the Companys stock option and grant plan.
Eligible employees can also purchase shares of the Companys common stock at a discount under the Companys employee stock purchase plan.
The benefits provided under these plans are share-based payments subject to the provisions of share-based payment accounting guidance.
The Company uses the fair value method to apply the provisions of share-based payment accounting guidance.
Stock-based compensation expense for 2013, 2012 and 2011 was $35.3 million, $32.4 million and $23.1 million, respectively.
As of December 31, 2013, total unrecognized estimated compensation expense related to unvested stock options granted prior to that date was $39.9 million, which is expected to be recognized over a weighted average period of 1.7 years.
The value of each stock-based award was estimated on the date of grant or date of acquisition for options issued in a business combination using the Black-Scholes option pricing model (Black-Scholes model).
The determination of the fair value of share-based payment awards using an option pricing model is affected by the Companys stock price as well as assumptions regarding a number of complex and subjective variables.
These variables include the Companys expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rates and expected dividends.
The table below presents the weighted average input assumptions used and resulting fair values for options granted or issued in business combinations during each respective year.
The stock-based compensation expense for options is recorded ratably over their requisite service period.
The interest rate assumptions were determined by using the five-year U. S.  Treasury Note yield on the date of grant or date of acquisition.


| 2015 $574,438 | 2016 | 2017 | 2018 | 2019 | Thereafter | Total |


| Exposure as of  December 31, 2009 Exposure as of December 31, 2008 Net gains/(losses) (e) | Reported | in income – | Net of risk | management | (in millions) | U.S.Residential Mortgage:(a)(b)(c) | Prime | Alt-A | 6,512 | Subprime | Non-U.S. Residential(c) | Commercial Mortgage: | Securities | Loans |


Commercial Paper: On November 18, 2004, Torchmark entered into a credit facility with a group of lenders allowing unsecured borrowings and stand-by letters of credit up to $600 million.
Originally a fiveyear facility set to terminate on November 18, 2009, the lending banks agreed in August, 2006 to extend the maturities to August 31, 2011.
As a part of the facility, the Company has the ability to request up to $175 million in letters of credit to be issued against the facility.
The credit facility is further designated as a back-up credit line for a commercial paper program, whereby Torchmark may borrow from either the credit line or issue commercial paper at any time, with total commercial paper outstanding not to exceed $600 million less any letters of credit issued.
Interest is charged at variable rates.
At December 31, 2007, Torchmark had $203 million face amount ($202 million carrying amount) of commercial paper outstanding, $150 million of letters of credit issued, and no borrowings under the line of credit.
During 2007, the short term borrowings under the facility averaged approximately $238 million, and were made at an average yield of 5.4%, compared with an average balance of $166 million at an average yield of 5.0% a year earlier.
The facility does not have a ratings-based acceleration trigger which would require early payment.
A facility fee is charged for the entire $600 million facility at a rate of 10 basis points.
For letters of credit issued, there is an issuance fee of 27.5 basis points.
Additionally, if borrowings on both the line of credit and letters of credit exceed 50% of the total $600 million facility, there is a usage fee of 10 basis points.
During 2006, Torchmarks usage of the facility was below this threshold and no usage fee was required.
Torchmark is subject to certain covenants for the agreements regarding capitalization and earnings, with which it was in compliance at December 31, 2007 and throughout the three-year period ended December 31, 2007.
Borrowings on this facility are reported as short-term debt on the Consolidated Balance Sheets.
There was no capitalized interest during the three years ended December 31, 2007.


During the year ended December 31, 2013, the allowance for loan losses decreased by $27.7 million from the level at December 31, 2012, driven primarily by improving economic conditions and loan portfolio run-off.
During the year ended December 31, 2013, we evaluated and refined our default assumptions related to a subset of the home equity line of credit portfolio that will require borrowers to repay the loan in full at the end of the draw period, commonly referred to as balloon loans.
These loans were approximately $235 million of the home equity line of credit portfolio at December 31, 2013.
We evaluated the significant burden a balloon payment may place on a borrower with a low FICO score and high CLTV ratio, and the estimates around the time period that it might take for these borrowers equity positions in their collateral to appreciate in order to allow for possible refinance of the balloon loan at maturity.
As a result of this evaluation of the higher risk balloon loans, we increased our default assumptions and extended the period of managements forecasted loan losses captured within the general allowance to include the total probable loss on these loans.
The overall impact of these refinements drove the substantial majority of provision for loan losses during the year ended December 31, 2013.
The following table shows the trend of the ratio of the general allowance for loan losses, excluding the qualitative component, to loans that are 90+ days delinquent excluding modified TDRs (dollars in millions)


| Number of RSUs (In thousands) Weighted Average Grant-Date Fair Value PerShare | Nonvested at December 31, 2012 | Granted | Vested | Forfeited | Nonvested at December 31, 2013 |


| Payments Due by Period | Total | (in thousands) | Debt | Interest-1 | Operating leases-2 | Purchase obligations-3 | Future policy benefits payable and other long-term liabilities-4 | Total |


NOTE 2.
SUMMARY OF ACCOUNTING POLICIES Cash and Cash Equivalents Cash and all highly liquid investments with a maturity of three months or less at the date of purchase, including short-term time deposits and government agency and corporate obligations, are classified as Cash and cash equivalents.
Revenue Recognition - Automotive Sector Sales are generally recorded when products are shipped to customers (primarily dealers) and ownership is transferred.
Sales to daily rental car companies with a guaranteed repurchase option are accounted for as operating leases.
The lease revenue is recognized over the term of the lease and a gain or loss on the remaining residual value is recognized when the vehicles are sold at auction.
The carrying value of these vehicles is included in other current assets and, as of December 31, 2004, was $2.9 billion.
Income generated from cash and cash equivalents, investments in marketable securities, loaned securities and other miscellaneous receivables is reported as Interest income and other non-operating income/(expense), net.
Revenue Recognition - Financial Services Sector Revenue from finance receivables, including interest, net of certain deferred loan origination costs that are included as a reduction of financing revenue, is recognized over the term of the receivable using the interest method.
Revenue from operating leases, net of certain deferred origination costs, is recognized on a straight-line basis over the term of the lease.
The accrual of interest on receivables is discontinued at the time a receivable is determined to be uncollectible.
Subsequent amounts of interest collected are recognized in income only if full recovery of the remaining principal is probable.
Interest supplements paid by the Automotive sector are recognized over the term of the receivable or operating lease.
Use of Estimates The preparation of financial statements in accordance with U. S.  generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the periods reported.
Estimates are used when accounting for certain items such as marketing accruals, warranty costs, employee benefit programs, etc.
Estimates are based on historical experience, where applicable, and other assumptions that management believes are reasonable under the circumstances.
Due to the inherent uncertainty involved in marketing estimates, actual results may differ from those estimates under different assumptions or conditions.
Marketing Incentives Automotive marketing incentives, including customer and dealer cash payments and costs for special financing and leasing programs paid to the Financial Services sector are recognized as revenue reductions and are accrued at the later of the date the related vehicle sales are recorded or the date the incentive program is both approved and communicated.
Costs for marketing incentives are based on assumptions regarding the number of vehicles that will have a specific incentive applied against them.


(1) Includes month-to-month leases.
(2) The most recent month’s (or subsequent month’s, if acquired in the most recent month) base rent, including additional rent floors and cash income from DFLs, annualized for 12 months.
Base rent does not include tenant recoveries, additional rents in excess of floors and non-cash revenue adjustments (i. e. , straight-line rents, amortization of market lease intangibles, DFL non-cash interest and deferred revenues).
See the “Tenant Purchase Options” section of Note 6 to the Consolidated Financial Statements for additional information on leases subject to purchase options.
See Schedule III: Real Estate and Accumulated Depreciation, included in this report, which information is incorporated by reference in this Item 2.


| (Dollars in millions) 2001 2000 | Indemnified securities on loan | Loan commitments | Asset purchase agreements | Standby letters of credit | Letters of credit |


| 2005 2004 2003 | Basic | Income | Income from continuing operations | Income from discontinued operations, net of taxes | Cumulative effect of accounting change, net of taxes | Net income | Average shares | Average shares outstanding | Dilutive securities issuable in connection with stock plans | Total average shares | Earnings (loss) per share of common stock | Income from continuing operations | Income from discontinued operations, net of taxes | Cumulative effect of accounting change, net of taxes | Net income |


| December 31, 2006 December 31, 2005 | Estimated   Fair Value | (In millions) | Industrial | Foreign-1 | Finance | Utility | Other | Total |


| Options Outstanding Options Exercisable(a) | December 31, 2007Shares in thousandsRange of exercise prices | $37.43 – $46.99 | 47.00 – 56.99 | 57.00 – 66.99 | 67.00 – 76.23 | Total |


| Common Stock Series D Convertible Preferred Stock Series E Redeemable Preferred Stock | Year Ended December 31, | 2017 | Ordinary income | Return of capital | Capital gains at 25% | Capital gains at 20% | Total | Dividends declared |


STOCKHOLDERS’ EQUITY COMMON STOCK At September 30, 2011, the Company is authorized to issue 525,000,000 shares of common stock, par value $0.25 per share of which 195,407,396 shares are issued and 186,386,197 shares outstanding.
Holders of the Company’s common stock are entitled to such dividends as may be declared by the Company’s Board of Directors out of funds legally available for such purpose.
Dividends may not be paid on common stock unless all accrued dividends on preferred stock, if any, have been paid or declared and set aside.
In the event of the Company’s liquidation, dissolution or winding up, the holders of common stock will be entitled to share pro rata in the assets remaining after payment to creditors and after payment of the liquidation preference plus any unpaid dividends to holders of any outstanding preferred stock.
Each holder of the Company’s common stock is entitled to one vote for each such share outstanding in the holder’s name.
No holder of common stock is entitled to cumulate votes in voting for directors.
The Company’s second amended and restated certificate of incorporation provides that, unless otherwise determined by the Company’s Board of Directors, no holder of common stock has any preemptive right to purchase or subscribe for any stock of any class which the Company may issue or sell.
On August 3, 2010, the Board of Directors approved a stock repurchase program, pursuant to which the Company is authorized to repurchase up to $200.0 million of the Company’s common stock from time to time on the open market or in privately negotiated transactions as permitted by securities laws and other legal requirements.
During the fiscal year ended September 30, 2011, the Company paid approximately $70.0 million (including commissions) in connection with the repurchase of 2,768,045 shares of its common stock (paying an average price of $25.30 per share).
As of September 30, 2011, $130.0 million remained available under the existing share repurchase program.


Direct operating expenses incurred by our property segments include direct site level expenses and consist primarily of ground rent and power and fuel costs, some or all of which may be passed through to our tenants, as well as property taxes, repairs and maintenance.
These segment direct operating expenses exclude all segment and corporate selling, general, administrative and development expenses, which are aggregated into one line item entitled Selling, general, administrative and development expense in our consolidated statements of operations.
In general, our property segments selling, general, administrative and development expenses do not significantly increase as a result of adding incremental tenants to our legacy sites and typically increase only modestly year-over-year.
As a result, leasing additional space to new tenants on our legacy sites provides significant incremental cash flow.
We may, however, incur additional segment


Note 9.
Claim and Claim Adjustment Expense Reserves CNA’s property and casualty insurance claim and claim adjustment expense reserves represent the estimated amounts necessary to settle all outstanding claims, including claims that are incurred but not reported (“IBNR”) as of the reporting date.
CNA’s reserve projections are based primarily on detailed analysis of the facts in each case, CNA’s experience with similar cases and various historical development patterns.
Consideration is given to such historical patterns as field reserving trends and claims settlement practices, loss payments, pending levels of unpaid claims and product mix, as well as court decisions, economic conditions and public attitudes.
All of these factors can affect the estimation of claim and claim adjustment expense reserves.
Establishing claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves for catastrophic events that have occurred, is an estimation process.
Many factors can ultimately affect the final settlement of a claim and, therefore, the necessary reserve.
Changes in the law, results of litigation, medical costs, the cost of repair materials and labor rates can all affect ultimate claim costs.
In addition, time can be a critical part of reserving determinations since the longer the span between the incidence of a loss and the payment or settlement of the claim, the more variable the ultimate settlement amount can be.
Accordingly, short-tail claims, such as property damage claims, tend to be more reasonably estimable than long-tail claims, such as general liability and professional liability claims.
Adjustments to prior year reserve estimates, if necessary, are reflected in the results of operations in the period that the need for such adjustments is determined.
Catastrophes are an inherent risk of the property and casualty insurance business and have contributed to material period-to-period fluctuations in the Company’s results of operations and/or equity.
The level of catastrophe losses


(B) Retirement Savings 401(k) Plan We sponsor a 401(k) plan for all associates meeting certain eligibility criteria.
In conjunction with the pension plan curtailments, enhancements were made to the 401(k) plan effective January 1, 2009.
The enhancements increased the maximum salary contribution for eligible associates and increased our matching contribution.
Additionally, an annual discretionary companyfunded contribution regardless of associate participation was implemented, as well as an additional discretionary company-funded contribution to those associates meeting certain age and service requirements.
The total cost for company contributions was $29.8 million in fiscal 2016, $27.9 million in fiscal 2015 and $25.0 million in fiscal 2014.


| September 29, 2007 September 30, 2006 September 24, 2005 | Beginning allowance balance | Charged to costs and expenses | Deductions | Ending allowance balance |


(4) In the second quarter of 2018, we recorded a net benefit to tax expense of $43.4 million associated with the release of the valuation allowance related to deferred tax assets of our Brazil operations.
In the third quarter of 2018, we recorded a net benefit to tax expense of $683.3 million associated with the release of the valuation allowance related to most of the United States federal and all states deferred tax assets with the exception of California and Massachusetts.


| Sales Order Cancellations Fiscal Year Ended September 30, | Cancelled Sales Orders | 2011 | East | Midwest | Southeast | South Central | Southwest | West | 6,568 |


Liquidity and Capital Liquidity and capital are managed to preserve stable, reliable and cost-effective sources of cash to meet all current and future financial obligations and are provided by a variety of sources, including a portfolio of liquid assets, a diversified mix of short- and long-term funding sources from the wholesale financial markets and the ability to borrow through committed credit facilities.
The Holding Company is an active participant in the global financial markets through which it obtains a significant amount of funding.
These markets, which serve as cost-effective sources of funds, are critical components of the Holding Companys liquidity and capital management.
Decisions to access these markets are based upon relative costs, prospective views of balance sheet growth and a targeted liquidity profile and capital structure.
A disruption in the financial markets could limit the Holding Companys access to liquidity.
See Extraordinary Market Conditions.
 The Holding Companys ability to maintain regular access to competitively priced wholesale funds is fostered by its current high credit ratings from the major credit rating agencies.
Management views its capital ratios, credit quality, stable and diverse earnings streams, diversity of liquidity sources and its liquidity monitoring procedures as critical to retaining high credit ratings.
See The Company  Capital  Rating Agencies.
 Liquidity is monitored through the use of internal liquidity risk metrics, including the composition and level of the liquid asset portfolio, timing differences in short-term cash flow obligations, access to the financial markets for capital and debt transactions and exposure to contingent draws on the Holding Companys liquidity.


| As of December 31, 2016 As of December 31, 2015 | (in millions) | Assets | Money market and government funds | Available-for-sale-securities | Currency hedge contracts | $62 | Liabilities | Currency hedge contracts | Accrued contingent consideration | $— |


| (in millions) December 31, 2016 | Total stockholders’ equity | Less: Preferred stock | Common stockholders’ equity | Less: | Goodwill | Other intangible assets | Add: | Deferred tax liabilities(a) | Less: Other CET1 capital adjustments | Standardized/Advanced CET1 capital | Preferred stock | Less: | Other Tier 1 adjustments(b) | Standardized/Advanced Tier 1 capital | Long-term debt and other instruments qualifying asTier 2 capital | Qualifying allowance for credit losses | Other | Standardized Fully Phased-In Tier 2 capital | Standardized Fully Phased-in Total capital | Adjustment in qualifying allowance for credit losses for Advanced Tier 2 capital | Advanced Fully Phased-In Tier 2 capital | Advanced Fully Phased-In Total capital |


| Year EndedDecember 31, | 2015 | Reported tax rate | Impact of certain receipts/charges* | 9.7% |


| Percent Change 2014 vs. 2013 | Volume 1 | Consolidated | Eurasia & Africa | Europe | Latin America | North America | Asia Pacific | Bottling Investments | Corporate |


| Payments Due by Period | December 31, 2016 | (In millions) | Debt (a) | Operating leases | Claim and claim adjustment expense reserves (b) | Future policy benefits reserves (c) | Purchase and other obligations | Total (d) |


Realized Gains and Losses.
As a group of life and health insurance carriers, we collect premium income from policyholders for the eventual payment of policyholder benefits, sometimes paid many years or even decades in the future.
In addition to the payment of these benefits, we also incur acquisition costs, administrative expenses, and taxes as a part of insurance operations.
Because benefits are expected to be paid in future periods, premium receipts in excess of current expenses are invested to provide for these obligations.
For this reason, we hold a significant investment portfolio as a part of our core insurance operations.
This portfolio consists primarily of high-quality fixed maturities containing an adequate yield to provide for the cost of carrying these long-term insurance product obligations.
As a result, fixed maturities are generally held for long periods to support the liabilities.
Expected yields on these investments are taken into account when setting insurance premium rates and product profitability expectations.
Because our investment portfolio is large and diverse, investments are occasionally sold or called, resulting in a realized gain or loss.
These gains and losses occur only incidentally, usually as the result of sales because of deterioration in investment quality of issuers or calls by the issuers.
Investment losses are also caused by writedowns due to impairments.
We do not engage in trading investments for profit.
Therefore, gains or losses which occur in protecting the portfolio or its yield, or which result from events that are beyond our control, are only secondary to the core insurance operations of providing insurance coverage to policyholders.
Unlike investment income, realized gains and losses are not considered in determining premium rates or product profitability of our insurance products.
Realized gains and losses can be significant in relation to the earnings from core insurance operations, however, and as a result, have a material positive or negative impact on net income.
The significant fluctuations caused by gains and losses can cause period-to-period trends of net income to not be indicative of historical core operating results nor predictive of the future trends of core operations.
Accordingly, they have no bearing on core insurance operations or segment results as we view operations.
For these reasons, we remove the effects of realized gains and losses when evaluating overall insurance operating results.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Dollar amounts in thousands except per share data) Note 1Significant Accounting Policies (continued) proceeds of $5.1 million after expenses.
The second involved state income tax refunds of $6.7 million related to prior years.
The third settlement related to the Companys investments in Worldcom, amounting to $6.3 million, and representing a partial recovery of investment losses incurred prior to 2004.
The final settlement involved Federal income tax issues related to prior years, and consisted of a benefit due of $7.4 million.
The litigation receipt related to the disposed subsidiary and the Worldcom receipt were included in Other income on the Consolidated Statement of Operations.
The state income tax refunds and the Federal income tax benefit reduced Income taxes.
 In 2005, Torchmark settled three significant legal matters.
These cases involved Torchmarks racedistinct mortality/dual-pricing litigation, its class-action cancer case, and its Waddell & Reed litigation.
All of these cases related to litigation arising many years ago.
The Waddell & Reed litigation was settled with Torchmark recording the $13.5 million proceeds net of costs as Other income.
 The other two settlements resulted in a $15 million pre-tax charge to Other operating expenses.
 Postretirement Benefits: Torchmark adopted FASB Statement of Financial Accounting Standards (SFAS) No.158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans, effective as of December 31, 2006.
This Statement requires Torchmark to recognize the funded status of its postretirement benefit plans on its Consolidated Balance Sheets.
Periodic gains and losses attributable to changes in plan assets and liabilities that are not recognized as components of net periodic benefit costs are to be recognized as components of other comprehensive income, net of tax.
This Statement does not modify the procedures for measuring plan assets, liabilities, or net periodic benefit cost.
The information required by this Standard is found in Note 9Postretirement Benefits.
Upon adoption of this Standard, Accumulated other comprehensive income, net of tax, was decreased $9 million.
The incremental effect of applying this Statement to affected line items on Torchmarks Balance Sheet at December 31, 2006 was as follows:


| 2009 First Quarter Second Quarter Third Quarter Fourth Quarter | Net sales | Gross profit | Net earnings | Basic net earnings per common share | Diluted net earnings per common share | 2008 | Net sales | Gross profit | Net earnings | Basic net earnings per common share | Diluted net earnings per common share |


(1) Yields are based on quarterly average carrying values except for fixed maturities, equity securities and securities lending activity.
Yields for fixed maturities are based on amortized cost.
Yields for equity securities are based on cost.
Yields for fixed maturities and short-term investments and cash equivalents are calculated net of liabilities and rebate expenses corresponding to securities lending activity.
Yields exclude investment income on assets other than those included in invested assets.
Prior periods yields are presented on a basis consistent with the current period presentation.
(2) Includes investment income of securities brokerage, securities trading, banking operations, real estate and relocation services, and asset management operations.
See below for a discussion of the change in the Financial Services Businesses yields.
The increase in net investment income yield attributable to the Closed Block Business for 2010 compared to 2009, was primarily due to investments in joint ventures and limited partnerships, driven by appreciation and gains on the underlying assets, partially offset by the impact of lower interest rates on floating rate investments due to rate resets and lower fixed income reinvestment rates.
The decrease in net investment income yield attributable to the Closed Block Business for 2009 compared to 2008 was primarily due to the impact of lower interest rates on floating rate investments due to rate resets, higher losses from investments in joint ventures and limited partnerships, driven by depreciation and losses on the underlying assets, and lower income from short-term investments as a result of lower short-term rates.
The following tables set forth the income yield and investment income, excluding realized investment gains (losses) and non-hedge accounting derivative results, for each major investment category of the Financial Services Businesses general account, excluding the Japanese operations portion of the general account which is presented separately below, for the periods indicated.


| ($ in millions) 2006 2005 | Land | Buildings and leasehold improvements | Furniture and equipment | Construction in progress | 2,143 | Accumulated depreciation | $1,238 |


| 2005 2004 | Automotive Sector | Current | Dealer and customer allowances and claims | Deferred revenue | Employee benefit plans | Other postretirement employee benefits | Accrued interest | Pension liability | Other | Total Automotive current | Non-current | Other postretirement employee benefits | Dealer and customer allowances and claims | Pension liability | Deferred revenue | Employee benefit plans | Other | Total Automotive non-current | Total Automotive Sector | Financial Services Sector | Total |


New Term Loan A Facility, with the remaining unpaid principal amount of loans under the New Term Loan A Facility due and payable in full at maturity on June 6, 2021.
Principal amounts outstanding under the New Revolving Loan Facility are due and payable in full at maturity on June 6, 2021, subject to earlier repayment pursuant to the springing maturity date described above.
In addition to paying interest on outstanding principal under the borrowings, we are obligated to pay a quarterly commitment fee at a rate determined by reference to a total leverage ratio, with a maximum commitment fee of 40% of the applicable margin for Eurocurrency loans.
In July 2016, Breakaway Four, Ltd. , as borrower, and NCLC, as guarantor, entered into a Supplemental Agreement, which amended the Breakaway four loan to, among other things, increase the aggregate principal amount of commitments under the multi-draw term loan credit facility from ¬590.5 million to ¬729.9 million.
In June 2016, we took delivery of Seven Seas Explorer.
To finance the payment due upon delivery, we had export credit financing in place for 80% of the contract price.
The associated $373.6 million term loan bears interest at 3.43% with a maturity date of June 30, 2028.
Principal and interest payments shall be paid semiannually.
In December 2016, NCLC issued $700.0 million aggregate principal amount of 4.750% senior unsecured notes due December 2021 (the Â¡Â°NotesÂ¡Â±) in a private offering (the Â¡Â°OfferingÂ¡Â±) at par.
NCLC used the net proceeds from the Offering, after deducting the initial purchasersÂ¡Â¯ discount and estimated fees and expenses, together with cash on hand, to purchase its outstanding 5.25% senior notes due 2019 having an aggregate outstanding principal amount of $680 million.
The redemption of the 5.25% senior notes due 2019 was completed in January 2017.
NCLC will pay interest on the Notes at 4.750% per annum, semiannually on June 15 and December 15 of each year, commencing on June 15, 2017, to holders of record at the close of business on the immediately preceding June 1 and December 1, respectively.
NCLC may redeem the Notes, in whole or part, at any time prior to December 15, 2018, at a price equal to 100% of the principal amount of the Notes redeemed plus accrued and unpaid interest to, but not including, the redemption date and a Â¡Â°make-whole premium.
Â¡Â± NCLC may redeem the Notes, in whole or in part, on or after December 15, 2018, at the redemption prices set forth in the indenture governing the Notes.
At any time (which may be more than once) on or prior to December 15, 2018, NCLC may choose to redeem up to 40% of the aggregate principal amount of the Notes at a redemption price equal to 104.750% of the face amount thereof with an amount equal to the net proceeds of one or more equity offerings, so long as at least 60% of the aggregate principal amount of the Notes issued remains outstanding following such redemption.
The indenture governing the Notes contains covenants that limit NCLCÂ¡Â¯s ability (and its restricted subsidiariesÂ¡Â¯ ability) to, among other things: (i) incur or guarantee additional indebtedness or issue certain preferred shares; (ii) pay dividends and make certain other restricted payments; (iii) create restrictions on the payment of dividends or other distributions to NCLC from its restricted subsidiaries; (iv) create liens on certain assets to secure debt; (v) make certain investments; (vi) engage in transactions with affiliates; (vii) engage in sales of assets and subsidiary stock; and (viii) transfer all or substantially all of its assets or enter into merger or consolidation transactions.
The indenture governing the Notes also provides for events of default, which, if any of them occurs, would permit or require the principal, premium (if any), interest and other monetary obligations on all of the then-outstanding Notes to become due and payable immediately.
Interest expense, net for the year ended December 31, 2016 was $276.9 million which included $34.7 million of amortization of deferred financing fees and a $27.7 million loss on extinguishment of debt.
Interest expense, net for the year ended December 31, 2015 was $221.9 million which included $36.7 million of amortization of deferred financing fees and a $12.7 million loss on extinguishment of debt.
Interest expense, net for the year ended December 31, 2014 was $151.8 million which included $32.3 million of amortization of deferred financing fees and $15.4 million of expenses related to financing transactions in connection with the Acquisition of Prestige.
Certain of our debt agreements contain covenants that, among other things, require us to maintain a minimum level of liquidity, as well as limit our net funded debt-to-capital ratio, maintain certain other ratios and restrict our ability to pay dividends.
Substantially all of our ships and other property and equipment are pledged as collateral for certain of our debt.
We believe we were in compliance with these covenants as of December 31, 2016.
The following are scheduled principal repayments on long-term debt including capital lease obligations as of December 31, 2016 for each of the next five years (in thousands):


| Years ended December 31, 2015 2014 2013 | Net earnings | Non-cash items | Changes in working capital | Net cash provided by operating activities | Net cash (used)/provided by investing activities | Net cash used by financing activities | Effect of exchange rate changes on cash and cash equivalents | Net (decrease)/increase in cash and cash equivalents | Cash and cash equivalents at beginning of year | Cash and cash equivalents at end of period |


4.
FAIR VALUE GAAP guidance regarding fair value measurements address how companies should measure fair value when they are required to use fair value measures for recognition or disclosure purposes under GAAP and provides a common definition of fair value to be used throughout GAAP.
It defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly fashion between market participants at the measurement date.
In addition, it establishes a three-level valuation hierarchy for the disclosure of fair value measurements.
The valuation hierarchy is based on the transparency of inputs to the valuation of an asset or liability.
The level in the hierarchy within which a given fair value measurement falls is determined based on the lowest level input that is significant to the measurement, with Level 1 being the highest priority and Level 3 being the lowest priority.
The levels in the hierarchy are defined as follows: Level 1: Inputs to the valuation methodology are observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in an active market; Level 2: Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The Company’s fixed maturity and equity securities are primarily managed by third party investment asset managers.
The investment asset managers obtain prices from nationally recognized pricing services.
These services seek to utilize market data and observations in their evaluation process.
They use pricing applications that vary by asset class and incorporate available market information and when fixed maturity securities do not trade on a daily basis the services will apply available information through processes such as benchmark curves, benchmarking of like securities, sector groupings and matrix pricing.
In addition, they use model processes, such as the Option Adjusted Spread model to develop prepayment and interest rate scenarios for securities that have prepayment features.
On November 18, 2014, the Company entered into a collateralized reinsurance agreement with Kilimanjaro to provide the Company with catastrophe reinsurance coverage.
This agreement is a multi-year reinsurance contract which covers specified earthquake events.
The agreement provides up to $500,000 thousand of reinsurance coverage from earthquakes in the United States, Puerto Rico and Canada.
On December 1, 2015 the Company entered into two collateralized reinsurance agreements with Kilimanjaro Re to provide the Company with catastrophe reinsurance coverage.
These agreements are multi-year reinsurance contracts which cover named storm and earthquake events.
The first agreement provides up to $300,000 thousand of reinsurance coverage from named storms and earthquakes in the United States, Puerto Rico and Canada.
The second agreement provides up to $325,000 thousand of reinsurance coverage from named storms and earthquakes in the United States, Puerto Rico and Canada.
On April 13, 2017 the Company entered into six collateralized reinsurance agreements with Kilimanjaro to provide the Company with annual aggregate catastrophe reinsurance coverage.
The initial three agreements are four year reinsurance contracts which cover named storm and earthquake events.
These agreements provide up to $225,000 thousand, $400,000 thousand and $325,000 thousand, respectively, of annual aggregate reinsurance coverage from named storms and earthquakes in the United States, Puerto Rico and Canada.
The subsequent three agreements are five year reinsurance contracts which cover named storm and earthquake events.
These agreements provide up to $50,000 thousand, $75,000 thousand and $175,000 thousand, respectively, of annual aggregate reinsurance coverage from named storms and earthquakes in the United States, Puerto Rico and Canada.
Recoveries under these collateralized reinsurance agreements with Kilimanjaro are primarily dependent on estimated industry level insured losses from covered events, as well as, the geographic location of the events.
The estimated industry level of insured losses is obtained from published estimates by an independent recognized authority on insured property losses.
As of December 31, 2017, none of the published insured loss estimates for the 2017 catastrophe events have exceeded the single event retentions under the terms of the agreements that would result in a recovery.
In addition, the aggregation of the to-date published insured loss estimates for the 2017 covered events have not exceeded the aggregated retentions for recovery.
However, if the published estimates for insured losses for the covered 2017 events increase, the aggregate losses may exceed the aggregate event retentions under the agreements, resulting in a recovery.
Kilimanjaro has financed the various property catastrophe reinsurance coverages by issuing catastrophe bonds to unrelated, external investors.
On April 24, 2014, Kilimanjaro issued $450,000 thousand of notes (\
Series 2014-1 Notes\
).
On November 18, 2014, Kilimanjaro issued $500,000 thousand of notes (\
Series 2014-2 Notes\
).
On December 1, 2015, Kilimanjaro issued $625,000 thousand of notes (\
Series 2015-1 Notes\
).
On April 13, 2017, Kilimanjaro issued $950,000 thousand of notes (\
Series 2017-1 Notes) and $300,000 thousand of notes (\
Series 2017-2 Notes\
).
The proceeds from the issuance of the Notes listed above are held in reinsurance trust throughout the duration of the applicable reinsurance agreements and invested solely in US government money market funds with a rating of at least \
AAAm\
 by Standard & Poor’s.9.
OPERATING LEASE AGREEMENTS The future minimum rental commitments, exclusive of cost escalation clauses, at December 31, 2017, for all of the Company’s operating leases with remaining non-cancelable terms in excess of one year are as follows:


| Pension Other Benefits | 2015 | Discount rate | Rate of compensation increase | Initial healthcare trend rate | Ultimate healthcare trend rate | (Dollar amounts in millions) | Salaries and bonuses | Employee benefits: | Employee health and insurance | Retirement | Payroll taxes and other | Total benefits | Total salaries and employee benefits | Full-time equivalent employees at December 31 |


| Balance at January 1, 2011 $23,788 | Increases in current period tax positions | Decreases in current period tax positions | Balance at December 31, 2011 | Increases in current period tax positions | Decreases in current period tax positions | Balance at December 31, 2012 | Increases in current period tax positions | Decreases in current period tax positions | Balance at December 31, 2013 |


| Years Ended December 31, | 2009 | (in millions, except percentages) | Revenues | Management and financial advice fees | Distribution fees | Net investment income | Premiums | Other revenues | Total revenues | Banking and deposit interest expense | Total net revenues | Expenses | Distribution expenses | Interest credited to fixed accounts | Benefits, claims, losses and settlement expenses | Amortization of deferred acquisition costs | General and administrative expense | Total expenses | Pretax income (loss) | October 31, | 2006 | (in thousands) | Computer and other equipment | Buildings | Furniture and fixtures | Land | Leasehold improvements | 522,964 | Less accumulated depreciation and amortization | Total property and equipment, net-1 |