operating income of $39 million during 2004.
This improvement was primarily attributable to the impact of opening new stores and the segment’s year-over-year increase in average revenue per store, which resulted in higher leverage on occupancy, depreciation, and other fixed costs.
Expansion of the Retail segment has required and will continue to require a substantial investment in fixed assets and related infrastructure, operating lease commitments, personnel, and other operating expenses.
Capital expenditures associated with the Retail segment were $200 million in 2006, bringing the total capital expenditures since inception of the Retail segment to approximately $729 million.
As of September 30, 2006, the Retail segment had approximately 5,787 employees and had outstanding operating lease commitments associated with retail store space and related facilities of approximately $887 million.
The Company would incur substantial costs if it were to close its retail stores.
Such costs could adversely affect the Company’s results of operations and financial condition.


Convertible Debentures In January 2002, we sold convertible subordinated debentures having an aggregate principal amount of $402 million.
The proceeds from the offering, net of $6 million in offering expenses, were $396 million.
The debentures mature in 2022 and are callable at par, at our option, for cash on or after January 15, 2007.
Holders may require us to purchase all or a portion of their debentures on January 15, 2012, and again on January 15, 2017, if not previously redeemed, at a purchase price equal to 100% of the principal amount of the debentures plus accrued and unpaid interest up to but not including the date of purchase.
We have the option to settle the purchase price in cash, stock or a combination of cash and stock.
The debentures become convertible into shares of our common stock at a conversion rate of 21.7391 shares per $1,000 principal amount of debentures, equivalent to an initial conversion price of $46.00 per share, if the closing price of our common stock exceeds a specified price for 20 consecutive trading days in a 30-trading day period preceding the date of conversion, if our credit rating falls below specified levels, if the debentures are called for redemption or if certain specified corporate transactions occur.
The debentures were not convertible at February 27, 2010, and have not been convertible through April 26, 2010.
The debentures have an interest rate of 2.25% per annum.
The interest rate may be reset, but not below 2.25% or above 3.25%, on July 15, 2011, and July 15, 2016.
One of our subsidiaries has guaranteed the debentures.


| U.S. Pension Benefits U.S. Postretirement Medical Benefits International Pension Benefits | 2010 | Funded Status: | Fair value of plan assets | Benefit obligation | Funded status recognized at December 31 | Funded Status Amounts Recognized in our Balance Sheet: | Other non-current assets | Other current liabilities | Pension and postretirement benefit obligations | Net asset (liability) at December 31 | Amounts Recognized in AOCI: | Unrecognized net prior service cost | Unrecognized net actuarial loss | Gross unrecognized cost at December 31 | Deferred tax asset at December 31 | Net unrecognized cost at December 31 | Project Benefit Obligation Exceeds the Fair Value of Plan Assets | 2010 | U.S. Pension Benefits | Projected benefit obligation | Accumulated benefit obligation | Fair value of plan assets | International Pension Benefits | Projected benefit obligation | Accumulated benefit obligation | Fair value of plan assets |


| $ in millions Average for the Three Months Ended December 2017 | Total HQLA | Eligible HQLA | Net cash outflows | LCR |


MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (COMBINED FOR CON EDISON AND CON EDISON OF NEW YORK)–CONTINUED Con Edison of New York Electric Con Edison of New York’s electric sales and deliveries, excluding off-system sales, in 2005 compared with 2004 were:
Con Edison of New York’s electric operating revenues were $830 million higher in 2005 than in 2004, due primarily to increased recoverable purchased power and fuel costs ($405 million), warmer summer weather and sales growth ($119 million), the electric rate plan that took effect in April 2005 ($282 million), the charge in 2004 to resolve certain issues relating primarily to the treatment of prior period pension credits ($100 million) and recovery of costs relating to the East River Repowering Project ($54 million), offset in part by lower revenue taxes ($76 million; see “State Income Tax” in Note A to the financial statements), and provision for refund to customers of shared earnings above the target level ($53 million).
Electric sales and delivery volumes in Con Edison of New York’s service area increased 4.7 percent in 2005 compared with 2004, primarily reflecting warmer weather in the 2005 summer period compared with 2004 weather, growth in usage by existing customers and increased new business.
After adjusting for variations, principally weather and billing days in each period, electric sales and delivery volumes in Con Edison of New York’s service area increased 2.4 percent in 2005 compared with 2004.
Con Edison of New York’s electric purchased power costs increased $285 million in 2005 compared with 2004 reflecting an increase in unit costs, partially offset by decreased purchased volumes associated with additional customers obtaining their energy supply through competitive providers.
Electric fuel costs increased $120 million, reflecting higher sendout volumes from the company’s generating facilities and an increase in unit costs.
Con Edison of New York’s electric operating income increased $133 million in 2005 compared with 2004.


NOTE 3 - AVAILABLE FOR SALE SECURITIES: Available for sale securities are comprised primarily of CMOs, mortgage related debt, and certain equity securities of the Company's non-broker-dealer subsidiaries, principally RJBank.
There were proceeds from the sale of available for sale securities of $81,000 for the year ended September 30, 2007, $252,000 for the year ended September 30, 2006 and $9,250,000 for the year ended September 30, 2005.
The realized gains and losses related to the sale of available for sale securities were immaterial to the consolidated financial statements for all years presented.


D. R.  HORTON, INC.  AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The Company’s revolving credit facility imposes restrictions on its operations and activities, including requiring the maintenance of a minimum level of tangible net worth, a maximum allowable ratio of debt to tangible net worth and a borrowing base restriction if the Company’s ratio of debt to tangible net worth exceeds a certain level.
These covenants are measured as defined in the credit agreement governing the facility and are reported to the lenders quarterly.
A failure to comply with these financial covenants could allow the lending banks to terminate the availability of funds under the revolving credit facility or cause any outstanding borrowings to become due and payable prior to maturity.
In addition, the credit agreement governing the facility and the indenture governing the senior notes impose restrictions on the creation of secured debt and liens.
At September 30, 2016, the Company was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility and public debt obligations.
The Company has an automatically effective universal shelf registration statement filed with the Securities and Exchange Commission (SEC) in August 2015, registering debt and equity securities that the Company may issue from time to time in amounts to be determined.
On January 15, 2016, the Company repaid $170.2 million principal amount of its 5.625% senior notes, which were due on that date.
On April 15, 2016, the Company repaid $372.7 million principal amount of its 6.5% senior notes, which were due on that date.
The key terms of the Company’s senior notes outstanding as of September 30, 2016 are summarized below.


IMPAIRMENTS, NET LOSS ON SALE OF LONG-LIVED ASSETS, RESTRUCTURING AND MERGER RELATED EXPENSE The significant components reflected in impairments, net loss on sale of long-lived assets, restructuring and merger related expense in the accompanying consolidated statements of operations include the following: Impairments and Net Loss on Sale of Long-Lived Assets—During the years ended December 31, 2006, 2005 and 2004, the Company recorded impairments and net loss on sale of long-lived assets (primarily related to its rental and management segment) of $3.0 million, $19.1 million and $22.3 million, respectively.  ?
Non-Core Asset Impairment Charges—During the years ended December 31, 2006 and 2005 respectively, the Company recorded net losses associated with the sales of certain non-core towers and other assets, as well as impairment charges to write-down certain assets to net realizable value after an indicator of potential impairment had been identified.
As a result, the Company recorded net losses and impairments of approximately $2.0 million, $16.8 million and $17.7 million for the years ended December 31, 2006, 2005 and 2004, respectively.
The net loss for the year ended December 31, 2006 is comprised net losses from asset sales and other impairments of $7.0 million, offset by gains from asset sales of $5.1 million.  ?
Construction-In-Progress Impairment Charges—For the years ended December 31, 2006, 2005 and 2004, the Company wrote-off approximately $1.0 million, $2.3 million and $4.6 million, respectively, of construction-in-progress costs, primarily associated with sites that it no longer planned to build.


From an enterprise risk management perspective, management sets limits on the levels of catastrophe loss exposure the Company may underwrite.
The limits are revised periodically based on a variety of factors, including but not limited to the Companys financial resources and expected earnings and risk/reward analyses of the business being underwritten.
The Company may purchase reinsurance to cover specific business written or the potential accumulation or aggregation of exposures across some or all of its operations.
Reinsurance purchasing decisions consider both the potential coverage and market conditions including the pricing, terms, conditions, availability and collectability of coverage, with the aim of securing cost effective protection from financially secure counterparties.
The amount of reinsurance purchased has varied over time, reflecting the Companys view of its exposures and the cost of reinsurance.
Management estimates that the projected net economic loss from its largest 100-year event in a given zone represents approximately 11% of its December 31, 2016 shareholders equity.
Economic loss is the PML exposure, net of third party reinsurance, reduced by estimated reinstatement premiums to renew coverage and estimated income taxes.
The impact of income taxes on the PML depends on the distribution of the losses by corporate entity, which is also affected by inter-affiliate reinsurance.
Management also monitors and controls its largest PMLs at multiple points along the loss distribution curve, such as loss amounts at the 20, 50, 100, 250, 500 and 1,000 year return periods.
This process enables management to identify and control exposure accumulations and to integrate such exposures into enterprise risk, underwriting and capital management decisions.
The Companys catastrophe loss projections, segmented by risk zones, are updated quarterly and reviewed as part of a formal risk management review process.
The table below reflects the Companys PML exposure, net of third party reinsurance at various return periods for its top three zones/perils (as ranked by the largest 1 in 100 year economic loss) based on loss projection data as of December 31, 2016:


| Year ended December 31, | 2015 | (in millions) | Annualized new business premiums-1: | Group life | Group disability | Total |


| October 31, 2009 November 1, 2008 | Fair value of forward exchange contracts asset (liability) | Fair value of forward exchange contracts after a 10% unfavorable movement in foreign currency exchange rates asset (liability) | Fair value of forward exchange contracts after a 10% favorable movement in foreign currency exchange rates liability |


| 2004 2005 2006 2007 2008 2009 | Loews Common Stock | S&P 500 Index | Loews Peer Group (a) |


Loans acquired in connection with acquisition transactions subsequent to 2008 were recorded at fair value with no carry-over of any previously recorded allowance for credit losses.
Determining the fair value of the acquired loans required estimating cash flows expected to be collected on the loans and discounting those cash flows at then-current interest rates.
For acquired loans where fair value was less than outstanding principal as of the acquisition date and the resulting discount was due, at least in part, to credit deterioration, the excess of expected cash flows over the carrying value of the loans is recognized as interest income over the lives of the loans.
The difference between contractually required payments and the cash flows expected to be collected is referred to as the nonaccretable balance and is not recorded on the consolidated balance sheet.
The nonaccretable balance reflects estimated future credit losses and other contractually required payments that the Company does not expect to collect.
The Company regularly evaluates the reasonableness of its cash flow projections associated with such loans, including its estimates of lifetime principal losses.
Any decreases to the expected cash flows require the Company to evaluate the need for an additional allowance for credit losses and could lead to charge-offs of loan balances.
Any significant increases in expected cash flows result in additional interest income to be recognized over the then-remaining lives of the loans.
The carrying amount of loans acquired at a discount subsequent to 2008 and accounted for based on expected cash flows was $1.0 billion and $1.8 billion at December 31, 2017 and 2016, respectively.
The nonaccretable balance related to remaining principal losses associated with loans acquired at a discount as of December 31, 2017 and 2016 is presented in table 11.
During each of the last three years, based largely on improving economic conditions and borrower repayment performance, the Companys estimates of cash flows expected to be generated by loans acquired at a discount and accounted for based on expected cash flows improved, resulting in increases in the accretable yield.
In 2017, estimated cash flows expected to be generated by acquired loans increased by $66 million, or approximately 3%.
That improvement reflected higher estimated principal, interest and other recoveries largely associated with purchased-impaired residential real estate loans acquired from Hudson City.
In 2016, estimated cash flows expected to be generated by acquired loans increased by $50 million, or approximately 2%.
That improvement reflected a lowering of estimated principal losses by approximately $33 million, primarily due to a $19 million decrease in expected principal losses in the commercial real estate loan portfolios, as well as interest and other recoveries.
Similarly, in 2015, excluding expected cash flows on the purchased impaired loans acquired from Hudson City on November 1, 2015, estimated cash flows expected to be generated increased by $77 million, or approximately 3%.
That improvement reflected a lowering of estimated principal losses by approximately $58 million, primarily due to a $42 million decrease in expected principal losses in the commercial real estate loan portfolios, as well as interest and other recoveries.


2011 compared to 2010 MST’s net sales for 2011 decreased $311 million, or 4%, compared to 2010.
The decrease was attributable to decreased volume of approximately $390 million for certain ship and aviation system programs (primarily Maritime Patrol Aircraft and PTDS) and approximately $75 million for training and logistics solutions programs.
Partially offsetting these decreases was higher sales of about $165 million from production on the LCS program.
MST’s operating profit for 2011 decreased $68 million, or 10%, compared to 2010.
The decrease was attributable to decreased operating profit of approximately $55 million as a result of increased reserves for contract cost matters on various ship and aviation system programs (including the terminated presidential helicopter program) and approximately $40 million due to lower volume and increased reserves on training and logistics solutions.
Partially offsetting these decreases was higher operating profit of approximately $30 million in 2011 primarily due to the recognition of reserves on certain undersea systems programs in 2010.
Adjustments not related to volume, including net profit rate adjustments described above, were approximately $55 million lower in 2011 compared to 2010.
Backlog Backlog increased in 2012 compared to 2011 mainly due to increased orders on ship and aviation system programs (primarily MH-60 and LCS), partially offset decreased orders and higher sales volume on integrated warfare systems and sensors programs (primarily Aegis).
Backlog decreased slightly in 2011 compared to 2010 primarily due to higher sales volume on various integrated warfare systems and sensors programs.
Trends We expect MST’s net sales to decline in 2013 in the low single digit percentage range as compared to 2012 due to the completion of PTDS deliveries in 2012 and expected lower volume on training services programs.
Operating profit and margin are expected to increase slightly from 2012 levels primarily due to anticipated improved contract performance.


| Shares Weighted-Average Grant Date Fair Value (per share) | Non-vested total at January 1, 2014 | Granted | Performance share adjustment | Vested | Forfeited | Non-vested total at December 31, 2014 | 2014 | Intrinsic value | Income tax benefit |


| December 31, | 2017 | Gross | Carrying | Amount | Unamortizable intangible assets | Management contracts | Trademarks | Trade names | $163,553 | Amortizable intangible assets | Customer relationships | Mortgage servicing rights | Trademarks/Trade name | Management contracts | Covenant not to compete | Other | $2,236,297 | Total intangible assets |


Business Lending revenue in Global Corporate Banking and Global Commercial Banking remained relatively unchanged in 2014 compared to 2013 as the impact of growth in average loan balances was offset by spread compression.
Global Transaction Services revenue in Global Corporate Banking increased $223 million in 2014 driven by the impact of growth in U. S.  and non-U.
S.  deposit balances.
Global Transaction Services revenue in Global Commercial Banking remained relatively unchanged as the impact of higher deposit balances was more than offset by spread compression.
Average loans and leases in Global Corporate and Global Commercial Banking increased five percent in 2014 driven by growth in the commercial and industrial and commercial real estate portfolios.
Average deposits in Global Corporate and Global Commercial Banking increased 10 percent in 2014 due to client liquidity and international growth.


| Three Months Ended | Dec. 31, 2018 | (Unaudited, in thousands) | Reconciliation of Net Income (Loss) to Adjusted EBITDA: | Net income (loss) | Stock-based compensation expense | Depreciation and amortization expense | Interest and other expense, net | Provision (benefit) for income taxes | Restructuring charges and one-time nonrecurring gain | Adjusted EBITDA |


| Year Ended December 31, | (dollars in millions) | Salaries and employee benefits | Outside services | Occupancy | Equipment expense | Amortization of software | Other operating expense | Noninterest expense |


| 2013 $3,189 | 2014 | 2015 | 2016 | 2017 | 2018 and thereafter | Total |


Commodity Price Risk We are exposed to fluctuations in commodity prices due to contractual agreements with component suppliers.
In order to protect ourselves against future price volatility and, consequently, fluctuations in gross margins, we periodically enter into commodity swap contracts with designated banks to fix the cost of certain raw material purchases with the objective of minimizing changes in inventory cost due to market price fluctuations.
Certain commodity swap contracts are derivative contracts that are designated as cash flow hedges under GAAP.
We also have commodity swap contracts that represent an economic hedge, however do not qualify for hedge accounting and are marked to market through earnings.
For those contracts that qualify for hedge accounting, the effective portion of the unrealized gain or loss is deferred and reported as a component of AOCL.
When the hedged forecasted transaction (purchase) occurs, the unrealized gain or loss is reclassified into income in the same line item associated with the hedged transaction in the same period or periods during which the hedged transaction affects income.
The ineffective portion of the hedge, if any, is recognized in current income in the period in which the ineffectiveness occurs.
As of December 31, 2011, we expect to reclassify an unrealized net loss of $11 million from AOCL to income over the next year.
Our internal policy allows for managing these cash flow hedges for up to three years.


Share-Based Compensation Plans and Other Incentive PlansStock Options, Stock Appreciation Rights and Employee Stock Purchase PlanThe Company grants options to acquire shares of common stock to certain employees and to existing option holders of acquired companies in connection with the merging of option plans following an acquisition.
Each option granted and stock appreciation right has an exercise price of no less than 100% of the fair market value of the common stock on the date of the grant.
The awards have a contractual life of five to fifteen years and vest over two to four years.
Stock options and stock appreciation rights assumed or replaced with comparable stock options or stock appreciation rights in conjunction with a change in control of the Company only become exercisable if the holder is also involuntarily terminated (for a reason other than cause) or quits for good reason within 24 months of a change in control.
The employee stock purchase plan allows eligible participants to purchase shares of the Companys common stock through payroll deductions of up to 20% of eligible compensation on an after-tax basis.
Plan participants cannot purchase more than $25,000 of stock in any calendar year.
The price an employee pays per share is 85% of the lower of the fair market value of the Companys stock on the close of the first trading day or last trading day of the purchase period.
The plan has two purchase periods, the first from October 1 through March 31 and the second from April 1 through September 30.
For the years ended December 31, 2013, 2012 and 2011, employees purchased 1.5 million, 1.4 million and 2.2 million shares, respectively, at purchase prices of $43.02 and $50.47, $34.52 and $42.96, and $30.56 and $35.61, respectively.
The Company calculates the value of each employee stock option, estimated on the date of grant, using the Black-Scholes option pricing model.
The weighted-average estimated fair value of employee stock options granted during 2013, 2012 and 2011 was $9.52, $9.60 and $13.25, respectively, using the following weighted-average assumptions:


| 2011 2010 2009 2008 | $17,362 |


| Years ended December 31 2013 2012 2011 | Operating income: | Risk Solutions | HR Solutions | Unallocated | Operating income | Interest income | Interest expense | Other income | Income before income taxes |


| Year Ended September 30, | 2014 | (In millions, except per share data) | Operating Data: | Revenues: | Homebuilding | Financial Services | Inventory and land option charges | Gross profit — Homebuilding | Income (loss) before income taxes: | Homebuilding | Financial Services | Income tax expense (benefit) (1) (2) | Net income | Net income per share: | Basic | Diluted | Cash dividends declared per common share | September 30, | 2014 | (In millions) | Balance Sheet Data: | Cash and cash equivalents and marketable securities -3 | Inventories | Total assets | Notes payable -4 | Total equity |


Akyem, Ghana.
Gold production was in line with prior year mainly due to higher ore grade milled and a reduction of in-circuit inventory, offset by lower throughput as a result of load shedding requirements related to the power shortage in Ghana.
Costs applicable to sales per ounce increased 18% due to higher mining and site support costs, partially offset by lower oil prices and milling costs.
Depreciation and amortization per ounce increased 11% due to higher amortization rates.
All-in sustaining costs per ounce increased 35% due to higher costs applicable to sales per ounce and higher sustaining capital spend.


| As of December | in millions | Balance, beginning of year | Increases based on tax positions related to the current year | Increases based on tax positions related to prior years | Decreases related to tax positions of prior years | Decreases related to settlements | Acquisitions/(dispositions) | Exchange rate fluctuations | Balance, end of year | Related deferred income tax asset1 | Net unrecognized tax benefit2 |


As of February 1, 2012, there were 1,230 holders of record of our common shares.
Recent Sales of Unregistered Securities During the fourth quarter of 2011, we issued 20,891 common shares upon the redemption of Class A units of the Operating Partnership held by persons who received units, in private placements in earlier periods, in exchange for their interests in limited partnerships that owned real estate.
The common shares were issued without registration under the Securities Act of 1933 in reliance on Section 4 (2) of that Act.
Information relating to compensation plans under which our equity securities are authorized for issuance is set forth under Part III, Item 12 of this Annual Report on Form 10-K and such information is incorporated by reference herein.
Recent Purchases of Equity Securities In December 2011, we received 410,783 Vornado Common shares at an average price of $76.36 per share as payment for the exercise of certain employee options.


Note 2 BUSINESS SEGMENT INFORMATION BMS operates in a single segment engaged in the discovery, development, licensing, manufacturing, marketing, distribution and sale of innovative medicines that help patients prevail over serious diseases.
A global research and development organization and supply chain organization are responsible for the development and delivery of products to the market.
Regional commercial organizations are used to distribute and sell the product.
The business is also supported by global corporate staff functions.
Segment information is consistent with the financial information regularly reviewed by the chief executive officer for purposes of evaluating performance, allocating resources, setting incentive compensation targets, and planning and forecasting future periods.
Products are sold principally to wholesalers, and to a lesser extent, directly to distributors, retailers, hospitals, clinics, government agencies and pharmacies.
Gross revenues to the three largest pharmaceutical wholesalers in the U. S.  as a percentage of global gross revenues were as follows:


| (Millions) 2011 2010 2009 | Royalty income | Share of net earnings (loss) of equity affiliates (See Note 5) | Gain on sale of assets | Other | Total |


| Coal Nuclear Natural Gas Renewables Oil | Ameren:(a) | 2011 | 2010 | 2009 | Ameren Missouri: | 2011 | 2010 | 2009 | Merchant Generation: | 2011 | 2010 | 2009 | Genco: | 2011 | 2010 | 2009 | Unrecognized Tax Benefits | Balance at July 1, 2008 | Additions for current year tax positions | Additions for prior year tax positions | Reductions for prior year tax positions | Settlements | Reductions related to expirations of statute of limitations | Balance at June 30, 2009 | Additions for current year tax positions | Reductions for current year tax positions | Additions for prior year tax positions | Reductions for prior year tax positions | Settlements | Reductions related to expirations of statute of limitations | Balance at June 30, 2010 |


| 2016 2015 2014 | Accounts receivable | Inventory | Accounts payable | Cash conversion cycle |


Issuer Purchases of Equity Securities Repurchases of common stock are made to support the Companys stock-based employee compensation plans and for other corporate purposes.
On February 13, 2006, the Board of Directors authorized the purchase of $2.0 billion of the Companys common stock between February 13, 2006 and February 28, 2007.
In August 2006, 3Ms Board of Directors authorized the repurchase of an additional $1.0 billion in share repurchases, raising the total authorization to $3.0 billion for the period from February 13, 2006 to February 28, 2007.
In February 2007, 3Ms Board of Directors authorized a twoyear share repurchase of up to $7.0 billion for the period from February 12, 2007 to February 28, 2009.


CONSOLIDATED OVERVIEW 2017 IN REVIEW ?
Outstanding operating performance: ?
Revenue increased to $31 billion with growth in our Aerospace and Combat Systems groups.  ?
Operating earnings of $4.2 billion and operating margin of 13.5% increased 11.9% and 130 basis points, respectively, from 2016.  ?
Return on sales increased 60 basis points from 2016 to 9.4%.  ?
Earnings from continuing operations per diluted share of $9.56 increased 10.6% from 2016.  ?
Free cash flow from operations was 119% of earnings from continuing operations.  ?
$2.9 billion of cash deployed for share repurchases, dividends and business acquisitions, consistent with 2016.  ?
Return on invested capital (ROIC) of 16.8%, 50 basis points higher than 2016.  ?
Robust backlog of $63.2 billion increased nearly $1 billion from 2016, supporting our long-term growth expectations.  ?
Net orders for Gulfstream aircraft increased over 20% from 2016.  ?
Several significant contract awards received in 2017 in our defense groups.


The valuation allowance primarily relates to net operating loss and tax credit carryforwards for which utilization is uncertain.
Cumulative tax losses in certain state and foreign jurisdictions during recent years, limited carryforward periods in certain jurisdictions, future reversals of existing taxable temporary differences, and reasonable tax planning strategies were among the factors considered in determining the valuation allowance.
These loss and credit carryforwards have expiration dates that vary generally over the next 20 years, but no significant amounts expire in any one year.
Deferred income taxes and withholding taxes have been provided on earnings of our foreign subsidiaries to the extent it is anticipated that the earnings will be remitted in the future as dividends.
The tax effect of most distributions would be significantly offset by available foreign tax credits.


equity investment income.
At December 31, 2009 and 2008, the cost of this investment was $2.6 billion and the fair value was $5.4 billion and $2.5 billion.
At December 31, 2009 and 2008, the Corporation had a 24.9 percent, or $2.5 billion and $2.1 billion, investment in Grupo Financiero Santander, S. A. , the subsidiary of Grupo Santander, S. A.
This investment is recorded in other assets and is accounted for under the equity method of accounting with income being recorded in equity investment income.
As part of the acquisition of Merrill Lynch, the Corporation acquired an economic ownership in BlackRock, a publicly traded investment company.
At December 31, 2009, the carrying value was $10.0 billion representing approximately a 34 percent economic ownership interest in BlackRock.
This investment is recorded in other assets and is accounted for using the equity method of accounting with income being recorded in equity investment income.
During 2009, BlackRock completed its purchase of Barclays Global Investors, an asset management business, from Barclays PLC which had the effect of diluting the Corporations ownership interest in BlackRock from approximately 50 percent to approximately 34 percent and, for accounting purposes, was treated as a sale of a portion of the Corporations ownership interest.
As a result, upon the closing of this transaction, the Corporation recorded an adjustment to its investment inBlackRock, resulting in a pre-tax gain of $1.1 billion.
The summarized earnings information for BlackRock, which represents 100 percent of BlackRock, includes revenues of $4.7 billion, operating income and income before income taxes of $1.3 billion, and net income of $875 million in 2009.
On June 26, 2009, the Corporation entered into a joint venture agreement with First Data Corporation (First Data) creating Banc of America Merchant Services, LLC.
Under the terms of the agreement, the Corporation contributed its merchant processing business to the joint venture and First Data contributed certain merchant processing contracts and personnel resources.
The Corporation recorded in other income a pre-tax gain of $3.8 billion related to this transaction.
The Corporation owns approximately 46.5 percent of this joint venture, 48.5 percent is owned by First Data, with the remaining stake held by a third party investor.
The third party investor has the right to put their interest to the joint venture which would have the effect of increasing the Corporations ownership interest to 49 percent.
The investment in the joint venture, which was initially recorded at a fair value of $4.7 billion, is being accounted for under the equity method of accounting with income being recorded in equity investment income.
The carrying value at December 31, 2009 was $4.7 billion.


DEVELOPING BUSINESSES DIVISION


| Year ended December 31, 2009 2008 | (in millions) | Allowance for loan losses: | Beginning balance at January 1, | Gross charge-offs | Gross (recoveries) | Net charge-offs | Provision for loan losses: | Provision excluding accounting conformity | Accounting conformity(a) | Total provision for loan losses | Acquired allowance resulting from Washington Mutual transaction | Other(b) | Ending balance at December 31 | Components: | Asset-specific(c)(d) | Formula-based | Purchased credit-impaired | Total allowance for loan losses | Allowance for lending-related commitments: | Beginning balance at January 1, | Provision for lending-related commitments | Provision excluding accounting conformity | Accounting conformity(a) | Total provision for lending-related commitments | Acquired allowance resulting from Washington Mutual transaction | Other(b) | Ending balance at December 31 | Components: | Asset-specific | Formula-based | Total allowance for lending-related commitments | Total allowance for credit losses | Credit ratios: | Allowance for loan losses to retained loans | Net charge-off rates(e) | Credit ratios excluding home lending purchased credit-impairedloans and loans held by the Washington Mutual Master Trust | Allowance for loan losses to retained loans(f) |


| December 31 - in millions 2007 2006 | Commercial | Commercial real estate | Consumer | Residential mortgage | Lease financing | Other | Total loans | Unearned income | Total loans, net of unearned income |


| As of December 31, 2014 Under 1 Year 1 to 5 Years 6 to 10 Years Over 10 Years | (Dollars in millions) | Available for sale-1: | U.S. Treasury and federal agencies: | Direct obligations | Mortgage-backed securities | Asset-backed securities: | Student loans | Credit cards | Sub-prime | Other | Total asset-backed | Non-U.S. debt securities: | Mortgage-backed securities | Asset-backed securities | Government securities | Other | Total non-U.S. debt securities | State and political subdivisions-2 | Collateralized mortgage obligations | Other U.S. debt securities | Total | Held to maturity-1: | U.S. Treasury and federal agencies: | Direct Obligations | Mortgage-backed securities | Asset-backed securities | Student loans | Credit cards | Other | Total asset-backed | Non-U.S. debt securities: | Mortgage-backed securities | Asset-backed securities | Government securities | Other | Total non-U.S. debt securities | State and political subdivisions-2 | Collateralized mortgage obligations | Total |


| In millions December 312012 December 312011 | Commercial mortgages at fair value | Commercial mortgages at lower of cost or market | Total commercial mortgages | Residential mortgages at fair value | Residential mortgages at lower of cost or market | Total residential mortgages | Other | Total |


| Years ended December 31 2014 2013 2012 | Revenue | Operating income | Operating margin |


| Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights(a) Weighted-average exerciseprice of outstanding options, warrants and rights(b) Number of securitiesremaining available forfuture issuance under equity compensation plans (excluding securities reflected in column (a))(c) | Equity compensation plans approved by security holders | Equity compensation plans not approved by security holders | Total |


| Common stock under stock and option plans 21,829 | Common stock under the Vertex Purchase Plan | Common stock under the Vertex 401(k) Plan | Total |


| December 31, 2014 2013 | Cash and cash equivalents | Equity securities: | U.S.-based companies | International-based companies | Fixed-income securities: | Government bonds | Corporate bonds and debt securities | Mutual, pooled and commingled funds | Hedge funds/limited partnerships | Real estate | Other | Total other postretirement benefit plan assets1 |


| 2010 2009 2008 | (in millions) | Balance, beginning of year | Capitalization of commissions, sales and issue expenses | Amortization—Impact of assumption and experience unlocking and true-ups | Amortization—All Other | Change in unrealized investment gains and losses | Foreign currency translation and other | Balance, end of year |


| Balance at January 1, 2011 $118,314 | Increases in current period tax positions | Decreases in prior period measurement of tax positions | Balance at December 31, 2011 | Increases in current period tax positions | Decreases in prior period measurement of tax positions | Balance at December 31, 2012 |


| Millions, Except Estimated UsefulLifeAs of December 31, 2013 Cost$5,120 AccumulatedDepreciation$N/A Net BookValue$5,120 EstimatedUseful LifeN/A | Road: | Rail and other track material | Ties | Ballast | Other roadway [a] | Total road | Equipment: | Locomotives | Freight cars | Work equipment and other | Total equipment | Technology and other | Construction in progress | Total |


| In millions 2017 2016 2015 | Weighted-average number of basic shares | Shares issuable under incentive stock plans | Weighted-average number of diluted shares |


| Rating equivalent 2014 2013(a) | December 31,(in millions, except ratios) | AAA/Aaa to AA-/Aa3 | A+/A1 to A-/A3 | BBB+/Baa1 to BBB-/Baa3 | BB+/Ba1 to B-/B3 | CCC+/Caa1 and below | Total |


| RSUs PSUs | Number of Shares | Nonvested as of January 1, 2009 | Granted | Replacement awards | Vested | Forfeited | Nonvested at December 31, 2009 | Pension Benefits | Years Ended December 31 | Service cost | Interest cost | Expected return on plan assets | Net amortization | Termination benefits | Curtailments | Settlements | Net pension and other postretirement cost |


Operating expenses were up $137 million from 2003, as higher expenses for salaries and employee benefits, transaction processing, occupancy and other fees were largely offset by decreases in merger, integration, divestiture and restructuring costs.
Operating expenses for 2004 included $62 million of merger and integration costs, compared with $110 million of merger, integration and divestiture costs in 2003.
In addition, 2004 operating expenses included $21 million of restructuring costs related to a reduction in force, down from $296 million in 2003.
Salaries and employee benefits expense increased $226 million for 2004, driven by higher incentive compensation costs resulting from our improved earnings, somewhat offset by a decrease in expenses for costs related to the PAM business prior to its sale.
Information systems and communications expense decreased $24 million from the prior year, primarily the result of the benefits of converting GSS customers to our systems.
Transaction processing services expense increased $84 million from 2003.
These expenses, which are in large part volume-related, include equity trading services and fees related to securities settlement, subcustodian fees and external contract services.
The increase resulted from a higher level of investment activity combined with higher net asset values that impact subcustodian fees.
Occupancy expense increased $63 million from 2003, reflective of our move to our new corporate headquarters, the costs of a new data center, and the recognition of a loss of $16 million from a sub-lease agreement.
Merger and integration costs related to the acquisition of the GSS business were $62 million in 2004, down from $103 million in 2003.
Divestiture costs related to the sale of the PAM business were $7 million in 2003.


| Base period Indexed Returns For the Years Ended December 31, | Company/Index | Mastercard | S&P 500 Financials | S&P 500 Index |


| 2005 2004 | As of December 31, | Media | Automotive | Consumer products | Telecom services | Airlines | Utilities | Machinery and equipmentmanufacturing | Retail and consumer services | Real estate | Building materials/construction | All other | Total excluding HFS | Held-for-sale(a) | Total |


Capitalized SoftwareThe Company accounts for capitalized software under applicable accounting guidance which, among other provisions, requires capitalization of certain internal-use software costs once certain criteria are met.
Overhead, general and administrative and training costs are not capitalized.
Capitalized software balances, net of accumulated amortization, were $4.4 million and $4.6 million at December 31, 2016 and 2015, respectively.
Stock-Based CompensationThe Company recognizes expense for the grant date fair value of its employee stock awards on a straight-line basis (or, in the case of performance-based awards, on a graded basis) over the employees requisite service period (generally the vesting period of the award).
The fair value of option awards is estimated using the Black-Scholes option valuation model.
Due to the adoption of an ASU in 2016, cash flows resulting from the tax benefits arising from tax deductions in excess of the compensation cost recognized for stock award exercises (excess tax benefits) are no longer classified as financing cash flows.
Prior periods were not adjusted, as the ASU was adopted on a prospective basis.
See the the caption Recent Accounting Prononcements elsewhere in this Note for additional information regarding the ASU.


| Year Ended December 31 2013 2012 Variance | Revenues | Operating earnings | Operating margins |


| Year Ended December 31, | 2010 | ($ in millions) | Production | Ad valorem | Other | Total |


| December 31, | 2014 | U.S. | (in millions) | Accumulated Benefit Obligation | Information for pension plans with an accumulated benefit obligation in excess of plan assets: | Projected benefit obligation | Accumulated benefit obligation | Fair value of plan assets | Information for pension plans with a projected benefit obligation in excess of plan assets: | Projected benefit obligation | Fair value of plan assets |


| December 31, 2007 | Public | Carrying amount | (in millions) | Three months or less | Greater than three to six months | Greater than six to nine months | Greater than nine to twelve months | Greater than twelve to twenty-four months | Greater than twenty-four to thirty-six months | Greater than thirty-six months | Total fixed maturities, available-for-sale |


| 2014 2013 2012 | Weighted-average fair value ($) | Risk-free interest rate (%) | Average expected option life (years) | Expected volatility (%) | Expected dividend yield (%) |


| December 31, 2008 December 31, 2007 | Carrying amount | ($ in millions) | Fixed maturity securities: | Public | Private | Equity securities | Mortgage loans: | Commercial | Residential | Real estate held for sale | Real estate held for investment | Policy loans | Other investments | Total invested assets | Cash and cash equivalents | Total invested assets and cash |


| Thousands of Dt Delivered Revenues in Millions (a) | For the Years Ended | Description | Residential | General | Firm transportation | Total firm sales and transportation | Interruptible sales (c) | NYPA | Generation plants | Other | Other operating revenues (d) | Total |


| Shares Weighted Average Grant-Date Fair Value | Nonvested at December 31, 2005 | Granted | Vested | Forfeited | Nonvested at December 31, 2006 |


MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (COMBINED FOR CON EDISON AND CON EDISON OF NEW YORK)–CONTINUED Electric delivery volumes in Con Edison of New York’s service area increased 1.9 percent in 2004 compared with 2003, reflecting principally increased new business.
After adjusting for variations, principally weather and billing days in each period and the August 2003 regional power outage, electric delivery volumes in Con Edison of New York’s service area increased 1.4 percent in 2004 compared with 2003.
Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.
Con Edison of New York’s electric fuel costs increased $46 million in 2004 as compared with 2003, primarily because the company’s generation plants were dispatched more frequently than in the same period last year.
Electric purchased power costs decreased $80 million, reflecting a decrease in purchased volumes, partially offset by higher unit costs.
Con Edison of New York’s electric operating income decreased $106 million in 2004 compared with 2003.
The principal components of the decrease were lower net revenues ($147 million), and increases in other operations and maintenance expense ($49 million – due primarily to a reduced net credit for pensions and other postretirement benefits), property taxes ($21 million) and depreciation ($16 million).
The increases in expense were offset in part by lower income tax ($80 million), state and local revenue taxes ($32 million), sales and use tax ($8 million).
Gas Con Edison of New York’s gas operating revenues in 2004 increased $8 million compared with 2003, reflecting primarily higher firm and non-firm revenues due principally to the gas rate plan ($23 million) and the reconciliation of gas distribution losses to levels reflected in rates, which resulted in a net benefit of $12 million.
This increase was partially offset by non-cash charge ($18 million) under the gas rate plan (see Note B to the financial statements).
Con Edison of New York’s revenues from gas sales are subject to a weather normalization clause that moderates, but does not eliminate, the effect of weather-related changes on net income.


| Years Ended December 31, | 2015 | Low Interest Rate Scenario | Three-month LIBOR | 10-year U.S. Treasury |


| Options(a,b) WeightedAverageExercisePrice WeightedAverageRemainingLife(years) AggregateIntrinsicValue(thousands) | Outstanding at December 31, 2012 | Granted | Exercised | Expired | Outstanding at December 31, 2013 | Granted | Exercised | Expired | Outstanding at December 31, 2014 | Granted | Exercised | Expired | Outstanding at December 31, 2015 |


Note 6  Shareholders Equity and Share-based Compensation Preferred Stock The Company has five million shares of authorized preferred stock, none of which is issued or outstanding.
Under the terms of the Companys Restated Articles of Incorporation, the Board of Directors is authorized to determine or alter the rights, preferences, privileges and restrictions of the Companys authorized but unissued shares of preferred stock.
Dividend and Stock Repurchase Program In 2012, the Board of Directors of the Company approved a dividend policy pursuant to which it plans to make, subject to subsequent declaration, quarterly dividends of $2.65 per share.
On July 24, 2012, the Board of Directors declared a dividend of $2.65 per share to shareholders of record as of the close of business on August 13, 2012.
The Company paid $2.5 billion in conjunction with this dividend on August 16, 2012.
No dividends were declared in the first three quarters of 2012 or in 2011 and 2010.


Operating Environment.
Following difficult market conditions and the impact of a challenging macroeconomic environment on corporate performance, particularly in the energy sector, in the first quarter of 2016, market conditions improved during the rest of the year as macroeconomic concerns moderated.
Global equity markets increased during 2016, contributing to net gains from investments in public equities, and corporate performance rebounded from the difficult start to the year.
If macroeconomic concerns negatively affect corporate performance or company-specific events, or if global equity markets decline, net revenues in Investing & Lending would likely be negatively impacted.
Although net revenues in Investing & Lending for 2015 benefited from favorable company-specific events, including sales, initial public offerings and financings, a decline in global equity prices and widening high-yield credit spreads during the second half of 2015 impacted results.2016 versus 2015.
Net revenues in Investing & Lending were $4.08 billion for 2016, 25% lower than 2015.
This decrease was primarily due to significantly lower net revenues from investments in equities, primarily reflecting a significant decrease in net gains from private equities, driven by company-specific events and corporate performance.
In addition, net revenues in debt securities and loans were lower compared with 2015, reflecting significantly lower net revenues related to relationship lending activities, due to the impact of changes in credit spreads on economic hedges.
Losses related to these hedges were $596 million in 2016, compared with gains of $329 million in 2015.
This decrease was partially offset by higher net gains from investments in debt instruments and higher net interest income.
See Note 9 to the consolidated financial statements for further information about economic hedges related to our relationship lending activities.
Operating expenses were $2.39 billion for 2016, essentially unchanged compared with 2015.
Pre-tax earnings were $1.69 billion in 2016, 44% lower than 2015.2015 versus 2014.
Net revenues in Investing & Lending were $5.44 billion for 2015, 20% lower than 2014.
This decrease was primarily due to lower net revenues from investments in equities, principally reflecting the sale of Metro in the fourth quarter of 2014 and lower net gains from investments in private equities, driven by corporate performance.
In addition, net revenues in debt securities and loans were significantly lower, reflecting lower net gains from investments.


| 2014 2013 2012 | Income from continuing operations | Income (loss) from discontinued operations, net of tax | Diluted earnings per share |


6.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES Risk Management Objectives The Company is exposed to market risks associated with its enterprise-wide business activities, namely the purchase and sale of fuel and electricity as well as foreign currency risk and interest rate risk.
In order to manage the market risks associated with these business activities, we enter into contracts that incorporate derivatives and financial instruments, including forwards, futures, options, swaps or combinations thereof, as appropriate.
The Company applies hedge accounting for all contracts as long as they are eligible under the accounting standards for derivatives and hedging.
While derivative transactions are not entered into for trading purposes, some contracts are not eligible for hedge accounting.
THE AES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) DECEMBER 31, 2010, 2009, AND 2008 Recourse debt as of December 31, 2010 is scheduled to reach maturity as set forth in the table below:


| Years Ended December 31, | 2005 | Collection: | Residential | Commercial | Industrial | Other | Total collection | Transfer and disposal | Less: Intercompany | Transfer and disposal, net | Other | Revenue |


| Income Statement Classification Gain/(Loss) on   Swaps Gain/(Loss)   on Note Net Income   Effect | Other income |


In determining the allowance for credit losses, residential real estate loans and consumer loans are generally evaluated collectively after considering such factors as payment performance and recent loss experience and trends, which are mainly driven by current collateral values in the market place as well as the amount of loan defaults.
Loss rates on such loans are determined by reference to recent charge-off history and are evaluated (and adjusted if deemed appropriate) through consideration of other factors including near-term forecasted loss estimates developed by the Company’s credit department.
In arriving at such forecasts, the Company considers the current estimated fair value of its collateral based on geographical adjustments for home price depreciation/appreciation and overall borrower repayment performance.
With regard to collateral values, the realizability of such values by the Company contemplates repayment of any first lien position prior to recovering amounts on a second lien position.
However, residential real estate loans and outstanding balances of home equity loans and lines of credit that are more than 150 days past due are generally evaluated for collectibility on a loan-by-loan basis by giving consideration to estimated collateral values.
The carrying value of residential real estate loans and home equity loans and lines of credit for which a partial charge-off has been recognized totaled $29 million and $23 million, respectively, at December 31, 2018 and $34 million and $25 million, respectively, at December 31, 2017.
Residential real estate loans and home equity loans and lines of credit that were more than 150 days past due but did not require a partial charge-off because the net realizable value of the collateral exceeded the outstanding customer balance were $21 million and $31 million, respectively, at December 31, 2018 and $20 million and $32 million, respectively, at December 31, 2017.
The Company also measures additional losses for purchased impaired loans when it is probable that the Company will be unable to collect all cash flows expected at acquisition plus additional cash flows expected to be collected arising from changes in estimates after acquisition.
The determination of the allocated portion of the allowance for credit losses is very subjective.
Given that inherent subjectivity and potential imprecision involved in determining the allocated portion of the allowance for credit losses, the Company also provides an inherent unallocated portion of the allowance.
The unallocated portion of the allowance is intended to recognize probable losses that are not otherwise identifiable and includes management’s subjective determination of amounts necessary to provide for the possible use of imprecise estimates in determining the allocated portion of the allowance.
Therefore, the level of the unallocated portion of the allowance is primarily reflective of the inherent


| As of December 31, | 2010 | AIG | S&P 500 | Peer Group |


| Year Ended December 31, | 2014 | Other revenue special item, net -1 | Mainline operating special items, net -2 | Regional operating special items, net | Nonoperating special items, net -3 | Reorganization items, net -4 | Income tax special items, net -5 | Total |


| December 31, | (DOLLARS IN THOUSANDS) | Equity-based awards | Liability-based awards | Total stock-based compensation | Less tax benefit | Total stock-based compensation, net of tax | December 31, | (DOLLARS IN THOUSANDS) | Equity-based awards | Liability-based awards | Total stock-based compensation | Less tax benefit | Total stock-based compensation, net of tax |


Payments to participants in the unfunded Other Liquidity Items Cash payments required for long-term debt maturities, rental payments under noncancellable operating leases, purchase obligations and other commitments in effect at December 31, 2010, are summarized in the following table:
(a) Amounts reported in local currencies have been translated at the year-end 2010 exchange rates.
(b) For variable rate facilities, amounts are based on interest rates in effect at year end and do not contemplate the effects of hedging instruments.
(c) The company¡¯s purchase obligations include contracted amounts for aluminum, steel and other direct materials.
Also included are commitments for purchases of natural gas and electricity, aerospace and technologies contracts and other less significant items.
In cases where variable prices and/or usage are involved, management¡¯s best estimates have been used.
Depending on the circumstances, early termination of the contracts may or may not result in penalties and, therefore, actual payments could vary significantly.
The table above does not include $60.1 million of uncertain tax positions, the timing of which is uncertain.
Contributions to the company¡¯s defined benefit pension plans, not including the unfunded German plans, are expected to be in the range of $30 million in 2011.
This estimate may change based on changes in the Pension Protection Act and actual plan asset performance, among other factors.
Benefit payments related to these plans are expected to be $71.4 million, $74.0 million, $77.1 million, $80.3 million and $84.9 million for the years ending December 31, 2011 through 2015, respectively, and a total of $483.1 million for the years 2016 through 2020.
Payments to participants in the unfunded German plans are expected to be between $21.8 million (€16.5 million) to $23.2 million (€17.5 million) in each of the years 2011 through 2015 and a total of $102.7 million (€77.5 million) for the years 2016 through 2020.
For the U. S.  pension plans in 2011, we changed our return on asset assumption to 8.00 percent (from 8.25 percent in 2010) and our discount rate assumption to an average of 5.55 percent (from 6.00 percent in 2010).
Based on the changes in assumptions, pension expense in 2011 is anticipated to be relatively flat compared to 2010.
A reduction of the expected return on pension assets assumption by a quarter of a percentage point would result in an estimated $2.9 million increase in the 2011 global pension expense, while a quarter of a percentage point reduction in the discount rate applied to the pension liability would result in an estimated $3.5 million of additional pension expense in 2011.
Additional information regarding the company¡¯s pension plans is provided in Note 14 accompanying the consolidated financial statements within Item 8 of this report.
Annual cash dividends paid on common stock were 20 cents per share in 2010, 2009 and 2008.
Total dividends paid were $35.8 million in 2010, $37.4 million in 2009 and $37.5 million in 2008.
On January 26, 2011, the company¡¯s board of directors approved an increase in the quarterly dividends to 7 cents per share.
Share Repurchases Our share repurchases, net of issuances, totaled $506.7 million in 2010, $5.1 million in 2009 and $299.6 million in 2008.
On November 2, 2010, we acquired 2,775,408 shares of our publicly held common stock in a private transaction for $88.8 million.
On February 17, 2010, we entered into an accelerated share repurchase agreement to buy $125.0 million of our common shares using cash on hand and available borrowings.
We advanced the $125.0 million on February 22, 2010, and received 4,323,598 shares, which represented 90 percent of the total shares as calculated using the previous day¡¯s closing price.
The agreement was settled on May 20, 2010, and the company received an additional 398,206 shares.
Net repurchases in 2008 included a $31 million settlement on January 7, 2008, of a forward contract entered into in December 2007 for the repurchase of 1,350,000 shares.
From January 1 through February 24, 2011, Ball repurchased an additional $143.3 million of its common stock.
Table of Contents into U. S.  Dollars using the spot foreign exchange rate in effect on the exercise date.
Upon the exercise of share options, the company either issues new shares or can utilize shares held in treasury (see Note 10, “Share Capital”) to satisfy the exercise.
The share option plans provided for a grant price equal to the quoted market price of the company's shares on the date of grant.
If the options remain unexercised after a period of 10 years from the date of grant, the options expire.
Furthermore, options are forfeited if the employee leaves the company before the options vest.
All options outstanding at December 31, 2011were exercisable and had a range of exercise prices from ￡6.39 to ￡19.19, and weighted average remaining contractual life of 2.62 years.
The total intrinsic value of options exercised during the years ended December 31, 2011, 2010, and 2009, was $9.2 million, $18.5 million, and $20.7 million, respectively.
At December 31, 2011, the aggregate intrinsic value of options outstanding and options exercisable was $36.3 million.
The market price of the company's common stock at December 31, 2011 was $20.09 (December 31, 2010: $24.06).
Changes in outstanding share option awards are as follows:


| December 31, 2018 December 31, 2017 | CarryingValue | Mortgages and notes payable | Senior notes and debentures |


Research and Development Research and development expenses consist primarily of personnel-related costs, including salaries, benefits and stock-based compensation, for our engineers and other employees engaged in the research and development of our products and services.
In addition, research and development expenses include amortization of acquired intangible assets, allocated facilities and other supporting overhead costs.


(1) Other International includes EOG's United Kingdom, China, Canada and Argentina operations.
The Argentina operations were sold in the third quarter of 2016.
(2) Thousand barrels or thousand barrels of oil equivalent, as applicable; oil equivalents include crude oil and condensate, NGLs and natural gas.
Oil equivalents are determined using a ratio of 1.0 barrel of crude oil and condensate or NGLs to 6.0 thousand cubic feet of natural gas.
(3) Billion cubic feet.


Goodwill.
Goodwill is the cost of acquired companies in excess of the fair value of net assets, including identifiable intangible assets, at the acquisition date.
Goodwill is assessed for impairment annually in the fourth quarter or more frequently if events occur or circumstances change that indicate an impairment may exist.
When assessing goodwill for impairment, first, qualitative factors are assessed to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
If the results of the qualitative assessment are not conclusive, a quantitative goodwill test is performed.
The quantitative goodwill test consists of two steps: ° The first step compares the estimated fair value of each reporting unit with its estimated net book value (including goodwill and identifiable intangible assets).
If the reporting units estimated fair value exceeds its estimated net book value, goodwill is not impaired.
To estimate the fair value of each reporting unit, a relative value technique is used because the firm believes market participants would use this technique to value the firms reporting units.
The relative value technique applies observable price-to-earnings multiples or price-to-book multiples and projected return on equity of comparable competitors to reporting units net earnings or net book value.
The net book value of each reporting unit reflects an allocation of total shareholders equity and represents the estimated amount of total shareholders equity required to support the activities of the reporting unit under currently applicable regulatory capital requirements.
° If the estimated fair value of a reporting unit is less than its estimated net book value, the second step of the goodwill test is performed to measure the amount of impairment, if any.
An impairment is equal to the excess of the carrying amount of goodwill over its fair value.
During the fourth quarter of 2016, the firm assessed goodwill for impairment using a qualitative assessment.
Multiple factors were assessed with respect to each of the firms reporting units to determine whether it was more likely than not that the fair value of any of these reporting units was less than its carrying amount.
The qualitative assessment also considered changes since the 2015 quantitative test.
In accordance with ASC 350, the firm considered the following factors in the qualitative assessment performed in the fourth quarter when evaluating whether it was more likely than not that the fair value of a reporting unit was less than its carrying amount: ° Performance Indicators.
During 2016, the firms net earnings, pre-tax margin, diluted earnings per common share, return on average common shareholders equity and book value per common share increased as compared with 2015.
In addition, the firms overall cost structure declined reflecting the impact of expense savings initiatives.
° Firm and Industry Events.
There were no events, entityspecific or otherwise, since the 2015 quantitative goodwill test that would have had a significant negative impact on the valuation of the firms reporting units.
° Macroeconomic Indicators.
Since the 2015 quantitative goodwill test, the firms general operating environment improved as concerns about the outlook for global economic growth moderated.
° Fair Value Indicators.
Since the 2015 quantitative goodwill test, fair value indicators improved as global equity prices increased and credit spreads tightened.
In addition, most publicly-traded industry participants, including the firm, experienced increases in stock price, price-to-book multiples and price-to-earnings multiples.
As a result of the qualitative assessment, the firm determined that it was more likely than not that the fair value of each of the reporting units exceeded its respective carrying amount.
Notwithstanding the results of the qualitative assessment, since the 2015 quantitative goodwill test determined that the estimated fair value of the Fixed Income, Currency and Commodities Client Execution reporting unit was not substantially in excess of its carrying value, the firm also performed a quantitative test on this reporting unit during the fourth quarter of 2016.
In the quantitative test, the estimated fair value of the Fixed Income, Currency and Commodities Client Execution reporting unit substantially exceeded its carrying value.
Therefore, the firm determined that goodwill for all reporting units was not impaired.


A reconciliation of the amounts included in the computation of earnings per common share from continuing operations, and diluted earnings per common share from continuing operations is as follows:
Note: If an amount does not appear in the above table, the security was antidilutive for the period presented.
NOTE 3 INDUSTRY SEGMENT INFORMATION Financial information by industry segment and geographic area for 2006, 2005 and 2004 is presented on pages 43 and 44.


| Change | 2007 | Government segment medical members: | Medicare Advantage | Medicare stand-alone PDP | Total Medicare | Military services | Military services ASO | Total military services | Medicaid | Medicaid ASO | Total Medicaid | Total Government | Commercial segment medical members: | Fully-insured | ASO | Total Commercial | Total medical membership |


| PXP MMR Total | Increase in current assets (primarily current deferred income tax asset) | Decreases in oil and gas properties - full cost method: | Subject to amortization | Not subject to amortization | Increase in other assets (deferred income tax asset) | Net increase in deferred income tax liability | Net decrease (increase) in other liabilities (primarily warrants) | Decrease in redeemable noncontrolling interest | (Decrease) increase in goodwill |


| Balance at October 1, 2010 $19,900 | Increases based on positions related to prior years | Increases based on positions related to current year | Decreases relating to settlements with taxing authorities | Decreases relating to lapses of applicable statutes of limitations | Balance at September 30, 2011 |


| At July 31, 2015 At July 31, 2014 | (In millions) | Assets: | Cash equivalents, primarily money market funds | Available-for-sale debt securities: | Municipal bonds | Municipal auction rate securities | Corporate notes | U.S. agency securities | Total available-for-sale securities | Total assets measured at fair value on a recurring basis | Liabilities: | Senior notes -1 |


Restructuring charges.
In September 2018, we initiated a restructuring plan to match strategic and financial objectives and optimize resources for long term growth.
As a result of these initiatives, we recorded a restructuring charge of $18.4 million in the fourth quarter of fiscal year 2018 related to a reduction in workforce.
In September 2017, we initiated a restructuring plan to reduce our operating expenses and better align our workforce and costs with market opportunities, product development and business strategies.
As a result of these initiatives, we recorded a restructuring charge of $12.7 million in the fourth quarter of fiscal year 2017 related to a reduction in workforce.


| Share Awards Weighted Average  Grant-Date  Fair Value | Non-vested at May 31, 2007 | Granted | Vested | Forfeited | Non-vested at May 31, 2008 | Granted | Vested | Forfeited | Non-vested at May 31, 2009 |


| 2010 | (millions of dollars) | Operating income increase | Net earnings increase attributable to BorgWarner Inc. | Earnings per share increase — Basic | Earnings per share increase — Diluted |


| Year ended December 31, (in millions) 2008 2007 2006 | U.S. | Non-U.S.(a) | Income from continuing operationsbefore income taxexpense (benefit) |


| As of December 31, | Year Ended December 31, | 2005 |


| September 30, 2006 September 24, 2005 September 25, 2004 | Beginning allowance balance | Charged to costs and expenses | Deductions(a) | Ending allowance balance |


| Actual Allocations Target Allocations | Asset Class | Fixed income | Global equity | Private equity | Real estate and real assets | Hedge funds | Total |


| Number of RSUs (In thousands) Weighted Average Grant-Date Fair Value PerShare | Nonvested at December 31, 2011 | Granted | Vested | Forfeited | Nonvested at December 31, 2012 | Granted | Vested | Forfeited | Nonvested at December 31, 2013 | Granted | Vested | Forfeited | Nonvested at December 31, 2014 |


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


| Payments Due by Period | Total | Debt-1 | Interest on debt-2 | Operating lease obligations-3 | Purchase obligations-4 | Total contractual obligations-5 |


| Number of Life Settlement Contracts Fair Value of Life Settlement Contracts Face Amount of Life Insurance Policies | (Dollar amounts in millions) | Estimated maturity during: | 2010 | 2011 | 2012 | 2013 | 2014 | Thereafter | Total |


| Fair Value Impact | In Millions | Interest rate instruments | Foreign currency instruments | Commodity instruments | Equity instruments |


| Millions of kWhs Delivered Revenues in Millions | Twelve Months Ended | Description | Residential/Religious(a) | Commercial/Industrial | Retail access customers | Public authorities | Other operating revenues | Total |


| 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 | United Parcel Service, Inc. | S&P 500 Index | Dow Jones Transportation Average |


| Shares Weighted- Average Grant- Date Fair Value | (In thousands) | Non-vested at January 1, 2013 | Granted | Vested | Forfeited | Non-vested at December 31, 2013 |


A summary of the status of the Company’s performance stock units and restricted stock units as of December 31, 2005, and the change during 2005 is presented below:


Certain investments in private equity and real estate ventures and certain equity method investments Citigroup invests in private equity and real estate ventures for the purpose of earning investment returns and for capital appreciation.
The Company has elected the fair-value option for certain of these ventures, because such investments are considered similar to many private equity or hedge fund activities in our investment companies, which are reported at fair value.
The fair-value option brings consistency in the accounting and evaluation of certain of these investments.
As required by SFAS 159, all investments (debt and equity) in such private equity and real estate entities are accounted for at fair value.
These investments are classified as Investments on Citigroups Consolidated Balance Sheet.
Citigroup also holds various non-strategic investments in leveraged buyout funds and other hedge funds that previously were required to be accounted for under the equity method.
The Company elected fair-value accounting to reduce operational and accounting complexity.
Since the funds account for all of their underlying assets at fair value, the impact of applying the equity method to Citigroups investment in these funds was equivalent to fair-value accounting.
Thus, this fair-value election had no impact on opening Retained earnings.
These investments are classified as Other assets on Citigroups Consolidated Balance Sheet.
Changes in the fair values of these investments are classified in Other revenue in the Companys Consolidated Statement of Income.


| December 31, | 2014 | (in millions) | Stock option | Restricted stock-1 | Restricted stock units | Liability awards | Total |


| Total Domestic International | $ | December 31, 2016 | Components of revenue change: | Foreign exchange impact | Acquisition revenue, net of disposition revenue | Organic growth | December 31, 2017 | 2017 | Americas: | North America | Latin America | EMEA: | Europe | Middle East and Africa | Asia-Pacific | $15,273.6 |


Valuation techniques – Cash equivalents are mostly comprised of short-term money-market instruments and are valued at cost, which approximates fair value.
U. S.  equity securities and international equity securities categorized as Level 1 are traded on active national and international exchanges and are valued at their closing prices on the last trading day of the year.
For U. S.  equity securities and international equity securities not traded on an active exchange, or if the closing price is not available, the trustee obtains indicative quotes from a pricing vendor, broker, or investment manager.
These securities are categorized as Level 2 if the custodian obtains corroborated quotes from a pricing vendor or categorized as Level 3 if the custodian obtains uncorroborated quotes from a broker or investment manager.
Commingled equity funds are investment vehicles valued using the Net Asset Value (NAV) provided by the fund managers.
The NAV is the total value of the fund divided by the number of shares outstanding.
Commingled equity funds are categorized as Level 1 if traded at their NAV on a nationally recognized securities exchange or categorized as Level 2 if the NAV is corroborated by observable market data (e. g. , purchases or sales activity) and we are able to redeem our investment in the near-term.
Fixed income investments categorized as Level 2 are valued by the trustee using pricing models that use verifiable observable market data (e. g. , interest rates and yield curves observable at commonly quoted intervals and credit spreads), bids provided by brokers or dealers, or quoted prices of securities with similar characteristics.
Fixed income investments are categorized at Level 3 when valuations using observable inputs are unavailable.
The trustee obtains pricing based on indicative quotes or bid evaluations from vendors, brokers, or the investment manager.
Private equity funds, real estate funds, and hedge funds are valued using the NAV based on valuation models of underlying securities which generally include significant unobservable inputs that cannot be corroborated using verifiable observable market data.
Valuations for private equity funds and real estate funds are determined by the general partners.
Depending on the nature of the assets, the general partners may use various valuation methodologies, including the income and market approaches in their models.
The market approach consists of analyzing market transactions for comparable assets while the income approach uses earnings or the net present value of estimated future cash flows adjusted for liquidity and other risk factors.
Hedge funds are valued by independent administrators using various pricing sources and models based on the nature of the securities.
Private equity funds, real estate funds, and hedge funds are generally categorized as Level 3 as we cannot fully redeem our investment in the near-term.


Interest Expense Interest expense was $39.9 million, $37.5 million and $31.7 million for the years ended May 31, 2015, 2014 and 2013, respectively.
Interest expense is comprised primarily of interest on our long-term debt and short-term lines of credit.
Interest expense also includes settlements on our interest rate swap, amortization of deferred debt issuance costs, commitment fees on the unused portions of our Corporate Credit Facility and short-term lines of credit and interest related to unrecognized income tax benefits.
Interest expense of $3.6 million that had been accrued related to an unrecognized tax benefit was eliminated as of May 31, 2015 and reflected as a reduction to Interest and other expense in the year ended May 31, 2015 in our consolidated statement of income.
See Note 8  Income Tax for further discussion.
Interest expense during the year ended May 31, 2014 includes a loss on extinguishment of debt of $2.1 million in connection with the refinancing of our term loan and revolving credit facilities.
Interest expense for the years ended May 31, 2014 and 2013 includes dividend payments to HSBC Asia in the amounts of $3.3 million and $8.4 million, respectively, related to a redeemable noncontrolling interest that HSBC Asia held in Global Payments Asia-Pacific.
See Note 3  Business and Intangible Asset Acquisitions and Joint Ventures-Redeemable Noncontrolling Interest Acquisition for further discussion.


On January 1, 2012, the Company's health care cost trend assumption for US postretirement medical plan's net periodic benefit cost was 7.5% for the first year, declining 0.5% per year to an ultimate rate of 5%.
On January 1, 2011, the Company's health care cost trend assumption for US postretirement medical plan's net periodic benefit cost was 8% for the first four years declining 0.5% per year to an ultimate rate of 5%.
On January 1, 2010, the Company's health care cost trend assumption for US postretirement medical plan's net periodic benefit cost was 8.5% for the first year declining 0.5% per year to an ultimate rate of 5%.
Assumed health care cost trend rates for US postretirement medical plans have a significant effect on the amounts reported for the health care plans.
The impact of a one percentage point change in the assumed health care cost trend is as follows: