document stringlengths 8.64k 13.4k | summary stringlengths 179 2.97k | __index_level_0__ int64 0 16.8k |
|---|---|---|
overview lightstone value plus real estate investment trust ii , inc. ( โ lightstone reit ii โ ) , together with lightstone value plus reit ii , lp ( the โ operating partnership โ and collectively โ the company โ , also referred to as โ we โ , โ our โ or โ us โ ) has and may continue to acquire and operate commercial ( including hospitality and retail properties ) and residential real estate assets , as well as other real estate-related investments , principally in the united states . our acquisitions and investments are principally conducted through our operating partnership and generally include both portfolios and individual properties . our commercial holdings currently consist of hospitality and retail ( multi-tenanted shopping centers ) properties . our real estate investments have been and will continue to be acquired and operated by us alone or jointly with others . we do not have employees . we have entered into an advisory agreement pursuant to which the advisor supervises and manages our day-to-day operations and selects our real estate and real estate related investments , subject to oversight by our board of directors . we pay the advisor fees for services related to the investment and management of our assets , and we will reimburse the advisor for certain expenses incurred on our behalf . we engage in certain activities through taxable reit subsidiaries ( โ trss โ ) , including when we acquire a hotel we usually establish a trs which then enters into an operating lease agreement for the hotel . as such , we are subject to u.s. federal and state income and franchise taxes from these activities . acquisitions and investment strategy we have made and intend to continue to make direct or indirect real estate investments that will satisfy our primary investment objectives of preserving capital , paying distributions , if necessary to maintain our status as a reit , and achieving appreciation of our assets over the long term . the ability of our advisor to identify and execute investment opportunities directly impacts our financial performance . we will continue to seek to acquire and operate hotels and other commercial real estate assets primarily located in the united states . we may also acquire and operate residential properties and make other real estate-related investments . we may acquire and operate all such properties alone or jointly with another party . current environment our operating results are substantially impacted by the overall health of local , u.s. national and global economies and may be influenced by market and other challenges . additionally , our business and financial performance may be adversely affected by current and future economic and other conditions ; including , but not limited to , availability or terms of financings , financial markets volatility , political upheaval or uncertainty , natural and man-made disasters , terrorism and acts of war , unfavorable changes in laws and regulations , outbreaks of contagious diseases , cybercrime , loss of key relationships , and recession . these and other market and economic challenges could materially affect ( i ) the value and performance of our investments , ( ii ) our ability to pay future distributions , if any , ( iii ) the availability or terms of financings , ( iv ) our ability to make scheduled principal and interest payments , and ( v ) our ability to refinance any outstanding debt when contractually due . we are not currently aware of any other material trends or uncertainties , favorable or unfavorable , that may be reasonably anticipated to have a material impact on either capital resources or the revenues or income to be derived from our operations , other than those referred to above or throughout this form 10-k. 18 covid-19 pandemic operations and liquidity update on march 11 , 2020 , the world health organization declared covid-19 a global pandemic leading many countries , including the united states , particularly at the individual state level , to subsequently impose various degrees of restrictions and other measures , including , but not limited to , mandatory temporary closures , quarantine guidelines , limitations on travel , and โ shelter in place โ rules in an effort to reduce its duration and the severity of its spread . although the covid-19 pandemic has continued to evolve , most of these previously imposed restrictions and other measures have now been reduced and or lifted . however , the covid-19 pandemic remains highly unpredictable and dynamic and its duration and extent is likely dependent on numerous developments such as the regulatory approval , mass production , administration and ultimate effectiveness of vaccines , as well as the timeline to achieve a level of sufficient herd immunity amongst the general population . accordingly , the covid-19 pandemic may continue to have negative effects on the overall health of the u.s. economy for the foreseeable future . the extent to which our business may be affected by the ongoing covid-19 pandemic will largely depend on both current and future developments , all of which are highly uncertain and can not be reasonably predicted . as a result of the covid-19 pandemic , room demand for our consolidated and unconsolidated hotels began to significantly decline in march 2020 and while there has been some slight improvement ; room demand continues to be substantially below historical levels . the covid-19 pandemic has had a significant negative impact on our operations and financial results to date and we currently expect that the covid-19 pandemic will continue to have a significant negative impact on our results of operations , financial position and cash flow for the foreseeable future . we can not currently estimate if and when room demand will fully recover to pre-pandemic levels for our hotels . additionally , we have an unconsolidated 48.6 % membership interest in brownmill , which owns two retail properties located in new jersey that have been subject to various restrictions . story_separator_special_tag these accounting policies are most important to the portrayal of our results and financial position , either because of the significance of the financial statement items to which they relate or because they require management 's most difficult , subjective or complex judgments . revenue recognition . our revenues are comprised primarily of revenues from the operations of hotels . room revenue is generated through contracts with customers whereby the customers agree to pay a daily rate for right to use a hotel room . the company 's contract performance obligations are fulfilled at the end of the day that the customer is provided the room and revenue is recognized daily at the contract rate . payment from the customer is secured at the end of the contract upon check-out by the customer from our hotel . the company participates in frequent guest programs sponsored by the brand owners of our hotels whereby the brand owner allows guests to earn loyalty points during their hotel stay . the company recognizes revenue at the amount earned that it will receive from the brand owner when a guest redeems their loyalty points by staying at one of the company 's hotels . revenue from food , beverage and other ancillary services is generated when a customer chooses to purchase goods or services separately from a hotel room and revenue is recognized when these goods or services are provided to the customer and the company 's contract performance obligations have been fulfilled . some contracts for rooms , food , beverage or other services require an upfront deposit which is recorded as deferred revenues ( or contract liabilities ) and recognized once the performance obligations are satisfied . the contract liabilities are not significant . the company notes no significant judgments regarding the recognition of room , food and beverage or other revenues . investments in real estate . carrying value of assets the amounts to be capitalized as a result of periodic improvements and additions to real estate property , when applicable , and the periods over which the assets will be depreciated or amortized , are determined based on the application of accounting standards that may require estimates as to fair value and the allocation of various costs to the individual assets . differences in the amount attributed to the assets may be significant based upon the assumptions made in calculating these estimates . 20 impairment evaluation we evaluate our investments in real estate assets for potential impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable for a particular property . we evaluate the recoverability of our investments in real estate assets at the lowest identifiable level , the individual property level . no single indicator would necessarily result in us preparing an estimate to determine if an individual property 's future undiscounted cash flows are less than its carrying value . we use judgment to determine if the severity of any single indicator , or the fact there are a number of indicators of less severity that when combined , would result in an indication that a property requires an estimate of the undiscounted cash flows to determine if an impairment has occurred . relevant facts and circumstances include , among others , significant underperformance relative to historical or projected future operating results and significant negative industry or economic trends . the estimated cash flows used for the impairment analysis are subjective and require us to use our judgment and the determination of estimated fair value are based on our plans for the respective assets and our views of market and economic conditions . the estimates consider matters such as future operating income , market and other applicable trends and residual value , as well as the effects of demand , competition , and recent sales data for comparable properties . an impairment loss is recognized only if the carrying amount of a property is not recoverable and exceeds its fair value . the results of our 2020 impairment analysis did not identify any properties where the undiscounted cash flows were less than the carrying value . however , any changes in assumptions used in our impairment analysis could result in future impairment losses , which could be material . depreciation and amortization depreciation expense is computed based on the straight-line method over the estimated useful life of the applicable real estate asset . we generally use estimated useful lives of up to thirty-nine years for buildings and improvements and five to ten years for furniture and fixtures . maintenance and repairs will be charged to expense as incurred . investments in unconsolidated entities . we evaluate all investments in other entities for consolidation . we consider our percentage interest in the joint venture , evaluation of control and whether a variable interest entity exists when determining whether or not the investment qualifies for consolidation or if it should be accounted for as an unconsolidated investment under the equity method of accounting . if an investment qualifies for the equity method of accounting , our investment is recorded initially at cost , and subsequently adjusted for equity in net income or loss and cash contributions and distributions . the net income or loss of an unconsolidated investment is allocated to its investors in accordance with the provisions of the operating agreement of the entity . the allocation provisions in these agreements may differ from the ownership interest held by each investor . differences , if any , between the carrying amount of our investment in the respective joint venture and our share of the underlying equity of such unconsolidated entity are amortized over the respective lives of the underlying assets as applicable . these items are reported as a single line item in the statements of operations as income or loss from investments in unconsolidated entities . we review investments for impairment in value whenever events or changes in circumstances indicate that the carrying amount of such investment may not be recoverable .
| results of operations acquisition and disposition activities the following summarizes our acquisition and disposition activities during the years ended december 31 , 2020 and 2019 . 2019 : disposition of alabama hotels on may 9 , 2019 , we completed the disposition of two limited services hotels ( collectively , the โ alabama hotels โ ) for an aggregate contractual sales price of $ 13.3 million resulting in a gain on disposition of real estate and other assets of $ 0.1 million . the alabama hotels were comprised of the following properties : โ a holiday inn express hotel & suites ( the โ holiday inn โ opelika โ ) located in opelika , alabama ; and โ a holiday inn express hotel & suites ( โ holiday inn express โ auburn โ ) located in auburn , alabama . disposition of springhill suites - peabody on october 24 , 2019 , we completed the disposition of a springhill suites hotel located in peabody , massachusetts , ( the โ springhill suites โ peabody โ ) for an aggregate contractual sales price of $ 19.0 million resulting in a gain on disposition of real estate and other assets of $ 8.3 million . the dispositions of the alabama hotels and the springhill suites โ peabody are collectively referred to as the โ 2019 disposed hotels โ . the 2019 disposed hotels did not qualify to be reported as discontinued operations since the dispositions did not represent a strategic shift in our operations that had a major effect on our operations and financial results . accordingly , the operating results of the 2019 disposed hotels are reflected in our results from continuing operations for all periods presented through their respective dates of disposition . see note 4 of the notes to consolidated financial statements for additional information on our dispositions . 22 we currently have one operating segment .
| 2,300 |
the ids segment is primarily involved in the design , manufacture , and distribution of high-performance and innovative identification and healthcare products . the wps segment provides workplace safety and compliance products , half of which are internally manufactured and half are externally sourced . approximately 45 % of our total sales are derived outside of the united states . foreign sales within the ids and wps segments are approximately 35 % and 65 % , respectively . the ability to provide customers with a broad range of proprietary , customized and diverse products for use in various applications across multiple customers and geographies , along with a commitment to quality and service , have made brady a leader in many of its markets . the long-term sales growth and profitability of our segments will depend not only on improved demand in end markets and the overall economic environment , but also on our ability to continuously improve operational excellence , focus on the customer , develop and market innovative new products , and to advance our digital capabilities . in our ids business , our strategy for growth includes an increased focus on key customers , industries and products and improving the efficiency and effectiveness of the research and development ( `` r & d '' ) function . in our wps business , our strategy for growth includes a focus on workplace safety critical industries , innovative new product offerings , compliance expertise , and improving our digital capabilities . 15 story_separator_special_tag generated operating income of $ 117.9 million in fiscal 2016. operating income from continuing operations was $ 35.3 million in fiscal 2015 ; excluding impairment charges of $ 46.9 million and restructuring charges of $ 16.8 million , the company generated operating income from continuing operations of $ 99.0 million in 2015. the increase of $ 18.9 million in operating income was due to the improvement in gross profit margin primarily in the ids segment as well as reduced sg & a primarily in the wps segment . the increase was partially offset by the negative impact of currency fluctuations . 17 operating income to net earnings replace_table_token_6_th investment and other income investment and other income was $ 1.1 million in fiscal 2017 compared to expense of $ 0.7 million in fiscal 2016 and income of $ 0.8 million in fiscal 2015 . the increase in income in 2017 compared to 2016 was primarily due to an increase in the market value of securities held in executive deferred compensation plans . the increase in expense in 2016 compared to 2015 was primarily due to a decrease in the gain on market value of securities held in deferred compensation plans and an increase in foreign currency exchange losses . interest expense interest expense decreased to $ 5.5 million in fiscal 2017 compared to $ 7.8 million in fiscal 2016 and $ 11.2 million in fiscal 2015 . the decline since 2015 was due to the company 's declining principal balance under its outstanding debt agreements . income taxes the company 's effective income tax rate was 24.5 % in fiscal 2017. the effective income tax rate was reduced from the statutory tax rate of 35.0 % due to the generation of foreign tax credits from cash repatriations that occurred during the year and geographic profit mix , partially offset by adjustments to the reserve for uncertain tax positions . the company 's effective income tax rate was 26.7 % in fiscal 2016. the effective income tax rate was reduced from the statutory tax rate of 35.0 % due to certain adjustments to tax accruals and reserves , the generation of foreign tax credit carryforwards , research and development tax credits and the section 199 manufacturer 's deduction . the company 's effective income tax rate was 80.4 % in fiscal 2015. the effective income tax rate was significantly impacted by impairment charges of $ 46.9 million recognized during the period , as $ 39.8 million of these charges were nondeductible for income tax purposes . the effective income tax rate was further impacted by the generation of $ 5.0 million of foreign tax credit carry-forwards from the fiscal 2014 income tax return and increases in uncertain tax positions recognized in fiscal 2015. loss from discontinued operations discontinued operations include the asia die-cut and european die-cut businesses ( `` die-cut '' ) , of which a portion was divested in the fourth quarter of fiscal 2014 and the remainder was divested in the first quarter of fiscal 2015. the loss from discontinued operations net of income taxes of $ 1.9 million in fiscal 2015 primarily related to professional fees associated with the divestiture and a $ 0.4 million loss on the sale of die-cut , recorded during the three months ended october 31 , 2014. there was no depreciation or amortization expense recognized within discontinued operations for fiscal 2015 as the die-cut business was reported as held for sale beginning in the third quarter of fiscal 2013 , at which point the fixed assets and intangible assets of these businesses were no longer depreciated or amortized in accordance with applicable u.s. gaap . business segment operating results the company is organized and managed on a global basis within two reportable segments : id solutions and workplace safety . effective august 1 , 2016 , the company changed its internal measure of segment profit and loss that is reported to the chief operating 18 decision maker for purposes of making decisions about allocating resources to the segments and assessing its performance . prior to august 1 , 2016 , administrative costs were excluded from the measure of segment profit and loss . effective august 1 , 2016 , a portion of these administrative costs have been included within the ids and wps segments , which includes the cost of finance , information technology , human resources , and certain other administrative costs . story_separator_special_tag wps sales decreased 3.7 % to $ 312.9 million in fiscal 2017 , compared to $ 325.1 million in fiscal 2016 , which consisted of an organic sales decline of 2.0 % and a negative foreign currency impact of 1.7 % . the wps business in europe realized low-single digit organic sales growth in fiscal 2017 compared to fiscal 2016. the growth in the region was driven primarily by france and sweden due to improvements in website functionality , digital sales , and key account management . digital sales grew by double digits in the europe region in fiscal 2017 compared to fiscal 2016. organic sales in the americas declined in the high-single digits in fiscal 2017 compared to fiscal 2016. this decrease was primarily in north america due to lower response rates to catalog promotions and pricing pressures in industrial end markets . although digital sales increased in the low-single digits , the increase was not enough to balance the decline in sales through the catalog channel . in addition , pricing pressures from certain competitors have led to an acceleration of organic sales declines in the region from prior years . organic sales in australia were essentially flat in fiscal 2017 compared to fiscal 2016 , following an extended period of organic sales declines . we have started to realize some sales growth by bringing our diverse product offering to many different industries in australia as our sales to the mining industry have become less significant over the past several years . we continue to focus on enhancing our expertise in these industries to drive sales growth as well as addressing our cost structure to improve profitability . segment profit decreased to $ 25.6 million in fiscal 2017 from $ 30.8 million in fiscal 2016 , a decrease of $ 5.2 million , or 16.9 % . as a percentage of sales , segment profit decreased to 8.2 % in fiscal 2017 compared to 9.5 % in the prior year . the decrease in segment profit was primarily due to the decline in sales and reduced gross profit margins due to pricing challenges in the americas region , which was partially offset by reduced selling , general and administrative expenses . fiscal 2016 vs. 2015 approximately 50 % of net sales in the wps segment were generated in europe , 35 % in the americas , and 15 % in australia . wps sales decreased 5.7 % to $ 325.1 million in fiscal 2016 , compared to $ 344.9 million in fiscal 2015 , which consisted of an organic sales decline of 0.7 % and a negative currency impact of 5.0 % . since half of the wps business is in europe , the strengthening of the u.s. dollar against the euro and british pound during certain periods of the fiscal year had a larger impact on the wps segment than it did on the ids segment . the wps business in europe realized low-single digit organic sales growth in fiscal 2016 compared to the prior year . the increase was primarily driven by germany , france , and belgium due to improvements in website functionality and key account management . these improvements led to a double-digit increase in digital sales in europe compared to fiscal 2015. organic sales in the americas declined in the low-single digits in fiscal 2016 compared to the prior year . this decrease was primarily in north america due to reduced demand for our products in the industrial end markets and a decrease in sales through traditional catalog channels , which were partially offset by slight growth in digital sales . organic sales in australia declined in the mid-single digits in fiscal 2016 compared to fiscal 2015. the decrease in the australian business was due to its higher concentration in industries that are experiencing economic challenges , which include manufacturing and mining production . segment profit for the wps segment increased to $ 30.8 million in fiscal 2016 from $ 29.3 million in fiscal 2015 , an increase of $ 1.5 million , or 5.1 % . as a percentage of sales , segment profit increased to 9.5 % in fiscal 2016 compared to 8.5 % in the prior year . the increase in segment profit margin was mainly driven by a reduction in sg & a and catalog advertising . 21 liquidity & capital resources cash and cash equivalents were $ 133.9 million at july 31 , 2017 , a decrease of $ 7.3 million from july 31 , 2016 . the following summarizes the cash flow statement for fiscal years ended july 31 : replace_table_token_9_th fiscal 2017 vs. 2016 net cash provided by operating activities increased to $ 144.0 million during fiscal 2017 compared to $ 139.0 million in the prior year . the increase in cash provided by operating activities of $ 5.0 million was primarily due to higher net earnings partially offset by lower non-cash depreciation and amortization . net cash used in investing activities was $ 15.3 million during fiscal 2017 , compared to $ 15.4 million in the prior year . net cash used in financing activities was $ 136.2 million during fiscal 2017 , compared to $ 99.6 million during the prior year . the increase in cash used in financing activities of $ 35.1 million was primarily due to an increase of $ 75.3 million in credit facility and debt repayments in the current year , which was partially offset by a $ 14.5 million increase in proceeds from stock option exercises in the current year . the remainder of the change was due to $ 23.6 million of cash used for share repurchases in the prior year , while no shares were repurchased in the current year . the effect of fluctuations in exchange rates increased cash balances by $ 0.2 million in fiscal 2017 , primarily due to cash balances held in certain currencies that appreciated against the u.s. dollar during the current fiscal year . fiscal 2016 vs. 2015 net cash provided by operating activities increased to $ 139.0
| results of operations a comparison of results of operating income from continuing operations for the fiscal years ended july 31 , 2017 , 2016 , and 2015 is as follows : replace_table_token_5_th references in this form 10-k to โ organic sales โ refer to sales from continuing operations calculated in accordance with u.s. gaap , excluding the impact of foreign currency translation . the company 's organic sales disclosures exclude the effects of foreign currency translation as foreign currency translation is subject to volatility that can obscure underlying business trends . management believes that the non-gaap financial measure of organic sales is meaningful to investors as it provides them with useful information to aid in identifying underlying sales trends in our businesses and facilitating comparisons of our sales performance with prior periods . in fiscal 2017 , sales decreased 0.7 % to $ 1,113.3 million , compared to $ 1,120.6 million in fiscal 2016 , which consisted of organic sales growth of 0.5 % and a negative foreign currency impact of 1.2 % due to the strengthening of the u.s. dollar against certain other major currencies during the year . organic sales grew 1.6 % in the ids segment and declined 2.0 % in the wps segment . the ids segment realized sales growth in the product id and wire id product lines , partially offset by sales declines in the healthcare id product line . catalog sales in the wps segment declined , but were partially offset by sales growth in the digital channel . during fiscal 2016 , net sales decreased 4.4 % from fiscal 2015 , which consisted of an organic sales decline of 0.7 % and a negative currency impact of 3.7 % due to the strengthening of the u.s. dollar against certain other major currencies during the year .
| 2,301 |
the following table sets forth the cash and cash equivalents , and short-term investments as of september 30 , 2017 : ( in thousands ) amortized cost gross unrealized gains gross unrealized losses fair value cash and cash equivalents $ 31,227 $ ย $ ย $ 31,227 short-term investments 30,977 ย ย 30,977 total $ 62,204 $ ย story_separator_special_tag the following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes to those statements included elsewhere in this form 10-k. in addition to historical financial information , the following discussion and analysis contains forward-looking statements that involve risks , uncertainties and assumptions . our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors , including those discussed under ยrisk factorsย and elsewhere in this form 10-k. the last day of our fiscal year is september 30 , and we refer to our fiscal year ended september 30 , 2016 as fiscal 2016 or 2016 , september 30 , 2017 as fiscal 2017 or 2017 and our fiscal year ended september 30 , 2018 as fiscal 2018 or 2018. overview we are a leading and rapidly growing synthetic biology company that has developed a disruptive dna synthesis platform to industrialize the engineering of biology . the core of our platform is a proprietary technology that pioneers a new method of manufacturing synthetic dna by ยwritingย dna on a silicon chip . we have combined this technology with proprietary software , scalable commercial infrastructure and an e-commerce platform to create an integrated technology platform that enables us to achieve high levels of quality , precision , automation , and manufacturing throughput at a significantly lower cost than our competitors . we are leveraging our unique technology to manufacture a broad range of synthetic dna-based products , including synthetic genes , tools for next generation sample preparation , and antibody libraries for drug discovery and development . additionally , we believe our platform will enable new value-add opportunities , such as discovery partnerships for biologic drugs , and will enable new applications for synthetic dna , such as digital data storage . we sell our synthetic dna and synthetic dna-based products to a customer base of over 700 customers across a broad range of industries . we launched the first application of our platform , synthetic genes and oligo pools , in april 2016 to disrupt the gene synthesis market and make legacy dna synthesis methods obsolete . from inception to september 30 , 2018 , we have sold our products to more than 700 customers . in fiscal 2017 , we served 286 customers including $ 0.3 million in sales to seven of the top 20 pharmaceutical companies by revenue , $ 4.3 million in sales to ginkgo bioworks , inc. , or ginkgo bioworks ( which we believe is the largest global purchaser of synthetic dna ) , $ 0.3 million in sales to three of the largest agricultural biotechnology companies , $ 2.7 million in sales to over 100 academic research institutions worldwide , and $ 7.3 million in sales to innovative customers using synthetic dna for new and emerging applications , such as microsoft corporation and the university of washington for use of dna as a digital data storage medium . we are also an original equipment manufacturer , or oem , of synthetic dna to four synthetic dna manufacturers that also compete with us , which we believe is a strong demonstration of the superiority of our platform . in fiscal 2018 , we served 719 customers as follows : sales to the industrial chemicals sector , the academic research sector , the agricultural sector and the healthcare sector accounted for 59 % , 23 % , 2 % and 16 % of the total $ 25.4 million revenues for the year ended september 30 , 2018. sales to ginkgo bioworks amounted to $ 8.7 million , or 34 % and sales to customers other than ginkgo bioworks was $ 16.7 million , or 66 % , for the year ended september 30 , 2018 ; an increase in revenue of 101 % and 160 % , respectively , as compared to the year ended september 30 , 2017. we have also leveraged the versatility of our platform to expand our product portfolio into other markets in which we believe we have a competitive advantage . in february 2018 , we launched an innovative and comprehensive preparation kit for next generation sequencing at the advances in genome biology and technology conference . our kit leverages our platform to precisely synthesize oligo pools and uniformly amplify the desired target dna segments , considerably improving the accuracy of the downstream sequencing analysis . we have also commercialized a custom dna library solution which enables more 57 effective biologic drug discovery and development for our customers . we believe we can further leverage our platform to develop other proprietary tools , such as our anti-gpcr library and antibody optimization solution , to provide an end-to-end solution in biologics drug discovery and early development , from target to investigational new drug ( ind ) application , adding value as a partner to biotech and pharmaceutical companies . we also aim to explore development of dna as a digital data storage medium via internal research and industry partnerships . we have built a scalable commercial platform that enables us to reach a diverse customer base that we believe includes over 100,000 synthetic dna users today . in order to address this diverse customer base , we have employed a multi-channel strategy comprised of a direct sales force targeting synthetic dna customers , a direct sales force focusing on the ngs market and an e-commerce platform . story_separator_special_tag we shipped products to 97 customers in fiscal 2016 , 286 customers in fiscal 2017 and 719 customers in fiscal 2018. between september 30 , 2015 and september 30 , 2018 , we sold products to more than 700 customers . replace_table_token_7_th financial overview the following table summarizes certain selected historical financial results : replace_table_token_8_th revenues we generate revenue from sales of synthetic genes , oligo pools , next generation sequencing tools and dna libraries . we recognize revenue upon delivery to our customers and bill them directly for the shipments . our ability to increase our revenues will depend on our ability to further penetrate the domestic and international markets , generate sales through our direct sales force , and over time from our e-commerce platform . revenues by geography we have one reportable segment from the sale of synthetic dna products . the following table shows our revenues by geography , based on our customers ' shipping addresses . north america consists of canada and mexico ; emea consists of europe , middle east , and africa ; and apac consists of japan , china , south korea , singapore , malaysia and australia . replace_table_token_9_th 60 revenues by products the table below sets forth revenues by products : replace_table_token_10_th revenues by industry revenues by industry were as follows : replace_table_token_11_th revenues and accounts receivable concentration customer revenues equal to or greater than 10 % of total revenues was as follows : replace_table_token_12_th * less than 10 percent one customer accounted for greater than 10 % of net accounts receivable as follows : replace_table_token_13_th gene shipments shipments and number of genes shipped in the three months ended december 31 , 2016 , march 31 , 2017 , june 30 , 2017 , september 30 , 2017 , december 31 , 2017 , march 31 , 2018 , june 30 , 2018 and september 30 , 2018 were as follows : replace_table_token_14_th cost of revenues cost of revenues reflect the aggregate cost incurred in the production and delivery of our products and consists of : production materials , personnel costs ( salaries , benefits , bonuses and stock-based compensation ) , cost of expensed equipment and consumables , laboratory supplies , depreciation of capitalized equipment , production overhead costs and allocations of it and facility costs . we expect that our cost of revenues will increase as we increase our revenues with new product developments . 61 other operating expenses our operating expenses are classified in the following categories : research and development , and selling , general and administrative . for each category , the largest component is personnel costs , which includes salaries , employee benefit costs , bonuses , and stock-based compensation expenses . research and development research and development expenses consist primarily of costs incurred for the development of our products , which include personnel costs , laboratory supplies , consulting costs and allocated overhead , including it and facility costs . we expense our research and development expenses in the period in which they are incurred . we expect to increase our research and development expenses as we continue to develop new products . selling , general and administrative selling expenses consist of personnel cost , customer service expenses , direct marketing expenses , educational and promotional expense , market research and analysis . general and administrative expenses include executive , finance and accounting , legal and human resources . these expenses consist of personnel costs , audit and legal expenses , consulting costs and allocated it and facility costs . we expense all selling , general and administrative expenses as incurred . we expect our selling and marketing cost will continue to increase in absolute dollars , primarily driven by our efforts to expand our commercial capability , with an increased presence both within and outside the united states , and to expand our brand awareness and customer base through targeted marketing initiatives . we expect general and administrative expenses will increase as well as we scale our operations . in addition , we expect to incur additional accounting , legal and other expenses that we did not incur as a private company . interest expense interest expense is attributable to borrowing under our senior secured term loan and our equipment financing facility . interest income interest income consists primarily of interest earned on our cash , cash equivalents , and short-term investments . other income ( expense ) , net other income ( expense ) , net consists of realized gains and losses on sales of short-term investments and change in the redeemable convertible preferred stock warrant liability . story_separator_special_tag to commercial expansion of our products and setting up our infrastructure to become a public company . our marketing related activities increased $ 1.7 million and remaining increases all relate to commercialization of sales group or corporate development towards preparation of going public . 64 interest , and other income ( expense ) , net replace_table_token_20_th interest income was $ 0.2 million in the year ended september 30 , 2016 , $ 0.4 million in the year ended september 30 , 2017 and $ 1.0 million in the year ended september 30 , 2018 , resulting from our short-term investments . interest expense was $ 0.7 million in fiscal 2016 , $ 0.9 million in fiscal 2017 and $ 1.3 million in fiscal 2018 related to our outstanding debt . the change in the redeemable convertible preferred stock warrant liability was $ 0.1 million in fiscal 2016 , $ 0.3 million in fiscal 2017 and less than $ 0.1 million in fiscal 2018. provision for income taxes replace_table_token_21_th we recorded $ 0.3 million in 2017 and $ 0.2 million in 2018. quarterly results of operations the following table shows unaudited quarterly consolidated statement of operations data for each of the last eight quarters .
| results of operations the following table sets forth selected consolidated statements of operations data for the fiscal years indicated and the percentage change in such data from year to year . these historical operating results may not be indicative of the results for any future period . 62 replace_table_token_15_th comparison of the years ended september 30 , 2016 , 2017 and 2018 revenues replace_table_token_16_th we commenced selling our products in april 2016. in the year ended september 30 , 2016 , we generated revenue of $ 2.3 million from shipments of our synthetic dna products , primarily oligonucleotides , clonal and non-clonal synthetic genes , and dna libraries . revenue from customers in the united states was 78 % , and outside the united states was 22 % . revenue increased to $ 10.8 million in the year ended september 30 , 2017 , as we continued to ramp up production capacity and sales of our synthetic dna products , primarily oligonucleotides , clonal and non-clonal synthetic genes , dna libraries and oligo pools . in fiscal 2017 , revenues from customers in the united states accounted for 77 % and 23 % from customers outside the united states . revenues increased from $ 10.7 million to $ 25.4 million in the year ended september 30 , 2018 , which was an increase of $ 14.7 million , or 136 % . this revenue increase was driven by revenues from synthetic genes of $ 18.0 million and ngs tools of $ 2.7 million . the primary increase in synthetic genes revenue was attributed to volume increases of genes shipped to customers period-over-period , driven by increased investment in our sales force infrastructure and the launching of the e-commerce platform in fiscal 2018. in the year ended september 30 , 2018 , we shipped 247,102 genes compared to 125,462 genes in the year ended september 30 , 2017 , an increase of 96 % .
| 2,302 |
the key assumptions used in the dcf model to determine the highest and best use of estimated future cash flows include revenue growth rates and profit margins based on internal forecasts , terminal value and an estimate of a market participant 's weighted-average cost of capital used to discount future cash flows to their present value . while the company uses available information to prepare estimates and to perform impairment evaluations story_separator_special_tag the following management 's discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes appearing elsewhere in this annual report on form 10-k. this discussion and analysis includes certain forward-looking statements that involve risks , uncertainties and assumptions . you should review the risk factors section of this form 10-k for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by such forward-looking statements . see cautionary note regarding forward-looking information at the beginning of this form 10-k. overview we are a leading healthcare commercialization company providing go-to-market strategy and execution to established and emerging pharmaceutical , biotechnology , diagnostics and healthcare companies in the united states through our commercial services segment , and developing and commercializing molecular diagnostic tests through our interpace diagnostics segment . our commercial services segment is focused on providing outsourced pharmaceutical , biotechnology , medical device and diagnostic sales teams to our customers . through this business , we offer a range of complementary sales support services designed to achieve our customers ' strategic and financial objectives . our customers in this business include pharmaceutical , biotechnology , diagnostics and healthcare companies . in this business , we also provide integrated multi-channel message delivery . our interpace diagnostics segment is focused on developing and commercializing molecular diagnostic tests , leveraging the latest technology and personalized medicine for better patient diagnosis and management . through our interpace diagnostics segment , we aim to provide physicians and patients with diagnostic options for detecting genetic and other molecular alterations that are associated with gastrointestinal and endocrine cancers . customers in our interpace diagnostics segment consist primarily of physicians , hospitals and clinics . we provide pharmaceutical , biotechnology , diagnostics and healthcare companies with full-service outsourced product commercialization and promotion solutions through our commercial services segment . our commercial services segment offers customers a range of standard and customizable options for their products throughout their entire lifecycles , from development to commercialization . we have over 25 years of experience in the services business that allows us to provide services that are innovative , flexible and designed to drive our customers ' profits and respond to a continually changing market . over the course of our operating history , we have designed and successfully implemented commercialization programs for many large pharmaceutical companies , a variety of emerging and specialty pharmaceutical and biotechnology companies and diagnostic and other healthcare service providers . our services provide a vital link between our customers and the medical community through the communication of product information to physicians and other healthcare professionals for use in the care of their patients . we are also developing and commercializing molecular diagnostic tests to detect genetic and other molecular alterations that are associated with gastrointestinal and endocrine cancers through our interpace diagnostics segment . as a result of our 2014 acquisitions of redpath integrated pathology , inc. ( redpath ) and certain assets from asuragen , inc. ( asuragen ) our interpace diagnostics segment offers pancragen ( formerly known as pathfindertgยฎ pancreas ) , a diagnostic test designed for determining risk of malignancy in pancreatic cysts , and thygenx , a next-generation sequencing test designed to assist physicians in distinguishing between benign and malignant genotypes in indeterminate thyroid nodules . we have three diagnostic tests in late stage development that are designed to detect genetic and other molecular alterations that are associated with gastrointestinal cancers and one diagnostic test in late stage development that is designed to detect molecular alterations that are associated with thyroid cancer . in august 2013 , we entered into phase one of a collaboration agreement with a privately held , emerging molecular diagnostics company ( the diagnostics company ) to commercialize their fully-developed , molecular diagnostic tests . the diagnostics company does not have experience in , or a history of , successfully commercializing diagnostic products . the initial test to be commercialized is fully developed . under the terms of the collaboration agreement , we paid an initial fee of $ 1.5 million . in august 2014 , we entered into an amendment to the collaboration agreement with the diagnostics company reducing the option price to a maximum amount of $ 3.0 million plus any amounts outstanding under the loan to the diagnostics company . if we purchase the outstanding common stock of the diagnostics company , in addition to the option price , beginning in 2015 , we would pay a royalty of 5.5 % on annual net revenue up to $ 50.0 million with escalating royalty percentages for higher annual net revenue capped at 7.5 % for annual net revenue in excess of $ 100.0 million . we can terminate the amended collaboration agreement if all milestones are not achieved by march 31 , 2015. if all milestones are achieved by march 31 , 2015 and we have not exercised our option , the diagnostics company can terminate the collaboration agreement and pay us a termination fee of approximately $ 1.5 million . the amended collaboration agreement gives us the right to extend the effective date of termination to september 30 , 2015 by making a payment of $ 0.5 million ( the extension fee ) to the diagnostics company . if the extension fee is paid , and we thereafter purchase the outstanding stock of the diagnostics company , then the option price due at closing will be reduced by the amount of the extension fee . story_separator_special_tag revenue from incentive fees is recognized in the period earned when the performance benchmarks have been attained and when we are reasonably assured that payment will be made . many contracts also stipulate penalties if agreed upon performance benchmarks have not been met . revenue is recognized net of any potential penalties until the performance criteria relating to the penalties have been achieved . commission based revenue is recognized when performance is completed . our commercial services contracts are generally for terms of one to three years and may be renewed or extended . the majority of these contracts , however , are terminable by the customer without cause upon 30 days ' to 180 days ' prior written notice . certain contracts include provisions mandating that such notice may not be provided prior to a pre-determined future date and also provide for termination payments if the customer terminates the agreement without cause . typically , however , the total compensation provided by minimum service periods ( otherwise referred to as minimum purchase obligations ) and termination payments within any individual agreement will not fully offset the revenue we would have earned from fully executing the contract or the costs we may incur as a result of its early termination . we maintain continuing relationships with our commercial services customers which may lead to multiple ongoing contracts between us and one customer . in situations where we enter into multiple contracts with one customer at or near the same time , we evaluate the various factors involved in negotiating the arrangements in order to determine if the contracts were negotiated as a package and should be accounted for as a single agreement . the loss or termination of a large pharmaceutical detailing contract or the loss of multiple contracts could have a material adverse effect on our financial condition or results of operations . historically , we have derived a significant portion of service revenue from a limited number of customers . concentration of business in the pharmaceutical industry is common and the industry continues to consolidate . as a result , we are likely to continue to experience significant customer concentration in future periods . for the year ended december 31 , 2014 , our two largest customers , who each individually represented 10 % or more of our commercial services revenue , collectively accounted for approximately 69.7 % of our consolidated service revenue . for the year ended december 31 , 2013 , our two largest customers , who each individually represented 10 % or more of our commercial services revenue , collectively accounted for approximately 67.4 % of our consolidated service revenue . see note 13 , significant customers , to our consolidated financial statements included in this annual report on form 10-k. cost of services consists primarily of the costs associated with executing product detailing programs , performance based contracts or other sales and marketing services identified in the contract and includes personnel costs and other direct costs , as well as the initial direct costs associated with staffing a product detailing program . personnel costs , which constitute the largest portion of cost of services , include all labor related costs , such as salaries , bonuses , fringe benefits and payroll taxes for the sales representatives , sales managers and professional staff that are directly responsible for executing a particular program . other direct costs include , but are not limited to , facility rental fees , travel expenses , sample expenses and other promotional expenses . initial direct program costs are the costs associated with initiating a product detailing program , such as recruiting and hiring and certain other direct incremental costs , excluding pass through costs that are billed to customers . other direct costs include , but are not limited to , facility rental fees , travel expenses , sample expenses and other promotional expenses . initial direct program costs are deferred and amortized to expense in proportion to the revenue recognized as driven by the terms of the underlying contract . as of december 31 , 2014 and 2013 , we deferred $ 0.4 million and $ 2.3 million of initial direct program costs , respectively . during each of the years ended december 31 , 2014 and 2013 , we amortized $ 0.9 million of initial direct program costs into expense . reimbursable out-of-pocket expenses include those relating to travel and other similar costs , for which we are reimbursed at cost by our customers . reimbursements received for out-of-pocket expenses incurred are characterized as revenue and an identical 39 pdi , inc. annual report on form 10-k ( continued ) amount is included as cost of services in the consolidated statements of comprehensive loss . for the years ended december 31 , 2014 and 2013 , reimbursable out-of-pocket expenses were $ 27.4 million and $ 30.8 million , respectively . training costs include the costs of training the sales representatives and managers on a particular product detailing program so that they are qualified to properly perform the services specified in the related contract . for the majority of our contracts , training costs are reimbursable out-of-pocket expenses . interpace diagnostics interpace diagnostics revenue is generated using our proprietary tests . our performance obligation is fulfilled upon the completion , review and release of test results . in conjunction with fulfilling these services , we bill the third-party payor or hospital . we recognize interpace diagnostics revenue related to billings for medicare , medicare advantage , and hospitals on an accrual basis , net of contractual adjustment , when a contract is in place , a reliable pattern of collectability exists and collectability is reasonably assured . contractual adjustments represent the difference between the list prices and the reimbursement rate set by medicare and medicare advantage , the contractual rate or the amounts agreed to with hospitals . until a contract has been negotiated with a commercial insurance carrier or governmental program , the services may or may not be covered by these entities existing reimbursement policies .
| consolidated results of operations the following table sets forth for the periods indicated below selected statement of comprehensive loss data as a percentage of revenue . the trends illustrated in this table may not be indicative of future operating results . 43 pdi , inc. annual report on form 10-k ( continued ) replace_table_token_1_th results of continuing operations for the year ended december 31 , 2014 compared to the year ended december 31 , 2013 replace_table_token_2_th operations overview we currently operate in two reporting segments : commercial services and interpace diagnostics . in 2014 , decreases in revenues from our commercial services segment drove a decrease in commercial services segment gross profit relative to 2013. we also incurred significant losses within our interpace diagnostics segment due to the ramping up of this business . our commercial services revenue and profitability depend to a great extent on our relationships with a limited number of large pharmaceutical companies . our two largest customers in 2014 accounted for approximately 47.4 % and 22.3 % , respectively , of our revenue . we believe that we will continue to experience a high degree of customer concentration and that the loss or a significant reduction of business from any of our major customers , or a decrease in demand for our services , could have a material adverse effect on our business , financial condition and results of operations . revenue , net 44 pdi , inc. annual report on form 10-k ( continued ) consolidated revenue for the year ended december 31 , 2014 decreased by $ 26.6 million , or 18.2 % , to $ 119.9 million , compared to the year ended december 31 , 2013 .
| 2,303 |
share-based compensation expense recognized for 2017 and 2016 was $ 417,000 and $ 632,000 before income taxes and $ 271,000 and $ 411,000 after income taxes , respectively . share-based compensation expense is recorded as a part of selling , general and administrative expenses . employee stock purchase plan under the company 's employee stock purchase plan ( โ espp โ ) , employees are able to acquire shares of common stock at 85 % of the price at the end of each current quarterly plan term . the most recent term ended december 31 , 2017. the espp is considered compensatory under current rules . at december 31 , 2017 , after giving effect to the shares issued as of that date , 53,205 shares remain available for purchase under the espp . employee stock ownership plan ( esop ) all eligible employees of the company participate in the esop after completing one year of service . contributions are allocated to each participant based on compensation and vest 20 % after two years of service and incrementally thereafter , with full vesting after six years . at december 31 , 2017 , the esop held 696,688 shares of the company 's common stock , all of which have been allocated to the accounts of eligible employees . contributions to the plan are determined by the board of directors and can be made in cash or shares of the company 's stock . the 2017 esop contribution was $ 425,890 for which the company issued 119,632 shares in march 2018. the 2016 esop contribution was $ 218,758 for which the company issued 47,248 shares in 2017. note 9 โ common stock purchases of communications systems , inc. common stock in october 2008 , the company 's board of directors authorized the repurchase of shares of the company 's stock pursuant to exchange act rule 10b-18 on the open market , in block trades or in private transactions . at december 31 , 2017 , 411,910 additional shares could be repurchased under outstanding board authorizations . shareholder rights plan on december 23 , 2009 the board of directors adopted a shareholders ' rights plan under which the board declared a distribution of one right per share of common stock . each right entitles the holder to purchase 1/100 th of a share of a new series of junior participating preferred stock of the company at an initial exercise price of $ 41 . the rights expire on december 23 , 2019. the rights will become exercisable only following the acquisition by a person or story_separator_special_tag overview communications systems , inc. provides physical connectivity infrastructure products and services for global deployments of broadband networks through the following business units : suttle founded in 1910 , suttle provides network solutions that meet service providers ' needs at the edge of the network and inside the home/business . suttle 's product portfolio incorporates technology that leverages existing infrastructure and lays the foundation for future growth . products are designed to comply with the most stringent industry standards . quality management systems are iso 9001 and tl9000 certified . suttle 's newest brands are futurelink tm and mediamax . futurelink tm provides high-speed connectivity solutions in the last mile of a network . the futurelink tm stackable fiber interface terminal ( sfit ) โamong other platforms that feature grow-as-you-go capabilityโis part of suttle 's fttx solution . mediamax is designed for gigabit services for the connected home/business . mediamax optimizes installation cost while maximizing coverage and high-bandwidth . transition networks with over 30 years of growth and expertise in hardware and software development , transition networks offers customers the ability to affordably integrate the benefits of fiber optics into any data network , in any application , and in any environment . offering support for multiple protocols , any interface , and a multitude of hardware platforms , transition networks ' portfolio gives customers the power to deliver and manage network traffic reliably over fiber . transition networks distributes hardware-based connectivity solutions through a network of resellers in over 90 countries . jdl technologies jdl technologies provides technology services and infrastructure to the commercial , healthcare and education market segments . jdl 's portfolio of technology solutions includes managed services , virtualization and cloud solutions , wired and wireless network design and implementation services , and converged infrastructure configuration and deployment . jdl has provided many of these technology services to the school board of broward county , florida , the sixth largest public school district in the u.s. , for more than a decade , and also provides these services to a number of commercial and healthcare clients . net2edge net2edge has been created to focus on the service provider/communications markets . net2edge designs , manufactures and markets carrier ethernet based network access devices and software designed to revolutionize the near future evolution to the next wave of network modernization . carrier ethernet is the standard universal service provider delivery system based on the internationally recognized mef service standards . net2edge has created significant market differentiation by enabling legacy services over carrier ethernet access devices . service providers all over the world still deploy old networks that are expensive to operate , maintain and manage , yet have millions of subscribers . net2edge helps resolve that challenge by bringing these legacy services in to the 21 st century network . key 2017 developments โ the company 's 2017 sales were $ 82.3 million , a 17 % decrease from 2016 sales of $ 99.4 million . โ the company 's 2017 net loss was $ 11.8 million , or ( $ 1.32 ) per diluted share , compared to net loss of $ 8.1 million or ( $ 0.92 ) per diluted share in fiscal 2016 . story_separator_special_tag 25 revenue from jdl technologies ' sales to small and medium-sized commercial businesses ( smbs ) , which are primarily healthcare and commercial clients , decreased by 27 % or $ 1,145,000 due to a decrease in the number of infrastructure and professional services projects completed in 2017 , due , in part , to jdl 's continued focus on building managed services revenue rather than incident-based or project-based opportunities , and fewer bids for , and therefore , contracts for infrastructure refresh projects . jdl gross margin decreased 47 % to $ 2,773,000 in 2017 compared to $ 5,219,000 in 2016. gross margin as a percentage of sales decreased to 25 % in 2017 from 34 % in 2016 due to a lower margin project in our education sector during the second quarter of 2017. selling , general and administrative expenses decreased 36 % in 2017 to $ 2,101,000 , or 19 % of sales , compared to $ 3,296,000 in 2016 , or 21 % of sales due to cost saving measures we implemented over the past year . jdl reported an operating loss of $ 791,000 in 2017 compared to operating income of $ 1,923,000 in 2016 , which included a $ 1,463,000 goodwill impairment loss recognized in the second quarter of 2017. jdl technologies continues to aggressively leverage opportunities to provide managed services , cloud migration and virtualization services , hipaa-compliant technology services , and other network and infrastructure services to the commercial and healthcare markets . this strategic , multiyear plan to reduce the impact of volatile government funding is beginning to produce results . net2edge results net2edge 's sales decreased 42 % to $ 1,079,000 in 2017 compared to $ 1,873,000 in 2016 due to declines in legacy product sales and delays in the release of new products . gross margin decreased 30 % to $ 681,000 in 2017 compared to $ 969,000 in 2016. gross margin as a percentage of sales increased to 63 % in 2017 from 52 % in 2016 due to low margins realized on a large customer project in 2016. selling , general and administrative expenses remained fairly flat at $ 3,127,000 in 2017 compared to $ 3,141,000 in 2016. net2edge reported an operating loss of $ 2,600,000 in 2017 compared to a loss of $ 2,172,000 in 2016 , which included a $ 154,000 impairment loss related to intangible assets during the second quarter of 2017. income taxes the company 's loss before income taxes was $ 11,860,000 in 2017 compared to a loss before income taxes of $ 7,857,000 in 2016. the company 's effective income tax rate was 0 % in 2017 compared to -3 % in 2016. the 2017 and 2016 effective rates differed from the standard rate of 35 % primarily due to the valuation allowances related to deferred tax assets , along with the impact of state income taxes , foreign tax rate differences , foreign losses not deductible for u.s. income tax purposes , provisions for interest charges for uncertain income tax positions . the impact of the corporate tax rate change from 35 % to 21 % resulted in a decrease of $ 3,047,000 in our deferred tax assets and corresponding reduction in our valuation allowance . see note 10 for a reconciliation of the standard tax rate to the company 's effective tax rate for 2017 and 2016. acquisitions and dispositions the company is a growth-focused manufacturer of telecommunications connecting and networking devices . the company continually searches for acquisition candidates with products that would enable the company to better serve its target markets . effects of inflation inflation has not had a significant effect on operations in recent years . the company does not have long-term production or procurement contracts and has historically been able to adjust pricing and purchasing decisions to respond to inflationary pressures . liquidity and capital resources as of december 31 , 2017 , the company had approximately $ 17,994,000 in cash , cash equivalents and investments . of this amount , $ 6,193,000 was invested in short-term money market funds that are not considered to be bank deposits and are not insured or guaranteed by the fdic or other government agency . these money market funds seek to preserve the value of the investment at $ 1.00 per share ; however , it is possible to lose money investing in these funds . the remainder in cash and cash equivalents is operating cash . the company also had $ 5,541,000 in investments consisting of corporate notes and bonds and commercial paper that are traded on the open market and are classified as available-for-sale at december 31 , 2017 . 26 the company had working capital of $ 36,506,000 , consisting of current assets of approximately $ 45,466,000 and current liabilities of $ 8,960,000 at december 31 , 2017 , compared to working capital of $ 44,005,000 , consisting of current assets of $ 55,373,000 and current liabilities of $ 11,368,000 at the end of 2016. the company 's working capital at december 31 , 2017 decreased from the prior year-end as the company decreased its inventory as part of a concerted effort to more efficiently manage its inventory and begin to phase out specific legacy products . cash flow provided by operating activities was approximately $ 3,650,000 in 2017 compared to $ 1,215,000 in 2016. significant working capital changes from 2016 to 2017 included a decrease in inventories of $ 8.3 million due to a concerted effort to reduce excess inventory and a decrease in receivables of $ 2.4 million , offset by a decrease in accounts payable and accrued liabilities of $ 2.3 million . cash used in investing activities was $ 294,000 in 2017 compared to cash provided of $ 4,435,000 in 2016 , due to the additional purchase of investments in 2017. net cash used by financing activities was $ 1,361,000 in 2017 compared to $ 4,899,000 in 2016. cash dividends
| results of operations 2017 compared to 2016 consolidated sales were $ 82,323,000 in 2017 , an 17 % decrease from sales of $ 99,353,000 in 2016. net loss in 2017 was $ 11,826,000 , or ( $ 1.32 ) per share compared to net loss of $ 8,114,000 or ( $ 0.92 ) per share in 2016 . 23 suttle results suttle sales decreased 23 % to $ 32,384,000 in 2017 compared to $ 42,076,000 in 2016 due to continuing pricing pressures from major telecommunications customers , volume declines in legacy products , and a shift in purchasing decisions from tier 1 telecom suppliers to installers . sales by product groups in 2017 and 2016 were : replace_table_token_4_th suttle 's sales by customer groups in 2017 and 2016 were : replace_table_token_5_th sales to the major communication service providers decreased 23 % to $ 29,071,000 in 2017 compared to $ 37,796,000 in 2016 due to continuing pricing pressures and volume declines in legacy products . sales to these customers accounted for 90 % of suttle 's sales in 2017 and 2016. sales to distributors decreased 6 % due to the continued decline in dsl product sales and the impact from the discontinuation of certain legacy products , and accounted for 8 % of sales in 2017 compared to 6 % in 2016. international sales accounted for 2 % of suttle 's 2017 sales and decreased 51 % compared to 2016 due to reduced volume from legacy products in major telecommunications customers . sales of structured cabling and connecting system products decreased 22 % primarily due to volume declines as a result of project delays from major telecommunications customers . sales of dsl and other products decreased 37 % due to reduced orders from a large international customer and the maturation of the dsl technology product life cycle in the domestic market .
| 2,304 |
in july 2012 , the fasb issued authoritative guidance included in asc topic 350. this guidance permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is impaired , as a basis for determining whether it is necessary to perform the quantitative impairment test described in fasb asc topic 350. the company elected to early adopt the guidance for the story_separator_special_tag the following discussion should be read in conjunction with the consolidated financial statements and notes thereto contained elsewhere herein . overview we are a major supplier to the aerospace industry and have three operating segments : ( i ) triumph aerostructures group , whose companies ' revenues are derived from the design , manufacture , assembly and integration of metallic and composite aerostructures and structural components for the global aerospace original equipment manufacturers , or oem , market ; ( ii ) triumph aerospace systems group , whose companies design , engineer and manufacture a wide range of proprietary and build-to-print components , assemblies and systems also for the oem market ; and ( iii ) triumph aftermarket services group , whose companies serve aircraft fleets , notably commercial airlines , the u.s. military and cargo carriers , through the maintenance , repair and overhaul of aircraft components and accessories manufactured by third parties . effective october 4 , 2013 , the company acquired all of the issued and outstanding shares of general donlee . general donlee is based in toronto , canada and is a leading manufacturer of precision machined products for the aerospace , nuclear and oil and gas industries . the acquired business now operates as triumph gear systems-toronto and its results are included in the aerospace systems group . effective may 6 , 2013 , the company acquired four related entities collectively comprising primus from precision castparts corp. the acquired business , which includes two manufacturing facilities in farnborough , england and rayong , thailand , operates as triumph structures - farnborough and triumph structures - thailand and is included in the aerostructures segement from the date of acquisition . together , triumph structures - farnborough and triumph structures - thailand constitute a global supplier of composite and metallic propulsion and structural composites and assemblies . in addition to its composite operations , the thailand operation also machines and processes metal components . financial highlights for the fiscal year ended march 31 , 2014 include : net sales for fiscal 2014 increased 1.6 % to $ 3.76 billion , including a 6.1 % decrease in organic sales . operating income in fiscal 2014 decreased 24.7 % to $ 400.0 million . net income for fiscal 2014 decreased 30.6 % to $ 206.3 million . backlog increased 4.9 % over the prior year to $ 4.75 billion . for the fiscal year ended march 31 , 2014 , net sales totaled $ 3.76 billion , a 1.6 % increase from fiscal year 2013 net sales of $ 3.70 billion . net income for fiscal year 2014 decreased 30.6 % to $ 206.3 million , or $ 3.91 per diluted common share , versus $ 297.3 million , or $ 5.67 per diluted common share , for fiscal year 2013 . as discussed in further detail below under `` results of operations , '' the decrease in net income is attributable to additional 747-8 program costs ( $ 85.0 million ) and cost associated with the relocation from our jefferson street facility ( $ 70.3 million ) . our working capital needs are generally funded through cash flows from operations and borrowings under our credit arrangements . for the fiscal year ended march 31 , 2014 , we generated $ 135.1 million of cash flows from operating activities , used $ 246.7 million in investing activities and received $ 103.2 million from financing activities . cash flows from operating activities in fiscal year 2014 included $ 46.3 million in pension contributions versus $ 109.8 million in fiscal year 2013. we continue to remain focused on growing our core businesses as well as growing through strategic acquisitions . our organic sales decreased in fiscal 2014 due to production rate cuts by our customers on the 747-8 and 767 program as it transitions from the commercial variant to the tanker and a decrease in military sales . our company has an aggressive but selective acquisition approach that adds capabilities and increases our capacity for strong and consistent internal growth . in august 2011 , the budget control act ( the `` act '' ) reduced the united states defense top-line budget by approximately $ 490 billion through 2021. the act further reduced the defense top-line budget by an additional $ 500 billion through 2021 if congress did not enact $ 1.2 trillion in further budget reductions by january 15 , 2012. should congress in future years provide funding above the yearly spending limits of the act , sequestration will automatically take effect and cancel any excess amount above the limits . the annual spending limits of the act will remain unless and until the current law is changed . on march 1 , 2013 , sequestration was implemented for the u.s. government fiscal year 2013. the lack of agreement between congress and the administration to end sequestration , certain office of management and budget reports and 30 communications from the u.s. department of defense ( `` u.s. dod '' ) indicate that there are likely to be reductions to our military business . reductions , cancellations or delays impacting existing contracts or programs could have a material effect on our results of operations , financial position and or cash flows . while the u.s. dod would sustain the bulk of sequestration cuts affecting us , civil programs and agencies could be significantly impacted as well . in fiscal 2012 , we began efforts to establish a new facility in red oak , texas to expand our manufacturing capacity , particularly under the bombardier global 7000/8000 program . story_separator_special_tag also , in the future , we may disclose different non-gaap financial measures in order to help our investors more meaningfully evaluate and compare our future results of operations to our previously reported results of operations . we view adjusted ebitda as an operating performance measure and , as such , we believe that the gaap financial measure most directly comparable to it is income from continuing operations . in calculating adjusted ebitda , we exclude from income from continuing operations the financial items that we believe should be separately identified to provide additional analysis of the financial components of the day-to-day operation of our business . we have outlined below the type and scope of these exclusions and the material limitations on the use of these non-gaap financial measures as a result of these exclusions . adjusted ebitda is not a measurement of financial performance under gaap and should not be considered as a measure of liquidity , as an alternative to net income ( loss ) , income from continuing operations , or as an indicator of any other measure of performance derived in accordance with gaap . investors and potential investors in our securities should not rely on adjusted ebitda as a substitute for any gaap financial measure , including net income ( loss ) or income from continuing operations . in addition , we urge investors and potential investors in our securities to carefully review the reconciliation of adjusted ebitda to income from continuing operations set forth below , in our earnings releases and in other filings with the sec and to carefully review the gaap financial information included as part of our quarterly reports on form 10-q and our annual reports on form 10-k that are filed with the sec , as well as our quarterly earnings releases , and compare the gaap financial information with our adjusted ebitda . adjusted ebitda is used by management to internally measure our operating and management performance and by investors as a supplemental financial measure to evaluate the performance of our business that , when viewed with our gaap results and the accompanying reconciliation , we believe provides additional information that is useful to gain an understanding of the factors and trends affecting our business . we have spent more than 15 years expanding our product and service capabilities partially through acquisitions of complementary businesses . due to the expansion of our operations , which included acquisitions , our income from continuing operations has included significant charges for depreciation and amortization . adjusted ebitda excludes these charges and provides meaningful information about the operating performance of our business , apart from charges for depreciation and amortization . we believe the disclosure of adjusted ebitda helps investors meaningfully evaluate and compare our performance from quarter to quarter and from year to year . we also believe adjusted ebitda is a measure of our ongoing operating performance because the isolation of non-cash charges , such as depreciation and amortization , and non-operating items , such as interest and income taxes , provides additional information about our cost structure , and , over time , helps track our operating progress . in addition , investors , securities analysts and others have regularly relied on adjusted ebitda to provide a financial measure by which to compare our operating performance against that of other companies in our industry . set forth below are descriptions of the financial items that have been excluded from our income from continuing operations to calculate adjusted ebitda and the material limitations associated with using this non-gaap financial measure as compared to income from continuing operations : curtailments , settlements and early retirement incentives may be useful for investors to consider because it represents the current period impact of the change in the defined benefit obligation due to the reduction in future service costs as well as the incremental cost of retirement incentive benefits paid to participants . we do not believe these earnings necessarily reflect the current and ongoing cash earnings related to our operations . 32 amortization of acquired contract liabilities may be useful for investors to consider because it represents the non-cash earnings on the fair value of off-market contracts acquired through acquisitions . we do not believe these earnings necessarily reflect the current and ongoing cash earnings related to our operations . amortization expense may be useful for investors to consider because it represents the estimated attrition of our acquired customer base and the diminishing value of product rights and licenses . we do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating cost structure . depreciation may be useful for investors to consider because it generally represents the wear and tear on our property and equipment used in our operations . we do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating cost structure . the amount of interest expense and other we incur may be useful for investors to consider and may result in current cash inflows or outflows . however , we do not consider the amount of interest expense and other to be a representative component of the day-to-day operating performance of our business . income tax expense may be useful for investors to consider because it generally represents the taxes which may be payable for the period and the change in deferred income taxes during the period and may reduce the amount of funds otherwise available for use in our business . however , we do not consider the amount of income tax expense to be a representative component of the day-to-day operating performance of our business . management compensates for the above-described limitations of using non-gaap measures by using a non-gaap measure only to supplement our gaap results and to provide additional information that is useful to gain an understanding of the factors and trends affecting our business .
| fiscal year ended march 31 , 2014 compared to fiscal year ended march 31 , 2013 replace_table_token_9_th net sales increased by $ 60.6 million , or 1.6 % , to $ 3.8 billion for the fiscal year ended march 31 , 2014 from $ 3.7 billion for the fiscal year ended march 31 , 2013 . the fiscal 2014 and fiscal 2013 acquisitions , net of current year and prior year divestitures contributed $ 282.6 million . organic sales decreased $ 222.0 million , or 6.1 % , due to production rate cuts by our customers on the 747-8 program and , as it transitions from the commercial variant to the tanker , the 767 program , and a decrease in military sales . the prior fiscal year was positively impacted by our customers ' increased production rates on existing programs and new product introductions . cost of sales increased by $ 148.3 million , or 5.4 % , to $ 2.9 billion for the fiscal year ended march 31 , 2014 from $ 2.8 billion for the fiscal year ended march 31 , 2013 . this increase in cost of sales was largely due to increased sales . gross margin for the fiscal year ended march 31 , 2014 was 22.6 % compared with 25.4 % for the fiscal year ended march 31 , 2013 . this change was impacted by reductions in profitability estimates on the 747-8 program , driven largely by the identification of additional 747-8 program costs ( $ 85.0 million ) identified during the year , additional program costs resulting from disruption and accelerated depreciation associated with the relocation from our jefferson street facilities ( $ 38.4 million ) , price concessions ( $ 4.0 million ) and a non-recurring termination customer settlement ( $ 9.5 million ) which had a favorable impact on the prior year gross margin .
| 2,305 |
subject to the terms and conditions of the rights agreement , rights become exercisable ten days after the public announcement that a โ person โ has become an โ acquiring person โ ( as each such term is defined in the rights agreement ) . any rights held by an acquiring person are void and may not be exercised . if a person becomes an acquiring person , all holders of rights , except the acquiring person , may purchase at the right 's then-current exercise price , common stock having a market value equal to twice the exercise price . moreover , at any time after a person becomes an acquiring person ( unless such person acquires 50 percent or more of our common stock then outstanding , as more fully described in the rights agreement ) , the board of directors may exchange all ( but not less than all ) of the then outstanding rights ( other than rights owned by such person , which would have become void ) for shares of common stock at an exchange ratio of one share of common stock per right , appropriately adjusted in order to protect the interests of holders of rights . the rights agreement was approved by our board of directors on july 18 , 2014. the rights will expire at the close of business on its ten year anniversary , unless earlier exchanged or terminated by us . f- 12 tg therapeutics , inc. and subsidiaries notes to consolidated financial statements common stock our amended and restated certificate of incorporation authorizes the issuance of up to 150,000,000 shares of $ 0.001 par value common stock . at the annual shareholder meeting on june 6 , 2014 , an amendment to the company 's certificate of incorporation to decrease its authorized share capital by 350,000,000 shares from 500,000,000 to 150,000,000 was approved . on july 18 , 2013 , we announced the pricing of an underwritten public offering of 5,700,000 shares of our common stock at a price of $ 6.15 per share for gross proceeds of approximately $ 35 million . we also granted to the underwriters a 30-day option to acquire an additional 855,000 shares to cover overallotments in connection with the offering . total net proceeds from this offering , including the overallotment , were approximately $ 37.6 million , net of underwriting discounts and offering expenses of approximately $ 2.7 million . the shares were sold under a shelf registration statement on form s-3 ( file no . 333-189015 ) that was previously filed and declared effective by the sec on june 17 , 2013. on march 11 , 2014 , we announced the pricing of an underwritten sale of 2,702,809 shares of our common stock at a price of $ 6.71 per share for gross proceeds of approximately $ 18.1 million . net proceeds from this offering were approximately $ 16.8 million , net of underwriting discounts and offering expenses of approximately $ 1.3 million . the shares were sold under a shelf registration statement on form s-3 ( file no . 333-189015 ) that was previously filed and declared effective by the sec on june 17 , 2013. on june 21 , 2013 , we entered into an at-the-market issuance sales agreement ( the โ 2013 atm โ ) with mlv & co. llc ( โ mlv โ ) under which could issue and sell shares of our common stock , having an aggregate offering price of up to $ 50.0 million , from time to time through mlv , acting as the sales agent . under the agreement we would pay mlv a commission rate of up to 3.0 % of the gross story_separator_special_tag the following discussion and analysis contains forward-looking statements about our plans and expectations of what may happen in the future . forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties , and our results could differ materially from the results anticipated by our forward-looking statements as a result of many known or unknown factors , including , but not limited to , those factors discussed in โ item 1a . risk factors. โ see also the โ special cautionary notice regarding forward-looking statements โ set forth at the beginning of this report . you should read the following discussion and analysis in conjunction with โ item 8. financial statements and supplementary data , โ and our consolidated financial statements beginning on page f-1 of this report . overview we are a biopharmaceutical company focused on the acquisition , development and commercialization of novel treatments for b-cell malignancies and autoimmune diseases . currently , the company is developing two therapies targeting hematological malignancies . tg-1101 ( ublituximab ) is a novel , glycoengineered monoclonal antibody that targets a specific and unique epitope on the cd20 antigen found on mature b-lymphocytes . tg therapeutics is also developing tgr-1202 , an orally available pi3k delta inhibitor . the delta isoform of pi3k is strongly expressed in cells of hematopoietic origin and is believed to be important in the proliferation and survival of b-lymphocytes . both tg-1101 and tgr-1202 are in clinical development for patients with hematologic malignancies . the company also has a pre-clinical program to develop inhibitors of irak4 ( interleukin-1 receptor-associated kinase 4 ) , as well as an antibody research program to develop anti-pd-l1 and anti-gitr antibodies , all currently in pre-clinical development . we also actively evaluate complementary products , technologies and companies for in-licensing , partnership , acquisition and or investment opportunities . to date , we have not received approval for the sale of any of our drug candidates in any market and , therefore , have not generated any product sales from our drug candidates . story_separator_special_tag under the agreement we would pay mlv a commission rate of up to 3.0 % of the gross proceeds from the sale of any shares of common stock sold through mlv . during the year ended december 31 , 2014 , we sold a total of 4,850,055 shares of common stock under this arrangement for aggregate total gross proceeds of approximately $ 50.0 million at an average selling price of $ 10.31 per share . net proceeds were approximately $ 48.8 million after deducting commissions and other transaction costs . we have fully utilized the capacity under this 2013 atm and , accordingly , no further sales can be made under this 2013 atm . 2014 equity financing on march 11 , 2014 , we announced the pricing of an underwritten sale of 2,702,809 shares of our common stock at a price of $ 6.71 per share for gross proceeds of approximately $ 18.1 million . net proceeds from this offering were approximately $ 16.8 million , net of underwriting discounts and offering expenses of approximately $ 1.3 million . the shares were sold under a shelf registration statement on form s-3 ( file no . 333-189015 ) that was previously filed and declared effective by the sec on june 17 , 2013 . 2013 equity financing on july 18 , 2013 , we announced the pricing of an underwritten public offering of 5,700,000 shares of our common stock at a price of $ 6.15 per share for gross proceeds of approximately $ 35 million . we also granted to the underwriters a 30-day option to acquire an additional 855,000 shares to cover overallotments in connection with the offering , which they exercised . total net proceeds from this offering , including the overallotment , were approximately $ 37.6 million , net of underwriting discounts and offering expenses of approximately $ 2.7 million . the shares were sold under a shelf registration statement on form s-3 ( file no . 333-189015 ) that was previously filed and declared effective by the sec on june 17 , 2013 . 38 off-balance sheet arrangements we have not entered into any transactions with unconsolidated entities whereby we have financial guarantees , subordinated retained interests , derivative instruments or other contingent arrangements that expose us to material continuing risks , contingent liabilities , or any other obligations under a variable interest in an unconsolidated entity that provides us with financing , liquidity , market risk or credit risk support . critical accounting policies the discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements , which have been prepared in accordance with u.s. generally accepted accounting principles . the preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities and related disclosure of contingent assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the applicable period . actual results may differ from these estimates under different assumptions or conditions . we define critical accounting policies as those that are reflective of significant judgments and uncertainties and which may potentially result in materially different results under different assumptions and conditions . in applying these critical accounting policies , our management uses its judgment to determine the appropriate assumptions to be used in making certain estimates . these estimates are subject to an inherent degree of uncertainty . our critical accounting policies include the following : revenue recognition . we recognize license revenue in accordance with the revenue recognition guidance of the financial accounting standards board ( โ fasb โ ) accounting standards codification , or codification . we analyze each element of our licensing agreement to determine the appropriate revenue recognition . the terms of the license agreement may include payments to us of non-refundable up-front license fees , milestone payments if specified objectives are achieved , and or royalties on product sales . we recognize revenue from upfront payments over the period of significant involvement under the related agreements unless the fee is in exchange for products delivered or services rendered that represent the culmination of a separate earnings process and no further performance obligation exists under the contract . we recognize milestone payments as revenue upon the achievement of specified milestones only if ( 1 ) the milestone payment is non-refundable , ( 2 ) substantive effort is involved in achieving the milestone , ( 3 ) the amount of the milestone is reasonable in relation to the effort expended or the risk associated with achievement of the milestone , and ( 4 ) the milestone is at risk for both parties . if any of these conditions are not met , we defer the milestone payment and recognize it as revenue over the estimated period of performance under the contract . stock compensation . we have granted stock options and restricted stock to employees , directors and consultants , as well as warrants to other third parties . for employee and director grants , the value of each option award is estimated on the date of grant using the black-scholes option-pricing model . the black-scholes model takes into account volatility in the price of our stock , the risk-free interest rate , the estimated life of the option , the closing market price of our stock and the exercise price . we base our estimates of our stock price volatility on the historical volatility of our common stock and our assessment of future volatility ; however , these estimates are neither predictive nor indicative of the future performance of our stock . for purposes of the calculation , we assumed that no dividends would be paid during the life of the options and warrants .
| results of operations years ended december 31 , 2014 and 2013 replace_table_token_5_th 36 license revenue . license revenue was $ 152,381 for each of the years ended december 31 , 2014 and 2013. license revenue is related to the amortization of an upfront payment of $ 2.0 million associated with our license agreement with ildong . the upfront payment from ildong will be recognized as license revenue on a straight-line basis through december 2025 , which represents the estimated period over which the company will have certain ongoing responsibilities under the sublicense agreement . noncash stock expense associated with in-licensing agreements . noncash stock expense associated with in-licensing agreements was $ 5,350,094 for the year ended december 31 , 2014 , as compared to $ 0 for the year ended december 31 , 2013. the expense during the year ended december 31 , 2014 was recorded in conjunction with the stock issued to rhizen of approximately $ 4,100,000 to exercise our option to license tgr-1202 , and approximately $ 1,200,000 for the common stock issued to ligand as an upfront payment for the license to the irak4 inhibitors program . noncash compensation expense ( research and development ) . noncash compensation expense ( research and development ) related to equity incentive grants increased by $ 7,690,047 from $ 1,041,519 for the year ended december 31 , 2013 to $ 8,731,566 during the year ended december 31 , 2014. the increase in noncash compensation expense was primarily related to milestone-based vesting of restricted stock grants to employees and consultants during the year ended december 31 , 2014. we expect noncash compensation expense ( research and development ) to remain at a comparable level in 2015. other research and development expenses .
| 2,306 |
the expected stock price volatility is determined based on an average of both historical volatility and story_separator_special_tag general unless the context indicates otherwise , when we refer to โ we , โ โ us , โ โ our โ or the โ company โ in this form 10โk , we are referring to guess ? , inc. and its subsidiaries on a consolidated basis . business segments the company 's businesses are grouped into five reportable segments for management and internal financial reporting purposes : americas retail , americas wholesale , europe , asia and licensing . management evaluates segment performance based primarily on revenues and earnings ( loss ) from operations before corporate performance-based compensation costs , net gains ( losses ) from lease terminations , asset impairment charges , restructuring charges and certain non-recurring charges , if any . the americas retail segment includes the company 's retail and e-commerce operations in the americas . the americas wholesale segment includes the company 's wholesale operations in the americas . the europe segment includes the company 's retail , e-commerce and wholesale operations in europe and the middle east . the asia segment includes the company 's retail , e-commerce and wholesale operations in asia and the pacific . the licensing segment includes the worldwide licensing operations of the company . the business segment operating results exclude corporate overhead costs , which consist of shared costs of the organization , net gains ( losses ) on lease terminations , asset impairment charges , restructuring charges and certain non-recurring charges , if any . corporate overhead costs are presented separately and generally include , among other things , the following unallocated corporate costs : accounting and finance , executive compensation , corporate performance-based compensation , facilities , global advertising and marketing , human resources , information technology and legal . information regarding these segments is summarized in โ part iv . financial statements โ note 17 โ segment information โ in this form 10-k . products we derive our net revenue from the sale of guess ? , g by guess ( gbg ) , guess kids and marciano apparel and our licensees ' products through our worldwide network of directly operated and licensed retail stores , wholesale customers and distributors , as well as our online sites . we also derive royalty revenue from worldwide licensing activities . foreign currency volatility since the majority of our international operations are conducted in currencies other than the u.s. dollar ( primarily the canadian dollar , chinese yuan , euro , japanese yen , korean won , mexican peso , russian ruble and turkish lira ) , currency fluctuations can have a significant impact on the translation of our international revenues and earnings into u.s. dollar amounts . in addition , some of our transactions that occur primarily in europe , canada , south korea , china and mexico are denominated in u.s. dollars , swiss francs , british pounds and russian rubles , exposing them to exchange rate fluctuations when these transactions ( such as inventory purchases ) are converted to their functional currencies . as a result , fluctuations in exchange rates can impact the operating margins of our foreign operations and reported earnings ( loss ) , and are largely dependent on the transaction timing and magnitude during the period that the currency fluctuates . when these foreign exchange rates weaken versus the u.s. dollar at the time u.s. dollar denominated inventory is purchased relative to the purchases of the comparable period , our product margins could be unfavorably impacted if the relative sales prices do not change . during fiscal 2019 , the average u.s. dollar rate was weaker against the euro , the korean won and the chinese yuan and stronger against the canadian dollar , the mexican peso , russian ruble and turkish lira compared to the average rate in fiscal 2018 . this had an overall unfavorable impact on the translation of our international revenues and earnings from operations during fiscal 2019 compared to the prior year . if the u.s. dollar strengthens relative to the respective fiscal 2019 foreign exchange rates , foreign exchange could negatively impact our revenues and operating results as well as our international cash and other balance sheet items during fiscal 2020 , particularly in canada , europe ( primarily the euro , turkish lira and russian ruble ) and mexico . alternatively , if the u.s. dollar weakens relative to the respective fiscal 2019 foreign exchange rates , our revenues and operating results , as well as our other cash balance sheet items , could be positively impacted by foreign currency fluctuations during fiscal 2020 , particularly in these regions . the company enters into derivative financial instruments to offset some but not all of the exchange risk on foreign currency transactions . for additional discussion regarding our exposure to foreign currency risk , forward contracts designated as hedging instruments and forward contracts not designated as hedging instruments , refer to โ part ii , item 7a . quantitative and qualitative disclosures about market risk. โ recent developments on february 20 , 2019 , carlos alberini began his service as the company 's new chief executive officer and member of the board , replacing victor herrero , who separated from the company on february 2 , 2019. mr. alberini previously served as president and chief operating officer of the company from 2000 to 2010. from 2010 until 2014 , mr. alberini was co-ceo of restoration hardware and at present , remains a director on the board of restoration hardware . from 2014 until february 2019 , mr. alberini served as the chairman and ceo of lucky brand . although mr. alberini is currently in the process of developing a strategic vision and implementation plan for execution with our leadership team , he has already identified several key principles he plans to deploy to drive value creation . story_separator_special_tag in addition , during the fourth quarter of fiscal 2019 , the company received proceeds from borrowings of $ 22.7 million and made payments for borrowings and capital lease obligations of $ 23.5 million . accounts receivable consists of trade receivables relating primarily to the company 's wholesale business in europe and , to a lesser extent , to its wholesale businesses in asia and the americas , royalty receivables relating to its licensing operations , credit card and retail concession receivables related to its retail businesses and certain other receivables . accounts receivable in creased by $ 62.0 million , or 23.8 % , to $ 322.0 million as of february 2 , 2019 , compared to $ 260.0 million at february 3 , 2018 , and includes the impact of $ 36.0 million of allowances reclassified from accounts receivable to accrued expenses from the adoption of the new revenue recognition standard in the first quarter of fiscal 2019. on a constant currency basis , accounts receivable increased by $ 86.9 million , or 33.4 % . inventory in creased by $ 40.6 million , or 9.5 % , to $ 468.9 million as of february 2 , 2019 , compared to $ 428.3 million at february 3 , 2018 , and includes the impact of $ 12.4 million in reclassifications of accrued inventory from estimated returns to other assets from the adoption of the new revenue recognition standard in the first quarter of fiscal 2019. on a constant currency basis , inventory increased by $ 69.9 million , or 16.3 % . global store count in fiscal 2019 , together with our partners , we opened 199 new stores worldwide , consisting of 97 stores in asia and the pacific , 77 stores in europe and the middle east , 14 stores in central and south america , six stores in canada and five stores in the u.s. together with our partners , we closed 143 stores worldwide , consisting of 55 stores in asia and the pacific , 46 stores in europe and the middle east , 23 stores in the u.s. , 13 stores in central and south america and six stores in canada . we ended fiscal 2019 with 1,719 stores and 423 concessions worldwide , comprised as follows : replace_table_token_7_th of the total 1,719 stores , 1,405 were guess ? stores , 198 were guess ? accessories stores , 68 were g by guess ( gbg ) stores and 48 were marciano stores . results of operations the following table sets forth actual operating results for the fiscal years 2019 , 2018 and 2017 as a percentage of net revenue : replace_table_token_8_th 1 during the fourth quarter of fiscal 2018 , the company reclassified net royalties received on the company 's inventory purchases of licensed product from net revenue to cost of product sales . accordingly , amounts related to net royalties , net revenue and cost of product sales as well as operating results as a percentage of net revenue have been adjusted for fiscal 2017 to conform to the current period presentation . 2 during the first quarter of fiscal 2019 , the company adopted new authoritative guidance which requires that the non-service components of net periodic defined benefit pension cost be presented outside of earnings ( loss ) from operations . accordingly , amounts related to selling , general and administrative expenses , earnings from operations and other income ( expense ) , net , as a percentage of net revenue have been adjusted for fiscal 2018 and fiscal 2017 to conform to the current period presentation . refer to โ part iv . financial statements โ note 2 โ new accounting guidance โ in this form 10-k for further information . fiscal 2019 compared to fiscal 2018 consolidated results net revenue . net revenue in creased by $ 245.9 million , or 10.4 % , to $ 2.61 billion for fiscal 2019 , compared to $ 2.36 billion in fiscal 2018 . in constant currency , net revenue in crease d by 10.6 % as currency translation fluctuations relating to our foreign operations unfavorably impacted net revenue by $ 5.1 million compared to the prior year . the in crease in revenue was driven primarily by retail expansion in our international markets and , to a lesser extent , higher wholesale shipments in europe and the americas as well as positive comparable sales . gross margin . gross margin in creased 90 basis points to 36.0 % for fiscal 2019 , compared to 35.1 % in fiscal 2018 , of which 100 basis points was due to higher overall product margins , partially offset by 10 basis points related to a higher occupancy rate . the higher overall product margins were driven primarily by lower markdowns in americas retail . the higher occupancy rate was driven primarily by higher distribution costs related to the relocation of the 30 company 's european distribution center , partially offset by overall global leveraging of expenses and cost reductions due primarily to negotiated rent reductions in americas retail . gross profit . gross profit in creased by $ 110.8 million , or 13.4 % , to $ 939.6 million for fiscal 2019 , compared to $ 828.8 million in fiscal 2018 . the increase in gross profit , which included an unfavorabl e impact from currency translation , was due primarily to the favorable impact on gross profit from higher revenue and , to a lesser extent , higher overall products margins , partially offset by higher distribution costs related to the relocation of the company 's european distribution center . currency translation fluctuations relating to our foreign operations unfavorabl y impacted gross profit by $ 3.6 million . the company includes inbound freight charges , purchasing costs and related overhead , retail store occupancy costs , including rent and depreciation , and a portion of the company 's distribution costs related to its retail business in cost of product sales .
| executive summary overview net earnings attributable to guess ? , inc. were $ 14.1 million , or diluted earnings of $ 0.16 per common share , for fiscal 2019 , compared to net loss attributable to guess ? , inc. of $ 7.9 million , or diluted loss of $ 0.11 per common share for fiscal 2018 . 28 during fiscal 2019 , the company recognized a fine imposed by the european commission of 39.8 million ( $ 45.6 million ) , asset impairment charges of $ 6.9 million , net gains on lease terminations of $ 0.5 million , certain professional service and legal fees and related costs of $ 6.1 million , ceo severance charges of $ 5.2 million and income tax charges totaling $ 6.3 million related to the enactment of the tax reform ( or a combined $ 66.3 million after considering the related tax benefit of $ 3.4 million ) , or an unfavorable $ 0.82 per share impact . excluding the impact of these items , adjusted net earnings attributable to guess ? , inc. were $ 80.4 million and adjusted diluted earnings were $ 0.98 per common share for fiscal 2019 . during fiscal 2018 , the company recognized asset impairment charges of $ 8.5 million , net losses on lease terminations of $ 11.4 million , certain professional service and legal fees and related costs of $ 0.5 million and additional income tax charges totaling $ 47.9 million related to the tax reform ( or a combined $ 66.6 million after considering the related tax benefit of $ 1.6 million ) , or an unfavorable $ 0.81 per share impact . excluding the impact of these items , adjusted net earnings attributable to guess ?
| 2,307 |
the debenture has a term of two years , is convertible into shares of our common stock at a conversion price of $ 10.00 per share ( subject to adjustment ) , and has an annual interest rate of 10 % , with one initial payment of interest only due july 24 , 2013 , and thereafter , the principal amount is payable in six equal quarterly principal payments of $ 500 story_separator_special_tag overview the following management 's discussion and analysis of financial condition and results of operations ( `` md & a '' ) is intended to help the reader understand rick 's cabaret international , inc. , our operations and our present business environment . md & a is provided as a supplement to ย and should be read in conjunction with ย our consolidated financial statements and the accompanying notes thereto contained in `` item 8. financial statements and supplementary data '' of this report . this overview summarizes the md & a , which includes the following sections : ยท our business ย a general description of our business and the adult nightclub industry , our objective , our strategic priorities , our core capabilities , and challenges and risks of our business . ยท critical accounting policies and estimates ย a discussion of accounting policies that require critical judgments and estimates . ยท operations review ย an analysis of our company 's consolidated results of operations for the three years presented in our consolidated financial statements . ยท liquidity and capital resources ย an analysis of cash flows ; aggregate contractual obligations and an overview of financial position . general information we operate in the adult nightclub industry : 1. we own and or operate upscale adult nightclubs serving primarily businessmen and professionals . our nightclubs are in houston , austin , san antonio , dallas , fort worth , beaumont , longview , harlingen , edinburg , abilene , lubbock , el paso and odessa , texas ; charlotte , north carolina ; minneapolis , minnesota ; new york , new york ; miami gardens , florida ; los angeles , california ; philadelphia , pennsylvania , phoenix , arizona and indianapolis , indiana . no sexual contact is permitted at any of our locations . 2. we own a media division , including the leading trade magazine serving the multi-billion dollar adult nightclubs industry . we also own an industry trade show , one other industry trade publications and more than 15 industry websites . our nightclub revenues are derived from the sale of liquor , beer , wine , food , merchandise , cover charges , membership fees , independent contractors ' fees , commissions from vending and atm machines , valet parking and other products and services . media revenues include the sale of advertising content and revenues from an annual expo convention . our fiscal year end is september 30. our goal is to use our company 's assets ย our brands , financial strength and the talent and strong commitment of our management and associates ย to become more competitive and to accelerate growth in a manner that creates value for our shareholders . critical accounting policies management 's discussion and analysis of financial condition and results of operations are based upon our financial statements , which have been prepared in accordance with united states generally accepted accounting principles ( โ gaap โ ) . gaap consists of a set of standards issued by the fasb and other authoritative bodies in the form of fasb statements , interpretations , fasb staff positions , emerging issues task force consensuses and american institute of certified public accountants statements of position , among others . the fasb recognized the complexity of its standard-setting process and embarked on a revised process in 2004 that culminated in the release on july 1 , 2009 of the accounting standards codification ( โ asc โ ) . the asc does not change how company accounts for its transactions or the nature of related disclosures made . rather , the asc results in changes to how the company references accounting standards within its reports . this change was made effective by the fasb for periods ending on or after september 15 , 2009. the company has updated references to gaap in this annual report on form 10-k to reflect the guidance in the asc . the preparation of these consolidated financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets , liabilities , revenues and expenses , and related disclosure of contingent assets and liabilities . on a regular basis , we evaluate these estimates , including investment impairment . these estimates are based on management 's historical industry experience and on various other assumptions that are believed to be reasonable under the circumstances . actual results may differ from these estimates . property and equipment property and equipment are stated at cost . provisions for depreciation and amortization are made using straight-line rates over the estimated useful lives of the related assets and the shorter of useful lives or terms of the applicable leases for leasehold improvements . buildings have estimated useful lives ranging from 29 to 40 years . furniture , equipment and leasehold improvements have estimated useful lives between five and 40 years . expenditures for major renewals and betterments that extend the useful lives are capitalized . expenditures for normal maintenance and repairs are expensed as incurred . the cost of assets sold or abandoned and the related accumulated depreciation are eliminated from the accounts and any gains or losses are charged or credited in the accompanying consolidated statement of income of the respective period . goodwill and intangible assets fasb asc 350 , intangibles - goodwill and other addresses the accounting for goodwill and other intangible assets . under fasb asc 350 , goodwill and intangible assets with indefinite lives are no longer amortized , but reviewed on an annual basis for impairment . story_separator_special_tag fasb asc 740 also provides guidance on derecognition , measurement , classification , interest and penalties , accounting in interim periods , disclosure and transition . there are no unrecognized tax benefits to disclose in the notes to the consolidated financial statements . put options in certain situations , the company has issued restricted common shares as partial consideration for acquisitions of certain businesses or assets . pursuant to the terms and conditions of the governing acquisition agreements , the holder of such shares has the right , but not the obligation , to put a fixed number of the shares on a monthly basis back to the company at a fixed price per share . the company may elect during any given month to either buy the monthly shares or , if management elects not to do so , the holder can sell the monthly shares in the open market , and any deficiency between the amount which the holder receives from the sale of the monthly shares and the agreed fixed price of the shares will be paid by the company . the company has accounted for these shares in accordance with the guidance established by fasb asc 480 , distinguishing liabilities from equity , as a reclassification of the value of the shares from permanent to temporary equity . as the shares become due , the company transfers the value of the shares back to permanent equity , less any amount paid to the holder . also see โ derivative financial instruments โ above . we finished liquidating the put options during the quarter ended march 31 , 2013 and we have no more obligations under the put options . earnings ( loss ) per common share the company computes earnings ( loss ) per share in accordance with fasb asc 260 , earnings per share . fasb asc 260 provides for the calculation of basic and diluted earnings per share . basic earnings per share includes no dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period . diluted earnings per share reflect the potential dilution of securities that could share in the earnings of the company . potential common stock shares consist of shares that may arise from outstanding dilutive common stock options and warrants ( the number of which is computed using the โ treasury stock method โ ) and from outstanding convertible debentures ( the number of which is computed using the โ if converted method โ ) . diluted eps considers the potential dilution that could occur if the company 's outstanding common stock options , warrants and convertible debentures were converted into common stock that then shared in the company 's earnings ( loss ) ( as adjusted for interest expense , that would no longer occur if the debentures were converted ) . stock options the company has adopted the fair value recognition provisions of fasb asc 718 , compensationยstock compensation . the critical estimates are volatility , expected life and risk-free rate . the compensation cost recognized for the years ended september 30 , 2013 , 2012 and 2011 was $ 847,183 , $ 314,761 and $ 8,254 , respectively . there were zero stock options exercises for the years ended september 30 , 2013 and 2012 and 25,000 for the year ended september 30 , 2011. story_separator_special_tag style= '' clear : both ; margin : 0in 0in 0pt ; clear : both '' > other expenses increased due to the new clubs acquired . we added more debt from acquisitions while we paid off debt as we amortize the loans . as of september 30 , 2013 , the balance of long-term debt was $ 78.6 million compared to $ 63.5 million a year earlier . the increase is principally attributable to adding $ 24.8 million in debt in the 2013 acquisitions , principally real estate . non-gaap financial measures in addition to our financial information presented in accordance with gaap , management uses certain โ non-gaap financial measures โ within the meaning of the sec regulation g , to clarify and enhance understanding of past performance and prospects for the future . generally , a non-gaap financial measure is a numerical measure of a company 's operating performance , financial position or cash flows that excludes or includes amounts that are included in or excluded from the most directly comparable measure calculated and presented in accordance with gaap . we monitor non-gaap financial measures because it describes the operating performance of the company and helps management and investors gauge our ability to generate cash flow , excluding some recurring charges that are included in the most directly comparable measures calculated and presented in accordance with gaap . relative to each of the non-gaap financial measures , we further set forth our rationale as follows : non-gaap operating income and non-gaap operating margin . we exclude from gaap operating income and gaap operating margin amortization of intangibles , patron taxes , gains and losses from asset sales , stock-based compensation charges , litigation and other one-time legal settlements and acquisition costs . we believe that excluding these items assists investors in evaluating period-over-period changes in our operating income and operating margin without the impact of items that are not a result of our day-to-day business and operations . non-gaap net income and non-gaap net income per basic share and per diluted share . we exclude from gaap net income and gaap net income per diluted share and per basic share amortization of intangibles , patron taxes , income tax expense , impairment charges , gains and losses from asset sales , stock-based compensation , litigation , loss from discontinued operations and other one-time legal settlements and acquisition costs , and include the non-gaap provision for income taxes , calculated as the tax-effect at 35 % effective tax rate of the pre-tax non-gaap income before taxes less stock-based compensation , because we believe that excluding such measures helps management and investors better understand our operating activities .
| operations review results of operations for the fiscal year ended september 30 , 2013 as compared to the fiscal year ended september 30 , 2012 for the fiscal year ended september 30 , 2013 , we had consolidated total revenues of $ 112.2 million , compared to consolidated total revenues of $ 95.2 million for the year ended september 30 , 2012. this was an increase of $ 17.0 million or 17.8 % . the increase in total revenues was primarily due to revenues generated in our new clubs acquired in 2013 ( $ 3.5 million in 2013 ) , a full year of revenues from clubs purchased in 2012 ( increase of $ 14.2 million ) and increases in revenues from certain of our existing clubs , especially from our xtc austin , rick 's dfw and rick 's minnesota locations . revenues from nightclub operations for same-location same-period decreased by 1.2 % . our operating margin ( income ( loss ) from operations divided by total revenues ) was 19.7 % for the year ended september 30 , 2013 compared to 17.3 % for the prior year . our income from operations for our nightclub operations for the same-location-same-period decreased by 1.1 % . our net income was $ 9.2 million for the fiscal year ended september 30 , 2013 compared to $ 7.6 million for the previous year . the increase in our net income is explained in the following paragraphs . following is a comparison of the company 's income statement for the years ended september 30 , 2013 and 2012 with percentages compared to total revenue : following is an explanation of significant variances in the above amounts . replace_table_token_4_th other revenues include atm commissions earned , video games and other vending and certain promotion fees charged to our entertainers . the company recognizes revenue from other revenues and services at the point-of-sale upon receipt of cash , check , or credit card charge .
| 2,308 |
the service award units granted to the named executive officers were determined by reference to our peer group and the market-based benchmarks compiled by pm & p and were based on the named executive officers total compensation falling between the story_separator_special_tag overview we are a delaware limited partnership ( โ we , โ โ us , โ โ our , โ or the โ partnership โ ) formed in september 2010. ngl energy holdings llc serves as our general partner . at march 31 , 2019 , our operations included : crude oil logistics water solutions liquids refined products and renewables on march 30 , 2018 , we sold a portion of our retail propane segment to dcc lpg ( โ dcc โ ) for net proceeds of $ 212.4 million in cash , and recorded a gain on disposal of $ 89.3 million during the year ended march 31 , 2018. the retail propane businesses subject to this transaction consisted of our operations across the mid-continent and western portions of the united states . on july 10 , 2018 , we completed the sale of virtually all of our remaining retail propane segment to superior plus corp. ( โ superior โ ) for total consideration of $ 889.8 million in cash , and recorded a gain on disposal of $ 408.9 million during the year ended march 31 , 2019. we retained our 50 % ownership interest in victory propane , llc ( โ victory propane โ ) , which we subsequently sold on august 14 , 2018 ( see note 2 to our consolidated financial statements included in this annual report on form 10-k ( โ annual report โ ) ) . these transactions represent a strategic shift in our operations and will have a significant effect on our operations and financial results going forward . accordingly , the results of operations and cash flows related to our former retail propane segment ( including equity in earnings of victory propane ) have been classified as discontinued operations for all periods presented and prior periods have been retrospectively adjusted in the consolidated statements of operations and consolidated statements of cash flows . in addition , the assets and liabilities related to our former retail propane segment have been classified as held for sale within our march 31 , 2018 consolidated balance sheet . see note 1 and note 17 to our consolidated financial statements included in this annual report for a further discussion of the transaction . crude oil logistics our crude oil logistics segment purchases crude oil from producers and marketers and transports it to refineries or for resale at pipeline injection stations , storage terminals , barge loading facilities , rail facilities , refineries , and other trade hubs , and provides storage , terminaling , trucking , marine and pipeline transportation services through its owned assets . most of our contracts to purchase or sell crude oil are at floating prices that are indexed to published rates in active markets such as cushing , oklahoma . we attempt to reduce our exposure to price fluctuations by using back-to-back physical contracts whenever possible . when back-to-back physical contracts are not optimal , we enter into financially settled derivative contracts as economic hedges of our physical inventory , physical sales and physical purchase contracts . we use our transportation assets to move crude oil from the wellhead to the highest value market . spreads between crude oil prices in different markets can fluctuate , which may expand or limit our opportunity to generate margins by transporting crude oil to different markets . the following table summarizes the range of low and high crude oil spot prices per barrel of nymex west texas intermediate crude oil at cushing , oklahoma for the periods indicated and the prices at period end : replace_table_token_6_th we believe volatility in commodity prices will continue , and our ability to adjust to and manage this volatility may impact our financial results . our crude oil logistics segment generated an operating loss of $ 7.4 million during the year ended march 31 , 2019 , which included a loss of $ 105.0 million on our transaction with a third party in which they agreed to be fully responsible for our future minimum volume commitment in exchange for $ 67.7 million of deficiency credits on a contract with a crude oil 53 pipeline operator and $ 35.3 million in cash ( see note 13 to our consolidated financial statements included in this annual report for a further discussion ) . our crude oil logistics segment generated operating income of $ 122.9 million during the year ended march 31 , 2018 , which included a gain of $ 108.6 million on the sale of our previously held 50 % interest in glass mountain pipeline , llc ( โ glass mountain โ ) . water solutions our water solutions segment provides services for the treatment and disposal of wastewater generated from crude oil and natural gas production and for the disposal of solids such as tank bottoms , drilling fluids and drilling muds and performs truck and frac tank washouts . in addition , our water solutions segment sells the recovered hydrocarbons that result from performing these services and sells freshwater to producers for exploration and production activities . our water processing facilities are strategically located near areas of high crude oil and natural gas production . a significant factor affecting the profitability of our water solutions segment is the extent of exploration and production in the areas near our facilities , which is generally based upon producers ' expectations about the profitability of drilling and producing new wells . the primary customer of our wyoming facility has committed to deliver a specified minimum volume of water to our facility under a long-term contract . the primary customers of our colorado facilities have committed to deliver all wastewater produced at wells within the dj basin to our facilities . story_separator_special_tag see note 16 to our consolidated financial statements included in this annual report for a further discussion . as this sale transaction did not represent a strategic shift that will have a major effect on our operations or financial results , operations related to this portion of our crude oil logistics segment have not been classified as discontinued operations . trends crude oil prices can fluctuate widely based on changes in supply and demand conditions . the opportunity to generate revenues in our crude oil logistics business is heavily influenced by the volume of crude oil being produced . crude oil prices declined sharply during the period from july 2014 through february 2016. crude oil prices have rebounded and at march 31 , 2019 , the spot price for nymex west texas intermediate crude oil at cushing , oklahoma was $ 60.14 per barrel . while crude oil production in the united states has been strong in recent years , a sharp decline in crude oil prices could reduce the incentive for producers to expand production . low crude oil prices could result in declines in crude oil production and may adversely impact volumes and margins in our crude oil logistics business . crude oil price declines have had an adverse impact on many participants in the energy markets , and the inherent risk of customer or counterparty nonperformance is higher when crude oil prices are low or in decline . from january 2015 to january 2018 , crude oil markets were in contango , a condition in which forward crude oil prices are greater than spot prices . our crude oil logistics business benefits when the market is in contango , as increasing prices result in inventory holding gains during the time between when we purchase inventory and when we sell it . in addition , we are able to better utilize our storage assets when contango markets justify storing barrels . during the year ended march 31 , 2019 , crude oil markets have moved from being in backwardation to fairly flat . backwardation is a condition in which forward crude oil prices are lower than spot prices . when markets are in backwardation , falling prices typically have an unfavorable impact on our margins . our opportunity to generate revenues in our water solutions business is based on the level of production of natural gas and crude oil in the areas where our facilities are located . as described above , crude oil prices declined sharply since july 2014 but have increased since march 31 , 2016. also , drilling rigs and production have increased since march 31 , 2016 , particularly in the permian and dj basins which has positively impacted the volumes of our water solutions business ( during the three months ended march 31 , 2019 we processed 860,000 barrels of wastewater per day , compared to 761,000 barrels of wastewater per day during the three months ended march 31 , 2018 ) . a portion of the revenues in our water solutions business is generated from the sale of hydrocarbons that we recover when processing wastewater . these recovered hydrocarbon revenues have increased due primarily to an increase in the volume of wastewater processed at existing facilities as well as facilities acquired from acquisitions and an increase in crude oil prices ; however , these revenues were negatively impacted by a lower percentage of skim oil volumes recovered per wastewater barrel processed . this lower percentage was due primarily to an increase in wastewater transported through pipelines ( which contains less oil per barrel of wastewater ) , as well as operational changes in the dj basin , which have resulted in lower per-barrel revenues for our water solutions business . an important element of our refined products and renewables segment relates to the marketing of refined products in the southeast and east coast regions . we purchase product in the gulf coast , transport the product on third party pipelines , and sell the product at terminals owned by third parties . most of the contracts with these customers are one year in duration , with pricing indexed to prices in the gulf coast at the date of sale plus a specified differential . to operate this business we maintain inventory in transit on third party pipelines and at destination terminals where we sell the product . the value of this inventory 58 will increase or decrease as market prices change . in order to mitigate this risk , we enter into futures contracts , which are only available based on new york harbor pricing . because our contracts are indexed to gulf coast prices and our futures contracts are based on new york harbor prices , the futures contracts are not a perfect hedge against our inventory holding risk . during any given period , spreads between prices in the gulf coast and new york harbor could narrow or widen , which could reduce the effectiveness of the futures contracts as a hedge of the inventory holding risk . the tenor of these futures contracts , which are typically six months to one year in duration at inception , can also contribute to volatility in earnings among individual quarters within a fiscal year . during the year ended march 31 , 2019 , prices for refined products increased . gulf coast prices , on which our sales contracts are based , increased less than the new york harbor prices , on which our futures contracts are based , which had an unfavorable impact on our cost of sales . based on historical experience , we generally expect the spreads between gulf coast and new york harbor prices to be more consistent over the course of a contract year than during any individual quarter within the year , and that we should expect more volatility in cost of sales among quarters within a fiscal year than we would expect during a full fiscal year . seasonality seasonality impacts our liquids and refined products and renewables segments .
| consolidated results of operations the following table summarizes our consolidated statements of operations for the periods indicated : replace_table_token_11_th items impacting the comparability of our financial results our current and future results of operations may not be comparable to our historical results of operations for the periods presented due to business combinations , disposals and other transactions . recent developments transactions during the three months ended march 31 , 2019 repurchase and redemption of senior unsecured notes during the three months ended march 31 , 2019 , we repurchased $ 11.9 million of the 2019 notes ( as defined herein ) . see note 8 to our consolidated financial statements included in this annual report for a further discussion . on march 15 , 2019 , we paid $ 329.7 million to redeem all of our outstanding 2019 notes . see note 8 to our consolidated financial statements included in this annual report for a further discussion . credit agreement on february 6 , 2019 , we amended the credit agreement ( as defined herein ) to , among other things , reset and increase the basket for the repurchase of common units , decrease the maximum total leverage indebtedness ratio for future quarters and amend the defined term โ consolidated ebitda. โ see note 8 to our consolidated financial statements included in this annual report for a further discussion . 56 subsequent events see note 19 to our consolidated financial statements included in this annual report for a discussion of transactions that occurred subsequent to march 31 , 2019 . acquisitions as discussed below , we completed numerous acquisitions during the years ended march 31 , 2019 and 2018 . these acquisitions impact the comparability of our results of operations between our current and prior fiscal years .
| 2,309 |
the company did not incur any impairment charges for goodwill in the fiscal years ended march 31 , 2017 , 2016 , and 2015. intangible assets intangible assets โ definite-lived- definite-lived intangible assets are amortized using the straight-line method over their estimated useful lives , and are tested for recoverability whenever events or changes in circumstances indicate that carrying amounts of the asset group may not be recoverable . asset groups are established primarily by determining the lowest level of cash flows story_separator_special_tag financial condition and results of operations our fiscal year begins on april 1 and ends on march 31. unless otherwise noted , references to โ year โ pertain to our fiscal year . for example , 2017 refers to fiscal 2017 , which is the period from april 1 , 2016 to march 31 , 2017. the following discussion and analysis of our financial condition and results of our operations should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this annual report on form 10-k. this discussion contains forward-looking statements that are based on the beliefs of our management , as well as assumptions made by , and information currently available to , our management . our actual results could differ materially from those discussed below . factors that could cause or contribute to such differences include , but are not limited to , those identified below , and those discussed in the sections titled โ item 1a . risk factors โ and โ cautionary statement about forward-looking statements โ included elsewhere in this annual report on form 10-k. please read the following discussion together with the sections titled โ item 1a . risk factors , โ โ item 6. selected financial and operating data โ and our consolidated financial statements , including the related notes , included in โ item 8. financial statements and supplementary data โ of this form 10-k. we consolidate all of our joint ventures for purposes of gaap , except for our south american joint venture and our tigre-ads usa joint venture . overview we are the leading manufacturer of high performance thermoplastic corrugated pipe , providing a comprehensive suite of water management products and superior drainage solutions for use in the underground construction and infrastructure marketplace . our innovative products are used across a broad range of end markets and applications , including non-residential , residential , agriculture and infrastructure applications . we have established a leading position in many of these end markets by leveraging our national sales and distribution platform , our overall product breadth and scale and our manufacturing excellence . in the united states , our national footprint combined with our strong local presence and broad product offering make us the leader in an otherwise highly fragmented sector comprised of many smaller competitors . we believe the markets we serve in the united states represent approximately $ 11 billion of annual revenue opportunity . in addition , we believe the increasing acceptance of thermoplastic pipe products in international markets represents an attractive growth opportunity . our products are generally lighter , more durable , more cost effective and easier to install than comparable alternatives made with traditional materials . following our entrance into the non-residential construction market with the introduction of n-12 corrugated polyethylene pipe in the late 1980s , our pipe has been displacing traditional materials , such as reinforced concrete , corrugated steel and pvc , across an ever expanding range of end markets . this has allowed us to consistently gain share and achieve above market growth throughout economic cycles . we expect to continue to drive conversion to our products from traditional materials as contractors , civil design engineers and municipal agencies increasingly acknowledge the superior physical attributes and compelling value proposition of our thermoplastic products . in addition , we believe that overall demand for our products will benefit as the regulatory environment continues to evolve . our broad product line includes hdpe pipe , pp pipe and related water management products . building on our core drainage businesses , we have aggressively pursued attractive ancillary product categories such as storm and septic chambers , pvc drainage structures , fittings and filters , and water quality filters and separators . we refer to these ancillary product categories as allied products . given the scope of our overall sales and distribution platform , we have been able to drive growth within our allied products and believe there are significant growth opportunities going forward . key factors affecting our results of operations product demand- there are numerous factors that influence demand for our products . our businesses are cyclical in nature and sensitive to general economic conditions , primarily in the united states , canada , mexico and south america . the non-residential , residential , agricultural and infrastructure markets we serve are affected by the 43 advanced drainage systems , inc. availability of credit , lending practices , interest rates and unemployment rates . demand for new homes , farm income , commercial development and highway infrastructure spending have a direct impact on our financial condition and results of operations . accordingly , the following factors may have a direct impact on our business in the markets in which our products are sold : the strength of the economy ; the amount and type of non-residential and residential construction ; funding for infrastructure spending ; farm income and agricultural land values ; inventory of improved housing lots ; changes in raw material prices ; the availability and cost of credit ; non-residential occupancy rates ; commodity prices ; and demographic factors such as population growth and household formation . product pricing - the price of our products is impacted by competitive pricing dynamics in our industry as well as by raw material input costs . our industry is highly competitive and the sales prices for our products may vary based on the sales policies of our competitors . story_separator_special_tag historically , sales of our products have been higher in the first and second quarters of each fiscal year due to favorable weather and longer daylight conditions accelerating construction project activity during these periods while fourth quarter results are impacted by the timing of spring in the northern united states and canada . seasonal variations in operating results may also be significantly impacted by inclement weather conditions , such as cold or wet weather , which can delay projects , resulting in decreased net sales for one or more quarters , but we believe that these delayed projects generally result in increased net sales during subsequent quarters . in the non-residential , residential and infrastructure markets in the northern united states and canada , the construction season typically begins to gain momentum in late march and lasts through november , before winter sets in , significantly slowing the construction markets . in the southern and western united states , mexico , central america and south america , the construction markets are less seasonal . the agricultural drainage market is concentrated in the early spring just prior to planting and in the fall just after crops are harvested prior to freezing of the ground in winter . currency exchange rates - although we sell and manufacture our products in many countries , our sales and production costs are primarily denominated in u.s. dollars . we have wholly-owned facilities in canada , the netherlands , and puerto rico and joint venture facilities in mexico , chile , brazil , argentina , colombia and peru . 45 advanced drainage systems , inc. the functional currencies in the areas in which we have wholly-owned facilities and joint venture facilities other than the u.s. dollar are the canadian dollar , euro , mexican peso , chilean peso , brazilian real , argentine peso and colombian peso . from time to time , we use derivatives to reduce our exposure to currency fluctuations . during fiscal 2015 , we began to implement hedging strategies to manage exposure to the canadian dollar and , to a lesser extent , the mexican peso , which we continued in fiscal 2016 and 2017. description of our segments we operate a geographically diverse business , serving customers in approximately 80 countries . for fiscal 2017 , approximately 88 % ( $ 1,102.2 million ) of net sales were attributable to customers located in the united states and approximately 12 % ( $ 155.1 million ) of net sales were attributable to customers outside of the united states . our operations are organized into two reportable segments based on the markets we serve : domestic and international . we generate a greater proportion of our net sales and gross profit in our domestic segment , which consists of all regions of the united states . we expect the percentage of total net sales and gross profit derived from our international segment to continue to increase in future periods as we continue to expand globally . see โ note 21. business segment information , โ to our audited consolidated financial statements included in โ item 8. financial statements and supplementary data โ of this form 10-k. domestic - our operating results have been , and will continue to be , impacted by macroeconomic trends in the united states . for fiscal 2017 , 2016 , and 2015 , we generated net sales attributable to our domestic segment of $ 1,102.2 million , $ 1,113.8 million , and $ 1,027.9 million , respectively . unconsolidated sales for our domestic unconsolidated joint ventures ( our tigre-ads usa joint venture and our baysaver joint venture prior to july 17 , 2015 ) , were $ 18.7 million , $ 20.9 million and $ 24.9 million in fiscal years 2017 , 2016 , and 2015 , respectively . international - our international segment manufactures and markets products in regions outside of the united states , with a growth strategy focused on our owned facilities in canada and those markets serviced through our joint ventures in mexico and south america . pipe manufactured in these countries is primarily sold into the same region . our joint venture strategy has provided us with local and regional access to new markets . for fiscal 2017 , 2016 , and 2015 , we generated net sales attributable to our international segment of $ 155.1 million , $ 176.9 million , and $ 152.1 million , respectively . our investment in the south american joint venture is accounted for under the equity method and is not consolidated for financial reporting purposes . the unconsolidated sales of the south american joint venture were $ 42.2 million , $ 50.3 million , and $ 58.5 million , in fiscal 2017 , 2016 , and 2015 , respectively . recent developments acquisition of plastic tubing industries - in february 2017 , we acquired the assets of plastic tubing industries ( โ pti โ ) , a manufacturer of hdpe pipe and related accessories , in an all cash transaction for $ 9.5 million . at the time of acquisition , $ 8.5 million was paid in cash ; the remaining $ 1.0 million will be paid on august 6 , 2018. with the acquisition , we will increase our manufacturing footprint in georgia and texas , while adding production capacity to existing manufacturing facilities in florida , to better serve growing demand in the region . non-gaap financial measures adjusted ebitda - adjusted ebitda , which is a non-gaap financial measure , has been presented in this annual report on form 10-k as a supplemental measure of financial performance that is not required by , or presented in accordance with gaap . we calculate adjusted ebitda as net income before interest , income taxes , depreciation and amortization , stock-based compensation expense , non-cash charges and certain other expenses . adjusted ebitda is included in this annual report on form 10-k because it is a key metric used by management and our board of directors to assess our financial performance .
| results of operations results of operations by segment the following table presents our net sales by segment , net sales by segment as a percentage of total net sales , net income by segment , net income by segment as a percentage of total net income , segment adjusted ebitda and segment adjusted ebitda as a percentage of total adjusted ebitda by segment for the periods presented . replace_table_token_10_th 49 advanced drainage systems , inc. fiscal year ended march 31 , 2017 compared with fiscal year ended march 31 , 2016 the following table summarizes certain financial information relating to our operating results that have been derived from our consolidated financial statements for the fiscal years ended march 31 , 2017 and 2016. also included is certain information relating to the operating results as a percentage of net sales . we believe this presentation is useful to investors in comparing historical results . replace_table_token_11_th net sales - net sales totaled $ 1,257.3 million in fiscal 2017 , decreasing $ 33.4 million or 2.6 % , as compared to $ 1,290.7 million in fiscal 2016. replace_table_token_12_th our domestic sales decreased $ 11.6 million , or 1.0 % , as compared to fiscal 2016. domestic pipe sales decreased $ 25.5 million , or 3.1 % , which was primarily a result of volume decreases of $ 16.6 million and net price decreases of $ 8.8 million . the agriculture market has experienced continued sales decreases . allied product sales increased $ 14.0 million , or 4.6 % , as well as increased sales volume of products sold primarily into the non-residential and infrastructure end markets . 50 advanced drainage systems , inc. international sales decreased $ 21.9 million , or 12.4 % , to $ 155.0 million in fiscal year 2017 , as compared to $ 176.9 million in the prior year .
| 2,310 |
recent accounting pronouncements not yet adopted in january 2017 , the fasb issued asu 2017โ04 , intangiblesโgoodwill and other ( topic 350 ) : simplifying the test for goodwill impairment , which simplifies the subsequent measurement of goodwill to eliminate step 2 from the goodwill impairment test . in addition , it eliminates story_separator_special_tag the following discussion and analysis should be read in conjunction with โ item 6. selected financial data โ and โ item 8. financial statements and supplementary data โ . this discussion contains forward-looking statements relating to our future financial performance , business strategy , financing plans and other future events that involve uncertainties and risks . you can identify these statements by forward-looking words such as โ anticipate , โ โ intend , โ โ plan , โ โ continue , โ โ could , โ โ grow , โ โ may , โ โ potential , โ โ predict , โ โ strive , โ โ estimate , โ โ believe , โ โ expect โ and similar expressions that convey uncertainty of future events or outcomes . any forward-looking statements herein are made pursuant to the safe harbor provision of the private securities litigation reform act of 1995. our actual results could differ materially from the results anticipated by these forward-looking statements as a result of many known and unknown factors that are beyond our ability to control or predict , including but not limited to those discussed above in โ risk factors โ and elsewhere in this report . see also โ special cautionary notice regarding forward-looking statements โ at the beginning of โ item 1. business. โ critical accounting policies and estimates we have based the following discussion and analysis of financial condition and results of operations on our consolidated financial statements , which we have prepared in accordance with u.s. gaap . the preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities , disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period . note 1 to the consolidated financial statements for the fiscal year ended april 30 , 2020 , describes the significant accounting policies that we have used in preparing our consolidated financial statements . on an ongoing basis , we evaluate our estimates , including , but not limited to , those related to revenue/collectability . we base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . our actual results could differ materially from these estimates under different assumptions or conditions . we believe the critical accounting policies listed below affect significant judgments and estimates used in the preparation of the financial statements . revenue recognition . the most critical judgements required in applying topic 606 and our revenue recognition policy relate to the evaluation of the standalone selling price ( ssp ) for each performance obligation . we use historical sales transaction data and judgments , among other factors , in determining the ssp for products and services . for substantially all performance obligations except on-premise licenses , we are able to establish the ssp based on the observable prices of products or services sold separately in comparable circumstances to similar customers . we typically establish an ssp range for our products and services , which is reassessed on a periodic basis or when facts and circumstances change . ssp for our products and services can evolve over time due to changes in our pricing practices that are influenced by competition , changes in demand for our products and services , and economic factors , among others . our on-premise licenses historically have not been sold on a standalone basis , as substantially all customers elect to purchase support contracts at the time of a on-premise license purchase . support contracts are generally priced as a percentage of the net fees paid by the customer to access the on-premise license . we are unable to establish the ssp for our on-premise licenses based on observable prices given the same products are sold for a broad range of amounts ( that is , the selling price is highly variable ) and a representative ssp is not discernible from past transactions or other observable evidence . as a result , the ssp for a on-premise license included in a contract with multiple performance obligations is determined by applying a residual approach whereby all other performance obligations within a contract are first allocated a portion of the transaction price based upon their respective ssps , with any residual amount of transaction price allocated to on-premise license revenues . 43 story_separator_special_tag business or assets , the difficulty of assimilating operations and personnel , integrating acquired technologies and products and maintaining the loyalty of the customers of the acquired business . competitive technologies . there is a risk that our competitors may develop technologies that are substantially equivalent or superior to our technology . competition in general . there are risks inherent in the market for business application software and related services , which has been and continues to be intensely competitive ; for example , some of our competitors may become more aggressive with their prices and or payment terms , which may adversely affect our profit margins . for more information , please see โ risk factors โ in item 1a . above . story_separator_special_tag license fees revenues replace_table_token_6_th for the year ended april 30 , 2020 , license fee revenues increased by 6 % when compared to the previous year . our other business segment experienced a 70 % increase in license fees for the year ended april 30 , 2020 when compared to the same period in the prior year due to the timing of selling into the installed customer base . scm experienced a 5 % increase in license fees primarily due to a few new customers choosing to deploy our software on-premise this year . however , the majority of our current year license fee revenue is generated from additional users and expanded scope from our existing customers . scm constituted 97 % , 98 % and 99 % of our total license fee revenues for the years ended april 30 , 2020 , 2019 and 2018 , respectively . for the year ended april 30 , 2019 , license fee revenues decreased by 54 % when compared to the previous year due primarily to lower overall business information technology spending . scm experienced a 54 % decrease in license fees primarily due to the increased sales of our products on our cloud services platform that require revenue to be deferred over the life of the contracted period , which is typically three to five years . our other business segment experienced a 20 % decrease in license fees for the year ended april 30 , 2019 when compared to the same period in the prior year due to the timing of selling into the installed customer base . the direct sales channel provided approximately 92 % of license fee revenues for the year ended april 30 , 2020 , compared to approximately 84 % in fiscal 2019 and 85 % in fiscal 2018 . the increase in direct license fees from fiscal 2019 to fiscal 2020 was largely due to our indirect channel selling proportionately more saas than license contracts compared to our direct channel . the decrease in indirect license fees from fiscal 2018 to fiscal 2019 was largely due to lower overall business information technology spending . for the year ended april 30 , 2020 , our margins after commissions on direct sales were approximately 88 % , and our margins after commissions on indirect sales were approximately 53 % . for the year ended april 30 , 2019 , our margins after commissions on direct sales were approximately 87 % , and our margins after commissions on indirect sales were approximately 55 % . for the year ended april 30 , 2018 , our margins after commissions on direct sales were approximately 84 % , and our margins after commissions on indirect sales were approximately 36 % . the margins after commissions for direct were relatively consistent in a range of 84 % to 88 % , while the range for indirect sales had a wider spread of 36 % to 55 % . the indirect channel margins for the fiscal year ended april 30 , 2020 decreased when compared to the same periods in the prior year due to the mix of value-added reseller ( โ var โ ) commission rates . dmi is the source of the bulk of our indirect sales and the commission percentage varies based on whether the sale is domestic or international . 47 professional services and other revenues replace_table_token_7_th the 1 % increase in total professional services and other revenues for the year ended april 30 , 2020 was due to a 12 % increase from our scm segment due primarily due to a ramp up of implementation project work resulting from increased subscription and license fee sales in recent periods , combined with a 4 % increase in our other segment due to utilization from project implementation services and services revenues . this increase was partially offset by an 10 % decrease in our it consulting segment due to the timing of project work . the 6 % decrease in total professional services and other revenues for the year ended april 30 , 2019 was due to a 16 % decrease in professional services and other revenues from our scm segment due primarily to the timing of implementation project work . this decrease was partially offset by an 8 % increase in our it consulting segment and a 3 % increase in our other segment due to utilization from project implementation services and services revenues . in our software segments , we have observed that there is a tendency for professional services and other revenues to lag changes in license revenues by one to three quarters , as new licenses in one quarter often involve implementation and consulting services in subsequent quarters , for which we recognize revenues only as we perform those services . maintenance revenues replace_table_token_8_th the 5 % decrease in total maintenance revenues for the year ended april 30 , 2020 was due to a 6 % decrease in our other segment due to fewer customer renewals and a 5 % decrease in maintenance revenues from our scm segment due to normal customer attrition . the 4 % increase in total maintenance revenues for the year ended april 30 , 2019 was due to a 4 % increase in maintenance revenues from our scm segment and increased revenue from additional license sales . this increase was partially offset by a 14 % decrease in our other segment due to fewer customer renewals and lower software license sales . the scm segment 's maintenance revenues constituted 97 % of total maintenance revenues for the years ended april 30 , 2020 , 2019 and 2018. typically , our maintenance revenues have had a direct relationship to current and historic license fee revenues , since new licenses are the potential source of new maintenance customers .
| results of operations the following table sets forth certain revenue and expense items as a percentage of total revenues for the three years ended april 30 , 2020 , 2019 , and 2018 and the percentage increases and decreases in those items for the years ended april 30 , 2020 and 2019 : replace_table_token_3_th nm - not meaningful economic overview and significant trends in our business corporate capital spending trends and commitments are the primary determinants of the size of the market for business software . corporate capital spending is , in turn , a function of general economic conditions in the u.s. and abroad and in particular may be affected by conditions in u.s. and global credit markets . in recent years , the weakness in the overall global economy and the u.s. economy has resulted in reduced expenditures in the business software market . in april 2020 , the international monetary fund ( โ imf โ ) provided an update to the world economic outlook for the 2020 and 2021 world economic growth forecast . the update noted that , โ as a result of the pandemic , the global economy is projected to contract sharply by โ3 percent in 2020 , much worse than during the 2008โ09 financial crisis . in a baseline scenario , which assumes that the pandemic fades in the second half of 2020 and containment efforts can be gradually unwound , the global economy is projected to grow by 5.8 percent in 2021 as economic activity normalizes , helped by policy support . there is extreme uncertainty around the global growth forecast .
| 2,311 |
historically , we have grown through the acquisition and subsequent development and exploitation of producing properties , principally through the redevelopment of old fields utilizing new technologies such as modern log analysis and reservoir modeling techniques as well as 3-d seismic surveys and horizontal drilling . as a result of these activities , we believe that we have a number of development opportunities on our properties . in addition , we intend to expand upon our development activities with complementary acreage acquisitions in our core areas of operation . success in our development and exploration activities is critical in the maintenance and growth of our current production levels and associated reserves . our financial results depend upon many factors which significantly affect our results of operations including the following : commodity prices and the effectiveness of our hedging arrangements ; the level of total sales volumes of oil and gas ; the availability of and our ability to raise additional capital resources and provide liquidity to meet cash flow needs ; the level of and interest rates on borrowings ; and the level and success of exploration and development activity . commodity prices and hedging arrangements . the results of our operations are highly dependent upon the prices received for our oil and gas production . the prices we receive for our production are dependent upon spot market prices , differentials and the effectiveness of our derivative contracts , which we sometimes refer to as hedging arrangements . substantially all of our sales of oil and gas are made in the spot market , or pursuant to contracts based on spot market prices , and not pursuant to long-term , fixed-price contracts . accordingly , the prices received for our oil and gas production are dependent upon numerous factors beyond our control . significant declines in prices for oil and gas could have a material adverse effect on our financial condition , results of operations , cash flows and quantities of reserves recoverable on an economic basis . oil and gas prices have been volatile , and this volatility is expected to continue . as a result of the many uncertainties associated with the world political environment , worldwide supplies of oil , ngl and gas , the availability of other worldwide energy supplies and the relative competitive relationships of various energy sources in the view of consumers , we are unable to predict what changes may occur in oil , ngl , and gas prices in the future . the market price of oil , ngl and gas in 2020 will impact the amount of cash generated from operating activities , which will in turn impact our financial position . as of june 1 , 2020 , the nymex oil and gas price was $ 35.44 per bbl of oil and $ 1.77 per mcf of gas , respectively . during 2019 , the nymex future price for oil averaged $ 57.05 per barrel as compared to $ 64.98 per barrel in 2018 and the nymex future spot price for gas averaged $ 2.53 per mcf compared to $ 3.07 per mcf in 2018 . prices closed on december 31 , 2019 at $ 61.06 per bbl of oil and $ 2.19 per mcf of gas . if commodity prices decline from these levels , our revenue and cash flows from operations will also likely decline . in addition , lower commodity prices could also reduce the amount of oil and gas that we can produce economically . if oil and gas prices decline , our revenues , profitability and cash flows from operations will also likely decrease which could cause us to alter our business plans , including reducing our drilling activities . such declines will require us to write down the carrying value of our oil and gas assets which will also cause a reduction in net income . the realized prices that we receive for our production differ from nymex futures and spot market prices , principally due to : basis differentials which are dependent on actual delivery location ; adjustments for btu content ; quality of the hydrocarbons ; and gathering , processing and transportation costs . the following table sets forth our average differentials for the years ended december 31 , 2017 , 2018 and 2019 : replace_table_token_14_th _ ( 1 ) average realized prices are before the impact of hedging activities . the company 's derivative contracts as of december 31 , 2019 and december 31 , 2018 consisted of nymex-based fixed price swaps and basis differential swaps . under fixed price swaps , we receive a fixed price for our production and pay a variable market price to the contract counter-party . 39 as of december 31 , 2019 , we had nymex-based fixed price commodity swap arrangements , on approximately 90 % of the oil production from our estimated net proved developed producing reserves ( as of december 31 , 2019 ) through december 31 , 2020 , and 97 % for 2021. subsequent to december 31 , 2019 , we have entered into additional fixed price commodity swaps . taking these additional contracts into consideration , we have entered into fixed price commodity swap arrangements on approximately 91 % of the oil production of our estimated net proved developed producing reserves ( as of december 31 , 2019 ) through december 31 , 2020 , 99 % for 2021 , 104 % for 2022 , 77 % for 2023 and 93 % for 2024. by removing a portion of price volatility on our future oil and gas production , we believe we will mitigate , but not eliminate , the potential effects of changing commodity prices on our cash flows from operations for those periods . however , when prevailing market prices are higher than our contract prices , we will not realize increased cash flows on the portion of the production that has been hedged . story_separator_special_tag as of june 1 , 2020 , we had a total of $ 101.8 million outstanding under our credit facility , $ 100.0 million under our second lien credit facility and total indebtedness of $ 204.9 million ( including the current portion ) . if interest expense increases as a result of higher interest rates or increased borrowings , more cash flow from operations would be used to meet debt service requirements . as a result , we would need to increase our cash flow from operations in order to fund the development of our drilling opportunities which , in turn , will be dependent upon the level of our production volumes and commodity prices . exploration and development activity . we believe that our asset base , high degree of operational control and inventory of drilling projects position us for future growth . at december 31 , 2019 , we operated properties comprising approximately 99 % of the boe 's of our estimated net proved reserves , giving us substantial control over the timing and incurrence of operating and capital expenditures . we have identified numerous additional drilling locations on our existing leaseholds , the successful development of which we believe could significantly increase our production and proved reserves . over the five years ended december 31 , 2019 , we drilled or participated in 117 gross ( 53.8 net ) wells all of which were commercially productive . the amendments to our first lien credit facility and second lien credit facility , as described in note 14 to our consolidated financial statements place severe restrictions on our future capital expenditures . we have suspended any planned drilling activity for 2020 indefinitely . our future oil and gas production , and therefore our success , is highly dependent upon our ability to find , acquire and develop additional reserves that are profitable to produce . the rate of production from our oil and gas properties and our proved reserves will decline as our reserves are produced unless we acquire additional properties containing proved reserves , conduct successful development and exploration activities or , through engineering studies identify additional behind-pipe zones or secondary recovery reserves . we can not assure you that our exploration and development activities will result in increases in our proved reserves . if our proved reserves decline in the future , our production may also decline and , consequently , our cash flows from operations and the amount that we are able to borrow under our credit facilities may also decline . in addition , approximately 69 % of our estimated proved reserves on a boe basis at december 31 , 2019 were undeveloped . by their nature , estimates of undeveloped reserves are less certain . recovery of such reserves will require significant capital expenditures and successful drilling operations . we may be unable to acquire or develop additional reserves , in which case our results of operations and financial condition could be adversely affected . story_separator_special_tag font-size : 10pt ; margin : 0pt ; text-align : justify ; ' > ceiling limitation write-down . we record the carrying value of our oil and gas properties using the full cost method of accounting for oil and gas properties . under this method , we capitalize the cost to acquire , explore for and develop oil and gas properties . under the full cost accounting rules , the net capitalized cost of oil and gas properties less related deferred taxes , are limited by country , to the lower of the unamortized cost or the cost ceiling , defined as the sum of the present value of estimated unescalated future net revenues from proved reserves , discounted at 10 % , plus the cost of properties not being amortized , if any , plus the lower of cost or estimated fair value of unproved properties included in the costs being amortized , if any , less related income taxes . if the net capitalized cost of oil and gas properties exceeds the ceiling limit , we are subject to a ceiling limitation write-down to the extent of such excess . a ceiling limitation write-down is a charge to earnings which does not impact cash flows from operating activities . however , such write-downs do impact the amount of our stockholders ' equity and reported earnings . as of december 31 , 2019 , the net capitalized cost of our oil and gas properties exceeded the future net revenues from our estimated proved reserves resulting in the recording of an impairment of $ 51.3 million . for the year ended december 31 , 2018 , the net capitalized cost of our oil and gas properties did not exceed the future net revenues from our estimated proved reserves . the year-end amounts were calculated in accordance with sec rules utilizing the twelve month first-day-of-the-month average oil and gas prices utilized for the year ended 2019 which were $ 50.03 per bbl of oil and $ 0.56 per mcf of gas as adjusted to reflect the expected realized prices for our oil and gas reserves . the twelve month first-day-of-the-month average oil and gas prices utilized for the year ended 2018 were $ 59.65 per bbl of oil and $ 1.76 per mcf of gas as adjusted to reflect the expected realized prices for our oil and gas reserves . 42 comparison of year ended december 31 , 2018 to year ended december 31 , 2017 revenue . during the year ended december 31 , 2018 , revenue increased to $ 149.2 million from $ 86.3 million in 2017. the increase in revenue was primarily due to higher oil and ngl prices in 2018 as well as higher sales volumes in 2018 for all products as compared to 2017. higher commodity prices added $ 26.9 million to revenue , while higher sales volumes contributed $ 36.0 million to revenue in 2018. during 2018 we experienced an increase in the average realized oil price of approximately 23 % from 2017 levels .
| results of operations selected operating data . the following table sets forth operating data for the periods presented . replace_table_token_17_th _ ( 1 ) revenue and average sales prices are before the impact of hedging activities . comparison of year ended december 31 , 2019 to year ended december 31 , 2018 revenue . during the year ended december 31 , 2019 , revenue decreased to $ 129.1 million from $ 149.2 million in 2018 . the decrease in revenue was primarily due to lower prices for all products in 2019 partially offset by higher oil and ngl sales volumes in 2019 as compared to 2018 . lower commodity prices negatively impacted revenue by $ 24.4 million . during 2019 we experienced a decrease in the average realized oil price of approximately 9 % from 2018 levels . average realized gas prices decreased by approximately 63 % and average realized ngl prices decreased by approximately 79 % from 2018 levels . higher oil sales added $ 4.6 million to revenue in 2019 as compared to 2018. gas and ngl sales were negatively impacted by pipeline constraints in the permian and rocky mountain regions during 2019 . oil sales volumes increased to 2,388 mbbls for the year ended december 31 , 2019 from 2,308 mbbls for the same period of 2018 . the increase in oil sales volumes was due to new production brought on line offset by natural field declines and sales of non-core properties . new production brought on line added 558 mboe to sales in 2019. gas sales volumes decreased to 4,076 mmcf for the year ended december 31 , 2019 from 4,587 mmcf for the year ended december 31 , 2018 . the decrease in gas sales volumes was primarily due to numerous gas wells shut in in the permian basin due to low prices , offset by new wells brought on line .
| 2,312 |
( 3 ) amounts shown reflect the story_separator_special_tag you should read the following discussion of our results of operations and financial condition in conjunction with the audited consolidated financial statements and related notes thereto as of december 31 , 2014 and 2013 and for the years ended december 31 , 2014 , 2013 and 2012 of our predecessor and the sections entitled ยrisk factorsย , ยforward looking statementsย , ยbusinessย , and ยpropertiesย contained elsewhere in this annual report on form 10-k. this discussion contains forward-looking statements that involve risks and uncertainties . the forward-looking statements are not historical facts , but rather are based on current expectations , estimates , assumptions and projections about our industry , business and future financial results . our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors , including those discussed in the sections of this annual report on form 10-k entitled ยrisk factorsย and ยforward looking statements.ย as used in this section , ยwe , ย ยus , ย and ยourย refer to easterly government properties , inc. and ยthe companyย and ยour predecessorย means easterly partners , llc and its consolidated subsidiaries including ( i ) all entities or interests in u.s. government properties income and growth fund l.p. , u.s. government properties income and growth fund reit , inc. and the related feeder and subsidiary entities , 41 which we refer to , collectively , as easterly fund i , ( ii ) all entities or interests in u.s. government properties income and growth fund ii , lp , usgp ii reit lp , usgp ii ( parallel ) fund , lp and their related feeders and subsidiary entities , which we refer to , collectively , as easterly fund ii , and together with easterly fund i , we refer to as the easterly funds and ( iii ) the entities that manage the easterly funds , which we refer to as the management entities . our company we are an internally managed maryland corporation that intends to qualify as a real estate investment trust , or reit , focused primarily on the acquisition , development and management of class a commercial properties that are leased to u.s. government agencies that serve essential functions . we generate substantially all of our revenue by leasing our portfolio of commercial properties to such agencies through the gsa . our objective is to generate attractive risk-adjusted returns for our stockholders over the long term through dividends and capital appreciation . we wholly own 29 properties in the united states , including 26 properties that are leased primarily to u.s. government tenant agencies and three properties that are entirely leased to private tenants , encompassing approximately 2.1 million square feet , in the aggregate . our portfolio consists of 15 properties contributed by the easterly funds and 14 properties contributed by western devcon in the formation transactions which occurred concurrently with the completion of our initial public offering on february 11 , 2015. financial information analyzed below reflects the audited predecessor financial statements as of december 31 , 2014 , included in the f pages of this annual report on form 10-k. we have not included for the 14 properties acquired from western devcon inc. in this discussion and analysis of our financial conditions and results of operations since they were not owned by our predecessor on december 31 , 2014 and are not reflected in the financial statements attached here to . our predecessor the term ยour predecessorย refers to easterly partners , llc and its consolidated subsidiaries , including the easterly funds , which held 100 % of the fee interests in the entities that owned 15 of the properties , or the property-owning subsidiaries , that were contributed to us in the formation transactions , as well as the management entities . prior to our initial public offering the easterly funds used investment company accounting and , accordingly , account for their investments on a fair value basis , as reflected in the consolidated financial statements of our predecessor . going forward we will account for the properties owned by the easterly funds using historical cost accounting instead of investment company accounting . moving from investment company accounting to historical cost accounting will result in a significant change in the presentation of our consolidated financial statements following the formation transactions . our future financial condition and results of operations will differ significantly from , and will not be comparable with , the historical financial position and results of operations of our predecessor . formation transactions each of the properties in our portfolio was owned prior to the completion of our initial public offering by either the easterly funds or by western devcon . each of the easterly funds entered into a contribution agreement with us and our operating partnership pursuant to which they contributed their interests in their property-owning subsidiaries to our operating partnership . western devcon entered into a contribution agreement with us and our operating partnership pursuant to which it contributed its fee interest in 14 properties to our operating partnership . in addition , the owner of the management entities , which is in turn owned by darrell w. crate , our chairman , entered into a contribution agreement with us and our operating partnership pursuant to which it contributed all of the interests in the management entities to our operating partnership . the easterly funds , western devcon and the owner of the management entities received a combination of shares of common stock and common units in exchange for these contributions to our operating partnership . story_separator_special_tag comparison of results of operations for the years ended december 31 , 2013 and december 31 , 2012 the following table summarizes the consolidated historical results of operations of our predecessor for the years ended december 31 , 2013 and 2012. replace_table_token_7_th 44 income from real estate investments income from real estate investments increased by $ 2.2 million , or 124.4 % , to $ 4.0 million for the year ended december 31 , 2013 from $ 1.8 million for the year ended december 31 , 2012. this increase was primarily attributable to $ 0.5 million of distributions from three properties that were acquired after december 31 , 2012 : iceยcharleston , mepcomยjacksonville and uscgยmartinsburg . the remaining change was primarily attributable to 2013 being the first full year of operations for two easterly fund i investments : deaยalbany and irsยfresno . fund general and administrative fund general and administrative increased by $ 0.8 million , or 150.8 % , to $ 1.3 million for the year ended december 31 , 2013 from $ 0.5 million for the year ended december 31 , 2012. this increase was attributable to the organization of easterly fund ii in february 2013 and the first year of operation of easterly fund ii . corporate general and administrative corporate general and administrative increased by $ 1.6 million , or 60.8 % , to $ 4.3 million for the year ended december 31 , 2013 from $ 2.7 million for the year ended december 31 , 2012. this increase was primarily attributable to a $ 1.0 million increase in compensation expense , which was attributable to a $ 0.4 million increase in non-cash compensation expense as well as an increase in the number of employees an overall increase in compensation as well as a $ 0.8 million increase in marketing expenses associated with easterly fund ii , which held its first closing in 2013. the increase in compensation was primarily attributable to a $ 0.4 million increase in non-cash compensation expense as well as an increase in the number of employees . net unrealized gain on investments net unrealized gain on investments increased by $ 16.8 million , or 155.0 % , to $ 27.6 million for the year ended december 31 , 2013 from $ 10.8 million for the year ended december 31 , 2012. the $ 27.6 million unrealized gain on investment was attributable in part to $ 9.7 million of appreciation related to the acquisition of five new investments during 2013 , iceยcharleston , mepcomยjacksonville , uscgยmartinsburg , dotยlakewood , and fbiยomaha , $ 2.0 million of reduction in principal balance for the non-recourse debt underlying the properties owned by our predecessor and a $ 4.0 million reduction in the cost basis of the assets . distributions in excess of tax basis earnings and profits are considered a return of capital and reduce the cost basis of the investment . the majority of the remaining change is attributable to changes in projected net operating income of the properties as well as changes in market conditions including a decrease in residual capitalization rates and discount rates , which had a positive effect on the fair value of the properties owned by our predecessor for the year ended december 31 , 2013. the $ 10.8 million unrealized gain on investments for the year ended december 31 , 2012 was attributable in part to $ 3.2 million of appreciation related to the acquisition of two new investments during the period , deaยalbany , irsยfresno , $ 1.6 million of reduction in principal balance for the non-recourse debt underlying the properties owned by our predecessor and a $ 2.0 million reduction in the costs basis of the assets . distributions in excess of tax basis earnings and profits are considered a return of capital and reduce the cost basis of the investment . the majority of the remaining change is attributable to changes in projected net operating income of the properties as well as changes in market conditions including a decrease in residual capitalization rates and discount rates , which had a positive effect on the fair value of the properties owned by our predecessor for the year ended december 31 , 2012. we do not expect to have future unrealized gains as the accounting for the properties contributed by the easterly funds from the property-owning subsidiaries to us in connection with the formation transactions will change from investment company accounting to historical cost accounting . 45 liquidity and capital resources we anticipate that our cash flows from the sources listed below will provide adequate capital for the next 12 months for all anticipated uses , including all scheduled principal and interest payments on our outstanding indebtedness , current and anticipated tenant improvements , stockholder distributions to maintain our qualification as a reit and other capital obligations associated with conducting our business . our primary expected sources and uses and capital are as follows : sources cash and cash equivalents ; operating cash flow ; available borrowings under our existing revolving credit facility ; secured loans collateralized by individual properties ; issuance of long-term debt ; issuance of equity ; and asset sales . uses short term : redevelopments ; tenant improvements allowances and leasing costs ; recurring maintenance capital expenditures ; debt repayment requirements ; corporate and administrative costs ; and distribution payments . long term : major redevelopment , renovation or expansion programs at individual properties ; development ; acquisitions ; and debt maturities . although we may be able to anticipate and plan for certain of our liquidity needs , unexpected increases in uses of cash that are beyond our control and which affect our financial condition and results of operations may arise , or our sources of liquidity may be fewer than , and the funds available from such sources may be less than , anticipated or required .
| factors that may influence future results of operations formation transactions while the easterly funds , which were controlled by our predecessor , qualify for investment company accounting , going forward we will account for the properties owned by the easterly funds using historical cost accounting instead of investment company accounting . moving from investment company accounting to historical cost accounting will result in a significant change in the presentation of our consolidated financial statements following the formation transactions , and our future financial condition and results of operations will differ significantly from , and will not be comparable with , the historical financial position and results of operations of our predecessor . revenue our revenues primarily arise from the rental of space to tenants in our properties and tenant reimbursements , which include reimbursement for operating expenses , which are determined by the base year operating expenses and are subject to reimbursement in subsequent years based on changes in the urban cpi . tenant reimbursements also include amounts due from tenants for real estate taxes and other reimbursements . real estate taxes over the base year are reimbursed by the tenant . substantially all of our rental income comes from u.s. government tenants , including rents paid through the gsa . we expect that leases to agencies of the u.s. government will continue to be our primary source of revenues for the foreseeable future . due to such concentration , adverse events or conditions that affect the u.s. government could have a more negative effect on our financial condition and operations than if our tenant base was more diverse . however , positive or negative changes in conditions in local markets , such as changes in economic or other conditions , employment rates , local tax and budget conditions , recession , competition for real property investments in these markets , uncertainty about the future and other factors are significantly less likely to impact our overall performance .
| 2,313 |
also see โ forwardโlooking statements โ discussion . story_separator_special_tag roman , times , serif ; font-size : 10pt ; '' > in addition to project work , approximately 16.0 % of our revenue represents maintenance and repair service on already installed hvac and controls systems . this kind of work usually takes from a few hours to a few days to perform . prices to the customer are based on the equipment and materials used in the service as well as technician labor time . we usually bill the customer for service work when it is complete , typically with payment terms of up to thirty days . we also provide maintenance and repair service under ongoing contracts . under these contracts , we are paid regular monthly or quarterly amounts and provide specified service based on customer requirements . these agreements typically are for one or more years and frequently contain thirtyโ to sixtyโday cancellation notice periods . a relatively small portion of our revenue comes from national and regional account customers . these customers typically have multiple sites , and contract with us to perform maintenance and repair service . these contracts may also provide for us to perform new or replacement systems installation . we operate a national call center to dispatch technicians to sites requiring service . we perform the majority of this work with our own employees , with the balance being subcontracted to third parties that meet our performance qualifications . profile and management of our operations we manage our 36 operating units based on a variety of factors . financial measures we emphasize include profitability , and use of capital as indicated by cash flow and by other measures of working capital principally involving project cost , billings and receivables . we also monitor selling , general , administrative and indirect project support expense , backlog , workforce size and mix , growth in revenue and profits , variation of actual project cost from original estimate , and overall financial performance in comparison to budget and updated forecasts . operational factors we emphasize include project selection , estimating , pricing , management and execution practices , labor utilization , safety , training , and the makeโup of both existing backlog as well as new business being pursued , in terms of project size , technical application and facility type , endโuse customers and industries , and location of the work . most of our operations compete on a local or regional basis . attracting and retaining effective operating unit managers is an important factor in our business , particularly in view of the relative uniqueness of each market and operation , the importance of relationships with customers and other market participants such as architects and consulting engineers , and the high degree of competition and low barriers to entry in most of our markets . accordingly , we devote considerable attention to operating unit management quality , stability , and contingency planning , including related considerations of compensation , and nonโcompetition protection where applicable . economic and industry factors as a mechanical and building controls services provider , we operate in the broader nonresidential construction services industry and are affected by trends in this sector . while we do not have operations in all major cities of the united states , we believe our national presence is sufficiently large that we experience trends in demand for and pricing of our services that are consistent with trends in the national nonresidential construction sector . as a result , we monitor the views of major construction sector forecasters along with macroeconomic factors they believe drive the sector , including trends in gross domestic product , interest rates , business investment , employment , demographics , and the fiscal condition of federal , state and local governments . spending decisions for building construction , renovation and system replacement are generally made on a project basis , usually with some degree of discretion as to when and if projects proceed . with larger amounts of capital , time , and discretion involved , spending decisions are affected to a significant degree by uncertainty , particularly concerns about economic and financial conditions and trends . we have experienced periods of time when economic weakness caused a significant slowdown in decisions to proceed with installation and replacement project work . operating environment and management emphasis nonresidential building construction and renovation activity , as reported by the federal government , declined steeply over the four-year period from 2009 to 2012 , and 2013 and 2014 activity levels were relatively stable at the low levels of the preceding years . during the four-year period from 2015 to 2018 , there was an increase in overall activity levels and we currently expect that activity will continue at these improved levels during 2019. as a result of our continued strong emphasis on cash flow , at december 31 , 2018 we had modest indebtedness under our revolving credit facility , with positive uncommitted cash balances , as discussed further in โ liquidity and 26 capital resources โ below . we have a credit facility in place with terms we believe are favorable that does not expire until april 2023. we have strong surety relationships to support our bonding needs , and we believe our relationships with the surety markets are strong and benefit from our operating history and financial position . we have generated positive free cash flow in each of the last twenty calendar years and will continue our emphasis in this area . we believe that the relative size and strength of our balance sheet and surety relationships as compared to most companies in our industry represent competitive advantages for us . as discussed at greater length in โ results of operations โ below , we expect price competition to continue as our customers and local and regional competitors respond cautiously to improved market conditions . story_separator_special_tag other materials costs are not significant and are generally recorded when delivered to the work site . this measurement and comparison process requires updates to the estimate of total costs to complete the contract , and these updates may include subjective assessments and judgments . we generally do not incur significant incremental costs related to obtaining or fulfilling a contract prior to the start of a project . on rare occasions , when significant preโcontract costs are incurred , they are capitalized and amortized on a percentage of completion basis over the life of the contract . capitalized costs associated with unsuccessful contract bids are written off in the period that we are informed that we will not be awarded the contract . project contracts typically provide for a schedule of billings or invoices to the customer based on our job to date percentage of completion of specific tasks inherent in the fulfillment of our performance obligation ( s ) . the schedules for such billings usually do not precisely match the schedule on which costs are incurred . as a result , contract revenue recognized in the statement of operations can and usually does differ from amounts that can be billed or invoiced to the customer at any point during the contract . amounts by which cumulative contract revenue recognized on a contract as of a given date exceed cumulative billings and unbilled receivables to the customer under the contract are reflected as a current asset in our balance sheet under the caption โ costs and estimated earnings in excess of billings โ and โ unbilled accounts receivable. โ amounts by which cumulative billings to the customer under a contract as of a given date exceed cumulative contract revenue recognized on the contract are reflected as a current liability in our balance sheet under the caption โ billings in excess of costs and estimated earnings. โ the percentage of completion method of accounting is also affected by changes in job performance , job conditions , and final contract settlements . these factors may result in revisions to estimated costs and , therefore , revenue . such revisions are frequently based on further estimates and subjective assessments . the effects of these revisions are recognized in the period in which revisions are determined . when such revisions lead to a conclusion that a loss will be recognized on a contract , the full amount of the estimated ultimate loss is recognized in the period such conclusion is reached , regardless of the percentage of completion of the contract . revisions to project costs and conditions can give rise to change orders under which the customer agrees to pay additional contract price . revisions can also result in claims we might make against the customer to recover project variances that have not been satisfactorily addressed through change orders with the customer . except in certain circumstances , we do not recognize revenue or margin based on change orders or claims until they have been agreed upon with the customer . the amount of revenue associated with unapproved change orders and claims was immaterial for the year ended december 31 , 2018. variations from estimated project costs could have a significant impact on our operating results , depending on project size , and the recoverability of the variation via additional customer payments . accounting for allowance for doubtful accounts we are required to estimate the collectability of accounts receivable and provide an allowance for doubtful accounts for receivable amounts we believe we will not ultimately collect . this requires us to make certain judgments and estimates involving , among others , the creditworthiness of our customers , prior collection history with our customers , ongoing relationships with our customers , the aging of past due balances , our lien rights , if any , in the property where we performed the work , and the availability , if any , of payment bonds applicable to the contract . these estimates are evaluated and adjusted as needed when additional information is received . 28 accounting for selfโinsurance liabilities we are substantially selfโinsured for workers ' compensation , employer 's liability , auto liability , general liability and employee group health claims in view of the relatively high perโincident deductibles we absorb under our insurance arrangements for these risks . losses are estimated and accrued based upon known facts , historical trends and industry averages . estimated losses in excess of our deductible , which have not already been paid , are included in our accrual with a corresponding receivable from our insurance carrier . loss estimates associated with the larger and longerโdeveloping risksโworkers ' compensation , auto liability and general liabilityโare reviewed by a third-party actuary quarterly . we believe these accruals are adequate . however , insurance liabilities are difficult to estimate due to unknown factors , including the severity of an injury , the determination of our liability in proportion to other parties , timely reporting of occurrences , ongoing treatment or loss mitigation , general trends in litigation recovery outcomes and the effectiveness of safety and risk management programs . therefore , if actual experience differs from the assumptions and estimates used for recording the liabilities , adjustments may be required and would be recorded in the period that such experience becomes known . accounting for deferred tax assets we regularly evaluate valuation allowances established for deferred tax assets for which future realization is uncertain . we perform this evaluation quarterly . in assessing the realizability of deferred tax assets , we must consider whether it is more-likely-than-not some portion , or all , of the deferred tax assets will not be realized . we consider all available evidence , both positive and negative , in determining whether a valuation allowance is required . such evidence includes the scheduled reversal of deferred tax liabilities , projected future taxable income , taxable income in prior carryback years and tax planning strategies in making this assessment , and judgment is required in considering the relative weight of negative and positive evidence .
| introduction and overview we are a national provider of comprehensive mechanical installation , renovation , maintenance , repair and replacement services within the mechanical services industry . we operate primarily in the commercial , industrial and institutional hvac markets and perform most of our services within office buildings , retail centers , apartment complexes , manufacturing plants , and healthcare , education and government facilities . nature and economics of our business approximately 84.0 % of our revenue is earned on a project basis for installation of mechanical systems in newly constructed facilities or for replacement of systems in existing facilities . customers hire us to ensure such systems deliver specified or generally expected heating , cooling , conditioning and circulation of air in a facility . this entails installing core system equipment such as packaged heating and air conditioning units , or in the case of larger facilities , separate core components such as chillers , boilers , air handlers , and cooling towers . we also typically install connecting and distribution elements such as piping and ducting . our responsibilities usually require conforming the systems to preโestablished engineering drawings and equipment and performance specifications , which we frequently participate in establishing . our project management responsibilities include staging equipment and materials to project sites , deploying labor to perform the work , and coordinating with other service providers on the project , including any subcontractors we might use to deliver our portion of the work . 24 when competing for project business , we usually estimate the costs we will incur on a project , and then propose a bid to the customer that includes a contract price and other performance and payment terms .
| 2,314 |
there were no realized gains or losses on investments for the years ended december 31 , 2019 , 2018 or 2017. there were two debt securities and fourteen debt securities in an unrealized loss position as of december 31 , 2019 and december 31 , 2018 , respectively . none of these investments had been in an unrealized loss position for more than 12 months as of december 31 , 2019 or december 31 , 2018 , respectively . the fair value of these securities as of december 31 , 2019 and december 31 , 2018 was $ 5.8 million and $ 46.9 million , respectively , and the aggregate unrealized loss was immaterial . the company considered the decline in the market value for these securities to be primarily attributable to current economic conditions . as it was not more likely story_separator_special_tag you should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this annual report on form 10โk . the following discussion contains forwardโlooking statements that involve risks and uncertainties . our actual results and the timing of certain events could differ materially from those anticipated in these forwardโlooking statements as a result of certain factors , including those discussed below and as set forth under โ risk factors. โ please also refer to the section under the heading โ forwardโlooking statements. โ overview we are a biopharmaceutical company focused on developing and commercializing medicines to improve the survival and quality of life of cancer patients . our marketed product , copiktra ยฎ ( duvelisib ) capsules , and most advanced product candidates , defactinib and ch5126766 also referred to as vs-6766 , utilize a multi-faceted approach to treat cancers originating either in the blood or major organ systems . we are currently developing duvelisib and our product candidates in both preclinical and clinical studies as potential therapies for certain cancers , including leukemia , lymphoma , head and neck cancer , ovarian cancer , colorectal cancer , lung cancer , pancreatic cancer , and mesothelioma . we believe that these compounds may be beneficial as therapeutics either as single agents or when used in combination with immuno-oncology agents , other pathway inhibitors or other current and emerging standard of care treatments in aggressive cancers that do not adequately respond to currently available therapies . our operations to date have been organizing and staffing our company , business planning , raising capital , identifying and acquiring potential product candidates , undertaking preclinical studies and clinical trials for duvelisib and our product candidates and initiating u.s. commercial operations following the approval of copiktra . we have financed our operations to date primarily through public offerings of our common stock , sales of common stock under our at-the-market equity offering programs , our loan and security agreement executed with hercules capital , inc. ( hercules ) in march 2017 , as amended , the upfront payments under our license and collaboration agreements with sanofi , yakult and cspc , and the issuance of $ 150.0 million aggregate principal amount of 2018 notes in october 2018. with our u.s. commercial launch of copiktra on september 24 , 2018 , we have recently begun financing a portion of our operations through product revenue . as of december 31 , 2019 , we had an accumulated deficit of $ 524.8 million . our net loss was $ 149.2 million , $ 72.4 million , and $ 67.8 million the years ended december 31 , 2019 , 2018 and 2017 respectively . we expect to incur significant expenses and operating losses for the foreseeable future as a result of our commercialization of copiktra and the continued research and development of all of our product candidates . we will need to generate significant revenues to achieve profitability , and we may never do so . as of december 31 , 2019 , we had cash , cash equivalents , restricted cash and short-term investments of $ 111.3 million , inclusive of $ 35.7 million of restricted cash . on march 3 , 2020 , we received gross proceeds of $ 100.0 million from the sale of 46,511,628 shares of common stock . we expect our existing cash resources including proceeds from the sale of common stock in march 2020 , along with revenue we expect to generate from sales of copiktra , will be sufficient to fund our planned operations through 12 months from the date of issuance of these consolidated financial statements . we expect to finance the future development costs of our clinical product portfolio with our existing cash , cash equivalents and short-term investments , or through strategic financing opportunities that could include , but are not limited to collaboration agreements , future offerings of our equity , or the incurrence of debt . however , there is no guarantee that any of these strategic or financing opportunities will be executed or executed on favorable terms , and some could be dilutive to existing stockholders . if we fail to obtain additional future capital , we may be unable to complete our planned preclinical studies and clinical trials and obtain approval of certain investigational product candidates from the fda or foreign regulatory authorities . 75 financial operations overview revenue product revenue , net represents the gross sales of copiktra in the united states less provisions for product sales allowances and accruals . these provisions include trade allowances , rebates , chargebacks and discounts , product returns and other incentives . we sell copiktra to a limited number of specialty pharmacies and specialty distributors . although we expect net product revenues to increase over time , the provisions for product sales and allowances may fluctuate based on the mix of sales to either specialty pharmacy or specialty distributor customers . see โ critical accounting policies and significant judgements and estimates โ below for more information on the components of net u.s. product sales of copiktra . story_separator_special_tag this is due to the numerous risks and uncertainties associated with developing drugs , including the uncertainty of : ยท clinical trial results ; ยท the scope , rate of progress and expense of our research and development activities , including preclinical research and clinical trials ; ยท the potential benefits of our product candidates over other therapies ; ยท our ability to market , commercialize and achieve market acceptance for copiktra or any of our other product candidates that we receive regulatory approval for ; ยท the terms and timing of regulatory approvals ; and ยท the expense of filing , prosecuting , defending and enforcing patent claims and other intellectual property rights . a change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate . for example , if the fda or other regulatory authority were to require us to conduct clinical trials beyond those 77 which we currently anticipate will be required for the completion of clinical development of a product candidate or if we experience significant delays in enrollment in any clinical trials , we could be required to expend significant additional financial resources and time on the completion of clinical development . selling , general and administrative expenses selling , general and administrative expenses consist primarily of salaries and related costs for personnel , including stockโbased compensation expense , in our executive , finance , legal , information technology , commercial , communication , human resources , and business development functions . other selling , general and administrative expenses include allocated facility costs , commercial costs , professional fees for legal , patent , investor and public relations , consulting , insurance premiums , audit , tax and other public company costs . other , interest income and interest expense other expense in 2019 consists entirely of the mark-to-market adjustment of the bifurcated make-whole interest provision derivative liability related to the 2019 notes . other income in 2018 consists entirely of the mark-to-market adjustment of the bifurcated conversion option derivative liability related to the 2018 notes . interest income reflects interest earned on our cash , cash equivalents and available-for-sale securities . interest expense reflects interest expense due under both our term loan facility executed with hercules and the notes , as well as non-cash interest related to the amortization of debt discount and issuance costs . critical accounting policies and significant judgments and estimates our management 's discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements , which we have prepared in accordance with u.s. generally accepted accounting principles ( gaap ) . the preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of certain assets , liabilities , revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements . on an ongoing basis , we evaluate our estimates and judgments , including those related to accrued expenses , stockโbased compensation , revenue recognition , collaborative agreements , accounts receivable , inventory and intangible assets described in greater detail below . we base our estimates on our limited historical experience , known trends and events and various other factors that we believe are reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions . our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this annual report on form 10โk . however , we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our financial condition and results of operations . 78 revenue recognition the company recognizes revenue when its customer obtains control of promised goods or services , in an amount that reflects the consideration which the company expects to receive in exchange for those goods or services in accordance with asc 606 revenue from contracts with customers . to determine revenue recognition for arrangements that an entity determines are within the scope of asc 606 , the entity performs the following five steps : ( i ) identify the contract ( s ) with a customer ; ( ii ) identify the performance obligations in the contract ; ( iii ) determine the transaction price ; ( iv ) allocate the transaction price to the performance obligations in the contract ; and ( v ) recognize revenue when ( or as ) the entity satisfies a performance obligation . we only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer . at contract inception , once the contract is determined to be within the scope of asc 606 , we assess the goods or services promised within each contract and determine which goods or services are performance obligations , and assess whether each promised good or service is distinct . we then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when ( or as ) the performance obligation is satisfied . product revenue , net โ we sell copiktra to a limited number of specialty pharmacies and specialty distributors in the united states . these customers subsequently resell copiktra either directly to patients , or to community hospitals or oncology clinics with in-office dispensaries who in turn distribute copiktra to patients .
| results of operations all financial information presented has been consolidated and includes the accounts of our wholly-owned subsidiaries , verastem securities company and verastem europe gmbh . all intercompany balances and transactions have been eliminated in consolidation . replace_table_token_8_th 85 comparison of the year ended december 31 , 2019 to the year ended december 31 , 2018 product revenue , net . product revenue net for the year ended december 31 , 2019 ( 2019 period ) was $ 12.3 million compared to $ 1.7 million for the year ended december 31 , 2018 ( 2018 period ) . product revenue , net consisted of net product sales of copiktra in the united states . we began commercial sales of copiktra within the united states in september 2018 following receipt of fda marketing approval . the $ 10.6 million increase was driven primarily by an increase in product shipments for copiktra as a result of greater market penetration . license and collaboration revenue . license and collaboration revenue for the 2019 period was $ 5.1 million compared to $ 25.0 million for the 2018 period . the $ 19.9 million decrease was related to a $ 10.0 million upfront payment received in connection to our license and collaboration agreement with yakult and a $ 15.0 million upfront payment received in connection to our license and collaboration agreement with cspc in the 2018 period , partially offset by a $ 5.0 million upfront payment received in connection to our collaboration agreement with sanofi and collaboration revenue of $ 0.1 million related to the shipment of clinical supply of copiktra to yakult and cspc during the 2019 period . costs of sales โ product . costs of sales โ product for the 2019 period was $ 1.2 million compared to $ 0.2 million for the 2018 period .
| 2,315 |
amortization expense for the liability issuance costs was $ 0.7 million and $ 0.4 million , respectively , for fiscal 2015 and 2014. the notes consisted of the following ( in thousands ) : 57 replace_table_token_30_th ( 1 ) included in the consolidated balance sheets within convertible senior notes , net and amortized over the remaining lives of the notes on the straight-line basis as it approximates the effective interest rate method . ( 2 ) included in the consolidated balance sheets within additional paid-in capital , net of $ 2 million and $ 2 million for the 2018 notes and 2020 notes , respectively , in equity issuance costs . as of january 31 , 2015 , the remaining life of the 2018 notes and 2020 notes is approximately 41 months and 65 months , respectively . story_separator_special_tag you should read the following discussion of our financial condition and results of operations in conjunction with the consolidated financial statements and notes thereto included elsewhere in this report . the following discussion contains forward-looking statements that reflect our plans , estimates and beliefs . our actual results could differ materially from those discussed in the forward-looking statements . factors that could cause or contribute to these differences include those discussed below and elsewhere in this report , particularly in โ risk factors. โ overview workday provides financial management , human capital management , and analytics applications designed for the world 's largest companies , educational institutions , and government agencies . we offer innovative and adaptable technology focused on the consumer internet experience and cloud delivery model . our applications are designed for global enterprises to manage complex and dynamic operating environments . we provide our customers highly adaptable , accessible and reliable applications to manage critical business functions that enable them to optimize their financial and human capital resources . we were founded in 2005 to deliver cloud applications to global enterprises . our applications are designed around the way people work today โ in an environment that is global , collaborative , fast-paced and mobile . our cycle of frequent updates has facilitated rapid innovation and the introduction of new applications throughout our history . we began offering our human capital management ( hcm ) application in 2006. since then we have continued to invest in innovation and have consistently introduced new services to our customers , including our financial management application in 2007 , our procurement and employee expense management applications in 2008 , our payroll and mobile applications in 2009 , our talent management application in 2010 , our native ipad application and workday integration platform in 2011 , our time tracking and grants management applications in 2012 , big data analytics in 2013 , recruiting in 2014 and insight applications in 2015. we offer workday applications to our customers on an enterprise-wide subscription basis , typically with three-year terms and with subscription fees largely based on the size of the customer 's workforce . we generally recognize revenues from subscription fees ratably over the term of the contract . we currently derive a substantial majority of our subscription services revenues from subscriptions to our hcm application . we market our applications primarily through our direct sales force . we have achieved significant growth in a relatively short period of time . our diverse customer base includes large , global companies and our direct sales force generally targets organizations with more than 1,000 workers . a substantial majority of our growth comes from new customers . our current financial focus is on growing our revenues and expanding our customer base . while we are incurring losses today , we strive to invest in a disciplined manner across all of our functional areas to sustain continued near-term revenue growth and support our long-term initiatives . our operating expenses have increased significantly in absolute dollars in recent periods , primarily due to our significant growth in employees . we had approximately 3,750 and approximately 2,600 employees as of january 31 , 2015 and 2014 , respectively . we intend to continue investing for long-term growth . we have invested , and expect to continue to invest , heavily in our application development efforts to deliver additional compelling applications and to address customers ' evolving needs . in addition , we plan to continue to expand our sales and marketing organizations to sell our applications globally . we expect to make further significant investments in our data center infrastructure in fiscal 2016 as we plan for future growth . we are also investing in personnel to service our growing customer base . these investments will increase our costs on an absolute basis in the near-term . many of these investments will occur in advance of experiencing any direct benefit from them and will make it difficult to determine if we are allocating our resources efficiently . we expect our product development , sales and marketing , and general and administrative expenses as a percentage of revenues to decrease over time as we grow our revenues , and we anticipate that we will gain economies of scale by increasing our customer base without direct incremental development costs and by utilizing more of the capacity of our data centers . since inception , we have invested heavily in our professional services organization to help ensure that customers successfully deploy and adopt our applications . additionally , we continue to expand our professional services partner ecosystem to further support our customers . we believe our investment in professional services , as well as partners building consulting practices around workday , will drive additional customer subscriptions and continued growth in revenues . in addition , over time we expect professional services revenues and the cost of professional services as a percentage of total revenues to decline as we increasingly rely on our partners to deploy workday applications and as the number of our existing customers continues to grow . story_separator_special_tag costs of professional services fiscal 2015 compared to fiscal 2014. core operating expenses in costs of professional services were $ 149 million for fiscal 2015 , compared to $ 102 million for fiscal 2014 , a $ 47 million increase , or 46 % . this increase was primarily due to increases of $ 36 million to staff our deployment and integration engagements and $ 4 million in facility and it-related expenses . fiscal 2014 compared to fiscal 2013. core operating expenses in costs of professional services were $ 102 million for fiscal 2014 , compared to $ 76 million for fiscal 2013 , a $ 26 million increase , or 34 % . this increase was primarily due to increases of $ 21 million to staff our deployment and integration engagements and $ 2 million in facility and it-related expense . due to the large increase in demand for our professional services versus the prior year , we have increased both our internal professional service staff as well as third-party supplemental staff . over time , we expect costs of professional services as a percentage of total revenues to continue to decline as we increasingly rely on third parties to deploy our applications and as the number of our customers continues to grow . for fiscal 2016 , we anticipate professional services margins to be lower than fiscal 2015 as we invest in deploying our financial management applications , and in building our partnership ecosystem in the education and government sectors , as well as internationally . product development fiscal 2015 compared to fiscal 2014. core operating expenses in product development were $ 250 million for fiscal 2015 , compared to $ 159 million for fiscal 2014 , an increase of $ 91 million , or 57 % . the increase was primarily due to increases of $ 66 million in employee compensation costs due to higher headcount , $ 9 million in facility and it-related expenses , $ 6 million in depreciation expense for our development cloud data center and $ 5 million in third party costs for hardware maintenance and data center capacity . fiscal 2014 compared to fiscal 2013. core operating expenses in product development were $ 159 million for fiscal 2014 , compared to $ 99 million for fiscal 2013 , an increase of $ 60 million , or 61 % . the increase was primarily due to increases of $ 45 million in employee compensation costs due to higher headcount , $ 6 million in facility and it-related expenses and $ 4 million in contracted costs for our development cloud data center . 31 we expect that product development expenses will continue to increase in absolute dollars as we improve and extend our applications and develop new technologies . sales and marketing fiscal 2015 compared to fiscal 2014. core operating expenses in sales and marketing were $ 285 million for fiscal 2015 , compared to $ 184 million for fiscal 2014 , an increase of $ 101 million , or 55 % . the increase was primarily due to increases of $ 68 million in employee compensation costs due to higher headcount and higher commissionable sales volume , $ 17 million in advertising , marketing and event costs , $ 7 million in facility and it-related expenses and $ 6 million in travel . fiscal 2014 compared to fiscal 2013. core operating expenses in sales and marketing were $ 184 million for fiscal 2014 , compared to $ 121 million for fiscal 2013 , an increase of $ 63 million , or 52 % . the increase was primarily due to increases of $ 47 million in employee compensation costs due to higher headcount and higher commissionable sales volume , $ 6 million in advertising , marketing and event costs , $ 4 million in travel and $ 4 million in facility and it-related expenses . we expect that sales and marketing expenses will continue to increase in absolute dollars as we continue to invest in the expansion of our domestic and international selling and marketing activities to build brand awareness and attract new customers . general and administrative fiscal 2015 compared to fiscal 2014. core operating expenses in general and administrative were $ 62 million for fiscal 2015 , compared to $ 44 million for fiscal 2014 , an increase of $ 18 million , or 41 % . the increase was primarily due to $ 12 million in higher employee compensation costs due to higher headcount , $ 4 million in higher professional services costs including consulting , legal and audit and $ 2 million in facility and it-related expenses . fiscal 2014 compared to fiscal 2013. core operating expenses in general and administrative were $ 44 million for fiscal 2014 , compared to $ 30 million for fiscal 2013 , an increase of $ 14 million , or 47 % . the increase was primarily due to $ 11 million in higher compensation costs due to higher headcount and $ 2 million in higher professional services costs including consulting , legal and audit . we expect general and administrative expenses will continue to increase in absolute dollars as we further invest in our infrastructure and support our global expansion . share-based compensation expenses share-based compensation expenses were $ 156 million , $ 62 million and $ 15 million in fiscal 2015 , 2014 and 2013 , respectively . the increase in share-based compensation expenses for fiscal 2015 compared to fiscal 2014 was primarily due to an increase in the number of employees , as well as a change in the timing of the cycle in which we grant additional equity awards to existing employees which resulted in grants that were made earlier in the fiscal year in fiscal 2015 relative to fiscal 2014. the increase in share-based compensation expenses for fiscal 2014 compared to fiscal 2013 was primarily due to an increase in the number of employees during fiscal 2014. during fiscal 2015 , 2014 and 2013 , the realized excess tax benefits related to share-based compensation were immaterial .
| results of operations revenues our total revenues for fiscal 2015 , 2014 and 2013 were as follows : replace_table_token_7_th fiscal 2015 compared to fiscal 2014. total revenues were $ 788 million for fiscal 2015 , compared to $ 469 million for fiscal 2014 , an increase of $ 319 million , or 68 % . subscription services revenues were $ 613 million for fiscal 2015 , compared to $ 354 million for fiscal 2014 , an increase of $ 259 million , or 73 % . the increase in subscription revenues was due primarily to an increased number of customer contracts as compared to the prior year period . professional services revenues were $ 175 million for fiscal 2015 , compared to $ 115 million for the prior year period , an increase of $ 60 million , or 52 % . the increase in professional services revenues was due primarily to a greater number of customers requesting deployment and integration services . fiscal 2014 compared to fiscal 2013. total revenues were $ 469 million for fiscal 2014 , compared to $ 274 million for fiscal 2013 , an increase of $ 195 million , or 71 % . subscription services revenues were $ 354 million for fiscal 2014 , or 76 % of total revenues , compared to $ 190 million , or 70 % of total revenues , for fiscal 2013 , an increase of $ 164 million or 86 % . the increase in subscription services revenues was due primarily to the addition of new customers as compared to the prior year period . professional services revenues were $ 115 million for fiscal 2014 , compared to $ 83 million for fiscal 2013 , an increase of $ 32 million , or 38 % . the increase in professional services revenues was due primarily to the addition of new customers and a greater number of customers requesting deployment and integration services .
| 2,316 |
our revenues are derived primarily from two sources : the sale of food and beverages at our company restaurants and the collection of royalties and fees from restaurants operated by our franchisees under the denny 's name . sales and customer traffic at both company-operated and franchised restaurants are affected by the success of our marketing campaigns , new product introductions and customer service , menu pricing , as well as external factors including competition , economic conditions affecting consumer spending and changes in guest tastes and preferences . sales at company restaurants and royalty income from franchise restaurants are also impacted by the opening of new restaurants , the closing of existing restaurants and the sale of company restaurants to franchisees . 18 our operating costs are exposed to volatility in two main areas : product costs and payroll and benefit costs . many of the products sold in our restaurants are affected by commodity pricing and are , therefore , subject to price volatility . this volatility is caused by factors that are fundamentally outside of our control and are often unpredictable . in general , we purchase food products based on market prices or we set firm prices in purchase agreements with our vendors . our ability to lock in prices on certain key commodities is imperative to control food costs in an environment in which many commodity prices are on the rise . in addition , our continued success with menu management helps us to offer menu items that provide a compelling value to our customers while maintaining consistent product costs and appropriate profitability . the volatility of payroll and benefit costs results primarily from changes in wage rates and increases in labor related expenses , such as medical benefit costs and workers ' compensation costs . a number of our employees are paid the minimum wage . accordingly , substantial increases in the minimum wage increase our labor costs . additionally , changes in guest counts and investments in store-level labor impact payroll and benefit costs as a percentage of sales . during 2012 , we completed fgi , a strategic initiative to increase franchise restaurant development through the sale of certain geographic clusters of company restaurants to both current and new franchisees . in 2012 , as a result of our fgi , we sold 36 restaurant operations to franchisees . as of december 26 , 2012 , we have sold 380 company restaurants since our fgi program began in early 2007. while we now consider the fgi program to be complete , we may , from time to time , continue to sell restaurants to franchisees where geographically and economically beneficial to the company . additionally , we have negotiated development agreements for 257 new domestic restaurants , 133 of which have opened . the majority of the remaining restaurants in the development agreement pipeline are expected to open over the next five years . while the majority of the restaurants to be opened under these agreements are on schedule , from time to time some of our franchisees ' ability to grow and meet their development commitments is hampered by the economy and the difficult lending environment . as a result of the development efforts described above , over the past five years we have transitioned from a restaurant portfolio mix of 66 % franchised and 34 % company-operated to a restaurant portfolio mix of 90 % franchised and 10 % company-operated at december 26 , 2012. now that we have achieved our mix target , we expect that our percentage of company-operated restaurants will gradually decrease , as the majority of our future unit growth will be through franchised restaurants . specifically , our focus on fgi has impacted our financial performance as follows : company restaurant sales have decreased from $ 423.9 million in 2010 to $ 353.7 million in 2012 , primarily as a result of the sale of restaurants to franchisees . the decline in company restaurant revenues is partially offset by increased royalty income derived from the growth in the franchise restaurant base resulting from both traditional development and the conversion of restaurants . as a result , royalty income , which is included as a component of franchise and license revenue , has increased from $ 73.0 million in 2010 to $ 83.8 million in 2012. the resulting net reduction in total revenue related to our fgi is generally recovered by the benefits of a lower cost structure related to franchise and license revenues , a decrease in depreciation and amortization due to the sale of restaurant related assets to franchisees ( from $ 29.6 million in 2010 to $ 22.3 million in 2012 ) and a reduction in interest expense resulting from the use of proceeds to reduce debt ( from $ 25.8 million in 2010 to $ 13.4 million in 2012 ) . see also `` debt and refinancing and reductions '' below . initial franchise fees , included as a component of franchise and license revenue , are generally recognized in the period in which a restaurant is sold to a franchisee or when a new unit is opened . these initial fees are completely dependent on the number of restaurants sold to or opened by franchisees during a particular period and , as a result , can cause fluctuations in our total franchise and license revenue from year to year . occupancy revenues , also included as a component of franchise and license revenue , result from leasing or subleasing restaurants to franchisees . as a result of our fgi , occupancy revenues have increased from $ 44.8 million in 2010 to $ 47.8 million in 2012. additionally , when restaurants are sold and leased or subleased to franchisees , the occupancy costs related to these restaurants moves from costs of company restaurant sales to costs of franchise and license revenue to match the related occupancy revenue . as subleases with franchisees end over time , franchise occupancy revenue and costs could decrease if franchisees enter into direct leases with landlords . story_separator_special_tag other direct costs increase d by $ 0.5 million , or 4.9 % , primarily as a result of increases in headcount and payroll and benefits , including performance-based compensation , partially offset by a $ 0.5 million franchisee settlement recorded during the prior year period . as a result , costs of franchise and license revenue as a percentage of franchise and license revenue decrease d to 34.7 % for the year ended december 26 , 2012 from 35.0 % for the year ended december 28 , 2011 . other operating costs and expenses other operating costs and expenses such as general and administrative expenses and depreciation and amortization expense relate to both company and franchise operations . general and administrative expenses are comprised of the following : replace_table_token_12_th the $ 5.0 million increase in general and administrative expenses is primarily the result of an increase in performance-based compensation . 23 depreciation and amortization is comprised of the following : replace_table_token_13_th the overall decrease in depreciation and amortization expense is due primarily to the sale of company restaurants to franchisees during fiscal 2011 and 2012. operating ( gains ) , losses and other charges , net are comprised of the following : replace_table_token_14_th during the year ended december 26 , 2012 , we recognized gains of $ 7.1 million , primarily resulting from the sale of restaurant operations to franchisees . during the year ended december 28 , 2011 , we recognized gains of $ 3.2 million , primarily resulting from the sale of restaurant operations to franchisees , the sale of real estate and the recognition of deferred gains related to a restaurant sold to a franchisee during a prior period . restructuring charges and exit costs were comprised of the following : replace_table_token_15_th severance and other restructuring charges for the year ended december 26 , 2012 includes charges related to the departure of the company 's former chief operating officer . impairment charges of $ 3.7 million for the year ended december 26 , 2012 resulted primarily from the impairment of seven restaurants identified as held for sale and the impairment of an underperforming unit . impairment charges of $ 4.1 million for the year ended december 28 , 2011 resulted primarily from the impairment of three underperforming restaurants and two restaurants identified as assets held for sale . operating income was $ 56.4 million for the year ended december 26 , 2012 and $ 51.0 million for the year ended december 28 , 2011 . 24 interest expense , net is comprised of the following : replace_table_token_16_th the decrease in interest expense resulted from a decrease in interest rates related to the 2012 refinancing of our credit facility , as well as debt reductions during 2011 and 2012. other nonoperating expense , net was $ 7.9 million for the year ended december 26 , 2012 compared with $ 2.6 million for the year ended december 28 , 2011 . the $ 5.3 million change was primarily the result of $ 7.9 million of expenses and write-offs of deferred financing costs and original issue discount related to our 2012 debt refinancing , partially offset by the recognition of $ 1.4 million of costs related to the 2011 debt re-pricing in the prior year period . the provision for income taxes was $ 12.8 million for the year ended december 26 , 2012 compared with a benefit of $ 84.0 million for the year ended december 28 , 2011 . for the 2012 period , the difference in the overall effective tax rate from the u.s. statutory rate was due to discrete tax items , including a $ 1.7 million out-of-period adjustment related to the reversal of a portion of the income tax benefit recorded in fourth quarter of 2011. we do not believe the out-of-period adjustment was material to any prior or current year financial statements or on earnings trends . in addition , a $ 1.6 million tax benefit was recorded in 2012 relating to additional state credits generated during 2012 from prior years ' activity . for the 2011 period , we concluded that it was more likely than not that certain of our deferred tax assets will be utilized . as a result , we released the majority of our valuation allowance , recognizing a tax benefit of $ 89.1 million . net income was $ 22.3 million for the year ended december 26 , 2012 compared with $ 112.3 million for the year ended december 28 , 2011 due to the factors noted above . 25 2011 compared with 2010 unit activity replace_table_token_17_th company restaurant operations during the year ended december 28 , 2011 , we realized a 0.8 % increase in same-store sales , comprised of a 0.6 % increase in guest check average and a 0.2 % increase in guest counts . company restaurant sales decreased $ 12.3 million , or 2.9 % , primarily resulting from a ten equivalent unit decrease in company restaurants , partially offset by the increase in same-store sales for the year . the decrease in equivalent units resulted from the sale of company restaurants to franchisees . total costs of company restaurant sales as a percentage of company restaurant sales increased to 86.9 % from 86.3 % . product costs increased to 24.7 % from 23.9 % primarily due to the impact of increased commodity costs . payroll and benefits costs remained flat at 40.7 % as improved scheduling of restaurant staff was offset by unfavorable workers ' compensation claims development and higher incentive compensation . occupancy costs increased slightly to 6.7 % from 6.6 % . other operating expenses were comprised of the following amounts and percentages of company restaurant sales : replace_table_token_18_th marketing decreased 0.2 percentage points primarily as a result of additional corporate investment in media in the prior year period .
| summary of cash flows our primary sources of liquidity and capital resources are cash generated from operations , borrowings under our credit facility ( as described below ) and , in recent years , cash proceeds from the sale of restaurant operations to franchisees and sales of surplus properties , to the extent allowed by our credit facility . principal uses of cash are operating expenses , capital expenditures , debt repayments and , recently , the repurchase of shares of our common stock . the following table presents a summary of our sources and uses of cash and cash equivalents for the periods indicated : replace_table_token_25_th 29 we believe that our estimated cash flows from operations for 2012 , combined with our capacity for additional borrowings under our credit facility , will enable us to meet our anticipated cash requirements and fund capital expenditures over the next twelve months . net cash flows used in investing activities were $ 3.5 million for the year ended december 26 , 2012 . these cash flows include $ 15.6 million in proceeds from asset sales and collections of notes receivable of $ 2.0 million , partially offset by capital expenditures of $ 14.2 million , acquisition of a restaurant unit of $ 1.4 million and issuances of notes receivable of $ 5.4 million . the notes receivable primarily consist of notes from franchisees related to the system-wide roll-out of new coffee equipment . of these notes receivable , approximately $ 4.1 million are due within the next 12 months . our principal capital requirements have been largely associated with the following : replace_table_token_26_th the decrease in new construction is primarily the result of the conversion of restaurants at pilot flying j travel centers during the prior year . capital expenditures for fiscal 2013 are expected to be approximately $ 17-19 million , including approximately 20-25 remodels at company restaurants .
| 2,317 |
tax returns in earlier years in order to reduce net operating loss carryforwards story_separator_special_tag the following discussion and analysis should be read in conjunction with our โ selected consolidated financial data โ and consolidated financial statements and notes thereto included elsewhere in this annual report . overview we are a networking systems , services and software company , providing solutions that enable a wide range of network operators to deploy and manage next-generation networks that deliver services to businesses and consumers . we provide hardware , software and services that enable the transport , routing , switching , aggregation , service delivery and management of video , data and voice traffic on communications networks . our solutions are used by communications service providers , cable and multiservice operators , web-scale providers , submarine network operators , governments , enterprises , research and education institutions and emerging network operators . our solutions include networking platforms , including our converged packet optical and packet networking portfolios , which can be applied from the network core to end-user access points , and which allow network operators to scale capacity , increase transmission speeds , allocate traffic and adapt dynamically to changing end-user service demands . our converged packet optical portfolio includes products and solutions that support the connection of content to content and users to content , including in long haul and regional , submarine and data center interconnect networks . our packet networking portfolio includes products and solutions that enable next-generation metro , access and aggregation networks , connecting users to content in applications that include 5g , mobile backhaul , virtualization and enterprise services . to complement these solutions , we offer platform software , which provides management , domain control and specialized applications that automate network lifecycle operations , including provisioning equipment and services , network data , analytics and policy-based assurance to achieve closed loop automation across multi-vendor and multi-domain network environments . through our blue planetยฎ software suite , we enable customers to transform their business and operations support systems ( โ oss โ ) through software-based automation of their network and it infrastructures . to complement our hardware and software products , we offer a broad range of services that help our customers build , operate and improve their networks and associated operational environments , including network optimization and migration offerings . we refer to our complete portfolio vision as the adaptive network . the adaptive network emphasizes a programmable network infrastructure , software control and automation capabilities , network analytics and intelligence , and related advanced services . by transforming network infrastructures into a dynamic , programmable environment driven by automation and analytics , network operators can realize greater business agility , dynamically adapt to changing end-user service demands and rapidly introduce new revenue-generating services . they can also gain valuable real-time network insights , allowing them to optimize network operation and maximize the return on their network infrastructure investment . impact of the covid-19 pandemic on our business and operations covid-19 was declared a pandemic in march 2020 and continues to have a significant impact on the global economy , the industries and customers we serve and our operations . in response to the covid-19 pandemic , we have prioritized the safety of our employees and business partners , while continuing to support the needs of our customers and communities during this unprecedented period . we have also implemented business continuity plans designed to minimize potential business disruption from the covid-19 pandemic and to protect our supply chain and customer fulfillment and support operations . demand for products & services . since the outset of the covid-19 pandemic , we have experienced a dynamic demand environment , as reflected in significant changes in our order volumes and revenue . during the second quarter of fiscal 2020 , we experienced higher than typical orders for our products and services among a concentrated set of larger customers with whom we had an existing position as a supplier . at that time , we believed that some portion of these orders likely reflected short-term purchasing behaviors based on customer-specific considerations in the face of the pandemic , including : customer concerns about future continued availability of supply ; implementation of customer business continuity actions ; our enhanced efforts to obtain increased visibility into expected demand ; customer consumption of their existing inventory or spare equipment ; additional network capacity requirements ; acceleration of capital spending ; and , possibly , increased bandwidth demands being placed on networks due to the pandemic . during the third and fourth quarters of fiscal 2020 , our order volumes declined significantly from the level achieved in the second quarter of fiscal 2020 , particularly among our communications service provider customers and cable operator customers . we believe that this greater capital expenditure restraint stems from the deferral or re-prioritization of certain new network initiatives and continued uncertainty associated with the impact of the pandemic and economic uncertainty upon their enterprise business segments . as a result , our order volumes were meaningfully below revenue during the second half of fiscal 2020 , challenging our visibility and the outlook for orders and revenue in future 47 periods . we expect this more cautious spending environment to continue into fiscal 2021 and expect these conditions to continue to adversely affect our order volumes and revenue in the short term . over the longer term , we continue to believe that the unique and increased demands placed on network infrastructures as a result of the covid-19 pandemic , and the related increase in remote working worldwide , have accelerated certain trends , including cloud network adoption , networking resilience and flexibility , and enhanced network automation . we believe that we are well positioned competitively to capitalize on the longer-term opportunities that we expect to be presented by these dynamics . supply chain . story_separator_special_tag on december 10 , 2020 , we announced that we will resume purchases under our stock repurchase program beginning in the first quarter of fiscal 2021. the covid-19 pandemic and countermeasures taken to contain its spread have caused economic and financial disruptions globally . we continue to monitor the situation and actively assess further implications to our business , supply chain , fulfillment operations and customer demand . however , the covid-19 situation remains dynamic , and the duration and severity of its impact on our business and results of operations in future periods remains uncertain . if the covid-19 pandemic or its adverse effects become more severe or prevalent or are prolonged in the locations where we , our customers , suppliers or manufacturers conduct business , or we experience more pronounced disruptions in our business or operations , or in economic activity and demand for our products and services generally , our business and results of operations in future periods could be materially adversely affected . market opportunity the markets in which we sell our communications networking solutions are dynamic and are characterized by a high rate of change , including rapid growth in bandwidth demand and network traffic , the proliferation of cloud-based services and new approaches , or โ consumption models , โ for designing and procuring networking solutions . emerging services and applications , including 5g mobile communications , fiber deep and the internet of things , are further impacting or expected to impact wireline network infrastructures , particularly at the edge of networks , where increased computing power and automation are required to provide the quality of experience demanded by end users . many network operators are under pressure to constrain their capital expenditure budgets , as they can not grow their network spending at the rate of bandwidth growth , including due to their business models . to address these growing service demands and better manage network cost , many network operators are looking to adopt next-generation infrastructures that are more programmable and better capable of leveraging data for network insight , analytics and automation . other network operators are pursuing a diverse range of consumption models in their design and procurement of network infrastructure solutions . our adaptive network vision and our business strategy to capitalize on these changing market dynamics include the initiatives set forth in the โ strategy โ section of the description of our business in item 1 of part 1 of this annual report . business diversification a key element of our strategy is to continue to diversify our solutions offerings , customer base and geographic reach to address fast-growing applications and markets . we believe that the continued diversification of our business is important to address the dynamic industry environment in which we operate , to grow our business , and to better withstand potential slowdowns adversely affecting particular geographies , markets or customer segments . in recent fiscal years prior to fiscal 2020 , our diversification and global scale were key contributors to our strong revenue growth . in fiscal 2020 , we believe this diversification allowed us to maintain a greater degree of stability and allowed us to remain resilient despite the impact of the covid-19 pandemic on any particular geography , segment or customer account . investment in technology innovation we believe that our investment capacity and our efforts to push the pace of innovation in our markets , and to provide market-leading offerings ahead of our competitors , are important competitive differentiators in our markets . keeping pace with the market 's demand for technology innovation requires considerable research and development investment capacity and expenditures , and research and development spending represented 45.4 % of our operating expenses in fiscal 2020. during fiscal 2020 , we invested $ 529.9 million in research and development activities , a decrease of approximately 3.3 % compared to fiscal 2019 , primarily due to the impact of covid-19 . however , we expect our operating expenses to increase in fiscal 2021 , in part to support additional investment in research and development activities . we believe that remaining competitive in our addressable geographies , markets , and customer segments depends on our continued significant investment in innovation and our ability to offer leading solutions that enable adoption of next-generation network infrastructures and evolving consumption models for networking solutions . optical and packet infrastructure technology . we are focused on growing our optical and packet infrastructure business by addressing fast-growing markets and applications , including data center interconnection , packet aggregation and routing and submarine networks . in fiscal 2020 , we brought to market our fifth-generation coherent modem technology capable of delivering 800 gigabits of capacity per second over a single wavelength , and , during 2021 , we expect to bring to market our footprint-optimized wavelogic 5 nano 100g-400g coherent pluggable transceivers . we are also developing packet networking solutions with enhanced ip/ethernet capabilities to expand our addressable market into additional next generation metro and access applications including packet routing , aggregation and switching , 5g cross-haul , fiber deep , and edge computing . in fiscal 2020 , we also announced the future addition of several new routing platforms to support the demands of mobile xhaul ( fronthaul , midhaul and backhaul ) transport , which we expect to make available in fiscal 2021 . 49 blue planet automation software . we have continued to pursue both organic investments and acquisition opportunities to expand our blue planet automation software and services portfolio and business . on november 4 , 2019 , we acquired privately held centina systems , inc. , a provider of service assurance analytics and network performance management solutions . the acquisition of centina is intended to accelerate blue planet 's software strategy of providing closed loop , intelligent automation solutions that help communications service providers analyze network conditions , traffic demands , and resource availability , and determine the best placement of traffic for optimal service quality and resource utilization .
| consolidated results of operations a discussion regarding our financial condition and results of operations for fiscal 2020 compared to fiscal 2019 is presented below . a discussion of fiscal 2019 compared to fiscal 2018 can be found under item 7 of part ii of our annual report on form 10-k for the fiscal year ended november 2 , 2019 , filed with the sec on december 20 , 2019 ( our โ 2019 annual report โ ) , which is available free of charge on the sec 's website at www.sec.gov and our investor relations website at investor.ciena.com . operating segments our results of operations are presented based on the following operating segments : ( i ) networking platforms ; ( ii ) platform software and services ; ( iii ) blue planet automation software and services ; and ( iv ) global services . see note 24 to our consolidated financial statements included in item 8 of part ii of this annual report for more information on our segment reporting . fiscal 2020 compared to fiscal 2019 revenue during fiscal 2020 , approximately 15.9 % of our revenue was non-u.s. dollar denominated , primarily including sales in euros , canadian dollars , japanese yen , brazilian reais , british pounds , and indian rupee . during fiscal 2020 as compared to fiscal 2019 , the u.s. dollar fluctuated against these and other currencies . consequently , our revenue reported in u.s. dollars was slightly reduced by approximately $ 13.5 million , or 0.4 % , as compared to fiscal 2019 due to fluctuations in foreign currency .
| 2,318 |
all of them matured during the year and were settled by issuing 92,275 common shares at a price stated in the respective agreements , representing loans of hk $ 2.6 million and interest expenses of hk $ 5,521 , for a total of hk $ 2,605,521 ( equivalent to $ 334,027 ) ( see note 12 ) . in addition , the company recognized a beneficial conversion feature discount to the bond of $ 7,390 that was amortized during the year . additionally , the company recognized non-cash interest of $ 695 on these bonds . for the year ended december 31 , 2019 , four convertible bond agreements were entered into between the company , arcus and third party investors . three of the bonds matured in 2019 and were settled by issuing 141,782 common shares at a price stated in the respective agreements , representing loans of hk $ 4 million and interest expenses of hk $ 8,333 , for a total of hk $ 4,008,333 ( equivalent to $ 513,888 ) ( see note 12 ) . in addition , the company recognized a beneficial conversion feature discount to the bond of $ 10,705 that was amortized during the preceding year . additionally , the company recognized non-cash interest of $ 1,068 on these bonds . on november 26 , 2019 , a convertible bond agreement was signed including a hk $ 1.5 million ( equivalent to $ 192,308 ) loan bearing interest of 5 % per annum for six months . the convertible bond originally matured on may 25 , 2020 with a conversion price of $ 3.60 per share . in addition , the company recognized a beneficial conversion feature discount to the bond of $ 5,342 that is being amortized over the period using the effective interest method . on may 11 , 2020 , the company signed an extension letter with the bondholder to extend the maturity date from may 25 , 2020 to september 30 , 2020. therefore , the company recognized an additional beneficial conversion feature discount to the bond of $ 234 that is being amortized over the period using the effective interest method . on september 11 , 2020 , the company signed an extension letter with the bondholder to further extend the maturity date from september 30 , 2020 to april 30 , 2021. therefore , the company further recognized an additional beneficial conversion feature discount to the bond of $ 147 that is being amortized over the period using the effective interest method . for the year ended december 31 , 2020 , the company amortized $ 3,340 ( 2019 : $ 1,029 ) of the discount and recognized non-cash interest of $ 9,634 ( 2019 story_separator_special_tag forward looking statements this annual report contains forward-looking statements . these statements relate to future events or our future financial performance . in some cases , you can identify forward-looking statements by terminology such as โ may โ , โ should โ , โ expects โ , โ plans โ , โ anticipates โ , โ believes โ , โ estimates โ , โ predicts โ , โ potential โ or โ continue โ or the negative of these terms or other comparable terminology . these statements are only predictions and involve known and unknown risks , uncertainties and other factors that may cause our or our industry 's actual results , levels of activity , performance or achievements to be materially different from any future results , levels of activity , performance or achievements expressed or implied by these forward-looking statements . although we believe that the expectations reflected in the forward-looking statements are reasonable , we can not guarantee future results , levels of activity , performance or achievements . except as required by applicable law , including the securities laws of the united states , we do not intend to update any of the forward-looking statements to conform these statements to actual results . our audited financial statements are stated in united states dollars ( $ ) and are prepared in accordance with united states generally accepted accounting principles . the following discussion should be read in conjunction with our financial statements and the related notes to the consolidated financial statements included elsewhere in this form 10-k. the following discussion contains forward-looking statements that reflect our plans , estimates and beliefs . our actual results could differ materially from those discussed in the forward-looking statements . factors that could cause or contribute to such differences include , but are not limited to , those discussed below and elsewhere in this annual report . in this annual report , unless otherwise specified , all dollar amounts are expressed in united states dollars and all references to โ common stock โ refer to the common stock in our capital stock . as used in this annual report , the terms โ we โ , โ us โ , โ our โ or the โ company โ mean tgs international ltd. , a nevada corporation , and our subsidiaries , unless otherwise indicated . general overview tgs international ltd. was established on december 1 , 2016 in nevada , usa . on september 14 , 2018 , tgs international ltd. and arcus entered into a share exchange agreement , dated september 14 , 2018 , with chi kin loo , billion plus limited , first fortune investment limited , great win limited and master value holdings limited , pursuant to which the selling stockholders agreed to sell all of their ordinary shares of arcus to the company in exchange for an aggregate of 7,000,000 shares of common stock of tgs international ltd. we are a mining company focused on both fluorite mining operations in mongolia ( 3 mines in total , mining license numbers : mv-016819 , mv-017305 and mv-009918 ) and sales of fluorite across mongolia and china . story_separator_special_tag on september 14 , 2020 , the company issued 39,677 common shares at a price of $ 4.00 per share to settle the amount due to a stockholder of hk $ 1,237,941 ( equivalent to $ 158,710 ) . on december 21 , 2020 , the company issued 13,809 common shares at a price of $ 4.00 per share to settle the amount due to a director of hk $ 430,855 ( equivalent to $ 55,238 ) . apart from the exploration and infrastructure work at the mine sites , the company might consider further fund raising activities through the capital markets and from stockholders with the aim of speeding up the development of the company . story_separator_special_tag capital expenditures and other general corporate purposes , such as partnering arrangements , or reduction of debt obligations . however , there can be no assurance that we will be able obtain financing , if at all or upon terms that will be acceptable to us . cash flows as of december 31 , 2020 , we had $ 69,401 in cash and cash equivalents , compared to $ 106,850 on december 31 , 2019. net cash used in operating activities our net cash used in operating activities decreased to $ 1,070,424 in 2020 from $ 1,228,886 in 2019. net cash used in operating activities for the year ended december 31 , 2020 primarily reflected our net loss of $ 1,218,463 and the add-back of non-cash items , mainly consisting of depreciation of property , plant and equipment of $ 48,884 , loss on disposal of property , plant and equipment of $ 4,089 , amortization of non-cash interest expenses and bond discount related to convertible bonds of $ 21,059 , exchange difference of $ 327,779 , non-cash interest expenses related to other loans of $ 17,603 and changes in operating assets and liabilities primarily consisting of an increase in accounts receivable of $ 727,979 , an increase of other receivables of $ 68,596 , an increase of deposits and prepayments of $ 48,607 , decrease in accrued charges of $ 125,594 and offset by an increase of trade and other payables of $ 648,012 , an increase in income tax payable of $ 23,212 , an increase in provision for asset retirement obligations of $ 3,300 and an increase in provision for exploration asset compensation of $ 24,877. net cash used in investing activities our net cash used in investing activities decreased to $ 55,416 in 2020 from $ 976,818 in 2019. this was mainly due to a decrease of acquisition of property , plant and equipment at mine sites . net cash provided by financing activities our net cash provided by financing activities decreased to $ 1,092,060 in 2020 from $ 2,216,864 in 2019. this was mainly due to a decrease of proceeds from unrelated party loan , issuance of common stock and convertible bonds . future financings we anticipate continuing to rely on related party and unrelated party loans , convertible bonds or equity sales of our common stock in order to continue to fund our business operations . we believe this will enable us to meet our cash needs for the next 12 months . issuances of additional shares will result in dilution to our existing stockholders . importantly , there is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing ( whether from related parties or otherwise ) to fund our planned business activities . except for the convertible bonds and loans from others , we presently do not have any other arrangements or commitments for additional financing for the expansion of our operations , and no potential lines of credit or sources of financing are currently available for the purpose of proceeding with our plan of operations . off-balance sheet arrangements we have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition , changes in financial condition , revenues or expenses , results of operations , liquidity , and capital expenditures or capital resources that are material to stockholders . critical accounting policies the preparation of financial statements in conformity with accounting principles generally accepted in the united states ( โ gaap โ ) requires us 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 the reported amounts of revenues and expenses during the reported period . the critical accounting policies we employ in the preparation of our consolidated financial statements are those which involve impairment of long-lived assets , intangible assets and income taxes . 19 below , we discuss these policies further , as well as the estimates and judgments involved . we believe that our other policies either do not generally require us to make estimates and judgments that are as difficult or as subjective , or it is less likely that they would have a material impact on our reported results of operations for a given period . for a discussion of all our significant accounting policies , see note 2 to the consolidated financial statements included elsewhere in this annual report . impairment of long-lived assets and intangible assets long-lived assets held and used by the company and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable . the company evaluates recoverability of assets to be held and used by comparing the carrying amount of an asset to future net undiscounted cash flows to be generated by the asset . if such assets are considered to be impaired , the impairment loss is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets calculated using a discounted future cash flows analysis . income taxes
| results of operations comparison of years ended december 31 , 2020 and december 31 , 2019 revenue revenue consisted mainly of fluorite products generated from production at mine a. in 2020 , we had total revenue of $ 753,694 , as compared to revenue of $ 282,857 during 2019. the percentage of such increment was approximately 166 % as a result of the adoption of open-pit mining at mine a. this method is more flexible to cope with weather conditions . although revenue in mine a increased in 2020 , nil revenue was generated from mine b as a result of the closure of mongolia since january 31 , 2020 due to covid-19 . exploration cost exploration costs are expensed as incurred and included labor and benefits , construction service fee , mining overhead , including food , supplies , utilities and lubricants related to mine exploration . exploration costs decreased significantly from $ 737,248 in 2019 to $ 467,745 in 2020. the percentage of such decrease was approximately 37 % and was mainly because of the decrease in mining overheads and utilities cost as no operating activities were carried out in mine b in 2020. selling and distribution cost selling and distribution costs included transportation and handling costs related to the movement of finished goods from mines to customer designated locations , security fee , royalty and custom tax . selling and distribution costs decreased slightly from $ 105,279 in 2019 to $ 102,715 in 2020. the percentage of such decrease was approximately 2 % and was mainly due to the net effect of the increase in tax paid to the mongolian government and the decrease in transportation costs . administrative expenses administrative expenses included salaries and benefits , consulting , audit , tax , legal , insurance , rent , utilities , net foreign exchange losses and other general operating expenses .
| 2,319 |
a separate reserve was also maintained for probable incurred credit losses associated story_separator_special_tag forward-looking statements certain matters discussed throughout this form 10-k are forward-looking statements within the meaning of the private securities litigation reform act of 1995. in addition , we may make or approve certain statements in future filings with the united states securities and exchange commission ( `` sec '' ) , in press releases , or oral or written presentations by representatives of hsbc usa inc. ( `` hsbc usa '' and , together with its subsidiaries , `` husi '' ) that are not statements of historical fact and may also constitute forward-looking statements . words such as `` may , '' `` will , '' `` should , '' `` would , '' `` could , '' `` appears , '' `` believe , '' `` intends , '' `` expects , '' `` estimates , '' `` targeted , '' `` plans , '' `` anticipates , '' `` goal , '' and similar expressions are intended to identify forward-looking statements but should not be considered as the only means through which these statements may be made . all discussions related to strategy , including the matters discussed under the heading `` management 's discussion and analysis of financial condition and results of operations - executive overview '' and discussions of those matters elsewhere in this form 10-k are forward-looking statements . these matters or statements will relate to our future structure , operations , strategy , financial condition , economic forecast , results of operations , plans , objectives , performance or business developments and will involve known and unknown risks , uncertainties and other factors that may cause our actual results , performance or achievements to be materially different from that which was expressed or implied by such forward-looking statements . all forward-looking statements are , by their nature , subject to risks and uncertainties , many of which are beyond our control . our actual future results may differ materially from those set forth in our forward-looking statements . while there is no assurance that any list of risks and uncertainties or risk factors is complete , below are certain factors which could cause actual results to differ materially from those in the forward-looking statements : the impact of the coronavirus ( `` covid-19 '' ) pandemic and subsequent outbreaks , including the economic downturn and recovery , effect on global trade and changes in customer behavior and corporate strategy ; our ability to effectively implement and deliver on our business strategies , and the effect implementation of our business strategy may have on our operations and relationships with our customers , regulators , employees and other stakeholders ; uncertainty concerning the future market and economic conditions in the united states and abroad , including but not limited to , changes in interest rates , energy prices and unemployment levels , a decline in housing prices , the availability of credit and liquidity , changes in consumer confidence and consumer spending and behavior , consumer perception as to the continuing availability of credit and price competition in the market segments we serve and the consequences of unexpected geopolitical events , such as trade disputes and the united kingdom ( `` u.k. '' ) exiting the european union ( `` eu '' ) ; compliance with the chinese national security law and the hong kong autonomy act , which may impact , among other things , individuals or entities with which we are able to conduct business ; changes in laws and regulatory requirements ; the potential impact of any legal , regulatory or policy changes affecting financial institutions and the global economy as a result of the new administration ; the ability to deliver on our regulatory priorities ; capital and liquidity requirements under basel guidance , the federal reserve board 's ( `` frb '' ) comprehensive capital analysis and review ( `` ccar '' ) program , and the dodd-frank wall street reform and consumer protection act of 2010 ( `` dodd-frank act '' or `` dodd-frank '' ) stress testing ( `` dfast '' ) , including the u.s. frb requirements for u.s. global systemically important banks ( `` g-sibs '' ) and u.s. intermediate holding companies ( `` ihcs '' ) owned by non-u.s. g-sibs to issue total loss-absorbing capacity ( `` tlac '' ) instruments ; regulatory requirements in the u.s. and in non-u.s. jurisdictions to facilitate the future orderly resolution of large financial institutions ; changes in central banks ' policies with respect to the provision or removal of liquidity support to financial markets ; the ability of hsbc holdings plc ( `` hsbc '' and , together with its subsidiaries , `` hsbc group '' ) and hsbc bank usa , national association ( together with its subsidiaries , `` hsbc bank usa '' ) to fulfill the requirements imposed by applicable consent orders or guidance from regulators generally ; the use of us as a conduit for illegal activities without our knowledge by third parties ; the ability to successfully manage our risks ; the possibility of the inadequacy of our data management and policies and processes ; 36 hsbc usa inc. the financial condition of our clients and counterparties and our ability to manage counterparty risk ; concentrations of credit and market risk ; increases in our allowance for credit losses and changes in our assessment of our loan portfolios ; the ability to successfully implement changes to our operational practices as needed and or required from time to time ; damage to our reputation ; the ability to attract or retain key employees , including foreign workers , and customers ; the effects of competition in the markets where we operate including increased competition from non-bank financial services companies , including securities firms ; the effects of operational risks that are inherent in banking operations , including fraudulent and other criminal activities , breakdowns in processes or procedures and systems failure or non-availability ; disruption in our operations from the external environment arising from events such as natural disasters , climate story_separator_special_tag additionally , in april 2020 , fitch ratings ( `` fitch '' ) changed its rating outlook for both hsbc usa and hsbc bank usa to negative from stable and , in may 2020 , standard and poor 's ( `` s & p '' ) downgraded its long- and short-term issuer credit ratings of hsbc usa and hsbc bank usa by one notch , following similar rating actions for hsbc . the circumstances around this pandemic will continue to impact our business in future periods . should the current economic conditions persist or deteriorate further , it will continue to adversely impact our business which could include , but not be limited to , negative impacts on income due to lower interest rates , lower lending and transaction volumes , higher expected credit losses , lower wealth management revenue due to equity markets volatility and weakness , and increased model risk including credit loss models , capital models and asset/liability management models . other potential risks include the impact of postponed health screenings on the well-being of our employees , credit rating migration which could negatively impact our risk-weighted assets and capital position , and potential liquidity stress due to , among other factors , increased customer drawdowns , notwithstanding the significant initiatives that the u.s. government and the frb have put in place to support funding and liquidity . this could have a material adverse effect on our business , prospects , liquidity , financial condition , results of operations and credit ratings in future periods . the extent of such impact will depend on the outcome of certain developments , including but not limited to , the duration of the pandemic given that the pandemic may not be fully contained until a vaccine becomes widely available which might not occur until later in 2021 , as well as its continuing impact on our customers , vendors and employees , all of which are uncertain . see part ii , item 1a , `` risk factors - risks related to the impact of covid-19 '' for further discussion . during the first quarter of 2020 , as a result of the deterioration in economic conditions caused by the covid-19 pandemic and the amount of headroom calculated in our previous annual impairment test for certain reporting units , we performed an interim goodwill impairment test for all of our reporting units as of march 31 , 2020 and concluded that the fair value of our commercial banking reporting unit exceeded its carrying value , including goodwill . however , the cash flow projections for our retail banking and wealth management and our private banking reporting units were significantly lower than previous estimates which , in conjunction with valuation estimates under a market approach and in consideration of a challenging macroeconomic outlook , resulted in a fair value that was significantly lower than their book values , including goodwill . as a result , we recorded a non-cash impairment charge of $ 784 38 hsbc usa inc. million in the first quarter of 2020 , representing the entire amount of goodwill previously allocated to these reporting units . beginning in the second quarter of 2020 , our retail banking and wealth management and our private banking reporting units are being reported together within a newly created wealth and personal banking segment for segment reporting purposes . as discussed in `` critical accounting policies and estimates , '' our goodwill impairment testing is highly sensitive to certain assumptions and estimates used . for additional discussion of the results of our goodwill impairment testing , see note 10 , `` goodwill and other long-lived assets , '' in the accompanying consolidated financial statements . in february 2020 , we announced a strategic plan to restructure our operations ( `` restructuring plan '' ) in alignment with hsbc 's global strategy to refocus our wholesale operations to better serve our international corporate clients and restructure our retail operations to better meet the needs of globally mobile and affluent clients . our restructuring plan also includes streamlining our functional and operations support model by removing duplication and reducing the size of our balance sheet to better align with the scope and scale of the u.s. opportunity . we currently expect to incur pre-tax charges in connection with this restructuring plan largely over the two-year period of 2020-2021 of approximately $ 520- $ 590 million ( $ 390- $ 450 million after-tax ) . during 2020 , we recorded pre-tax charges in connection with our restructuring plan totaling $ 280 million . see note 3 , `` strategic initiatives , '' in the accompanying consolidated financial statements for a more detailed discussion of these costs . our restructuring plan is moving forward , including consolidation of our wholesale and retail middle and back office functions , each under a single operations structure , simplification of our support service functions , the exit of certain derivative contracts and the transfer of interest rate derivative contracts associated with fixed income activities to hsbc bank plc . in 2020 , we also completed the creation of our wealth and personal banking business and the consolidation of our retail branch network , closing 76 branches during the year . as a result of these actions , we have lowered staffing levels by approximately 13 percent and reduced risk-weighted assets by approximately 11 percent as compared with december 31 , 2019 , and are on track to exceed our commitment to reduce total operating expenses by 10-15 percent by 2022. we remain committed to our multi-year strategic plan to re-profile our business , and continue to explore strategic options with respect to our retail operations to focus on our high net worth client base and wealth management products . performance , developments and trends net income ( loss ) was a loss of $ 940 million during 2020 compared with income of $ 113 million and $ 320 million during 2019 and 2018 , respectively .
| balance sheet review the following table provides balance sheet totals at december 31 , 2020 and increases ( decreases ) since december 31 , 2019 : replace_table_token_8_th * percentage change is greater than 100 percent . short-term investments short-term investments include cash and due from banks , interest bearing deposits with banks and federal funds sold and securities purchased under agreements to resell . balances may fluctuate from period to period depending upon our liquidity position at the time and our strategy for deploying liquidity . short-term investments increased compared with december 31 , 2019 due to an increase in overall liquidity driven primarily by higher deposits as we actively raised funds in advance of their usage and our customers increased their demand and savings deposits in response to the economic uncertainty caused by the covid-19 pandemic and the actions taken by the u.s. government to provide financial support to households and businesses . 50 hsbc usa inc. loans , net the following table summarizes our loan balances at december 31 , 2020 and increases ( decreases ) since december 31 , 2019 : replace_table_token_9_th ( 1 ) represents large multinational firms including globally focused u.s. corporate and financial institutions , u.s. dollar lending to multinational banking clients managed by hsbc on a global basis and complex large business clients supported by gbm relationship managers . ( 2 ) includes loans to hsbc affiliates which totaled $ 1,100 million and $ 2,343 million at december 31 , 2020 and 2019 , respectively . ( 3 ) see `` credit quality '' in this md & a for a discussion of trends in our allowance for credit losses on loans . commercial loans decreased compared with december 31 , 2019 due primarily to the impact of our efforts to improve returns through disciplined lending as well as lower demand from global banking clients reflecting increased capital markets activity coupled with economic uncertainty caused by the covid-19 pandemic .
| 2,320 |
( 4 ) adjusted gross margin is a non-gaap financial measure used by management as a supplemental measure in evaluating operating performance . we define adjusted gross margin as gross margin less capitalized interest and adjustments resulting from the application of purchase accounting included in the cost of sales . our management believes this information is useful because it isolates the impact 33 that capitalized interest and purchase accounting adjustments have on gross margin . however , because adjusted gross margin information excludes capitalized interest and purchase accounting adjustment , which have real economic effects and could impact our results , the utility of adjusted gross margin information as a measure of our operating performance may be limited . in addition , other companies may not calculate adjusted gross margin information in the same manner that we do . accordingly , adjusted gross margin information should be considered only as a supplement to gross margin information as a measure of our performance . please see โ โnon-gaap measuresโadjusted gross margin โ for a reconciliation of adjusted gross margin to gross margin , which is the gaap financial measure that our management believes to be most directly comparable . ( 5 ) adjusted ebitda is a non-gaap financial measure used by management as a supplemental measure in evaluating operating performance . we define adjusted ebitda as net income before ( i ) interest expense , ( ii ) income taxes , ( iii ) depreciation and amortization , ( iv ) capitalized interest charged to the cost of sales , ( v ) other income , net and ( vi ) adjustments resulting from the application of purchase accounting . our management believes that the presentation of adjusted ebitda provides useful information to investors regarding our results of operations because it assists both investors and management in analyzing and benchmarking the performance and value of our business . adjusted ebitda provides an indicator of general economic performance that is not affected by fluctuations in interest rates or effective tax rates , levels of depreciation or amortization and items considered to be non-recurring . accordingly , our management believes that this measurement is useful for comparing general operating performance from period to period . other companies may define adjusted ebitda differently and , as a result , our measure of adjusted ebitda may not be directly comparable to adjusted ebitda of other companies . although we use adjusted ebitda as a financial measure to assess the performance of our business , the use of adjusted ebitda is limited because it does not include certain costs , such as interest and taxes , necessary to operate our business . adjusted ebitda should be considered in addition to , and not as a substitute for , net income in accordance with gaap as a measure of performance . our presentation of adjusted ebitda should not be construed as an indication that our future results will be unaffected by unusual or nonrecurring items . our adjusted ebitda is limited as an analytical tool , and you should not consider it in isolation or as a substitute for analysis of our results as reported under gaap . please see โ โnon-gaap measuresโadjusted ebitda โ for a reconciliation of adjusted ebitda to net income , which is the gaap financial measure that our management believes to be most directly comparable . 34 year ended december 31 , 2014 compared to year ended december 31 , 2013 homes sales . our home sales revenues and closings by division for the year ended december 31 , 2014 and 2013 were as follows ( dollars in thousands ) : replace_table_token_7_th home sales revenues for the year ended december 31 , 2014 were $ 383.3 million , an increase of $ 223.2 million , or 139.4 % , from $ 160.1 million for the year ended december 31 , 2013. the increase in home sales revenues is primarily due to a 121.8 % increase in homes closed and an increase in the average selling price per home during the year ended december 31 , 2014 as compared to the year ended december 31 , 2013. we closed 2,356 homes during the year ended december 31 , 2014 , as compared to 1,062 homes closed during the year ended december 31 , 2013. this increase in home closings was largely due to more active communities in 2014 and the gtis acquisition that was completed in november 2013. the average selling price per home closed during the year ended december 31 , 2014 was $ 162,677 , an increase of $ 11,955 , or 7.9 % , from the average selling price per home of $ 150,722 for the year ended december 31 , 2013. this increase in the average selling price per home was primarily due to changes in product mix and a generally favorable pricing environment . management and warranty fees . management and warranty fees for the year ended december 31 , 2013 were $ 2.7 million . management and warranty fees were received from the lgi/gtis joint ventures through november 2013 when the company acquired the joint venture interests that it did not own prior to such date . total home closings on a combined basis for the lgi/gtis joint ventures were 555 for the period january 1 , 2013 to november 13 , 2013. there were no management and warranty fees for the year ended december 31 , 2014 as the lgi/gtis joint ventures have been consolidated since the gtis acquisitions . cost of sales and gross margin ( home sales revenues less cost of sales ) . story_separator_special_tag % , from $ 73.8 million for the year ended december 31 , 2012. home sales revenues represented approximately 98.3 % and 96.8 % of our total revenues for the year ended december 31 , 2013 and 2012 , respectively . the increase in home sales revenues is primarily due to a 98.1 % increase in homes closed and an increase in the average selling price per home during the year ended december 31 , 2013 as compared to the year ended december 31 , 2012. the average selling price per home closed during the year ended december 31 , 2013 was $ 150,722 , an increase of $ 12,998 , or 9.4 % , from the average selling price per home of $ 137,724 for the year ended december 31 , 2012. we closed 1,062 homes during the year ended december 31 , 2013 , as compared to 536 homes closed during the year ended december 31 , 2012. management and warranty fees . management and warranty fees for the year ended december 31 , 2013 were $ 2.7 million , as compared to $ 2.4 million for the year ended december 31 , 2012. the increase in management and warranty fees is primarily attributable to an increase in the number of active communities and the geographic expansion of the lgi/gtis joint ventures ' operations during 2013. total home closings on a combined basis for the lgi/gtis joint ventures were 686 and 526 for the years ended december 31 , 2013 and 2012 , respectively . 36 cost of sales and gross margin ( home sales revenues less cost of sales ) . cost of sales increased for the year ended december 31 , 2013 to $ 121.3 million , an increase of $ 66.8 million , or 122.5 % , from $ 54.5 million for the year ended december 31 , 2012. this increase is primarily due to a 98.1 % , increase in homes closed during 2013 as compared to 2012. gross margin for the year ended december 31 , 2013 was $ 38.7 million , an increase of $ 19.5 million , or 100.8 % , from $ 19.3 million for the year ended december 31 , 2012. gross margin as a percentage of home sales revenues was 24.2 % for the year ended december 31 , 2013 and 26.1 % for the year ended december 31 , 2012. the decrease in gross margin as a percentage of home sales revenues reflects an increase in construction costs and higher developed lot costs for 2013 as compared to 2012 ; these construction and developed lot costs were partially offset by higher average homes sales prices , investments in new markets , and the transition between communities within existing markets . selling expenses . selling expenses as a percentage of home sales revenues were 9.9 % and 9.8 % for the years ended december 31 , 2013 and 2012 , respectively . the increase of selling expenses as a percentage of home sales revenues was primarily due to startup expenses related to new community openings , outside commissions , and direct mail and internet marketing . selling expenses for the year ended december 31 , 2013 were $ 15.8 million , an increase of $ 8.5 million , or 116.9 % , from $ 7.3 million for the year ended december 31 , 2012. this increase is primarily due to a 98.1 % , increase in homes closed during 2013 as compared to 2012 and the increase in the number of active communities for 2013 as compared to 2012. sales commissions increased to $ 5.3 million from $ 2.3 million and advertising and direct mail costs increased to $ 3.3 million from $ 1.8 million for the year ended december 31 , 2013 as compared to the year ended december 31 , 2012 , respectively . general and administrative . general and administrative expenses for the year ended december 31 , 2013 were $ 13.6 million , an increase of $ 7.5 million , or 123.2 % , from $ 6.1 million for the year ended december 31 , 2012. the increase in general and administrative expenses is partially due to the higher number of home closings and active communities in 2013 as compared to 2012. as a result of the increased number of active communities , we hired more employees and acquired additional office space . in addition , approximately $ 3.2 million of the $ 7.5 million increase during 2013 was attributable to accounting and professional fees and expenses incurred in connection with the reorganization transactions and financial reporting for the ipo . income from unconsolidated joint ventures . our share of income from the lgi/gtis joint ventures for the year ended december 31 , 2013 was $ 4.3 million , as compared to $ 1.5 million for the year ended december 31 , 2012. the increase is primarily attributed to our priority return determined based on cumulative cash distributions as provided for in the joint venture agreements . during the year ended december 31 , 2013 , three of the lgi/gti joint ventures paid sufficient cumulative cash distributions to the members of the respective joint ventures such that $ 2.7 million in priority returns were received . gain on remeasurement of interests in lgi/gtis joint ventures . a gain of $ 6.4 million was recognized by the company for the year ended december 31 , 2013 on the remeasurement of our predecessor 's equity interests in the lgi/gtis joint ventures in connection with the gtis acquisitions . ( income ) loss attributable to non-controlling interests .
| key results key financial results as of and for the year ended december 31 , 2014 , as compared to the year ended december 31 , 2013 , were as follows : homes closed increased 121.8 % to 2,356 homes from 1,062 homes with an increase in the average sales price of our homes of 7.9 % to $ 162,677 . on a pro forma basis , homes closed increased 45.7 % to 2,356 homes from 1,617 homes with an increase in the average sales price of our homes of 9.2 % to $ 162,677 . home sales revenues increased 139.4 % to $ 383.3 million from $ 160.1 million and on a pro forma basis , revenues increased 59.1 % from $ 241.0 million . gross margin as a percentage of home sales revenues increased to 26.8 % from 24.2 % . on a pro forma basis , gross margin as a percentage of home sales revenues increased to 26.8 % from 25.4 % . adjusted gross margin as a percentage of home sales revenues increased to 28.2 % from 27.1 % . on a pro forma basis , adjusted gross margin as a percentage of home sales revenues increased to 28.2 % from 27.3 % . net income before income taxes increased 88.9 % to $ 43.1 million from $ 22.8 million and increased 87.9 % on a pro forma basis . adjusted ebitda margin as a percentage of home sales revenues decreased to 12.6 % from 13.3 % . on a pro forma basis , adjusted ebitda margin as a percentage of home sales revenues increased to 12.6 % from 11.8 % . active communities at the end of 2014 increased from 25 to 39 . reflected in this increase are an additional 5 active communities in our southeast division , an additional 4 in our southwest division , another 3 in our florida division , and 2 in our texas division .
| 2,321 |
2018-13 , โ fair value measurement ( topic 820 ) : disclosure framework story_separator_special_tag executive overview colgate-palmolive company ( together with its subsidiaries , โ we , โ the โ company โ or โ colgate โ ) seeks to deliver strong , consistent business results and superior shareholder returns by providing consumers globally with products that make their lives healthier and more enjoyable . to this end , we are tightly focused on two product segments : oral , personal and home care ; and pet nutrition . within these segments , we follow a closely defined business strategy to grow our key product categories and increase our overall market share . within the categories in which we compete , we prioritize our efforts based on their capacity to maximize the use of the organization 's core competencies and strong global equities and to deliver sustainable long-term growth . operationally , we are organized along geographic lines with management teams having responsibility for the business and financial results in each region . we compete in more than 200 countries and territories worldwide with established businesses in all regions contributing to our sales and profitability . approximately 70 % of our net sales are generated from markets outside the u.s. , with approximately 50 % of our net sales coming from emerging markets ( which consist of latin america , asia ( excluding japan ) , africa/eurasia and central europe ) . this geographic diversity and balance help to reduce our exposure to business and other risks in any one country or part of the world . the oral , personal and home care product segment is managed geographically in five reportable operating segments : north america , latin america , europe , asia pacific and africa/eurasia , all of which sell primarily to a variety of traditional and ecommerce retailers , wholesalers and distributors . through hill 's pet nutrition , we also compete on a worldwide basis in the pet nutrition market , selling products principally through authorized pet supply retailers , veterinarians and ecommerce retailers . on an ongoing basis , management focuses on a variety of key indicators to monitor business health and performance . these indicators include net sales ( including volume , pricing and foreign exchange components ) , organic sales growth ( net sales growth excluding , the impact of foreign exchange , acquisitions , and divestments ) , a non-gaap financial measure , and gross profit margin , operating profit , net income and earnings per share , in each case , on a gaap and non-gaap basis , as well as measures used to optimize the management of working capital , capital expenditures , cash flow and return on capital . in addition , we review market share data to assess how our brands are performing within their categories on a global and regional basis . the monitoring of these indicators and our code of conduct and corporate governance practices help to maintain business health and strong internal controls . for additional information regarding non-gaap financial measures and the company 's use of market share data and the limitations of such data , see โ non-gaap financial measures โ and `` market share information '' below . to achieve our business and financial objectives , we are focused on innovating our core businesses ; improving our brand building activities with an elevated brand purpose model and the use of equity advertising ; innovating to gain market share in high growth segments and adjacencies ; expanding into new channels and markets ; maximizing growth online ; and investing to drive consumption in growing populations . we continue to develop initiatives to build strong relationships with consumers , dental , veterinary and skin health professionals and traditional and ecommerce retailers . in addition , we continue to invest behind our brands , not just in terms of advertising , but also to build key growth capabilities in areas such as innovation and data and analytics . we also continue to broaden our ecommerce offerings , including direct-to-consumer and subscription services . we continue to believe that growth opportunities are greater in those areas of the world in which economic development and rising consumer incomes expand the size and number of markets for the company 's products . we are also working to integrate our sustainability strategy across our organization . we are also changing the way we work to drive growth and how we approach innovation to respond to the dynamic retail landscape and the evolving preferences of our customers and consumers . the retail landscape , the ease of new entrants into the market in many of our categories and the evolving preferences of our customers and consumers demand that we work differently and faster in an agile , authentic and culturally relevant manner to drive innovation . 20 ( dollars in millions except per share amounts ) the investments needed to support growth are developed through continuous , company-wide initiatives to lower costs and increase effective asset utilization . through these initiatives , which are referred to as our funding-the-growth initiatives , we seek to become even more effective and efficient throughout our businesses . these initiatives are designed to reduce costs associated with direct materials , indirect expenses , distribution and logistics , and advertising and promotional materials , among other things , and encompass a wide range of projects , examples of which include raw material substitution , reduction of packaging materials , consolidating suppliers to leverage volumes and increasing manufacturing efficiency through sku reductions and formulation simplification . we also continue to prioritize our investments in high growth segments within our oral care , personal care and pet nutrition businesses , including by expanding our portfolio in premium skin health . 21 ( dollars in millions except per share amounts ) significant items impacting comparability on september 19 , 2019 , the company acquired laboratoires filorga cosmรฉtiques s.a. ( โ filorga โ ) , a skin health business , for cash consideration of 1,548 ( approximately $ 1,712 ) . story_separator_special_tag adoption of the new standard did not have a material impact on the company 's consolidated statements of income or cash flows . see note 15 , leases to the consolidated financial statements for additional information . 23 ( dollars in millions except per share amounts ) outlook looking forward , we expect global macroeconomic , political and market conditions to remain challenging . although we have seen improvement in category growth rates , we expect category growth rates to remain below historical levels . while the global marketplace in which we operate has always been highly competitive , we continue to experience heightened competitive activity in certain markets from strong local competitors , from other large multinational companies , some of which have greater resources than we do , and from new entrants into the market in many of our categories . such activities have included more aggressive product claims and marketing challenges , as well as increased promotional spending and geographic expansion . we have also been negatively affected by changes in the policies or practices of our retail trade customers in key markets , such as inventory de-stocking , limitations on access to shelf space or delisting of our products . in addition , the retail landscape in many of our markets continues to be impacted by the rapid growth of ecommerce retailers , changing consumer preferences ( as consumers increasingly shop online ) and the emergence of alternative retail channels , such as subscription services and direct-to-consumer businesses . this rapid growth in ecommerce and the emergence of alternative retail channels have created and may continue to create pricing pressures and or adversely affect our relationships with our key retailers . in addition , given that approximately 70 % of our net sales originate in markets outside the u.s. , we have experienced and will likely continue to experience volatile foreign currency fluctuations and higher raw and packaging material costs . while we have taken , and will continue to take , measures to mitigate the effect of these conditions , should they persist , they could adversely affect our future results . in addition , although we are taking steps to mitigate the impact of the novel coronavirus on our business , we expect it will negatively impact our business and results of operations in the near term . because this situation is continuing to develop , the full extent of the impact is not yet known and will depend on , among other things , the duration of quarantines and other travel restrictions , both within china and into and out of china , and the degree to which the virus spreads beyond currently affected geographies . for more information about factors that could impact our business see part i , item 1a `` risk factors . '' in summary , we believe we are well prepared to meet the challenges ahead due to our strong financial condition , experience operating in challenging environments and continued focus on our key priorities : growing sales through engaging with consumers , developing world-class innovation and working with retail partners ; driving efficiency on every line of the income statement to increase margins ; generating strong cash flow performance and utilizing that cash effectively to enhance total shareholder return ; and leading to win by staying true to the company 's culture and focusing on its stakeholders . our commitment to these priorities , together with the strength of our global brands , our broad international presence in both developed and emerging markets and cost-saving initiatives , such as our funding-the-growth initiatives , should position us well to increase shareholder value over the long term . 24 ( dollars in millions except per share amounts ) results of operations this section of this annual report on form 10-k generally discusses 2019 and 2018 items and year-to-year comparisons between 2019 and 2018. discussions of 2017 items and year-to-year comparisons between 2018 and 2017 that are not included in this annual report on form 10-k can be found in `` management 's discussion and analysis of financial condition and results of operations '' in part ii , item 7 of the company 's annual report on form 10-k for the fiscal year ended december 31 , 2018. net sales worldwide net sales were $ 15,693 in 2019 , up 1.0 % from 2018 , as volume growth of 2.5 % and net selling price increases of 2.0 % were partially offset by negative foreign exchange of 3.5 % . the company 's acquisition of filorga increased volume by 0.5 % . organic sales ( net sales excluding , as applicable , the impact of foreign exchange , acquisitions and divestments ) , a non-gaap financial measure as discussed below , increased 4.0 % in 2019 . net sales in the oral , personal and home care product segment were $ 13,168 in 2019 , even with 2018 , as volume growth of 2.5 % and net selling price increases of 1.5 % were offset by negative foreign exchange of 4.0 % . the company 's acquisition of filorga increased volume by 0.5 % . organic sales in the oral , personal and home care product segment increased 3.5 % in 2019 . the increase in organic sales in 2019 versus 2018 was due to increases in oral care , personal care and home care organic sales . the increase in oral care was primarily due to organic sales growth in the toothpaste category . the increase in personal care was primarily due to organic sales growth in the skin health , body wash , bar soap , shampoo and underarm protection categories , partially offset by a decline in organic sales in the liquid hand soap category . the increase in home care was due to organic sales growth in the liquid cleaner and fabric softener categories . the company 's share of the global toothpaste market was 41.1 % for full year 2019 , down 0.7 share points from full year 2018 , and its share of the global manual toothbrush market was 31.6
| segment results the company markets its products in over 200 countries and territories throughout the world in two product segments : oral , personal and home care ; and pet nutrition . the company evaluates segment performance based on several factors , including operating profit . the company uses operating profit as a measure of the operating segment performance because it excludes the impact of corporate-driven decisions related to interest expense and income taxes . oral , personal and home care north america replace_table_token_16_th net sales in north america increased 2.0 % in 2019 to $ 3,424 , as volume growth of 2.0 % and net selling price increases of 0.5 % were partially offset by negative foreign exchange of 0.5 % . organic sales in north america increased 2.5 % in 2019 . the increase in organic sales in north america in 2019 versus 2018 was due to increases in oral care , personal care and home care organic sales . the increase in oral care was primarily due to organic sales growth in the toothpaste category , partially offset by declines in organic sales in the manual toothbrush and mouthwash categories . the increase in personal care was primarily due to organic sales growth in the skin health , body wash and bar soap categories , partially offset by a decline in organic sales in the liquid hand soap category . the increase in home care was primarily due to organic sales growth in the liquid cleaner and fabric softener categories , partially offset by a decline in organic sales in the hand dish category . operating profit in north america decreased 5 % in 2019 to $ 982 , or 230 bps to 28.7 % of net sales .
| 2,322 |
the impairment loss story_separator_special_tag management 's discussion and analysis of financial condition and results of operations contains `` forward-looking statements '' within the meaning of section 27a of the securities act and section 21e of the exchange act that are based on management 's current expectations , estimates and projections about our business operations . our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of numerous factors , including the known material factors set forth in `` part i , item 1a . risk factors . '' you should read the following discussion and analysis together with our consolidated financial statements and the notes to those statements included elsewhere in this annual report on form 10โk . we provide a broad range of products and services to the oil and gas industry through our well site services , downhole technologies and offshore/manufactured products business segments . demand for our products and services is cyclical and substantially dependent upon activity levels in the oil and gas industry , particularly our customers ' willingness to invest capital in the exploration for and development of crude oil and natural gas reserves . our customers ' capital spending programs are generally based on their cash flows and their outlook for near-term and long-term commodity prices , economic growth , commodity demand and estimates of resource production . as a result , demand for our products and services is largely sensitive to future expectations with respect to crude oil and natural gas prices . our consolidated results of operations include contributions from the geodynamics and falcon acquisitions completed in the first quarter of 2018. our reported results of operations reflect the impact of current industry trends and customer spending activities with investments weighted toward u.s. shale play regions . however , in 2019 , we began to see a general improvement in the level of planned investments in deepwater markets globally . recent developments in addition to capital spending , we have invested in acquisitions of businesses complementary to our growth strategy . our acquisition strategy has allowed us to leverage our existing and acquired products and services into new geographic locations and has expanded the breadth of our technology and product offerings while allowing us to leverage our cost structure . we have made strategic and complementary acquisitions in each of our business segments in recent years . on december 12 , 2017 we entered into an agreement to acquire geodynamics , inc. ( `` geodynamics '' ) , which provides oil and gas perforation systems and downhole tools in support of completion , intervention , wireline and well abandonment operations . on january 12 , 2018 , we closed the acquisition of geodynamics for total consideration of approximately $ 615 million ( the `` geodynamics acquisition '' ) , consisting of ( i ) $ 295 million in cash ( net of cash acquired ) , ( ii ) approximately 8.66 million shares of our common stock ( valued at $ 34.05 per share on the date of closing ) and ( iii ) an unsecured $ 25 million promissory note . in connection with the geodynamics acquisition , we completed several financing transactions in 2018 to extend the maturity of our debt and to provide flexibility in repaying outstanding borrowings under the revolving credit facility with anticipated future cash flows from operations . on january 30 , 2018 , we sold $ 200 million aggregate principal amount of our 1.50 % convertible senior notes due february 2023 ( the `` notes '' ) through a private placement to qualified institutional buyers . we received net proceeds from the offering of the notes of approximately $ 194 million , after deducting issuance costs . we used the net proceeds to repay a portion of the borrowings outstanding under our revolving credit facility , substantially all of which were drawn to fund the cash portion of the purchase price paid for geodynamics . concurrently with the notes offering , we amended our revolving credit facility to extend the maturity date to january 2022 , permit the issuance of the notes and provide for up to $ 350 million in borrowing capacity , subject to certain limitations . on february 28 , 2018 , we acquired falcon flowback services , llc ( `` falcon '' ) , a full-service provider of flowback and well testing services for the separation and recovery of fluids , solid debris and proppant used during hydraulic fracturing operations . falcon provides additional scale and diversity to our completion services operations in key shale plays in the united states . the acquisition price was $ 84.2 million in cash , funded with borrowings under our revolving credit facility . during the third quarter of 2019 , we made the strategic decision to reduce the scope of our drilling services business ( adjusting from 34 rigs to 9 rigs ) due to the ongoing weakness in customer demand for vertical drilling rigs in the u.s. land market . as a result of this decision , our drilling services business recorded a non-cash impairment charge of $ 33.7 million to decrease the carrying value of the business ' fixed assets to their estimated fair value . substantially all of the decommissioned rigs were sold in the fourth quarter of 2019 . - 33 - during the fourth quarter of 2019 , our downhole technologies segment recorded a non-cash goodwill impairment charge of $ 165.0 million due to , among other factors , a reduction in our near-term outlook for demand related to our short-cycle products and services in the u.s. shale play regions . see note 4 , `` details of selected balance sheet accounts , '' note 5 , `` business acquisitions '' and note 7 , `` long-term debt '' to the consolidated financial statements included in this annual report on form 10-k for further discussion . story_separator_special_tag our downhole technologies segment is comprised of the geodynamics business we acquired in january 2018. geodynamics was founded in 2004 as a researcher , developer and manufacturer of consumable engineered products used in completion applications . this segment provides oil and gas perforation systems , downhole tools and services in support of completion , intervention , wireline and well abandonment operations . this segment designs , manufactures and markets its consumable engineered products to oilfield service as well as exploration and production companies . product and service offerings for this segment include innovations in perforation technology through patented and proprietary systems combined with advanced modeling and analysis tools . this expertise has led to the optimization of perforation hole size , depth , and quality of tunnels , which are key factors for maximizing the effectiveness of hydraulic fracturing . additional offerings include proprietary toe valve and frac plug products , which are focused on zonal isolation for hydraulic fracturing of horizontal wells , and a broad range of consumable products , such as setting tools and bridge plugs , that are used in completion , intervention and decommissioning applications . demand drivers for the downhole technologies segment include continued trends toward longer lateral lengths , increased frac stages and more perforation clusters to target increased unconventional well productivity . demand for our well site services and downhole technologies segments ' businesses is highly correlated to changes in the total number of wells drilled in the united states , total footage drilled , the number of drilled wells that are completed and changes in the drilling rig count . the following table sets forth a summary of the average u.s. drilling rig count , as measured by baker hughes , for the periods indicated . replace_table_token_6_th over recent years , our industry experienced an increase in customer spending on crude oil and liquids-rich exploration and development activities in u.s. shale plays utilizing horizontal drilling and completion techniques . as of december 31 , 2019 , oil-directed drilling accounted for 84 % of the total u.s. rig count โ with the balance largely natural gas related . following the significant decline in crude oil prices in the fourth quarter of 2018 , coupled with customer spending within their cash flows , the u.s. rig count declined steadily during the 2019 and exited the year at 805 rigs โ 278 rigs , or 26 % , below the level reported at the end of 2018. as a result , the average u.s. rig count in 2019 decreased 89 rigs , or 9 % , from the level reported in 2018 . our offshore/manufactured products segment provides technology-driven , highly-engineered products and services for offshore oil and natural gas production systems and facilities , as well as certain products and services to the offshore and land-based drilling and completion markets . this segment is particularly influenced by global deepwater drilling and production spending , which are primarily driven by our customers ' longer-term commodity demand forecasts and outlook for crude oil and natural gas prices . approximately 60 % of offshore/manufactured products sales in 2016 were driven by our customers ' capital spending for offshore production systems and subsea pipelines , repairs and , to a lesser extent , upgrades of existing offshore drilling rigs and construction of new offshore drilling rigs and vessels ( referred to herein as `` project-driven products '' ) . while increasing substantially from levels reported in 2017 and 2018 , these activities only represented approximately 40 % of the segment 's revenue in 2019 . deepwater oil - 36 - and gas development projects typically involve significant capital investments and multi-year development plans . such projects are generally undertaken by larger exploration , field development and production companies ( primarily international oil companies ( `` iocs '' ) and state-run national oil companies ( `` nocs '' ) ) using relatively conservative crude oil and natural gas pricing assumptions . given the long lead times associated with field development , we believe some of these deepwater projects , once approved for development , are less susceptible to short-term fluctuations in the price of crude oil and natural gas . however , lower crude oil prices that have persisted since 2014 , coupled with the relatively uncertain outlook around shorter-term and possibly longer-term pricing improvements , led exploration and production companies to reduce their capital expenditures in regards to these deepwater projects since they are expensive to drill and complete , have long lead times to first production and may be considered uneconomical relative to the risk involved . customers have focused on improving the economics of major deepwater projects at lower commodity breakeven prices by re-bidding projects , identifying advancements in technology , and reducing overall project costs through equipment standardization . this resulted in reduced bidding and quoting activity , as well as reduced orders from customers and backlog levels , for our offshore/manufactured products segment in 2017 and 2018 relative to 2014. bidding and quoting activity , along with orders from customers , for deepwater projects improved in 2019 from 2018 levels and the potential for future awards appears to be improving . reflecting increased project award activity , backlog in our offshore/manufactured products segment increased from $ 179 million at december 31 , 2018 to $ 280 million at december 31 , 2019 . the segment received four notable orders during 2019 for production facility content destined for south america and southeast asia , as well as connector products destined for the middle east and military products for the united states . the following table sets forth backlog reported by our offshore/manufactured products segment as of the dates indicated ( in millions ) .
| segment operating results well site services revenues . our well site services segment revenues decreased $ 48.2 million , or 10 % , in 2019 compared to 2018 . completion services revenue decreased $ 20.3 million , or 5 % , due to a significant decrease in u.s. land-based customer drilling and completion activity following the decline in commodity prices in the fourth quarter of 2018 , partially offset by the impact of two additional months of revenue generated by the falcon operations ( acquired february 28 , 2018 ) . our drilling services revenues decreased $ 27.9 million , or 40 % , to $ 41.3 million in 2019 from 2018 due to a reduction in customer vertical drilling operations in 2019 and our exit of drilling operations in the west texas region in the fourth quarter of 2019. operating loss . our well site services segment operating loss increased $ 38.0 million in 2019 from 2018 due primarily to the $ 33.7 million non-cash fixed asset impairment charge recorded in drilling services . our completion services operating loss increased by $ 4.0 million in 2019 compared to 2018 , which included $ 3.0 million in charges ( presented within cost of services ) associated with additional reserves established for the final settlement of legacy flsa claims . our drilling services operating loss increased $ 34.1 million in 2019 from 2018 due principally to the $ 33.7 million non-cash fixed asset impairment charge discussed previously . downhole technologies revenues . our downhole technologies segment revenues decreased $ 31.5 million , or 15 % , in 2019 compared to 2018 due primarily to a decline in u.s. land-based customer completion activity , competitive pricing pressures for certain of its conventional perforating products and a market shift toward sales of integrated perforating gun systems , which the segment did not commercialize until late 2019. operating income ( loss ) .
| 2,323 |
the company 's federal income tax returns from 2015 forward , state income tax returns from 2014 forward , and its australian tax returns beginning in 2017 are subject to examination by tax authorities ; however , the company 's tax attribute carryforwards such as nols and story_separator_special_tag financial condition and results of operations you should read the following discussion of our financial condition and results of operations in conjunction with the consolidated financial statemen t s and the notes thereto included elsewhere in this annual report on form 10-k. overview we are a clinical stage pharmaceutical company focused on the discovery , development and commercialization of novel therapeutics for rare endocrine diseases and endocrine-related tumors . endocrine pathways function to maintain homeostasis and commonly use peptide hormones acting through g protein coupled receptors , or gpcrs , to regulate many aspects of physiology including growth , energy , metabolism , gastrointestinal function and stress responses . we have assembled a seasoned team with extensive expertise in drug discovery and development in endocrine gpcrs and built a highly productive drug discovery organization . we have discovered a pipeline of oral nonpeptide ( small molecule ) new chemical entities that target peptide gpcrs to treat a variety of rare endocrine diseases where treatment options have significant efficacy , safety and or tolerability limitations . our lead product candidate , paltusotine ( formerly crn00808 ) , is currently in clinical development for the treatment of acromegaly , and we are advancing additional product candidates through clinical and preclinical studies in parallel . our vision is to build the leading endocrine company which consistently pioneers new therapeutics to help patients better control their disease and improve their daily lives . we focus on the discovery and development of oral nonpeptide therapeutics that target peptide gpcrs with well-understood biological functions , validated biomarkers and the potential to substantially improve the treatment of endocrine diseases and or endocrine-related tumors . our pipeline consists of the following two product candidates and preclinical programs : paltusotine , our lead product candidate , establishes a new class of oral selective nonpeptide somatostatin receptor type 2 , or sst2 , biased agonists designed for the treatment of acromegaly and neuroendocrine tumors , or nets . we are currently conducting three global phase 2 clinical trials of paltusotine in acromegaly patients , the acrobat evolve , or evolve , acrobat edge , or edge and acrobat advance , or advance , trials . the evolve trial is a double-blind , placebo-controlled , randomized withdrawal study designed to evaluate the safety , efficacy and pharmacokinetics of paltusotine , in subjects with acromegaly whose disease is biochemically controlled by octreotide lar or lanreotide depot monotherapy . the edge trial is an open label exploratory study designed to evaluate the safety , efficacy and pharmacokinetics of paltusotine in subjects with acromegaly that are treated with somatostatin analog based treatment regimens but whose disease is not biochemically controlled by monotherapy . the advance trial is an open label , long term extension study designed to evaluate the safety and efficacy of paltusotine in patients that have completed the evolve or edge trials . we dosed the first patients in the evolve and edge trials in march 2019. crn01941 is also an oral nonpeptide sst2 biased agonist initially in development for the treatment of nets . we initiated a phase 1 clinical trial in may 2019 to examine the safety , tolerability , pharmacokinetics , and pharmacodynamics of crn01941 and expect results from this trial in early 2020. we intend to decide whether to advance crn01941 or paltusotine into a later stage trial in nets upon analysis of the cumulative data from the paltusotine and crn01941 preclinical , nonclinical and clinical programs . we are developing the first nonpeptide product candidate to antagonize peptide adrenocorticotrophic hormone , or acth , designed for the treatment of cushing 's disease and other diseases caused by excess acth , including congenital adrenal hyperplasia and ectopic acth syndrome . we are currently conducting first-in-human enabling studies with our lead acth antagonist development candidate . we are developing a new class of oral selective nonpeptide somatostatin type 5 receptor , or sst5 , agonists designed to treat congenital hyperinsulinism , or chi . we are currently conducting first-in-human enabling studies with our lead sst5 agonist development candidate . to date , we have devoted substantially all of our resources to drug discovery , conducting preclinical studies and clinical trials , obtaining and maintaining patents related to our product candidates , and the provision of general and administrative support for these operations . we recognize revenues from various research and development grants , but do not have any products approved for sale and have not generated any product sales . we have funded our operations to date primarily through our grant revenues , the private placement of our preferred stock , and our initial public offering , or ipo , in july 2018. as of december 31 , 2019 , we had unrestricted cash , cash equivalents and investment securities of $ 118.4 million . we have incurred cumulative net losses since our inception and , as of december 31 , 2019 , we had an accumulated deficit of $ 93.8 million . our net losses may fluctuate significantly from quarter-to-quarter and year-to-year , depending on the timing of our clinical trials and preclinical studies and our expenditures on other research and development activities . we expect our expenses and operating losses will increase substantially as we conduct our ongoing and planned clinical trials , continue our research and development activities and conduct preclinical studies , hire additional personnel , protect our intellectual 69 property and incur costs associated with being a public company , including audit , legal , regulatory , and tax-related services associated with maint aining compliance with exchange listing and securities and exchange commission , or sec , requirements , director and officer insurance premiums , and investor relations costs . story_separator_special_tag we plan to substantially increase our research and development expenses for the foreseeable future as we continue the development of our product candidates and the discovery of new product candidates . we can not determine with certainty the timing of initiation , the duration or the completion costs of current or future preclinical studies and clinical trials of our product candidates due to the inherently unpredictable nature of preclinical and clinical development . clinical and preclinical development timelines , the probability of success and development costs can differ materially from expectations . we anticipate that we will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials , regulatory developments and our ongoing assessments as to each product candidate 's commercial potential . we will need to raise substantial additional capital in the future . in addition , we can not forecast which product candidates may be subject to future collaborations , when such arrangements will be secured , if at all , and to what degree such arrangements would affect our development plans and capital requirements . general and administrative general and administrative expenses consist primarily of salaries and employee-related costs , including stock-based compensation , for personnel in executive , finance and other administrative functions . other significant costs include facility-related costs , legal fees relating to intellectual property and corporate matters , professional fees for accounting and consulting services , insurance costs , and commercial planning expenses . we anticipate that our general and administrative expenses will increase in the future to support our continued research and development activities and , if any of our product candidates receive marketing approval , commercialization activities . we also anticipate increased expenses related to audit , legal , regulatory , and tax-related services associated with maintaining compliance with exchange listing and sec requirements , director and officer insurance premiums , and investor relations costs associated with operating as a public company . critical accounting policies and estimates our management 's discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements , which have been prepared in accordance with u.s. generally accepted accounting principles , or u.s. gaap . the preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements . on an ongoing basis , we evaluate our estimates and judgments , including those related to revenue recognition , accrued expenses and stock-based compensation . we base our estimates on historical experience , known trends and events , and various other factors that we believe are reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions . 71 while our significant accounting policies are described in more detail in note 2 to our consolidated financial statements appearing elsewhere in this annual report on form 10-k , we believe the following accounting policies and estimates to be most critical to the preparation of our consolidated financial statements . australian research and development tax incentive capl is eligible to obtain a cash refund from the australian taxation office for eligible research and development expenditures under the australian tax incentive . the australian tax incentive is recognized as a reduction to research and development expense when there is reasonable assurance that the australian tax incentive will be received , the relevant expenditure has been incurred , and the amount can be reliably measured . although we do not expect our estimates to be materially different from amounts actually received , if our estimates of the amounts and timing of the receipt of the australian tax incentive differ from actual amounts received , it could result in us reporting amounts that are too high or too low in any particular period . accrued expenses as part of the process of preparing our consolidated financial statements , we are required to estimate our accrued expenses as of each balance sheet date . this process involves reviewing open contracts and purchase orders , communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost . we make estimates of our accrued expenses as of each balance sheet date based on facts and circumstances known to us at that time . we periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary . the significant estimates in our accrued research and development expenses include the costs incurred for services performed by our vendors in connection with research and development activities for which we have not yet been invoiced . we base our expenses related to research and development activities on our estimates of the services received and efforts expended pursuant to quotes and contracts with vendors that conduct research and development on our behalf . the financial terms of these agreements are subject to negotiation , vary from contract to contract and may result in uneven payment flows . there may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the research and development expense . in accruing service fees , we estimate the time period over which services will be performed and the level of effort to be expended in each period . if the actual timing of the performance of services or the level of effort varies from our estimate , we adjust the accrual or prepaid expense accordingly .
| results of operations comparison of the years ended december 31 , 2019 and 2018 . the following table summarizes our results of operations for the years ended december 31 , 2019 and 2018 ( in thousands ) : replace_table_token_3_th grant revenues . grant revenues relate to reimbursable expenses incurred in connection with our sbir grants and totaled $ 1.2 million and $ 2.4 million for the years ended december 31 , 2019 and 2018 , respectively . our 2019 revenues were primarily associated with research activities for one sbir grant , while our 2018 revenues were primarily related to research activities for two such grants . we do not expect grant revenues to be significant in future periods . research and development expenses . research and development expenses were $ 41.5 million and $ 24.5 million for the years ended december 31 , 2019 and 2018 , respectively . the increase was primarily due to increased spending on manufacturing and development activities of $ 9.9 million associated with our clinical and nonclinical activities for paltusotine as well as our other clinical and preclinical programs . additionally , our 2019 results reflect an increase in costs of $ 4.5 million due to the hiring of additional personnel ( which includes $ 2.1 million of additional stock-based compensation ) . general and administrative expenses . general and administrative expenses were $ 13.5 million and $ 6.7 million for the years ended december 31 , 2019 and 2018 , respectively . the increase was primarily due to increases in personnel-related costs of $ 3.2 million ( which includes $ 1.9 million of additional stock-based compensation ) , spending on pre-commercialization activities and corporate legal services of $ 1.6 million , as well as expenses associated with operating as a publicly traded company . other income ( expense ) .
| 2,324 |
advances . from december 31 , 2014 to december 31 , 2015 , net loans receivable increased by $ 4,415,271 ( 1 % ) to $ 491,001,907. permanent loans secured by commercial real estate , primarily secured by owner occupied retail and low-income housing project , decreased $ 6,780,481 ( 3 % ) which was due to various expected payoffs and principal reductions . construction loans increased $ 8,678,311 ( 24 % ) due to increase in new construction loan demand combined with draws on existing loans . permanent multi-family loans increased $ 7,817,710 ( 23 % ) due to primarily two larger new credits and one larger credit increasing existing loan balance . commercial loans decreased $ 11,469,164 ( 12 % ) and installment loans increased $ 5,107,289 ( 30 % ) which was primarily due to the anticipated payoff of one larger relationship and one large credit previously classified as commercial being transferred to installment due to collateral changing . loans secured by both owner and non-owner occupied one-to-four unit residential real estate increased $ 356,604 ( less than 1 % ) . despite gross loan balances at december 31 , 2015 being above year-end 2014 , they declined $ 13.6 million for the second half of 2015. the decline was primarily due to loan payoffs combined with a highly competitive environment for new loans that has made it difficult to maintain loan balances . the company continues to focus its lending efforts in the commercial and owner occupied real estate mortgage loan categories , and to reduce its concentrations in non-owner occupied commercial real estate . as of december 31 , 2015 , management identified loans totaling $ 14,730,000 as impaired with a related allowance for loan losses of $ 865,000. impaired loans increased by $ 9,349,000 during 2015 , compared to the balance of $ 5,381,000 at december 31 , 2014. from december 31 , 2014 to december 31 , 2015 , the allowance for loan losses decreased $ 776,657 to $ 5,811,940. in addition to the provision for loan losses of $ 600,000 recorded by the company during the year ended december 31 , 2015 , loan charge-offs of specific loans ( previously classified as nonperforming ) exceeded recoveries by $ 1,376,657 for the year ended december 31 , 2015. the company 's increase in overall loan balances during 2015 has increased the general component of the allowance for loan loss reserve requirements . however , the overall reserve decreased as a result of charge-offs of specific reserves established on nonperforming loans . the allowance for loan losses , as a percentage of gross loans outstanding ( excluding mortgage loans held for sale ) , as of december 31 , 2015 and december 31 , 2014 was 1.17 % and 1.34 % , respectively . the allowance for loan losses , as a percentage of nonperforming loans outstanding , as of december 31 , 2015 and december 31 , 2014 was 109.9 % and 124.5 % , respectively . management believes the allowance for loan losses is at a level to be sufficient in providing for potential loan losses in the bank 's existing loan portfolio . as of december 31 , 2015 , foreclosed assets held for sale consisted primarily of one commercial development in northwest arkansas of $ 1.3 million and one commercial property located in springfield , missouri of $ 441,000 . 44 from december 31 , 2014 to december 31 , 2015 , bank owned life insurance increased $ 4,362,695 ( 30 % ) to $ 18,779,915 primarily due to an additional purchase of $ 4,000,000 of single premium life insurance on key members of management with the purpose of partially offsetting the company 's employee benefit costs as a whole . this purchase was completed in december 2015. from december 31 , 2014 to december 31 , 2015 , deposits increased $ 37,567,413 ( 8 % ) to $ 517,385,695. during this period , checking and savings transaction balances increased by $ 43,000,898 and certificates of deposit declined $ 5,433,485. the increase in transactional balances is primarily due to the company 's strong efforts to grow core transaction deposits , including retail , commercial and public funds . federal home loan bank and federal reserve bank advances decreased $ 8,250,000 ( 14 % ) from $ 60,350,000 as of december 31 , 2014 to $ 52,100,000 as of december 31 , 2015 due to principal reductions . securities sold under agreements to repurchase decreased $ 10,000,000 ( 100 % ) as of september 30 , 2015. the company executed a structured transaction during the second quarter selling approximately $ 4,000,000 of small business administration ( โ sba โ ) guaranteed loans and approximately $ 5,800,000 of investment securities for a combined gain of $ 488,000. with those proceeds , the company prepaid a $ 10,000,000 repurchase agreement ( bearing annual interest of 2.61 % ) incurring a prepayment penalty of $ 463,992. this prepayment has allowed the company to significantly reduce higher cost , non-core funding liabilities on its balance sheet and eliminate future annual interest expense of $ 261,000. this transaction has improved the company 's cost of funds as well as enhanced other liquidity and capital performance measurements . from december 31 , 2014 to december 31 , 2015 , stockholders ' equity ( including unrealized depreciation on available-for-sale securities , net of tax ) increased $ 4,945,618 ( 8 % ) to $ 66,422,465. net income for the year ended december 31 , 2015 exceeded dividends paid or declared by $ 4,708,435. the equity portion of the company 's unrealized losses on available-for-sale securities declined by $ 235,535 during 2015. on a per common share basis , stockholders ' equity increased from $ 14.30 as of december 31 , 2014 to $ 15.27 as of december 31 , 2015 . story_separator_special_tag non-interest income increased $ 1,234,247 ( 36 % ) which was primarily due to two factors . first , the company executed a structured transaction selling approximately $ 4,000,000 of sba guaranteed loans and approximately $ 5,800,000 of investment securities for a combined gain of $ 488,000. with those proceeds , the company prepaid a $ 10,000,000 repurchase agreement ( bearing annual interest of 2.61 % ) incurring a prepayment penalty of $ 463,992. this prepayment has allowed the company to significantly reduce higher cost , non-core funding liabilities on its balance sheet and eliminate future annual interest expense of $ 261,000. this transaction has improved the company 's cost of funds as well as enhanced other liquidity and capital performance measurements . 48 secondly , gains on sales of loans held for sale increased $ 589,394 ( 60 % ) . this was primarily due to a stronger real estate market and the company 's increased activity in federal housing administration lending compared to 2014. originations of mortgage loans held for sale were $ 56,515,986 during 2015 compared to $ 34,694,993 in 2014. non-interest expense . non-interest expense increased $ 1,851,098 ( 12 % ) . this increase was primarily due to a few factors . first , the company paid a $ 463,992 prepayment penalty incurred on the prepayment of a repurchase agreement ( further discussed above ) . secondly , salaries and employee benefits increased $ 909,984 ( 10 % ) which was primarily due to the addition of several key officers during 2015. the company continues to strengthen its depth in the areas of technology , marketing , commercial and retail production in order to position itself for future growth and expansion . also impacting compensation were mortgage commissions , which have increased due to the mortgage loan volume improvement noted above . other expenses that experienced increases were occupancy expense which increased $ 207,696 ( 12 % ) primarily due to depreciation expense recognized on new equipment purchases in late fourth quarter 2014 and into 2015. also , the company has increased its marketing efforts in 2015 and advertising expense increased $ 99,996 ( 24 % ) . income taxes . the provision for income taxes increased $ 348,821 ( 17 % ) over 2014 as a direct result of an increase in taxable income and the company 's increased utilization of state tax credits in 2014. furthermore , effective during the first quarter of 2015 , the company adopted financial accounting standards board ( โ fasb โ ) issued accounting standards update ( โ asu โ ) no . 2014-01 ( see the section captioned โ new accounting pronouncements โ in note 14 to the notes to the consolidated financial statements in the report ) . cash dividends paid . the company paid dividends of $ 0.05 per share on april 16 , 2015 to stockholders of record as of april 6 , 2015 , and $ 0.05 per share on july 16 , 2015 , to stockholders of record as of july 6 , 2015 , and $ .05 per share on october 15 , 2015 , to stockholders of record as of october 5 , 2015 and also declared a cash dividend of $ 0.08 per share on december 23 , 2015 , which was paid on january 16 , 2016 , to stockholders of record on january 5 , 2016. during 2014 , the company also paid $ 648,280 in dividends on common stock and $ 413,000 dividends on its preferred stock . during 2013 , the company paid $ 600,000 in dividends on its then outstanding preferred stock . results of operations - comparison of year ended december 31 , 2014 and december 31 , 2013 replace_table_token_28_th interest rates . the bank charges borrowers and pays depositors interest rates that are largely a function of the general level of interest rates . the above table sets forth the weekly average interest rates for the 52 weeks ending december 31 , 2014 and december 31 , 2013 as reported by the federal reserve . the bank typically indexes its adjustable rate commercial loans to prime and its adjustable rate mortgage loans to the one-year treasury rate . the ten-year treasury rate is a proxy for 30-year fixed rate home mortgage loans . 49 rates were steady and remained low for 2014 as the fomc left the discount rate at 25 basis points . as of december 31 , 2014 , the prime rate was 3.25 % and unchanged from december 31 , 2013. interest income . total interest income decreased $ 841,184 ( 3 % ) . the average balance of interest-earning assets decreased $ 14,810,000 ( 2 % ) while the yield on average interest earning assets decreased 3 basis points to 4.25 % . interest on loans decreased $ 630,791 ( 3 % ) and the average loan receivable balance increased $ 78,000 ( less than 1 % ) while the average yield decreased 14 basis points to 4.99 % . strong competition is causing a reduction in rates for new credits and to maintain existing credit relationships . interest expense . total interest expense decreased $ 768,189 ( 15 % ) as the average balance of interest-bearing liabilities decreased $ 28,631,000 ( 5 % ) while the average cost of interest-bearing liabilities decreased 10 basis points to 0.84 % . interest expense on deposits decreased $ 530,508 ( 19 % ) during 2014 as the average balance of interest bearing deposits decreased $ 21,027,000 ( 5 % ) and the average interest rate paid to depositors decreased 9 basis points to 0.54 % . the primary reason for the decrease in the average cost of interest bearing deposits was the continued decline in higher cost certificates of deposits as well as reductions in the average rate paid on transaction deposit balances . net interest income . the company 's net interest income decreased $ 72,995 ( less than 1 % ) .
| general guaranty federal bancshares , inc. ( the โ company โ ) is a delaware corporation organized on december 30 , 1997 that operates as a one-bank holding company . guaranty bank ( the โ bank โ ) is a wholly-owned subsidiary of the company . the primary activity of the company is to oversee its investment in the bank . the company engages in few other activities , and the company has no significant assets other than its investment in the bank . for this reason , unless otherwise specified , references to the company include the operations of the bank . the company 's principal business consists of attracting deposits from the general public and using such deposits to originate multi-family , construction and commercial real estate loans , mortgage loans secured by one- to four-family residences , and consumer and business loans . the company also uses these funds to purchase government sponsored mortgage-backed securities , us government and agency obligations , and other permissible securities . when cash outflows exceed inflows , the company uses borrowings and brokered deposits as additional financing sources . the company derives revenues principally from interest earned on loans and investments and , to a lesser extent , from fees charged for services . general economic conditions and policies of the financial institution regulatory agencies , including the missouri division of finance and the federal deposit insurance corporation ( โ fdic โ ) significantly influence the company 's operations . interest rates on competing investments and general market interest rates influence the company 's cost of funds . lending activities are affected by the interest rates at which such financing may be offered . the company intends to focus on commercial , one- to four-family residential and consumer lending throughout southwestern missouri . the company has two active wholly-owned subsidiaries other than the bank , its principal subsidiary : ( i ) guaranty statutory trust i , a delaware statutory trust ; and ( ii ) guaranty statutory trust ii , a delaware statutory trust and a third inactive subsidiary .
| 2,325 |
our actual results may differ materially from those we currently anticipate as a result of the factors we describe under โ risk factors โ and elsewhere in this annual report on form 10-k and other risks as well as other factors that are not currently known to us , that we currently consider immaterial or that are not specific to us , such as general economic conditions . overview we are a home care services provider operating in three segments : personal care ; hospice ; and home health . our services are principally provided in the home under agreements with federal , state and local government agencies . our consumers are predominantly โ dual eligible , โ meaning they are eligible to receive both medicare and medicaid benefits . managed care revenues accounted for 33.9 % , 33.1 % and 26.1 % of our revenue during the years ended december 31 , 2018 , 2017 and 2016 , respectively . a summary of our financial results for 2018 , 2017 and 2016 is provided in the table below . replace_table_token_9_th ( 1 ) net service revenues and net income from continuing operations , net income and total assets have been updated to reflect the correction described in note 2 to the notes to consolidated financial statements . as of december 31 , 2018 , we provided our services in 24 states through 156 offices . our payor clients include federal , state and local governmental agencies , managed care organizations , commercial insurers and private individuals . for the years ended december 31 , 2018 , 2017 and 2016 , we served approximately 57,000 , 51,000 and 50,000 discrete individuals , respectively . our personal care segment also includes staffing services , with clients including assisted living facilities , nursing homes and hospice facilities . acquisitions in addition to our organic growth , we have grown through acquisitions that have expanded our presence in current markets or facilitated our entry into new markets where in-home care has been moving to managed care organizations . on january 1 , 2018 , we acquired certain assets of lifestyle options , inc. ( โ lifestyle โ ) in order to expand private pay services in illinois . the total consideration for the transaction was $ 4.1 million , comprised of $ 3.3 million in cash and $ 0.8 million , which represented the estimated fair value of contingent consideration , subject to the achievement of certain performance targets set forth in an earn-out agreement . as of december 31 , 2018 , the performance targets were not met and the company remeasured the earn-out to fair value . on april 1 , 2018 , we completed an acquisition of certain assets of arcadia for approximately $ 18.9 million . arcadia provides home care services to approximately 2,300 consumers through 26 offices in 10 states . we funded this acquisition through the delayed draw term loan portion of our credit facility . in september 2018 , we acquired certain affiliate branches of arcadia for $ 0.6 million using cash on hand . on may 1 , 2018 , we completed the acquisition of all of the issued and outstanding stock of ambercare for approximately $ 39.6 million plus the amount of excess cash held by ambercare at closing ( approximately $ 12.0 million ) . with the purchase of ambercare , we expanded our personal care operations and acquired hospice and home health operations in the state of new mexico . we funded this acquisition through the delayed draw term loan portion of our credit facility . effective october 31 , 2018 , we entered into a definitive agreement to acquire the assets of vip health care services for approximately $ 28.0 million . with the purchase of vip health care services , we will expand our personal care operations in the state of new york and into the new york city metropolitan area . we expect to complete this transaction in the second quarter of 2019 , 35 contingent on the timing of certain regulatory approvals . we expect to fund this acquisition through a delayed draw term loan under our credit facility and available cash on hand . revenue by payor our payor clients are principally federal , state and local governmental agencies and , increasingly , managed care organizations . the federal , state and local programs under which the agencies operate are subject to legislative , budgetary and other risks that can influence reimbursement rates . we are experiencing a transition of business from government payors to managed care organizations , which we believe aligns with our emphasis on coordinated care and the reduction of the need for acute care . for the years ended december 31 , 2018 , 2017 and 2016 , our payor revenue was : replace_table_token_10_th with the acquisition of ambercare completed during the second quarter of 2018 , we began to report our business with two additional segments , hospice and home health . for the year ended december 31 , 2018 , our hospice and home health revenue was : replace_table_token_11_th we derive a significant amount of our net service revenues in illinois , which represented 47.5 % , 52.6 % and 53.6 % of our total net service revenues for the years ended december 31 , 2018 , 2017 and 2016 , respectively . a significant amount of our net service revenues are derived from one payor client , the illinois department on aging , which accounted for 31.0 % , 36.5 % and 42.1 % of our total net service revenues for the years ended december 31 , 2018 , 2017 and 2016 , respectively . the illinois department on aging 's payments for non-medicaid consumers have been delayed in the past and may continue to be delayed in the future due to budget disputes . the state of illinois did not adopt comprehensive budgets for fiscal years 2016 or 2017 , ending june 30 , 2016 and june 30 , 2017 , respectively . story_separator_special_tag depreciable assets consist principally of furniture and equipment , network administration and telephone equipment , and operating system software . depreciable and leasehold assets are depreciated or amortized on a straight-line method over their useful lives or , if less and if applicable , their lease terms . provision for doubtful accounts prior to 2018 , we established our allowance for doubtful accounts to the extent it was probable that a portion or all of a particular account will not be collected . we established our provision for doubtful accounts primarily by reviewing the creditworthiness of significant customers and through evaluations over the collectability of the receivables . an allowance for doubtful accounts was maintained at a level that our management believed was sufficient to cover potential losses . in 2018 , subsequent adjustments that are determined to be the result of an adverse change in the payor 's ability to pay are recognized as provision for doubtful accounts with the adoption of asu 2014-09 , revenue from contracts with customers . we recorded $ 9.7 million for the year ended december 31 , 2018 as a reduction to revenue that would have been recorded as provision for doubtful accounts under the prior revenue recognition guidance . interest income illinois law entitles designated service program providers to receive a prompt payment interest penalty based on qualifying services approved for payment that remain unpaid after a designated period of time . as the amount and timing of the receipt of these payments are not certain , the interest income is recognized when received and reported in the statement of income caption , โ interest income. โ for the years ended december 31 , 2018 and 2016 , we received $ 2.3 million and $ 2.8 million , respectively , in prompt payment interest . for the year ended december 31 , 2017 , we did not receive any prompt payment interest . while we may be owed additional prompt payment interest , the amount , timing , and intent to provide such payments remains uncertain , and we will continue to recognize prompt payment interest income upon satisfaction of these constraints interest expense interest expense is reported in the consolidated statements of income when incurred and consists of ( i ) interest and unused credit line fees on our credit facility , and our terminated senior credit facility ( as defined under senior secured credit facility below ) , ( ii ) interest on our capital lease obligations and ( iii ) amortization and write-off of debt issuance costs . other income for the year ended december 31 , 2017 , other income of $ 0.2 million consisted of income distributions received from investments in joint ventures , which were sold on october 1 , 2017. we accounted for this income in accordance with asc topic 325 , โ investmentsโother โ and recognized the net accumulated earnings only to the extent distributed by the joint ventures on the date received . income tax expense all of our income is from domestic sources . we incur state and local taxes in states in which we operate . for the years ended december 31 , 2018 , 2017 and 2016 , our federal statutory rate was 21.0 % , 35.0 % and 35.0 % , respectively . the effective income tax rate was 20.6 % , 39.0 % and 25.5 % for the years ended december 31 , 2018 , 2017 and 2016 , respectively . the difference between our federal statutory and effective income tax rates are principally due to the inclusion of state taxes and the use of federal employment tax credits . on december 22 , 2017 , the president of the united states signed into law the tax cuts and jobs act ( โ tax reform act โ ) . the legislation significantly changes u.s. tax law by , among other things , lowering corporate income tax rates . the tax reform act permanently reduces the u.s. corporate income tax rate from a maximum of 35.0 % to a flat 21.0 % rate , effective january 1 , 2018. our effective income tax rate increased by approximately 5.3 % in 2017 due to the revaluation of our deferred tax assets and a valuation allowance as a result of the elimination of a performance-based equity exception in calculating the $ 1.0 million limitation for 162 ( m ) under the tax reform act . 38 discontinued operations discontinued operations consists of the reduction of the indemnification reserve , net of tax , for our 2013 home health business that was sold effective march 1 , 2013 and the results of operations for an agency in pennsylvania that was sold on december 30 , 2013. results of operations year ended december 31 , 2018 compared to year ended december 31 , 2017 the following table sets forth , for the periods indicated , our consolidated results of operations . replace_table_token_12_th ( 1 ) for the year ended december 31 , 2017 , revenue , gross profit , provision for doubtful accounts , operating expenses , operating income from continuing operations , income tax expense , net income from continuing operations and net income have been updated to reflect the correction , as discussed in note 2 to the notes to consolidated financial statements . net service revenues increased by 21.6 % to $ 518.1 million for the year 2018 compared to $ 426.0 million in 2017. net service revenues increased primarily due to the acquisitions of arcadia and ambercare during the second quarter of 2018 and an increase in average billable census for personal care services in 2018 as compared to 2017. this increase in net service revenues was offset by a $ 9.7 million decrease in net service revenues as a result of our adoption of asc 606. under asc 606 the majority of what historically was classified as provision for doubtful accounts under operating expenses is now treated as an implicit price concession factored into net service revenues . see note 1 to the notes to consolidated financial statements for additional information .
| results of operations year ended december 31 , 2017 compared to year ended december 31 , 2016 the following table sets forth , for the periods indicated , our consolidated results of operations . replace_table_token_17_th ( 1 ) average billable census is the number of unique clients receiving a billable service during the year . ( 2 ) billable hours is the total number of hours served to clients during a year . ( 3 ) for the years ended december 31 , 2017 and 2016 , revenue , gross profit , provision for doubtful accounts , operating expenses , operating income from continuing operations , income tax expense , net income from continuing operations and net income have been updated to reflect the correction , as discussed in note 2 to the notes to consolidated financial statements for additional information . net service revenues from state , local and other governmental programs accounted for 64.2 % and 70.5 % of net service revenues for 2017 and 2016 , respectively . managed care organizations accounted for 33.1 % and 26.0 % of net service revenues in 2017 and 2016 respectively , with private and commercial payors accounting for the remainder of net service revenues . a significant amount of our net service revenues in 2017 and 2016 were derived from one payor client , illinois department on aging , which accounted for 36.5 % and 42.1 % respectively , of our total net service revenues . net service revenues increased $ 25.1 million , or 6.3 % , to $ 426.0 million for 2017 compared to $ 400.9 million for 2016. the increase was primarily due to a 4.1 % increase in average billable census and a 2.9 % increase in revenues per billable hour .
| 2,326 |
in addition , the amendments to topic 310 clarify that a creditor is precluded from using the story_separator_special_tag in addition to historical information , this annual report on form 10-k contains forward-looking statements within the meaning of section 27a of the securities act of 1933 and section 21e of the securities exchange act of 1934. these statements relate to future events or to our future financial performance and involve known and unknown risks , uncertainties and other factors that may cause our or our industry 's actual results , levels of activity , performance or achievements to be materially different from any future results , levels of activity , performance or achievements expressed or implied by these forward-looking statements . forward-looking statements include , but are not limited to , statements about : our goals and strategies ; our and our customers ' estimates regarding future revenues , operating results , expenses , capital requirements and liquidity and our needs for additional financing ; our future capital expenditures ; expansion of our manufacturing capacity ; the growth rates of our existing markets and potential new markets ; our and our customers ' and our suppliers ' ability to respond successfully to technological or industry developments ; our suppliers ' estimates regarding future costs ; our ability to increase our penetration of existing markets and penetrate new markets ; our plans to diversify our sources of revenues ; trends in the optical communications , industrial lasers and sensors markets , including trends to outsource the production of components used in those markets ; our ability to attract and retain a qualified management team and other qualified personnel and advisors ; and competition in our existing and new markets . these forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward-looking statements . factors that could cause or contribute to such differences include , but are not limited to , those discussed in this annual report on form 10-k and , in particular , the risks discussed under the heading ยrisk factorsย in item 1a of this annual report on form 10-k and those discussed in other documents we file with the securities and exchange commission . we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements . given these risks and uncertainties , readers are cautioned not to place undue reliance on such forward-looking statements . overview we provide precision optical , electro-mechanical and electronic manufacturing services to original equipment manufacturers ( oems ) of complex products such as optical communication components , modules and sub-systems , industrial lasers and sensors . we offer a broad range of advanced optical and electro-mechanical capabilities across the entire manufacturing process , including process design and engineering , supply chain management , manufacturing , final assembly and test . we focus primarily on low-volume production of a wide variety of high complexity products , which we refer to as ยlow-volume , high-mixย . based on our experience with , and feedback from , customers , we believe we are a global leader in providing these services to the optical communications market . 33 our customer base includes companies in complex industries that require advanced precision manufacturing capabilities , such as optical communications , industrial lasers and sensors . the products that we manufacture for our oem customers include : selective switching products ; tunable transponders and transceivers ; active optical cables ; solid state , diode-pumped , gas and fiber lasers ; and sensors . in many cases , we are the sole outsourced manufacturing partner used by our customers for the products that we produce for them . we also design and fabricate application-specific crystals , prisms , mirrors , laser components , substrates and other custom and standard borosilicate , clear fused quartz , and synthetic fused silica glass products . we incorporate our customized optics and glass into many of the products we manufacture for our oem customers , and we also sell customized optics and glass in the merchant market . we began operations in january 2000 through the acquisition of a precision mechanical and electro-mechanical manufacturing site in thailand from seagate technology , or seagate . we have been consistently profitable since our inception , achieving 46 consecutive quarters of profitable operations . revenues our total revenues increased by $ 237.9 million , or 47.0 % , to $ 743.6 million for fiscal 2011 , as compared to $ 505.7 million for fiscal 2010. we generated substantially all of our total revenues during fiscal 2011 from the optical communications , industrial lasers and sensors markets . since fiscal 2008 , our revenues from products for markets other than the optical communications market have increased substantially . our revenues from lasers , sensors and other markets as a percentage of total revenues have increased from 7.9 % for fiscal 2009 , to 18.3 % for fiscal 2010 to 20.9 % for fiscal 2011. we expect that industrial lasers and sensors will represent an increasing portion of our revenues in the future . because our share of the available business in the industrial lasers and sensors end-markets is presently small , we hope to grow our business in those end-markets in excess of industry growth forecasts . we believe our ability to expand our relationships with existing customers and attract new customers is due to a number of factors , including our broad range of complex engineering and manufacturing service offerings , flexible low-cost manufacturing platform , process optimization capabilities , advanced supply chain management , excellent customer service and experienced management team . we expect the prices we charge for the products we manufacture for our customers to decrease over time due in part to competitive market forces . story_separator_special_tag a second significant element of cost of revenues is employee costs , including : indirect employee costs related to design , configuration and optimization of manufacturing processes for our customers , quality testing , materials testing and other engineering services ; and direct costs related to our manufacturing employees . direct employee costs include employee salaries , insurance and benefits , merit-based bonuses , recruitment , training and retention . historically , our employee costs have increased primarily due to increases in the number of employees necessary to support our growth and , to a lesser extent , costs to recruit , train and retain employees . salary levels in thailand and the prc , the fluctuation of the thai baht and rmb against our functional currency , the u.s. dollar , and our ability to retain our employees significantly impact our cost of revenues . we expect our employee costs to increase as we continue to increase our headcount to service additional business and as wages continue to increase in thailand and the prc . wage increases may impact our ability to sustain our competitive advantage and may reduce our profit margin . we seek to mitigate these cost increases through improvements in employee productivity , employee retention and asset utilization . our infrastructure costs are comprised of depreciation , utilities , and facilities management and overhead costs . most of our facility leases are long-term agreements . our depreciation costs are comprised of buildings and fixed assets , primarily at our pinehurst campus in thailand , and capital equipment located at each of our manufacturing locations . we previously maintained an employee profit sharing plan , under which we allocated ten percent of our adjusted pre-tax profits to be distributed quarterly to our employees . a portion of the employee profit sharing plan was allocated to the executive bonus plan and made available for our executive officers and senior management , collectively known as our senior staff . the remainder of the employee profit sharing plan was distributed to our employees as direct profit sharing and merit-based bonus compensation . the employee profit sharing plan was eliminated during the three months ended march 27 , 2009. for fiscal 2011 , the compensation committee of our board of directors approved a new executive incentive plan with quantitative objectives , based on achieving certain revenue and earnings per share milestones for the fiscal year , and qualitative objectives . bonuses under the executive incentive plan are payable after the end of fiscal 2011. during fiscal 2011 , merit-based bonus awards were also available to our non-senior staff . charges included in cost of revenues for profit sharing and merit-based bonus distributions to employees under these plans were $ 1.7 million , $ 0 , and $ 1.3 million for fiscal 2011 , fiscal 2010 and fiscal 2009 , respectively . share-based compensation expense included in cost of revenues was $ 1.1 million , $ 0.3 million and $ 0.4 million for fiscal 2011 , fiscal 2010 and fiscal 2009 , respectively . other than incremental costs associated with growing our business generally , we do not expect to incur material incremental costs of revenue as a result of our planned expansion into new geographic markets , our continued diversification into the industrial lasers and sensors markets and other end-markets outside of the optical communications market or our further development of customized optics and glass manufacturing capabilities . 36 selling , general and administrative expenses our selling , general and administrative expenses , or sg & a expenses , primarily consist of corporate employee costs for sales and marketing , general and administrative and other support personnel , including amounts previously paid under our employee profit sharing plan , research and development expenses related to the design of customized optics and glass , travel expenses , legal and other professional fees , share-based compensation expense , and other general expenses not related to cost of revenues . in fiscal 2012 , we expect our sg & a expenses to increase as we continue to respond to the requirements of being a public company , including increased expenses associated with : preparing and filing required reports under the u.s. securities laws ; comprehensively documenting and assessing our system of internal controls and maintaining our disclosure controls and procedures as a result of the requirements of the sarbanes-oxley act ; competitively compensating our board of directors ; and insuring against additional risks associated with being a public company . charges included in sg & a expenses for profit sharing and merit-based bonus compensation distributed to employees and senior staff were $ 2.7 million , $ 0 and $ 1.6 million for fiscal 2011 , fiscal 2010 and fiscal 2009 , respectively . share-based compensation expense included in sg & a expenses was $ 2.3 million , $ 0.4 million and $ 0.4 million for fiscal 2011 , fiscal 2010 and fiscal 2009 , respectively . other than incremental costs associated with growing our business generally and increased costs associated with being a public company , we do not expect to incur material incremental sg & a expenses as a result of our planned expansion into new geographic markets , our continued diversification into the industrial lasers and sensors markets and other end-markets outside of the optical communications market or our further development of customized optics and glass manufacturing capabilities . additional financial disclosures foreign exchange as a result of our international operations , we are exposed to foreign exchange risk arising from various currency exposures primarily with respect to the thai baht and rmb . although a majority of our total revenues is denominated in u.s. dollars , a substantial portion of our payroll as well as certain other operating expenses are incurred and paid in thai baht . the exchange rates between the thai baht and the u.s. dollar have fluctuated substantially in recent years and may continue to fluctuate substantially in the future .
| results of operations the following table sets forth a summary of our consolidated statements of operations . we believe that period-to-period comparisons of operating results should not be relied upon as indicative of future performance . replace_table_token_8_th 42 the following table sets forth a summary of our consolidated statements of operations as a percentage of total revenues for the periods indicated . replace_table_token_9_th the following table sets forth our revenues by end market for the periods indicated . replace_table_token_10_th we operate and internally manage a single operating segment . as such , discrete information with respect to separate product lines and segments are not accumulated . comparison of year ended june 24 , 2011 to year ended june 25 , 2010 total revenues . our total revenues increased by $ 237.9 million , or 47.0 % , to $ 743.6 million for fiscal 2011 , as compared to $ 505.7 million for fiscal 2010. this increase was the result of $ 174.4 million increase in our revenues from optical communications products , primarily reflecting the growth in optical switching , higher speed transmission devices and tunable devices , and $ 63.5 million increase in our revenues from non-optical communications products , primarily reflecting the growth of our programs for industrial laser and sensor customers , primarily related to medical equipment and automotive devices . revenues from optical communications products represented 79.1 % of our total revenues for fiscal 2011 , as compared to 81.7 % for fiscal 2010. as of june 25 , 2010 , jds uniphase corporation was no longer classified as a related party . for fiscal 2011 , revenues from the sales of products to jds uniphase corporation was no longer recorded as revenues , related parties due to a reduction of share ownership through jdsu 's participation in our initial public offering as a selling shareholder . cost of revenues .
| 2,327 |
a total of 4,687,500 options vested on december 31 , 2019. total fair value of these options at grant date was approximately $ 328,000 using the black-scholes option pricing model with the following assumptions : life of 5 years ; risk free interest rate of 2.49 % ; volatility of 122 % ; and dividend yield of 0 % . 41 the table below summarizes the compensation paid by the company to its directors for the fiscal year ended december 31 , 2019. replace_table_token_5_th ( 1 ) effective july 1 , 2013 , the board approved a compensation policy which includes a $ 500 monthly fee paid to any member of the board of directors who serves on a board committee . effective may 6 , 2014 , the board approved a revised compensation policy which continued this $ 500 monthly fee . ( 2 ) effective january 1 , 2014 , the board passed a resolution suspending the july 1 , 2013 board compensation policy . effective may 6 , 2014 , the board approved a compensation policy which includes two annual grants of options , including i ) an option to purchase a number of shares of common stock equal to $ 25,000 divided by the per share closing price on the date of grant with an exercise price equal to the stock closing price on the date of grant , a one year vesting period and an expiration date 10 years from the date of grant ; and ii ) an option to purchase a number of shares of common stock equal to $ 25,000 divided by the per share fair market value of the option calculated using the black-scholes option pricing model based on market conditions , including stock closing price , risk free interest rate and stock volatility , on the date of grant with an exercise price equal to the stock closing price on the date of grant , vesting immediately and an expiration date 10 years from the date of grant . also , effective july 1 , 2013 , the board approved an annual grant of options to purchase 25,000 shares of common stock at a price equal to the stock 's closing price on the date of grant , vesting immediately and expiring 10 years from the date of grant as compensation to the chairman of the board 's audit committee . effective january 1 , 2015 , the board amended the policy such that i ) all options granted would vest over one year ; and ii ) options granted mid-year due to appointment to the board or appointment to chairman of the audit committee would be adjusted such that the number of shares would be calculated on a pro rata basis depending on the number of day remaining in the calendar year , and the options would vest december 31 of the year of grant . ( 3 ) on january 2 , 2018 , mr. lane was granted options to purchase 625,000 shares of common exercisable at $ 0.08/share , vesting monthly through december 31 , 2019 , and expiring ten years from the date of grant . total fair value of these options at grant date was approximately $ 43,750 using black-scholes option pricing . during the year ended december 31 , 2019 , the company recognized compensation costs of $ 43,750 based on the fair value of mr. lane 's options that vested . ( 4 ) on january 2 , 2018 , mr. bundros was granted options to purchase 625,000 shares of common exercisable at $ 0.08/share , vesting monthly through december 31 , 2019 , and expiring ten years from the date of grant . total fair value of these options at grant date was approximately $ 43,750 using black-scholes option pricing . during the year ended december 31 , 2019 , the company recognized compensation costs of $ 43,750 based on the fair value of mr. bundros ' options that vested . 42 on january 2 , 2018 , as chairman of the audit committee , mr. bundros was granted options to purchase 312,500 shares of common exercisable at $ 0.08/share , vesting monthly through december 31 , 2019 , and expiring ten years from the date of grant . total fair value of these options at grant date was approximately $ 21,875 using black-scholes option pricing . during the year ended december 31 , 2019 , the company recognized compensation costs of $ 65,625 based on the fair value of mr. bundros ' options that vested . as a member of a board committee , mr. bundros received compensation in the amount of $ 500 per month for the twelve-month period of january 1 , 2019 through december 31 , 2019 . ( 5 ) on january 2 , 2018 , mr. dickson was granted options to purchase 625,000 shares of common exercisable at $ 0.08/share , vesting monthly through december 31 , 2019 , and expiring ten years from the date of grant . total fair value of these options at grant date was approximately $ 43,750 using black-scholes option pricing . during the year ended december 31 , 2019 , the company recognized compensation costs of $ 43,750 based on the fair value of mr. dickson 's options that vested . as a member of a board committee , mr. dickson received compensation in the amount of $ 500 per month for the twelve-month period of january 1 , 2019 through december 31 , 2019 . story_separator_special_tag ( 6 ) on january 2 , 2018 , dr. bunting was granted options to purchase 625,000 story_separator_special_tag the following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and supplementary data referred to in item 7 of this form 10-k. this discussion contains forward-looking statements that involve risks and uncertainties . such statements , which include statements concerning future revenue sources and concentration , selling , general and administrative expenses , research and development expenses , capital resources , additional financings and additional losses , are subject to risks and uncertainties , including , but not limited to , those discussed above in item 1 and elsewhere in this form 10-k , particularly in โ risk factors , โ that could cause actual results to differ materially from those projected . unless otherwise expressly indicated , the information set forth in this form 10-k is as of december 31 , 2019 , and we undertake no duty to update this information . 25 overview the company has not generated significant revenues since its inception in february 1998. we continue to devote the bulk of our efforts to the promotion , design , testing and the commercial manufacturing and operations of our crude oil pipeline products in the upstream and midstream energy sector . we anticipate that these efforts will continue during 2020. our expenses to date have been funded primarily through the sale of shares of common stock and convertible debt , as well as proceeds from the exercise of stock purchase warrants and options . we raised capital in 2019 and also need to raise substantial additional capital in 2020 , and possibly beyond , to fund our sales and marketing efforts , continuing research and development , and certain other expenses , until our revenue base grows sufficiently . story_separator_special_tag style= '' border-collapse : collapse ; width : 100 % ; font-size : 10pt '' > 27 contractual obligations the company 's contractual commitments for future periods , including minimum guaranteed compensation payments and other agreements as described in the following table and associated footnotes : replace_table_token_2_th _ ( 1 ) consists of license maintenance fees to temple university in the amount of $ 187,500 paid annually through the life of the underlying patents or until otherwise terminated by either party . ( 2 ) consists of certain contractually provided benefits to a former executive officer pursuant to a severance agreement . as of december 31 , 2019 , $ 207,000 was payable under this agreement and was included as part of accounts payable and accrued expenses in the accompanying consolidated balance sheet . licensing fees to temple university for details of the licensing agreements with temple university , see financial statements attached hereto , note 6. critical accounting policies and estimates our discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states of america . the preparation of these consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets , liabilities , expenses , and related disclosure of contingent assets and liabilities . we evaluate , on an on-going basis , our estimates and judgments , including those related to the useful life of the assets . we base our estimates on historical experience and assumptions that we believe to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates . the methods , estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results that we report in our consolidated financial statements . the sec considers an entity 's most critical accounting policies to be those policies that are both most important to the portrayal of a company 's financial condition and results of operations and those that require management 's most difficult , subjective or complex judgments , often as a result of the need to make estimates about matters that are inherently uncertain at the time of estimation . for a more detailed discussion of the accounting policies of the company , see note 2 of the notes to the consolidated financial statements , โ summary of significant accounting policies โ . we believe the following critical accounting policies , among others , require significant judgments and estimates used in the preparation of our consolidated financial statements . estimates the preparation of consolidated financial statements in conformity with generally accepted accounting principles 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 consolidated financial statements and the reported amounts of expenses during the reporting period . certain significant estimates were made in connection with preparing our consolidated financial statements as described in note 2 to notes to consolidated financial statements . actual results could differ from those estimates . 28 stock-based compensation the company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs . the company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the financial accounting standards board whereas the value of the award is measured on the date of grant and recognized over the vesting period . from prior periods until december 31 , 2018 , the company accounted for share-based compensation issued to non-employees and consultants in accordance with the provisions of fasb asc 505-50 , equity - based payments to non-employees . measurement of share-based payment transactions with non-employees is based on the fair value of
| results of operation qs energy , inc. consolidated statements of operations replace_table_token_1_th revenue comparison , 2019 and 2018 the company recognized no revenues during the twelve-month periods ended december 31 , 2018 and december 31 , 2019. operating expense comparison , 2019 and 2018 operating expenses were $ 2,159,000 for the fiscal year ended december 31 , 2019 , compared to $ 1,853,000 for the fiscal year ended december 31 , 2018 , an increase of $ 306,000. this increase was attributable to a decrease in non-cash expenses of $ 12,000 and an increase in cash expenses of $ 318,000. specifically , the decrease in non-cash expenses is attributable to a decrease in depreciation expense of $ 16,000 offset by an increase in stock-based compensation related to warrants and options issued to employees , directors and consultants of $ 4,000. the increase in cash expenses is attributable to increases in consulting fees of $ 83,000 , mail and freight of $ 7,000 , insurance of $ 59,000 , office expenses of $ 29,000 , public and investor relations of $ 116,000 , patent maintenance expenses of 39,000 , rent and utilities of $ 32,000 , travel expenses of $ 24,000 , property tax expenses of $ 9,000 , and other expenses of $ 3,000 , offset by decreases in corporate expenses of $ 29,000 , legal and accounting fees of $ 23,000 , and salaries and benefits of $ 31,000 .
| 2,328 |
overview starbucks results for fiscal 2019 reflect the impacts of continued streamlining efforts , initiated during the fourth quarter of fiscal 2017 , to focus on accelerating growth in high-returning businesses and converting several market operations , including thailand , france , and the netherlands , to fully licensed models in fiscal 2019. additionally , in fiscal 2019 , we saw the full impact from the licensing of the majority of our cpg and foodservice businesses to nestlรฉ in the fourth quarter of fiscal 2018. in the fourth quarter of fiscal 2019 , we realigned our operating segment reporting structure to better reflect the cumulative effect of our streamlining efforts . specifically , our previous china/asia pacific ( `` cap '' ) segment and europe , middle east , and africa ( `` emea '' ) segment have been combined into one international segment . results of siren retail , a non-reportable operating segment consisting of starbucks reserve tm roastery & tasting rooms , certain stores under the starbucks reserve brand and princi operations , which were previously included within corporate and other , are now reported within the americas and international segments based on the geographical location of the operations . as a result , we have three reportable operating segments : americas , international and channel development . non-reportable operating segments and unallocated corporate expenses are reported within corporate and other . further , to better support the review of our results , we have changed the classification of certain costs . the most significant change was the reclassification of company-owned store occupancy costs from cost of sales to store operating expenses . we also made certain other immaterial changes . concurrent with the change in reportable segments and realignment of certain operating expenses noted above , we revised our prior period financial information to be consistent with the current period presentation . there was no impact on consolidated net revenues , total operating expenses , operating income , or net earnings per share as a result of these changes . in december 2017 , the u.s. government enacted comprehensive tax legislation into law h.r . 1 , commonly referred to as the tax cuts and jobs act ( the โ tax act โ ) , which significantly changed existing u.s. tax law and included numerous provisions that affect our business . our u.s. corporate income tax rate for fiscal 2019 and future years is 21 % , while a blended rate of 24.5 % was applied in fiscal 2018. story_separator_special_tag href= '' https : //www.sec.gov/archives/edgar/data/0000829224/000082922419000051/ # s0c46f37b59ec516091a7ecfbff4e002a '' style= '' font-family : inherit ; font-size:10pt ; '' > the effective tax rate for fiscal 2019 was 19.5 % compared to 21.8 % for fiscal 2018 . the decrease in the effective tax rate was primarily due to the lower corporate tax rate as a result of the tax act ( approximately 350 basis points ) , lapping prior year 's transition tax on our accumulated undistributed foreign earnings and remeasurement of our deferred tax liabilities ( approximately 300 basis points ) , higher stock-based compensation excess tax benefit ( approximately 140 basis points ) , the release of income tax reserves related to the settlement of a u.s. tax examination and the expiration of statute of limitations ( approximately 130 basis points ) and the tax impacts of the gain on the sale of our thailand retail operations ( approximately 130 basis points ) . these favorable impacts were partially offset by the lapping of prior year 's gain on the purchase of our east china joint venture that was not subject to income tax ( approximately 580 basis points ) and the impact of changes in indefinite reinvestment assertions for certain foreign subsidiaries during the first quarter of fiscal 2019 ( approximately 170 basis points ) . see note 13 , income taxes , for further discussion . 26 segment information results of operations by segment ( in millions ) : americas replace_table_token_12_th revenues americas total net revenues for fiscal 2019 increased $ 1.5 billion , or 9 % , primarily driven by a 5 % increase in comparable store sales ( $ 744 million ) and 282 net new starbucks ยฎ company-operated stores , or a 3 % increase , over the past 12 months ( $ 580 million ) . also contributing were higher product sales to and royalty revenues from our licensees ( $ 144 million ) , primarily resulting from comparable store sales growth and the opening of 323 net new starbucksยฎ licensed stores , or 4 % increase , over the past 12 months and the impact of the adoption of revenue recognition guidance on stored value card breakage ( $ 119 million ) . operating margin americas operating income for fiscal 2019 increased 9 % to $ 3.8 billion , compared to $ 3.5 billion in fiscal 2018 . operating margin decreased 10 basis points to 20.7 % , primarily driven by higher partner investments , largely funded by savings from the tax act , growth in wages and benefits ( approximately 130 basis points ) and to a much lesser extent , investments in labor hours heavily concentrated in our fiscal fourth quarter . partially offsetting these were cost savings initiatives , primarily in cost of sales ( approximately 90 basis points ) , the impact of the adoption of revenue recognition guidance on stored value card breakage ( approximately 50 basis points ) and sales leverage . 27 international replace_table_token_13_th discussion of our international segment results below reflects the impact of fully consolidating our east china business from an equity method joint venture to a company-operated market since the acquisition date of december 31 , 2017. under the joint venture model , we recognized royalties and product sales within revenue and related product cost of sales as well as our proportionate share of east china 's net earnings , which resulted in a higher margin business . under the company-operated ownership model , east china 's operating results are reflected in most income statement lines of this segment . story_separator_special_tag store operating expenses as a percentage of company-operated store revenues were flat , primarily driven by the impact of our ownership change in east china ( approximately 40 basis points ) , partially offset by increased partner investments , largely in the americas segment . other operating expenses increased $ 37 million , primarily driven by business taxes associated with the up-front payment received from nestlรฉ . depreciation and amortization expenses as a percentage of total net revenues increased 50 basis points , primarily due to the impact of our ownership change in east china ( approximately 60 basis points ) . general and administrative expenses increased $ 300 million , primarily due to higher salaries and benefits related to digital platforms , technology infrastructure and innovations and the 2018 u.s. stock award granted in the third quarter of fiscal 2018 , which was funded by savings from the tax act and vests over one year . restructuring and impairment expenses increased $ 71 million , primarily due to higher asset impairments associated with the decision to close certain company-operated stores in the u.s. and canada ( $ 23 million ) , higher goodwill impairment charges associated with our switzerland company-operated retail reporting unit ( $ 20 million ) and international restructuring costs , including severance and asset impairments ( $ 18 million ) . income from equity investees decreased $ 90 million , primarily due to the impact of ownership changes in our east china and taiwan joint ventures , partially offset by higher south korea joint venture income . the combination of these changes resulted in an overall decrease in operating margin of 280 basis points in fiscal 2018 when compared to fiscal 2017 . 31 other income and expenses replace_table_token_18_th gain resulting from acquisition of joint venture was due to remeasuring our preexisting 50 % ownership interest in our east china joint venture to fair value upon acquisition . net gain resulting from divestiture of certain operations primarily consisted of sales of our tazo brand and taiwan joint venture , partially offset by the net loss from the sale of our brazil retail operations in fiscal 2018. the gain in fiscal 2017 was primarily due to the sale of our singapore retail operations . interest income and other , net increased $ 10 million , primarily due to recognizing higher income on unredeemed stored value card balances , partially offset by the lapping of prior year 's gain on the sale of our investment in square , inc. warrants in the prior year period . interest expense increased $ 78 million primarily related to additional interest incurred on long-term debt issued in november 2017 , march 2018 and august 2018. the effective tax rate for fiscal 2018 was 21.8 % compared to 33.2 % for fiscal 2017. the decrease in the effective tax rate was primarily due to the gain on the purchase of our east china joint venture that was not subject to income tax ( approximately 580 basis points ) and the tax act ( approximately 480 basis points ) . the impact from the tax act primarily included favorability from the lower corporate income tax rate applied to our fiscal 2018 results ( approximately 760 basis points ) and the remeasurement of our net deferred tax liabilities ( approximately 130 basis points ) . this favorability was partially offset by the estimated transition tax on our accumulated undistributed foreign earnings ( approximately 400 basis points ) . see note 13 , income taxes , for further discussion . 32 segment information results of operations by segment ( in millions ) : americas replace_table_token_19_th revenues americas total net revenues for fiscal 2018 increased $ 1.1 billion , or 7 % , primarily driven by 383 net new starbucks ยฎ company-operated store openings , or a 4.1 % increase , over the past 12 months ( $ 604 million ) and a 2 % increase in comparable store sales ( $ 319 million ) . also contributing were higher product sales to and royalty revenues from our licensees ( $ 173 million ) , primarily resulting from the opening of 512 net new starbucksยฎ licensed stores , or a 7.2 % increase , over the past 12 months . operating income americas operating income for fiscal 2018 decreased 3 % to $ 3.5 billion , compared to $ 3.6 billion in fiscal 2017. operating margin decreased 210 basis points to 20.8 % , primarily due to food and beverage-related mix shifts ( approximately 130 basis points ) , increased partner investments ( approximately 120 basis points ) which included incremental investments funded by the tax act , increased strategic investments ( approximately 30 basis points ) , the impact of the may 29th anti-bias training ( approximately 20 basis points ) and higher restructuring costs , including asset impairments and severance ( approximately 20 basis points ) , partially offset by sales leverage . 33 international replace_table_token_20_th discussion of our international segment results below reflects the impact of fully consolidating our east china business from an equity method joint venture to a company-operated market since the acquisition date of december 31 , 2017. under the joint venture model , we recognized royalties and product sales within revenue and related product cost of sales as well as our proportionate share of east china 's net earnings , which resulted in a higher margin business . under a company-operated ownership model , east china 's operating results are reflected in most line items on the statements of earnings . revenues international total net revenues for fiscal 2018 increased $ 1.3 billion , or 32 % , primarily driven by the impact of our ownership change in east china ( $ 850 million ) , 433 net new starbucks ยฎ company-operated store openings , or a 12.1 % increase , over the past 12 months ( $ 298 million ) , and favorable foreign currency translation ( $ 121 million ) .
| financial highlights total net revenues increased 7 % to $ 26.5 billion in fiscal 2019 compared to $ 24.7 billion in fiscal 2018 . consolidated operating income increased to $ 4.1 billion in fiscal 2019 compared to operating income of $ 3.9 billion in fiscal 2018 . fiscal 2019 operating margin was 15.4 % compared to 15.7 % in fiscal 2018 . operating margin compression in fiscal 2019 was primarily driven by partner ( employee ) investments and growth in wages and benefits , licensing our cpg and foodservice businesses to nestlรฉ and other strategic investments . these decreases were partially offset by sales leverage , cost savings initiatives , lower restructuring and impairment costs and the impact of the adoption of new revenue recognition guidance on stored value card breakage . earnings per share ( โ eps โ ) for fiscal 2019 decreased to $ 2.92 , compared to eps of $ 3.24 in fiscal 2018 . the decrease was primarily driven by lapping the prior year gains from the acquisition of our east china joint venture and the sale of our tazo brand , partially offset by the gain from the sale of our thailand retail operations during fiscal 2019. capital expenditures were $ 1.8 billion in fiscal 2019 compared to $ 2.0 billion in fiscal 2018 . we returned $ 12.0 billion to our shareholders in fiscal 2019 through share repurchases and dividends compared to $ 8.9 billion in fiscal 2018 . acquisitions and divestitures see note 2 , acquisitions , divestitures and strategic alliance , to the consolidated financial statements included in item 8 of part ii of this 10-k for information regarding acquisitions and divestitures .
| 2,329 |
the cautionary statements made in this annual report on form 10-k should be read as applying to all related forward-looking statements wherever they appear in this annual report on form 10-k. our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors , including but not limited to those set forth under item 1a , โ risk factors โ and elsewhere in this annual report on form 10-k. business overview we are a provider of secure , integrated , intelligent communication solutions , focused on empowering mobile workers in healthcare , hospitality , energy , and other mission-critical mobile work environments , in the united states and internationally . today , the significant majority of our business is generated from sales of our solutions in the healthcare market to help our customers enhance patient safety and experience , improve staff resiliency and increase operational efficiency . as of december 31 , 2017 , care teams at approximately 1,500 healthcare facilities worldwide have selected our solutions . we primarily sell products , software maintenance and professional services directly to end users . total revenue increased 27.3 % to $ 162.5 million in 2017 from $ 127.7 million in 2016 , and our 2016 revenue increased 22.7 % from $ 104.1 million in 2015 . for the year ended december 31 , 2017 , we recorded a net loss of $ 14.2 million compared to a net loss of $ 17.3 million for the year ended december 31 , 2016 . our diverse customer base ranges from large hospital systems to small local hospitals , as well as other healthcare facilities and customers in non-healthcare markets . we do not rely on any one customer for a substantial portion of our revenue . while we have international customers in other english-speaking countries such as canada , the united kingdom , australia , new zealand and parts of the middle east , most of our customers are located in the united states . international customers represented 10.5 % and 10.6 % of our revenue in 2017 and in 2016 , respectively . we believe certain international markets represent attractive growth opportunities . we are exploring plans to expand our presence in other english-speaking markets and enter non-english speaking markets . we outsource the manufacturing of our hardware products . our outsourced manufacturing model allows us to scale our business without the significant capital investment and on-going expenses required to establish and maintain manufacturing operations . we work closely with our contract manufacturers , including smtc corporation , and key suppliers to manage the procurement , quality and cost of components . we seek to maintain an optimal level of finished goods inventory to meet our forecast for sales and unanticipated shifts in sales volume and mix . in the fourth quarter of 2016 , we acquired all of the outstanding equity interest of extension healthcare for $ 52.5 million in cash . in addition , $ 2.5 million has been set aside for retention bonuses for key employees of which $ 0.5 million and $ 1.0 million was paid in december 2016 and october 2017 , respectively and $ 1.0 million will be paid in october 2018. in may 2014 , the fasb together with the international accounting standards board issued converged guidance for revenue recognition that will replace most existing guidance , eliminate industry-specific guidance and provide a unified model for determining how and when revenue from contracts with customers should be recognized . under the new guidance , an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services . the new guidance permits two methods of adoption : retrospectively to each prior reporting period presented ( full retrospective method ) , or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application ( modified retrospective method ) . we adopted the new guidance on january 1 , 2018 using the full retrospective method , which requires us to present our historical financial information for fiscal years 2016 and 2017 as if the new revenue guidance had been applied to all prior periods . the most significant impact of the standard relates to the timing of revenue recognition for software licenses sold with professional services where we did not have vendor specific objective evidence ( โ vsoe โ ) for professional services under current guidance . under the new standard , the requirement to have vsoe for undelivered elements is eliminated and we will recognize revenue for software licenses upon transfer of control to our customers . additionally , the new standard requires the capitalization and amortization of costs related to obtaining a contract , such as sales commissions , which are currently recorded as an expense to sales and marketing at the time they are incurred . 32 the adoption of the standard will result in the recognition of additional revenue of $ 2.7 million and $ 4.3 million for the years ended december 31 , 2017 and 2016 , respectively , an increase in gross profit of $ 2.7 million and $ 4.3 million for the years ended december 31 , 2017 and 2016 , respectively , an increase ( decrease ) in sales and marketing expense of $ 0.1 million and $ ( 1.5 ) million for the years ended december 31 , 2017 and 2016 , respectively , and a decrease in loss from operations of $ 2.6 million and $ 5.8 million for the years ended december 31 , 2017 and 2016 , respectively . story_separator_special_tag currently , each of our international subsidiaries is operating under cost plus agreements where the u.s. parent company reimburses the international subsidiary for its costs plus an arm 's length profit . income taxes are computed using the asset and liability method , under which deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income . valuation allowances have been established to reduce deferred tax assets to the amount reasonably expected to be realized . changes in valuation allowances are reflected as a component of provision for income taxes . at december 31 , 2017 , we held a $ 45.3 million valuation allowance against our deferred tax assets . we review on a quarterly basis our conclusions about the appropriate amount of our deferred income tax asset valuation allowance . story_separator_special_tag 37 cost of service revenue increased $ 6.4 million , or 32.5 % , for the year ended december 31 , 2016 compared to the year ended december 31 , 2015. the cost of service revenue increased primarily due to an increase in the number of deployments of our solutions and higher headcount from the acquisition in october 2016. service gross margin as a percentage of service revenue decreased for the year ended december 31 , 2016 compared to the year ended december 31 , 2015. operating expenses : replace_table_token_14_th research and development expense . research and development expense increased $ 1.3 million , or 7.5 % , for the year ended december 31 , 2016 compared to the year ended december 31 , 2015. this increase was primarily due to a $ 1.2 million increase in compensation and benefits associated with increased headcount . sales and marketing expense . sales and marketing expense increased $ 5.2 million , or 10.8 % , for the year ended december 31 , 2016 compared to the year ended december 31 , 2015. this was primarily due to a $ 4.1 million increase in compensation and benefits associated with increased headcount and performance . the sales and marketing expense increase was also due to a $ 0.4 million increase in marketing development costs , a $ 0.2 million increase in travel and $ 0.2 million in amortization of intangibles related to the acquisition in october 2016. general and administrative expense . general and administrative expense increased $ 7.8 million , or 46.4 % , from the year ended december 31 , 2016 compared to the year ended december 31 , 2015. this resulted primarily from an increase of $ 5.1 million in acquisition related expenses from the acquisition in october 2016 , a $ 2.0 million increase in compensation and benefits due to increased headcount and performance and a $ 0.7 million increase in outside services . included in the $ 5.1 million of acquisition related expenses is $ 2.6 million of non-cash salary expense related to a portion of the purchase price that is expected to be distributed to certain employees who were not selling shareholders of the acquired business ( `` employee payments '' ) . for further discussion on the employee payments , please refer to note 11 in the notes to consolidated financial statements . replace_table_token_15_th interest income . interest income increased $ 0.2 million for the year ended december 31 , 2016 compared to the year ended december 31 , 2015 due to the shift in these periods from cash equivalents to higher interest-bearing short-term investments . other expense , net . the change in other expense , net for the year ended december 31 , 2016 compared to the year ended december 31 , 2015 was primarily due to foreign exchange fluctuations . provision for income taxes . the $ 0.5 million provision on $ 16.7 million of loss before income taxes in 2016 represented a negative effective tax rate of 3.2 % . the negative effective tax rate for 2016 was due primarily to the impact of pre-tax losses in the u.s. operations , offset by income taxes from foreign operations . the negative effective tax rate of 2.8 % in 2015 is due primarily to the impact of pre-tax losses in the u.s. operations , offset by income taxes from foreign operations . 38 liquidity and capital resources replace_table_token_16_th as of december 31 , 2017 , we had cash and cash equivalents and short-term investments of $ 81.2 million and no debt . during 2017 , 2016 and 2015 , our purchases of property and equipment were $ 2.8 million , $ 4.7 million and $ 1.2 million , respectively . the expenditures in 2017 primarily relate to leasehold improvements and computer equipment . the expenditures in 2016 primarily relate to leasehold improvements related to the renovation of our corporate offices . the expenditures in 2015 primarily related to leasehold improvements and computer equipment . we believe that our existing sources of liquidity will satisfy our anticipated working capital and capital requirements for at least the next twelve months . our future liquidity and capital requirements will depend upon numerous factors , including our rate of growth , the rate at which we add personnel to generate and support future growth , and potential future acquisitions . in the future , we may seek to sell additional equity securities or borrow funds . the sale of additional equity or convertible securities may result in additional dilution to our stockholders . if we raise additional funds through the issuance of debt securities or other borrowings , these securities or borrowings could have rights senior to those of our common stock and could contain covenants that could restrict our operations . any required additional capital may not be available on reasonable terms , if at all .
| results of operations the following table is a summary of our consolidated statements of operations for the years ended december 31 , 2017 , 2016 and 2015 . replace_table_token_7_th 34 year ended december 31 , 2017 compared to year ended december 31 , 2016 revenue : replace_table_token_8_th total revenue increased $ 34.9 million , or 27.3 % , for the year ended december 31 , 2017 compared to the year ended december 31 , 2016. the increase in total revenue was a result of increases in both product and services revenue . product revenue increased $ 18.2 million , or 25.8 % , for the year ended december 31 , 2017 compared to the year ended december 31 , 2016. device revenue increased $ 10.8 million , or 21.6 % , and software revenue increased $ 7.4 million , or 35.9 % , for the year ended december 31 , 2017 , compared to the year ended december 31 , 2016. the increase in device revenue , which related entirely to our communication and workflow system , was driven primarily by an increase in unit sales of badges and related accessories to new customers making initial purchases and existing customers expanding deployments within their facilities to departments and users . the increase in software revenue was mainly a result of an increase in unit sales of licenses of our software platform . service revenue increased $ 16.7 million , or 29.2 % , for the year ended december 31 , 2017 compared to the year ended december 31 , 2016. software maintenance and support revenue increased $ 9.1 million , or 21.0 % , and professional services and training revenue increased $ 7.6 million , or 55.6 % , for the year ended december 31 , 2017 compared to the year ended december 31 , 2016. the increase in software maintenance and support revenue was primarily a result of having a larger customer base .
| 2,330 |
the materials used in our products consist of purchased components and raw materials some of which are subject to fluctuations in the commodity markets such as zinc , brass and stainless steel . total material costs represented approximately 44 % of our cost of sales in 2013 , with commodity related raw materials accounting for approximately 11 % of our cost of sales . worldwide commodity raw material costs increased throughout 2011 , although during 2012 and 2013 they were mostly stable . we occasionally enter into short-term commodity related raw material supply arrangements to mitigate the impact of future increases in commodity related raw material costs . these arrangements generally provide for stated unit prices based upon specified purchase volumes , which helps us to stabilize commodity related raw material purchase prices to a certain extent . we enter into such arrangements for zinc and brass . we expect commodity related raw material prices to moderately increase in 2014 in conjunction with higher demand as a result of the expected growth in the world wide economy . these raw materials purchased on the spot market are sometimes subject to unanticipated and sudden price increases . we generally seek to mitigate the impact of fluctuations in commodity raw material costs on our margins through improvements in production efficiencies or other operating cost reductions . in the event we are unable to offset cost increases for these raw materials with other cost reductions , it may be difficult to recover those cost increases through increased product selling prices or raw material surcharges due to the competitive nature of the markets served by our products . consequently , overall operating margins may be affected by raw material cost pressures . interest income interest income was not significant in 2013 or 2012. i nterest income decreased in 2012 compared to 2011 primarily due to the maturity of our $ 15 million promissory note receivable in october 2011 and lower cash balances available for investment . we expect our interest income to be insignificant in 2014. interest expense interest expense decreased in 2013 compared to 2012 due to the prepayment of the remaining outstanding principal amount of the note payable in july of 2013. see note 9 to the consolidated financial statements . interest expense decreased in 2012 compared to 2011 as a result of the significant reduction in the principal balance of the note payable of $ 15.0 million in october of 2011 upon collection of the promissory note receivable discussed above . the average interest rate on the note payable at december 31 , 2011 and 2012 was 1.3 % and 1.5 % , respectively . our outstanding balance on the credit facility through october of 2012 was $ 2.0 million which was repaid in full in november of 2012 and terminated as of december 31 , 2012. during 2011 , we averaged $ 2.4 million outstanding on our revolving credit facility ( 4.4 % at december 31 , 2011 ) . we expect our interest expense in 2014 to be insignificant . provision for income taxes a tabular reconciliation between our effective income tax rate and the u.s. federal statutory income tax rate of 35 % is included in note 10 to the consolidated financial statements . as a member of the group of companies consolidated for u.s. federal income tax purposes with contran , the parent of our consolidated u.s. federal income tax group , we compute our provision for income taxes on a separate company basis , using the tax elections made by contran . our effective income tax rate attributable to continuing operations increased from 29 % in 2012 to 35 % in 2013. our effective income tax rate attributable to continuing operations decreased from 42 % in 2011 to 29 % in - 15 - 2012. the changes in our effective income tax rate is primarily related to changes in our deferred income tax asset valuation allowance , which resulted in an expense of $ 341,000 in 2011 and a benefit of $ 317,000 and $ 102,000 in 2012 and 2013 , respectively . see notes 10 and 13 to the consolidated financial statements . we currently expect our effective income tax rate for 2014 to be comparable to our effective income tax rate for 2013. discontinued operations on december 28 , 2012 , we completed the sale of our furniture components segment to a competitor of that segment for proceeds ( net of expenses ) of approximately $ 58.0 million in cash . we recognized a pre-tax gain of approximately $ 29.6 million on the disposal of these operations ( $ 27.6 million , net of income taxes of approximately $ 1.9 million ) in the fourth quarter of 2012. see note 2 to the consolidated financial statements . story_separator_special_tag which is generally used to ( i ) fund capital expenditures , ( ii ) repay short-term or long-term indebtedness incurred primarily for capital expenditures , business combinations or buyin g back shares of our outstanding stock and ( iii ) provide for the payment of dividends ( if declared ) . from time-to-time , we will incur indebtedness to fund capital expenditures , business combinations or other investment activities . in addition , from time-to-time , we may also sell assets outside the ordinary course of business , the proceeds of which are generally used to repay indebtedness ( including indebtedness which may have been collateralized by the assets sold ) or to fund capital expenditures or business combinations . consolidated cash flows . operating activities . trends in cash flows from operating activities , excluding changes in assets and liabilities , for the last three years have generally been similar to the trends in our earnings . story_separator_special_tag the significant items impacting cash provided by investing activities for the noted periods are as follows : during 2013 , ยท we collected $ 3.0 million in principal payments on a note receivable ; and ยท we received $ 1.6 million in net proceeds on the sale of assets held for sale . see notes 2 and 7 to the consolidated financial statements , respectively . during 2012 , ยท we sold our furniture components segment for net proceeds of $ 58.0 million less cash of the disposed operations of $ 5.4 million , and ยท we received $ 3.6 million in net proceeds on the sale of assets held for sale which were previously classified as assets held for sale . see notes 2 and 7 to the consolidated financial statements , respectively . - 19 - during 2011 , ยท we received the $ 15.0 million principal amount due to us under our promissory note receivable , and ยท we acquired a furniture components segment business for $ 4.8 million . capital expenditures for 2014 are estimated at approximately $ 3.2 million compared to capital expenditures of $ 3.2 million in 2011 , $ 4.5 million in 2012 and $ 3.5 million in 2013. capital expenditures for 2011 and 2012 include amounts attributable to our disposed operations . see note 3 to our consolidated financial statements . approximately $ 590,000 and $ 838,000 of our 2012 and 2013 capital expenditures , respectively , relates to the implementation of a new manufacturing and accounting system for our security products and marine components segments that was implemented in january of 2014. our capital expenditures over all three years were primarily related to expenditures required to meet expected customer demand and properly maintain our facilities and technology infrastructure . capital spending for 2014 is expected to be funded through cash on hand and cash generated from operations and relates to expenditures required to meet expected customer demand and properly maintain our facilities and technology infrastructure . in february 2010 , we entered into an unsecured demand promissory note with nl whereby we agreed to loan nl up to $ 8 million . in december 2012 , this promissory note was amended whereby we agreed to loan nl up to $ 40 million . no amounts were outstanding as of december 31 , 2011 , 2012 , and 2013. see note 12 to the consolidated financial statements . in may 2010 , for our investment purposes we purchased from nl for $ 15.0 million in cash a note receivable dated october 15 , 2008 in the original principal amount of $ 15.0 million initially payable to nl by a third party . we received the full $ 15.0 million in principal in october 2011. financing activities . net cash used by financing activities totaled $ 26.7 million , $ 12.0 million and $ 21.9 million in 2011 , 2012 and 2013 , respectively . these amounts were primarily impacted by the following items : during 2013 , ยท we prepaid the remaining outstanding principal on our long-term debt , plus accrued interest , without penalty ; debt repayments related to principal for 2013 totalled $ 18.5 million . see note 9 to the consolidated financial statements . during 2012 , ยท we repaid $ 2.0 million that was outstanding under our credit facility at december 31 , 2011 , ยท we repaid $ 3.8 million in principal payments on our note payable . during 2011 , ยท we repaid $ 3.0 million that was outstanding under our credit facility at december 31 , 2010 , ยท we borrowed $ 5.3 million in connection with our acquisition of a furniture components segment business and subsequently repaid $ 2.9 million during 2011 , and ยท we repaid $ 20 million in principal payments on our note payable . cash dividends paid totaled $ 6.2 million ( $ .50 per share ) in each of 2011 and 2012 and $ 3.4 million ( $ .275 per share ) in 2013. beginning in the second quarter of 2013 , we reduced our regular quarterly dividend from $ .125 per share to $ .05 per share . following our december 2012 sale of our furniture components business , earnings and cash flow generated by operations is expected to be significantly lower than in prior periods . as a result our board of directors determined that reducing the quarterly dividend from $ .125 per class a and class b share to $ .05 per share was appropriate . see note 11 to the consolidated financial statements . - 20 - at december 31 , 2011 , there was approximately $ 2.0 million outstanding under our revolving bank credit facility . in january 2012 , we amended and restated the facility to , among other things , decrease the size of the facility to $ 30 million . the $ 2.0 million outstanding at december 31 , 2011 was repaid in the fourth quarter of 2012 prior to the completion of the disposal of our furniture components segment , at which time we terminated the credit facility . see note 2 to the consolidated financial statements . off balance sheet financing arrangements . other than certain operating leases discussed in note 13 to the consolidated financial statements , neither we nor any of our subsidiaries or affiliates are parties to any off-balance sheet financing arrangements . other we believe cash generated from operations together with cash on hand will be sufficient to meet our liquidity needs for working capital , capital expenditures , debt service and dividends ( if declared ) for the next twelve months and our long term obligations for the next five years . to the extent that actual operating results or other developments differ materially from our expectations , our liquidity could be adversely affected . all of our $ 38.8 million aggregate cash and cash equivalents at december 31 , 2013 , was held
| segment results the key performance indicator for our segments is the level of their operating income ( see discussion below ) . for additional information regarding our segments refer to note 3 to the consolidated financial statements . replace_table_token_4_th security products . security products net sales increased 11 % to $ 81.5 million in 2013 compared to $ 73.7 million in 2012. the increase in sales is primarily due to an increase in sales to certain high security pin tumbler lock customers of $ 7.6 million . growth of our security products segment was aided by our ongoing efforts to diversify our products and customers . gross margin and operating income percentages increased in 2013 compared to 2012 by one percentage point primarily due to improved cost efficiencies from higher sales , partially offset by higher self-insured medical costs of $ 598,000 in 2013 , $ 507,000 of which impacted cost of goods sold and $ 91,000 of which impacted selling and administration expenses . security products net sales increased 3 % to $ 73.7 million in 2012 compared to $ 71.4 million in 2011 . the increase in sales is primarily due to somewhat improved economic conditions in north america resulting in higher order rates across most markets . gross margin and operating income percentages decreased in 2012 compared to 2011 by one percentage point primarily due to higher self-insured medical costs of $ 925,000 in 2012 , $ 815,000 of which impacted cost of goods sold and $ 110,000 of which impacted selling and administration expenses . the impact of the higher medical costs on cost of goods sold was partially offset by a $ 300,000 decrease - 16 - in depreciation expense relating to the timing of historical capital expenditures and retirements .
| 2,331 |
actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors , including , but not limited to , those presented under ยrisks related to our businessย included in item 1a and elsewhere in this annual report . overview we are a leader in the distribution of avocados , prepared avocado products , and other perishable food products throughout the united states . our expertise in marketing and distributing avocados , prepared avocados , and other perishable foods allows us to deliver a wide array of fresh and prepared food products to food distributors , produce wholesalers , supermarkets , and restaurants on a worldwide basis . we procure avocados principally from california , mexico , and chile . through our various operating facilities , we sort , pack , and or ripen avocados , tomatoes and or hawaiian grown papayas . additionally , we also produce salsa and prepare ready-to-eat produce and deli products . during the second quarter of 2012 , we increased the number of our reportable segments and our chief executive officer now reviews our business as having three reportable segments . renaissance food group , llc ( rfg ) , which was previously included in our calavo foods segment , has now been separated as a segment of its own . the change in segments was made as rfg ceased having similar economic characteristics to products included in our calavo foods segment . accordingly , we now have three reportable operating segments , ( 1 ) fresh products , ( 2 ) calavo foods , and ( 3 ) rfg . segment results of the prior period have been reclassified to reflect these changes . our fresh products business grades , sizes , packs , cools , and ripens ( if desired ) avocados for delivery to our customers . we presently operate two packinghouses and three operating and distributing facilities that handle avocados across the united states . these packinghouses handled approximately 26 % of the california avocado crop during the 2012 fiscal year , based on data obtained from the california avocado commission . our operating results and the returns we pay our growers are highly dependent on the volume of avocados delivered to our packinghouses , as a significant portion of our costs is fixed . our strategy calls for continued efforts to retain and recruit growers that meet our business model . additionally , our fresh products business also procures avocados grown in chile and mexico , as well as other various commodities , including tomatoes , papayas , and pineapples . we operate a packinghouse in mexico that , together with certain co-packers that we frequently purchase fruit from , handled approximately 22 % of the mexican avocado crop bound for the united states market and approximately 5 % of the avocados exported from mexico to countries other than the united states during the 2011-2012 mexican season , based on our estimates . additionally , during the 2011-2012 chilean avocado season , we handled approximately 6 % of the chilean avocado crop , based on our estimates . our strategy is to increase our market share of currently sourced avocados to all accepted marketplaces . we believe our diversified avocado sources provides a level of supply stability that may , over time , help solidify the demand for avocados among consumers in the united states and elsewhere in the world . we believe our efforts in distributing our other various commodities , such as those shown above , complement our offerings of avocados . from time to time , we continue to explore distribution of other crops that provide reasonable returns to the business . our calavo foods business procures avocados , processes avocados into a wide variety of guacamole products , and distributes the processed product to our customers . all of our prepared avocado products shipped to north america are now ยcold pasteurizedย and include both frozen and fresh guacamole . due to the long shelf-life of our frozen guacamole and the purity of our fresh guacamole , we believe that we are well positioned to address the diverse taste and needs of today 's customers . additionally , we also prepare various fresh salsa products . customers include both food service industry and retail businesses . we continue to seek to expand our relationships with major food service companies and develop alliances that will allow our products to reach a larger percentage of the marketplace . net sales of frozen products represented approximately 50 % and 51 % of total processed segment sales for the years ended october 31 , 2012 and 2011. net sales of our ultra high pressure products represented approximately 50 % and 49 % of total processed segment sales for the years ended october 31 , 2012 and 2011. our rfg business produces , markets and distributes nationally a portfolio of healthy , high quality lifestyle products for consumers via the retail channel . rfg products range from fresh-cut fruit , ready-to-eat vegetables , recipe-ready vegetables and deli meat products . rfg sells under the popular labels of garden highway fresh cut , garden highway , and garden highway chef essentials to a wide range of customers . 17 the operating results of all of our businesses have been , and will continue to be , affected by quarterly and annual fluctuations and market downturns due to a number of factors , such as pests and disease , weather patterns , changes in demand by consumers , the timing of the receipt , reduction , or cancellation of significant customer orders , the gain or loss of significant customers , market acceptance of our products , our ability to develop , introduce , and market new products on a timely basis , availability and cost of avocados and supplies from growers and vendors , new product introductions by our competitors , change in the mix of avocados and calavo foods we sell , and general economic conditions . story_separator_special_tag in the event the future consequences of differences between financial reporting bases and tax bases of our assets and liabilities result in a deferred tax asset , we perform an evaluation of the probability of being able to realize the future benefits indicated by such asset . a valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion or all of the deferred tax asset will not be realized . as a multinational corporation , we are subject to taxation in many jurisdictions , and the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in various taxing jurisdictions . if we ultimately determine that the payment of these liabilities will be unnecessary , the liability will be reversed and we will recognize a tax benefit during the period in which it is determined the liability no longer applies . conversely , we record additional tax charges in a period in which it is determined that a recorded tax liability is less than the ultimate assessment is expected to be . the application of tax laws and regulations is subject to legal and factual interpretation , judgment and uncertainty . tax laws and regulations themselves are subject to change as a result of changes in fiscal policy , changes in legislation , the evolution of regulations and court rulings . therefore , the actual liability for u.s. or foreign taxes may be materially different from management 's estimates , which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities . goodwill and acquired intangible assets . goodwill , defined as unidentified asset ( s ) acquired in conjunction with a business acquisition , is tested for impairment on an annual basis and between annual tests whenever events or changes in circumstances indicate that the carrying amount may not be recoverable . goodwill is tested at the reporting unit level , which is defined as an operating segment or one level below the operating segment . goodwill impairment testing is a two-step process . the first step of the goodwill impairment test , used to identify potential impairment , compares the fair value of a reporting unit with its carrying amount , including goodwill . if the fair value of a reporting unit exceeds its carrying amount , goodwill of the reporting unit is considered not impaired , and the second step of the impairment test would be unnecessary . if the carrying amount of a reporting unit exceeds its fair value , the second step of the goodwill impairment test must be performed to measure the amount of impairment loss , if any . the second step of the goodwill impairment test , used to measure the amount of impairment loss , compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill . if the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill , an impairment loss must be recognized in an amount equal to that excess . goodwill impairment testing requires significant judgment and management estimates , including , but not limited to , the determination of ( i ) the number of reporting units , ( ii ) the goodwill and other assets and liabilities to be allocated to the reporting units and ( iii ) the fair values of the reporting units . the estimates and assumptions described above , along with other factors such as discount rates , will significantly affect the outcome of the impairment tests and the amounts of any resulting impairment losses . we performed our annual assessment of goodwill and determined that an impairment $ 0.1 million existed related to the acquisition of csl . this impairment was a result of less than anticipated sales since acquisition , and a forecast projection analysis with the consultation from a third party consulting firm . the impairment was recorded in cost of goods sold . no other impairments were noted as of october 31 , 2012. contingent consideration . each period , we revalue our contingent consideration obligations to their fair value and record increases or decreases in the fair value into selling , general and administrative expense . increases or decreases in the fair value of the contingent consideration obligations can result from changes in the assumed timing and amount of revenue and expense estimates , changes in the probability of payment scenarios , as well as changes in capital market conditions , which impact the discount rate used in the fair valuation . significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period . accordingly , future business and economic conditions , as well as changes in any of the assumptions described above , can materially impact the amount of contingent consideration expense we record in any given period . total net increase to the contingent considerations in fiscal year 2012 totaled $ 0.4 million . total net decrease to the contingent considerations in fiscal year 2011 totaled $ 0.5 million . allowance for accounts receivable . we provide an allowance for estimated uncollectible accounts receivable balances based on historical experience and the aging of the related accounts receivable . if the financial condition of our customers were to deteriorate , resulting in an impairment of their ability to make payments , additional allowances may be required . 19 results of operations the following table sets forth certain items from our consolidated statements of income , expressed as percentages of our total net sales , for the periods indicated : replace_table_token_3_th net sales we believe that the fundamentals for our products continue to be favorable . firstly , americans are eating more avocados .
| quarterly results of operations the following table presents our operating results for each of the eight fiscal quarters in the period ended october 31 , 2012. the information for each of these quarters is derived from our unaudited interim financial statements and should be read in conjunction with our audited consolidated financial statements included in this annual report . in our opinion , all necessary adjustments , which consist only of normal and recurring accruals , have been included to fairly present our unaudited quarterly results . historically , we receive and sell a substantially lesser number of california avocados in our first fiscal quarter . replace_table_token_13_th liquidity and capital resources operating activities for fiscal 2012 , 2011 and 2010 provided cash flows of $ 21.7 million , $ 7.9 million , and $ 20.0 million . fiscal year 2012 operating cash flows reflect our net income of $ 16.9 million , net noncash charges ( depreciation and amortization , income from unconsolidated entities , provision for losses on accounts receivable , interest on deferred compensation , deferred income taxes , and stock compensation expense ) of $ 5.3 million and a net decrease from changes in the non-cash components of our working capital accounts of approximately $ 0.5 million . fiscal year 2012 decreases in operating cash flows , caused by working capital changes , includes an increase in inventory of $ 5.2 million , an increase in accounts receivable of $ 2.8 million , and an increase in prepaid expenses and other current assets of $ 0.6 million , partially offset by a decrease in payable to growers of $ 3.4 million , a decrease in trade accounts payable and accrued expenses of $ 3.2 million , a decrease in advances to suppliers of $ 1.0 million and a decrease in income tax receivable of $ 0.5 million .
| 2,332 |
investment companies โ software solutions replace_table_token_10_th nm โ not meaningful year ended december 31 , 2020 compared to the year ended december 31 , 2019 net sales for the year ended december 31 , 2020 were $ 67.0 million , an increase of $ 4.4 million , or 7.0 % , compared to the year ended december 31 , 2019 , primarily due to higher arcdigital volumes . loss from operations improved by $ 6.1 million , or 78.2 % , to $ 1.7 million compared to an operating loss of $ 7.8 million for the year ended december 31 , 2019 , primarily due to cost control initiatives and the impact of higher sales volumes , partially offset by higher incentive compensation expense , higher restructuring , impairment and other charges , net , and a non-income tax charge . operating margins improved from a negative margin of 12.5 % for the year ended december 31 , 2019 to a negative margin of 2.5 % for the year ended december 31 , 2020 , primarily due to cost control initiatives and the impact of higher sales volumes , partially offset by higher incentive compensation expense and higher restructuring , impairment and other charges , net and a non-income tax charge , which combined to negatively impact the change in operating margin by 5.1 % . year ended december 31 , 2019 compared to the year ended december 31 , 2018 net sales for the year ended december 31 , 2019 were $ 62.6 million , an increase of $ 3.7 million , or 6.3 % , compared to the year ended december 31 , 2018 , primarily due to higher arc suite volumes . loss from operations increased $ 2.7 million , or 52.9 % , to $ 7.8 million compared to an operating loss of $ 5.1 million for the year ended december 31 , 2018 , primarily due to increased depreciation and amortization , partially offset by the impact of the net sales increase and lower spin-off related transaction expense . operating margins decreased from a negative margin of 8.7 % for the year ended december 31 , 2018 to a negative margin of 12.5 % for the year ended december 31 , 2019 , primarily due to increased depreciation and amortization , partially offset by lower spin-off related transaction expense , which positively impacted the change in operating margin by 1.6 % . 37 investment companies โ compliance and communication s management replace_table_token_11_th nm โ not meaningful year ended december 31 , 2020 compared to the year ended december 31 , 2019 net sales for the year ended december 31 , 2020 were $ 270.3 million , a decrease of $ 25.4 million , or 8.6 % , compared to the year ended december 31 , 2019 , primarily due to lower mutual fund compliance and commercial print volumes . income from operations decreased $ 72.5 million to an operating loss of $ 43.1 million for the year ended december 31 , 2020 as compared to income from operations of $ 29.4 million for the year ended december 31 , 2019 , primarily due to higher restructuring , impairment and other charges , net , which includes a $ 40.6 million goodwill impairment charge , the impact of the net gain from the sale of a building recorded in 2019 , higher incentive compensation expense , lower sales volume and covid-19 related net charges , partially offset by cost control initiatives . operating margins decreased from 9.9 % for the year ended december 31 , 2019 to a negative margin of 15.9 % for the year ended december 31 , 2020 , primarily due to higher restructuring , impairment and other charges , net , the impact of the net gain from the sale of a building recorded in 2019 and covid-19 related net charges , which combined to negatively impact the change in operating margin by 24.5 % , and higher incentive compensation expense , partially offset by cost control initiatives . year ended december 31 , 2019 compared to the year ended december 31 , 2018 net sales for the year ended december 31 , 2019 were $ 295.7 million , a decrease of $ 7.0 million , or 2.3 % , compared to the year ended december 31 , 2018 , primarily due to lower mutual fund print volumes and commercial print volumes . income from operations increased $ 14.5 million , or 97.3 % , to $ 29.4 million for the year ended december 31 , 2019 as compared to $ 14.9 million for the year ended december 31 , 2018 , primarily due to the $ 19.2 million net gain from the sale of a building in 2019 , lower spin-off related transaction expense and the impact of cost control initiatives , partially offset by the lower net sales volumes and an unfavorable sales mix . operating margins increased from 4.9 % for the year ended december 31 , 2018 to 9.9 % for the year ended december 31 , 2019 , primarily due to the impact of the net gain from the sale of a building recorded in 2019 and a decline in spin-off related transaction expense , which combined to positively impact the change in operating margin by 8.4 % , along with the impact of cost control initiatives , partially offset by unfavorable sales mix . 38 language solutions results of operations for the year ended december 31 , 2018 include the operating results of the language solutions business that was sold on july 22 , 2018. summary operating results associated with the language solutions business were as follows : net sales $ 41.8 income from operations 50.1 operating margin nm items impacting comparability gain on sale of language solutions business ( 53.8 ) restructuring , impairment and other charges , net ( 0.2 ) spin-off related transaction expense 0.5 disposition-related expenses 1.4 nm โ not meaningful corporate story_separator_special_tag investment companies โ software solutions replace_table_token_10_th nm โ not meaningful year ended december 31 , 2020 compared to the year ended december 31 , 2019 net sales for the year ended december 31 , 2020 were $ 67.0 million , an increase of $ 4.4 million , or 7.0 % , compared to the year ended december 31 , 2019 , primarily due to higher arcdigital volumes . loss from operations improved by $ 6.1 million , or 78.2 % , to $ 1.7 million compared to an operating loss of $ 7.8 million for the year ended december 31 , 2019 , primarily due to cost control initiatives and the impact of higher sales volumes , partially offset by higher incentive compensation expense , higher restructuring , impairment and other charges , net , and a non-income tax charge . operating margins improved from a negative margin of 12.5 % for the year ended december 31 , 2019 to a negative margin of 2.5 % for the year ended december 31 , 2020 , primarily due to cost control initiatives and the impact of higher sales volumes , partially offset by higher incentive compensation expense and higher restructuring , impairment and other charges , net and a non-income tax charge , which combined to negatively impact the change in operating margin by 5.1 % . year ended december 31 , 2019 compared to the year ended december 31 , 2018 net sales for the year ended december 31 , 2019 were $ 62.6 million , an increase of $ 3.7 million , or 6.3 % , compared to the year ended december 31 , 2018 , primarily due to higher arc suite volumes . loss from operations increased $ 2.7 million , or 52.9 % , to $ 7.8 million compared to an operating loss of $ 5.1 million for the year ended december 31 , 2018 , primarily due to increased depreciation and amortization , partially offset by the impact of the net sales increase and lower spin-off related transaction expense . operating margins decreased from a negative margin of 8.7 % for the year ended december 31 , 2018 to a negative margin of 12.5 % for the year ended december 31 , 2019 , primarily due to increased depreciation and amortization , partially offset by lower spin-off related transaction expense , which positively impacted the change in operating margin by 1.6 % . 37 investment companies โ compliance and communication s management replace_table_token_11_th nm โ not meaningful year ended december 31 , 2020 compared to the year ended december 31 , 2019 net sales for the year ended december 31 , 2020 were $ 270.3 million , a decrease of $ 25.4 million , or 8.6 % , compared to the year ended december 31 , 2019 , primarily due to lower mutual fund compliance and commercial print volumes . income from operations decreased $ 72.5 million to an operating loss of $ 43.1 million for the year ended december 31 , 2020 as compared to income from operations of $ 29.4 million for the year ended december 31 , 2019 , primarily due to higher restructuring , impairment and other charges , net , which includes a $ 40.6 million goodwill impairment charge , the impact of the net gain from the sale of a building recorded in 2019 , higher incentive compensation expense , lower sales volume and covid-19 related net charges , partially offset by cost control initiatives . operating margins decreased from 9.9 % for the year ended december 31 , 2019 to a negative margin of 15.9 % for the year ended december 31 , 2020 , primarily due to higher restructuring , impairment and other charges , net , the impact of the net gain from the sale of a building recorded in 2019 and covid-19 related net charges , which combined to negatively impact the change in operating margin by 24.5 % , and higher incentive compensation expense , partially offset by cost control initiatives . year ended december 31 , 2019 compared to the year ended december 31 , 2018 net sales for the year ended december 31 , 2019 were $ 295.7 million , a decrease of $ 7.0 million , or 2.3 % , compared to the year ended december 31 , 2018 , primarily due to lower mutual fund print volumes and commercial print volumes . income from operations increased $ 14.5 million , or 97.3 % , to $ 29.4 million for the year ended december 31 , 2019 as compared to $ 14.9 million for the year ended december 31 , 2018 , primarily due to the $ 19.2 million net gain from the sale of a building in 2019 , lower spin-off related transaction expense and the impact of cost control initiatives , partially offset by the lower net sales volumes and an unfavorable sales mix . operating margins increased from 4.9 % for the year ended december 31 , 2018 to 9.9 % for the year ended december 31 , 2019 , primarily due to the impact of the net gain from the sale of a building recorded in 2019 and a decline in spin-off related transaction expense , which combined to positively impact the change in operating margin by 8.4 % , along with the impact of cost control initiatives , partially offset by unfavorable sales mix . 38 language solutions results of operations for the year ended december 31 , 2018 include the operating results of the language solutions business that was sold on july 22 , 2018. summary operating results associated with the language solutions business were as follows : net sales $ 41.8 income from operations 50.1 operating margin nm items impacting comparability gain on sale of language solutions business ( 53.8 ) restructuring , impairment and other charges , net ( 0.2 ) spin-off related transaction expense 0.5 disposition-related expenses 1.4 nm โ not meaningful corporate
| financial review in the financial review that follows , the company discusses its consolidated results of operations , financial condition , cash flows and certain other information . this discussion and analysis should be read in conjunction with the company 's audited consolidated financial statements and related notes thereto . 31 results of operations for the year ended december 31 , 2020 as compared to the year ended december 31 , 2019 and year ended december 31 , 2019 as compared to year ended december 31 , 2018 the following table shows the results of operations for the years ended december 31 , 2020 , 2019 and 2018 : replace_table_token_7_th nm โ not meaningful ( a ) exclusive of depreciation and amortization consolidated year ended december 31 , 2020 compared to the year ended december 31 , 2019 net sales of tech-enabled services for the year ended december 31 , 2020 increased $ 44.5 million , or 12.2 % , to $ 409.2 million versus the year ended december 31 , 2019. net sales of tech-enabled services increased primarily due to higher capital markets transactional and compliance activity , partially offset by lower mutual fund compliance and commercial volumes . net sales of software solutions for the year ended december 31 , 2020 increased $ 10.9 million , or 5.8 % , to $ 200.2 million versus the year ended december 31 , 2019. net sales of software solutions increased primarily due to higher arc suite , activedisclosure and venue volumes along with price increases in other compliance software solutions . net sales of print and distribution for the year ended december 31 , 2020 decreased $ 35.6 million , or 11.1 % , to $ 285.1 million versus the year ended december 31 , 2019. net sales of print and distribution decreased primarily due to lower mutual fund compliance , commercial and capital markets transactional and compliance print volumes .
| 2,333 |
the effective tax rate decreased to 37.0 % for fiscal 2015 compared to 37.4 % for fiscal 2014 . the decrease was primarily due the reduction of state taxes resulting from a change in the corporate structure . comparison of fiscal 2014 versus fiscal 2013 net income was $ 106.6 million during fiscal 2014 , a 2.4 % increase over the $ 104.1 million earned during fiscal 2013. this increase resulted primarily from an increase in operating income ( revenues less provision for loan losses and general and administrative expenses ) of $ 7.8 million , or 4.2 % , partially offset by a $ 3.8 million and a $ 1.4 million increase in interest expense and income tax expense , respectively . total revenues increased to $ 599.3 million in fiscal 2014 , a $ 35.6 million , or 6.3 % , increase over the $ 563.6 million in fiscal 2013. revenues from the 1,131 branches open throughout both fiscal years increased by 3.7 % . at march 31 , 2014 , the company had 1,271 branches in operation , an increase of 68 branches from march 31 , 2013. interest and fee income during fiscal 2014 increased by $ 38.4 million , or 7.9 % , over fiscal 2013. this increase resulted from an increase of $ 54.7 million , or 7.0 % , in average net loans receivable between the two fiscal years . the increase in average loans receivable was attributable to the company 's internal growth and an increase in the average loan balance , which increased from $ 1,115 to $ 1,163. the increase in income was less than expected given the increased fees in texas and georgia due to the law changes in these two states . the revenue increase was offset by a reduction in loan volume in the year which resulted from the implementation of a system change that ensured customers were not encouraged to refinance existing loans where the proceeds from the transaction were less than 10 % of the loan being refinanced . the increase was also offset by a shift in the portfolio mix to larger loans . the percentage of loans outstanding that represent larger loans has increased from 33.1 % at march 31 , 2013 to 38.0 % at march 31 , 2014. insurance commissions and other income decreased by $ 2.7 million , or 3.5 % , over the two fiscal years . insurance commissions decreased by $ 1.0 million , or 1.9 % , when comparing the two fiscal periods . insurance commissions in tennessee decreased by approximately $ 890,000 , primarily due to the state of tennessee 's change in its maximum loan size for alternative rate loans from $ 1,000 to $ 2,000. lenders in tennessee are not permitted to offer insurance products with alternative rate loans . other income decreased by $ 1.8 million , or 6.6 % , when comparing the two fiscal periods . this decrease resulted primarily from a decrease in the sales of motor club of $ 908,000 , and a decrease in the sales of wcbc of $ 880,000 , partially offset by increased revenue from the company 's tax preparation business of $ 422,000 and paradata of $ 230,000. the provision for loan losses during fiscal 2014 increased by $ 12.3 million , or 10.7 % , from the previous year . this increase resulted from an increase in the amount of loans charged off and an increase in the general reserve associated with the increase in the gross loans when comparing the two periods . net charge-offs for fiscal 2014 amounted to $ 123.0 million , a 12.8 % increase over the $ 109.0 million charged off during fiscal 2013. accounts that were 60 days or more past due were 3.0 % and 2.7 % on a recency basis , and were 5.3 % and 4.4 % on a contractual basis at both march 31 , 2014 and march 31 , 2013. when excluding the impact of payroll deduct loans in mexico , the accounts contractually delinquent 60 days or more were 4.8 % at march 31 , 2014. during the current fiscal year , the company has also had an increase in year-over-year loan loss ratios . annualized net charge-offs as a percentage of average net loans increased from 13.9 % during fiscal 2013 to 14.7 % during fiscal 2014. the prior year charge-off ratio of 13.9 % and the current year charge-off ratio of 14.7 % are in line with historical levels . from fiscal 2002 to fiscal 2006 , the charge-offs as a percent of average loans ranged from 14.6 % to 14.8 % . in fiscal 2007 the company experienced a temporary decline to 13.3 % , which was attributed to a change in the bankruptcy law but returned to 14.5 % in fiscal 2008. in fiscal 2009 the ratio increased to 16.7 % , the highest in the company 's history as a result of the difficult economic environment and higher energy costs that our customers faced . the ratio steadily declined from 15.5 % in fiscal 2010 to 14.3 % in fiscal 2012. general and administrative expenses during fiscal 2014 increased by $ 15.6 million , or 5.9 % , over the previous fiscal year . of the total increase , approximately $ 9.4 million related to personnel expense , the majority of which was attributable to the year-over-year increase in our branch network , normal merit increases to employees , increased health insurance costs , and incentive costs , including stock compensation expense , which increased approximately $ 6.5 million . increases in personnel expense were offset by the reversal of $ 2.9 million of compensation expense related to the resignation and retirement of executive officers during the current fiscal year . general and administrative expenses , when divided by average open branches , decreased slightly when comparing the two fiscal years and , overall , general and administrative expenses as a percent of total revenues decreased to 46.9 % in fiscal 2014 from 47.1 % in fiscal 2013 , respectively . story_separator_special_tag in addition , the proposals would include a rebuttable presumption that customers seeking to refinance a covered longer-term loan lack an โ ability to repay โ if at the time of refinancing the borrower : ( i ) was delinquent or had recently been delinquent on an outstanding loan ; ( ii ) stated or indicated an inability to make a scheduled payment or that the loan was causing financial distress ; ( iii ) is allowed to skip a payment or pays a smaller amount than a payment that would have been due on the loan , unless the refinancing provides a substantial amount of cash to the consumer ; or ( iv ) is in default on the outstanding loan . to overcome this presumption of inability to repay , the lender would have to verify a change in the borrower 's circumstances to indicate an ability to repay the additional extension of credit . these proposals are subject to several procedural requirements and to possible change before any final rules would be issued and implemented and we can not predict what the ultimate rulemaking will provide . the company does not believe that these proposals as currently described by the cfpb would have a material impact on the company 's existing lending procedures , because the company currently underwrites all its loans ( including those secured by a vehicle title that would fall within the scope of these proposals ) by reviewing the customer 's ability to repay based on the company 's standards . however , there can be no assurance that these proposals for longer-term loans , if and when implemented in final rulemaking , would not require changes to the company 's practices and procedures for such loans that could materially and adversely affect the company 's ability to make such loans , the cost of making such loans , the company 's ability to , or frequency with which it could , refinance any such loans , and the profitability of such loans . any final rulemaking also could have effects beyond those contemplated in the initial proposal that could further materially and adversely impact our business and operations . as part of the cfpb 's outline of the proposed rulemaking initiative described above , the cfpb also stated that it expects to conduct separate rulemaking to identify larger participants in the installment lending market for purposes of its supervision program . though the timing of any such rulemaking is uncertain , the company believes that the implementation of such rules would likely bring the company 's business under the cfpb 's supervisory authority which , among other things , would subject the company to reporting obligations to , and on-site compliance examinations by , the cfpb . see part i , item 1 , โ business - government regulation - federal legislation , โ for a further discussion of these matters and the federal regulations to which the company 's operations are subject and part i , item 1a , โ risk factors , โ for more information regarding these regulatory and related risks . new mexico rate cap bills . on february 4 , 2015 , members of the new mexico house regulatory and public affairs subcommittee tabled measures that would have led to the introduction of house bill 36 and house bill 24 , which were to propose a 36 % rate cap on all financial lending products . the company , through its state and federal trade associations , is working in opposition to this pending legislation ; however , it is uncertain whether these efforts will be successful in preventing the passage of the legislation . as discussed elsewhere in this report , the company 's operations are subject to extensive state and federal laws and regulations , and changes in those laws or regulations or their application could have a material adverse effect on the company 's business , results of operations , prospects or ability to continue operations in the jurisdictions affected by these changes . see part i , item 1 , โ business - government regulation - state legislation โ and โ - federal legislation , โ and part i , item 1a , โ risk factors , โ for more information regarding this legislation and related risks . critical accounting policies the company 's accounting and reporting policies are in accordance with u.s. generally accepted accounting principles and conform to general practices within the finance company industry . the significant accounting policies used in the preparation of the consolidated financial statements are discussed in note 1 to the consolidated financial statements . certain critical accounting policies involve significant judgment by the company 's management , including the use of estimates and assumptions which affect the reported amounts of assets , liabilities , revenues , and expenses . as a result , changes in these estimates and assumptions could significantly affect the company 's financial position and results of operations . the company considers its policies regarding the allowance for loan losses , share-based compensation , and income taxes to be its most critical accounting policies due to the significant degree of management judgment involved . allowance for loan losses the company has developed policies and procedures for assessing the adequacy of the allowance for loan losses that take into consideration various assumptions and estimates with respect to the loan portfolio . the company 's assumptions and estimates may be affected in the future by changes in economic conditions , among other factors . for additional discussion concerning the allowance for loan losses , see โ credit quality โ below . share-based compensation the company measures compensation cost for share-based awards at fair value and recognizes compensation over the service period for awards expected to vest . the fair value of restricted stock is based on the number of shares granted and the quoted price of our common stock at the time of grant , and the fair value of stock options is determined using the black-scholes valuation model .
| general the company 's financial performance continues to be dependent in large part upon the growth in its outstanding loans receivable , the maintenance of loan quality and acceptable levels of operating expenses . since march 31 , 2010 , gross loans receivable have increased at a 7.6 % annual compounded rate from $ 770.3 million to $ 1.1 billion at march 31 , 2015 . the increase over this period reflects both the higher volume of loans generated through the company 's existing branches and the contribution of loans generated from new branches opened or acquired over the period . during this same five-year period , the company has grown from 990 branches to 1,320 branches as of march 31 , 2015 . during fiscal 2016 , the company currently plans to open approximately 30 new branches in the united states , open 10 new branches in mexico and also evaluate acquisitions as opportunities arise . the company 's paradata financial systems subsidiary provides data processing systems to 102 separate finance companies , including the company , and currently supports over 1,986 individual branches in 44 states and mexico . paradata 's revenue is highly dependent upon its ability to attract new customers , which often requires substantial lead time , and as a result its revenue may fluctuate from year to year . its net revenues from system sales and support amounted to $ 2.1 million , $ 2.4 million and $ 2.1 million in fiscal 2015 , 2014 and 2013 , respectively . paradata 's net revenue to the company will continue to fluctuate on a year to year basis . paradata continues to provide data processing support for the company 's in-house integrated computer system at a substantially reduced cost to the company . the company offers an income tax return preparation and electronic filing program in all but a few of its u.s. branches .
| 2,334 |
story_separator_special_tag overview united continental holdings , inc. ( together with its consolidated subsidiaries , ยualย or the ยcompanyย ) is a holding company and its principal , wholly-owned subsidiary is united airlines , inc. ( together with its consolidated subsidiaries , ยunitedย ) . as ual consolidates united for financial statement purposes , disclosures that relate to activities of united also apply to ual , unless otherwise noted . united 's operating revenues and operating expenses comprise nearly 100 % of ual 's revenues and operating expenses . in addition , united comprises approximately the entire balance of ual 's assets , liabilities and operating cash flows . when appropriate , ual and united are named specifically for their individual contractual obligations and related disclosures and any significant differences between the operations and results of ual and united are separately disclosed and explained . we sometimes use the words ยwe , ย ยour , ย ยus , ย and the ยcompanyย in this report for disclosures that relate to all of ual and united . 2014 financial highlights 2014 net income was $ 1.1 billion , or $ 2.93 diluted earnings per share . the company recorded non-gaap net income of $ 1.97 billion for 2014 , or $ 5.06 diluted earnings per share , which excludes $ 507 million of operating and nonoperating special charges and $ 327 million of economic hedge adjustments , consisting of $ 244 million of mark-to-market losses recorded in nonoperating expense from fuel hedges settling in future periods and $ 83 million of prior period gains recorded in nonoperating expense on fuel contracts settled in the current period . see part ii , item 6 of this report for a reconciliation of gaap to non-gaap net income . united 's consolidated prasm increased 1.6 % for 2014 compared to 2013 . 2014 consolidated casm , excluding special charges , third-party business expenses , fuel and profit sharing , increased 1.3 % year-over-year on a consolidated capacity increase of 0.3 % . 2014 casm , including those items , decreased 1.6 % year-over-year . in 2014 , ual returned approximately $ 320 million to shareholders as part of its previously announced $ 1 billion share repurchase program . in addition , throughout the year , united spent $ 310 million to retire convertible debt that was convertible into approximately 5.8 million shares of ual common stock . ual ended the year with $ 5.7 billion in unrestricted liquidity , which consisted of unrestricted cash , cash equivalents , short-term investments and available capacity under the revolving credit facility of the company 's credit agreement . 2014 operational highlights consolidated rpms for 2014 increased 0.2 % as compared to 2013 , and consolidated asms increased 0.3 % from the prior year , resulting in a consolidated load factor of 83.6 % in 2014 , which is the same load factor as in 2013. the company took delivery of four new boeing 787-8 and two new boeing 787-9 dreamliners in 2014 , bringing its total dreamliner fleet to 14 aircraft . the company also took delivery of 29 new boeing 737-900ers and 19 new embraer e175s in 2014. united exited from scheduled service 37 boeing 757-200s . 2015 outlook set forth below is a discussion of the principal matters that we believe could impact our financial and operating performance and cause our results of operations in future periods to differ materially from our historical operating results and or from our anticipated results of operations described in the forward-looking statements in this report . see item 1a. , risk factors , of this report and the factors described under ยforward-looking informationย below for additional discussion of these and other factors that could affect us . 33 the company is committed to improving the efficiency and quality of all aspects of its business in 2015. key initiatives for the year include improving our operational reliability and the handling of customers during irregular operations , such as adverse weather , improving our customer experience by adding satellite-based wi-fi to nearly all our mainline aircraft , introducing a new united.com website , refurbishing aircraft interiors , investing in our airports and taking delivery of more than 40 new , highly-efficient and customer-pleasing aircraft , and improving our financial performance . economic conditions . the economic outlook for the aviation industry in 2015 is characterized by expected slow or modest u.s. and global economic growth . in such conditions , we expect a modest increase in the demand for air travel . continuing economic uncertainty , along with the strengthening u.s. dollar , is providing uncertainty in key asian and european markets , and along with continued political and socioeconomic tensions in regions such as the middle east , may result in diminished demand for air travel . the global economy is also being impacted by declining oil prices , putting pressure on certain geographic markets . capacity . over the past three years , the company leveraged the flexibility of its fleet to better match capacity with market demand . in 2015 , the company expects consolidated asms to grow between 1.5 % and 2.5 % year-over-year . fuel . the company 's average aircraft fuel price per gallon including related taxes was $ 2.99 in 2014 as compared to $ 3.13 in 2013. recently , the price of jet fuel has declined , but remains volatile . decreases in fuel prices for an extended period may result in increased industry capacity , increased competitive actions for market share and lower fares or surcharges in general . if fuel prices were subsequently to rise significantly , there may be a lag between improvement of revenue and the adverse impact of higher fuel prices . given the highly competitive nature of the airline industry , the company may not be able to increase its fares and fees sufficiently to offset the full impact of increases in fuel prices , especially if these increases are rapid and sustained . story_separator_special_tag the table below presents integration-related costs and special items incurred by the company during the years ended december 31 ( in millions ) : replace_table_token_11_th see note 17 to the financial statements included in part ii , item 8 of this report for additional information . nonoperating income ( expense ) the following table illustrates the year-over-year dollar and percentage changes in the company 's nonoperating income ( expense ) ( in millions , except percentage changes ) : replace_table_token_12_th the decrease in interest expense of $ 48 million , or 6.1 % , in 2014 as compared to 2013 was primarily due to the company 's extinguishment of certain of its debt instruments and the refinancing of certain of its debt instruments at lower interest rates . in 2014 , miscellaneous , net included a mtm loss of $ 465 million from fuel hedge derivatives as compared to a gain of $ 84 million in 2013. miscellaneous , net also included foreign currency losses of $ 41 million and $ 29 million in 2014 and 2013 , respectively . 2014 miscellaneous , net includes a $ 64 million debt extinguishment charge related to the retirement of the $ 248 million 6 % convertible junior subordinated debentures . united 's nonoperating expense also included a net gain of $ 19 million associated with marking to market the fair value of derivative assets and liabilities related to agreements that provide for united 's convertible debt to be settled with ual common stock as compared to a net gain of $ 70 million in 2013. these net gains and related derivatives are reflected only in the united stand-alone financial statements as they are eliminated at the consolidated level . see note 9 to the financial statements included in part ii , item 8 of this report for additional information . 37 2013 compared to 2012 operating revenue the table below illustrates the year-over-year percentage change in the company 's operating revenues for the years ended december 31 ( in millions , except percentage changes ) : replace_table_token_13_th the table below presents the company 's selected passenger revenue and selected operating data based on geographic region ( regional flights consist primarily of domestic routes ) : replace_table_token_14_th ( a ) see part ii , item 6 of this report for the definition of these statistics . consolidated passenger revenue in 2013 increased $ 539 million , or 1.7 % , as compared to 2012. this increase was primarily due to an increase in consolidated yield of 1.8 % and an increase in average fare per passenger of 2.6 % , offset in part by a decline in capacity of 1.4 % and a reduction in traffic of 0.2 % as compared to the year-ago period . consolidated passenger revenue was also impacted by factors including additional competitive capacity in china and the japanese yen weakening against the u.s. dollar , resulting in lower pacific yields and a revenue management demand forecast which underestimated the amount of close-in booking demand resulting in a lower-than-expected yield mix in 2013. cargo revenue decreased by $ 136 million , or 13.4 % , in 2013 as compared to 2012 due to lower volumes on freight primarily in the domestic and atlantic regions offset slightly by an increase in mail revenue for the period . both freight volume and yield continued to decrease in 2013 compared to 2012 due primarily to the continuation of declining demand for shipments of freight . other operating revenue increased $ 724 million , or 20.4 % , in 2013 as compared to 2012 , which was primarily due to the sale of aircraft fuel of approximately $ 400 million to a third party . other operating revenue also increased due to additional revenue from non-airline partners under our mileageplus loyalty program , passenger ticket change fees and sales of airport lounge access . 38 operating expense the table below includes data related to the company 's operating expense for the year ended december 31 ( in millions , except percentage changes ) : replace_table_token_15_th the significant decrease in aircraft fuel expense was primarily attributable to decreased fuel prices , a 1.4 % reduction in capacity and gains ( losses ) from fuel hedging activity in both years , as shown in the table below : replace_table_token_16_th ( a ) includes ineffectiveness gains ( losses ) on cash-settled hedges and gains ( losses ) on cash-settled hedges that were not designated for hedge accounting . these amounts are recorded in nonoperating income ( expense ) : miscellaneous , net . salaries and related costs increased $ 680 million , or 8.6 % , in 2013 as compared to 2012. the increase was due to higher pay rates driven by new collective bargaining agreements , profit sharing and other incentive programs , as well as increased pension and retirement plan costs . landing fees and other rent increased $ 161 million , or 8.3 % , in 2013 as compared to 2012 primarily due to a transition from paying regional carriers for landing fees to paying airports directly . landing fees paid directly to airports are charged to landing fees and other rent while payments to regional carriers are recorded to regional capacity purchase . as a result of this change , there was a significant shift of expense out of regional capacity purchase into landing fees and other rent in 2013. other rent also increased as a result of the increase in rent at newark liberty pursuant to an amendment to united 's terminal c lease signed in early 2013 that extended the term of the terminal c lease with respect to concourses c-1 and c-2 at newark liberty until 2033 . 39 aircraft maintenance materials and outside repairs increased $ 61 million , or 3.5 % , in 2013 as compared to 2012 primarily due to increased volume and scope of airframe heavy checks , mainly on the boeing 747 and boeing 757 fleet types , partially offset by a reduction in engine maintenance volumes driven mainly by the timing of overhauls .
| results of operations in this section , we compare results of operations for the year ended december 31 , 2014 with results of operations for the year ended december 31 , 2013 , and results of operations for the year ended december 31 , 2013 with results of operations for the year ended december 31 , 2012. non-gaap financial measures are presented because they provide management and investors with the ability to measure and monitor the company 's performance on a consistent basis . 2014 compared to 2013 operating revenue the table below illustrates the year-over-year percentage change in the company 's operating revenues for the years ended december 31 ( in millions , except percentage changes ) : replace_table_token_8_th the table below presents the company 's selected passenger revenue and selected operating data based on geographic region ( regional flights consist primarily of domestic routes ) : increase ( decrease ) in 2014 from 2013 ( a ) : domestic pacific atlantic latin total mainline regional consolidated passenger revenue ( in millions ) $ 490 $ ( 41 ) $ 169 $ 170 $ 788 $ ( 148 ) $ 640 passenger revenue 3.9 % ( 0.9
| 2,335 |
stockholders who would have otherwise been entitled to fractional shares as a result of the reverse stock split received a cash payment in lieu of receiving fractional shares . all share and per share amounts in this annual report are shown on a post-split basis . overview we are a biopharmaceutical company focused on the development and commercialization of immunotherapies and other targeted biologics . our drug candidates are derived from a broad set of human and bispecific antibodies which have the ability to engage the human immune system and or directly inhibit tumors to treat specific types of cancer or other diseases . they are aimed at addressing market opportunities for which we believe current therapies are inadequate or non-existent . we are focusing our efforts and resources on the continued research and development of : cdx-1140 , an agonist monoclonal antibody targeted to cd40 , a key activator of immune response , currently being studied as a single-agent and in combination with cdx-301 , a dendritic cell growth factor . dose escalation was recently completed in a phase 1 study in solid tumors and lymphoma and the recommended dose for further study was determined to be 1.5 mg/kg for both cdx-1140 monotherapy and in combination with cdx-301 . celldex has initiated multiple expansion cohorts within the study , including a combination cohort with keytrudaยฎ ( pembrolizumab ) . the company is exploring additional combination cohorts with mechanisms that we believe could be complementary or synergistic with cdx-1140 . cdx-3379 , a monoclonal antibody designed to block the activity of erbb3 ( her3 ) , currently in an early phase 2 study in advanced head and neck squamous cell cancer in combination with erbituxยฎ ; cdx-0159 , a monoclonal antibody that specifically binds the kit receptor and potently inhibits its activity , which is currently completing a phase 1 study in healthy subjects . we plan to study cdx-0159 in mast cell driven diseases , including , initially , chronic spontaneous urticaria ( csu ) and chronic inducible urticarias ( cindus ) ; and , cdx-527 , a bispecific antibody that uses our proprietary highly active anti-pd-l1 and cd27 human antibodies to couple cd27 co-stimulation with blockade of the pd-l1/pd-1 pathway , for which we are planning a phase 1 study in advanced solid tumors . we routinely work with external parties to collaboratively advance our drug candidates . in addition to celldex-led studies , we also have an investigator initiated research ( iir ) program with multiple studies ongoing with our drug candidates . our goal is to build a fully integrated , commercial-stage biopharmaceutical company that develops important therapies for patients with unmet medical needs . we believe our program assets provide us with the strategic options to either retain full economic rights to our innovative therapies or seek favorable economic terms through advantageous commercial partnerships . this approach allows us to maximize the overall value of our technology and product portfolio while best ensuring the expeditious development of each individual product . currently , all programs are fully owned by celldex . 54 we estimate that clinical trials of the type we generally conduct are typically completed over the following timelines : clinical phase estimated completion period phase 1 1 - 2 years phase 2 1 - 5 years phase 3 1 - 5 years the duration and the cost of clinical trials may vary significantly over the life of a project as a result of differences arising during the clinical trial protocol , including , among others , the following : the number of patients that ultimately participate in the trial ; the duration of patient follow-up that seems appropriate in view of results ; the number of clinical sites included in the trials ; the length of time required to enroll suitable patient subjects ; and the efficacy and safety profile of the drug candidate . we test potential drug candidates in numerous preclinical studies for safety , toxicology and immunogenicity . we may then conduct multiple clinical trials for each drug candidate . as we obtain results from trials , we may elect to discontinue or delay clinical trials for certain drug candidates in order to focus our resources on more promising drug candidates . an element of our business strategy is to pursue the discovery , research and development of a broad portfolio of drug candidates . this is intended to allow us to diversify the risks associated with our research and development expenditures . to the extent we are unable to maintain a broad range of drug candidates , our dependence on the success of one or a few drug candidates increases . regulatory approval is required before we can market our drug candidates as therapeutic products . in order to proceed to subsequent clinical trial stages and to ultimately achieve regulatory approval , the regulatory agency must conclude that our clinical data demonstrate that our product candidates are safe and effective . historically , the results from preclinical testing and early clinical trials ( through phase 2 ) have often not been predictive of results obtained in later clinical trials . a number of new drugs and biologics have shown promising results in early clinical trials but subsequently failed to establish sufficient safety and efficacy data to obtain necessary regulatory approvals . furthermore , our business strategy includes the option of entering into collaborative arrangements with third parties to complete the development and commercialization of our drug candidates . in the event that third parties take over the clinical trial process for one of our drug candidates , the estimated completion date would largely be under control of that third party rather than us . we can not forecast with any degree of certainty which proprietary products , if any , will be subject to future collaborative arrangements , in whole or in part , and how such arrangements would affect our development plan or capital requirements . our programs may also benefit from subsidies , grants , contracts or government or agency-sponsored studies that could reduce our development costs . story_separator_special_tag this patient also reported decreased tumor pain . a second patient experienced cavitation of greater than 50 % of lung metastases on ct scan after one dose of cdx-1140 3 mg/kg . a patient with gastroesophageal carcinoma experienced a recist response after two cycles of cdx-1140 0.36 mg/kg plus cdx-301 that included 41 % shrinkage of liver and lymph node target lesions , with near complete resolution of the liver lesion . this response was durable for four months . six patients experienced stable disease ( n=4 cdx-1140 monotherapy ; n=2 cdx-1140/cdx-301 combination ) with a duration of 1.8 months to 5.4 months . one patient experienced immune unconfirmed progressive disease on their first scan and continued on treatment for 10+ months without confirmation of progressive disease at cdx-1140 0.09 mg/kg plus cdx-301 . potent pharmacological effects associated with immune activation were also observed , including transient induction of inflammatory cytokines and chemokines associated with dendritic cell and t cell activation at higher dose levels . similar activation was observed with each cycle of therapy . peripheral blood immune cells had upregulated immune activation markers and cdx-301 markedly increased the number of dendritic cells and was associated with higher il-12p40 induction , a key molecule for inducing anti-tumor t cell responses . cdx-1140 monotherapy expansion cohorts in hnscc , renal cell carcinoma and gastroesophageal adenocarcinoma have been added to the study , along with a combination cohort of cdx-1140 and cdx-301 in hnscc . in addition , we have amended the ongoing phase 1 study to evaluate cdx-1140 in combination with keytrudaยฎ ( pembrolizumab ) , merck 's anti-pd-1 therapy , under a clinical trial collaboration agreement with merck ( known as msd outside of the u.s. and canada ) . the cohort is designed to characterize the safety , pharmacodynamics and activity of cdx-1140 in combination with 57 pembrolizumab in patients refractory to pd1/pdl1 treatment . enrollment is ongoing . the company is exploring additional combination cohorts with mechanisms that we believe could be complementary or synergistic with cdx-1140 . cdx-3379 cdx-3379 is a human monoclonal antibody with half-life extension designed to block the activity of erbb3 ( her3 ) . we believe erbb3 may be an important receptor regulating cancer cell growth and survival as well as resistance to targeted therapies . erbb3 is expressed in many cancers , including head and neck , thyroid , breast , lung and gastric cancers , as well as melanoma . we believe the proposed mechanism of action for cdx-3379 sets it apart from other drugs in development in this class due to its ability to block both ligand-independent and ligand-dependent erbb3 signaling by binding to a unique epitope . it has a favorable pharmacologic profile , including a longer half-life and slower clearance relative to other drug candidates in this class . we believe cdx-3379 also has potential to enhance anti-tumor activity and or overcome resistance in combination with other targeted and cytotoxic therapies to directly kill tumor cells . tumor cell death and the ensuing release of new tumor antigens has the potential to serve as a focus for combination therapy with immuno-oncology approaches , even in refractory patients . cdx-3379 has been evaluated in three phase 1 studies for the treatment of multiple solid tumors that express erbb3 and is currently being evaluated in a phase 2 study . enrollment opened in november 2017 to an open-label phase 2 study in combination with erbitux in patients with human papillomavirus ( hpv ) negative , erbitux-resistant , advanced hnscc who have previously been treated with an anti-pd1 checkpoint inhibitor , a population with limited options and a particularly poor prognosis . the study was initially designed as a simon two-stage design with an interim futility analysis following enrollment of the first 13 patients . according to the study design , if at least one patient achieved an objective response in the first stage , enrollment could progress to the second stage . the primary endpoint of the study is objective response rate ( orr ) . secondary endpoints include assessments of clinical benefit response ( cbr ) , duration of response ( dor ) , progression-free survival ( pfs ) , overall survival ( os ) , and safety and pharmacokinetics associated with the combination . enrollment to the first stage of the phase 2 study ( n=15 ) is complete and interim data from the study were presented at the 2019 asco annual meeting in june that support the continued development of cdx-3379 . patients had a median of 3 ( range of 2-6 ) prior cancer therapy treatments . all patients had received prior checkpoint inhibitor treatment and 14 of 15 patients were cetuximab refractory . notable clinical activity was observed in this refractory patient population . a durable confirmed complete response ( 11+ months ) was observed . an unconfirmed partial response ( upr ) in a patient that had not received cetuximab was also observed . 7 patients experienced stable disease ( 47 % ; includes upr ) . a clinical benefit rate of 29 % was achieved ( objective response or stable disease greater than or equal to 12 weeks ) . cdx-3379 in combination with cetuximab was generally associated with the expected target-mediated adverse events of diarrhea and rash . emerging data from the phase 2 study and earlier studies of cdx-3379 suggest that antitumor activity may be associated with somatic mutations in certain genes . based on these observations , next-generation sequencing was performed on tumor samples from 18 patients with hnscc treated with cdx-3379 across three clinical studies of cdx-3379 that have enrolled patients with hnscc . this data set included four patients with clinical responses , eight patients with stable disease and or tumor shrinkage , and six patients with progressive disease . key findings are outlined below . all four clinical responses occurred in patients with mutations in the fat1 gene . all four clinical responses occurred in patients with a primary tumor site of oral cavity .
| results of operations year ended december 31 , 2019 compared with year ended december 31 , 2018 replace_table_token_6_th net loss the $ 100.3 million decrease in net loss for the year ended december 31 , 2019 , as compared to the year ended december 31 , 2018 , was primarily the result of a decrease in non-cash goodwill and intangible asset impairment expense and a decrease in research and development expenses , partially offset by the decrease in gain on fair value remeasurement of contingent consideration . revenue the $ 2.9 million decrease in product development and licensing agreements revenue for the year ended december 31 , 2019 , as compared to the year ended december 31 , 2018 , was primarily due to a decrease in revenue related to our bms agreement as a result of the completion of our combination clinical study . the $ 3.1 million decrease in contracts and grants revenue for the year ended december 31 , 2019 , as compared to the year ended december 31 , 2018 , was primarily related to a decrease in services performed under our contract manufacturing and research and development agreements with rockefeller university and the international aids vaccine initiative . we expect revenue to decrease over the next twelve months , although there may be fluctuations on a quarterly basis . 63 research and development expense research and development expenses consist primarily of ( i ) personnel expenses , ( ii ) laboratory supply expenses relating to the development of our technology , ( iii ) facility expenses and ( iv ) product development expenses associated with our drug candidates as follows : replace_table_token_7_th personnel expenses primarily include salary , benefits , stock-based compensation and payroll taxes .
| 2,336 |
there were no other changes in terms including those related to covenants or interest rates . there are now six banks participating in the syndication . there was $ 105.8 million outstanding under the credit facility at march 29 , 2014. we were in compliance with all debt covenants as of march 29 , 2014. the interest rate on the credit facility increased from 100 basis points to 125 basis points over libor during fiscal year 2014. at march 29 , 2014 , the interest rate was 125 basis points over libor . 48 monro muffler brake , inc. and subsidiary notes to consolidated financial statements ย ( continued ) within the credit facility , we have a sub-facility of $ 40 million for the purpose of issuing standby letters of credit . the line requires fees aggregating 1.375 % annually of the face amount of each standby letter of credit , payable quarterly in arrears . there was $ 22.7 million in an outstanding letter of credit at march 29 , 2014. the net availability under the credit facility at march 29 , 2014 was $ 121.5 million . specific terms of the credit facility permit the payment of cash dividends not to exceed 50 % of the prior year 's net income , and permit mortgages and specific lease financing arrangements with other parties with certain limitations . additionally , the credit facility is not secured by our real property , although we have agreed not to encumber our real property , with certain permissible exceptions . the agreement also requires the maintenance of specified interest and rent coverage ratios . long-term debt , including current portion , had a carrying amount of $ 106.5 million and a fair value of $ 106.5 million as of march 29 , 2014 , as compared to a carrying amount of $ 127.8 million and a fair value of $ 127.8 million as of march 30 , 2013. the fair value of long-term debt was estimated based on discounted cash flow analyses using either quoted market prices for the same or similar issues , or the current interest rates offered to monro for debt with similar maturities . in addition , we have financed certain store properties and vehicles with capital leases/financing obligations , which amount to $ 88.1 million and are due in installments through 2042. during fiscal 1995 , monro purchased 12.7 acres of land for $ .7 million from the city of rochester , new york , on which its office/warehouse facility is located . the city has provided financing for 100 % of the cost of the land via a 20-year non-interest bearing mortgage , all due and payable in fiscal 2015. aggregate debt maturities over the next five years are as follows : replace_table_token_25_th 49 monro muffler brake , inc. and subsidiary notes to consolidated financial statements ย ( continued ) note 7 ย income taxes the components of the provision for income taxes are as follows : replace_table_token_26_th deferred tax ( liabilities ) assets consist of the following : replace_table_token_27_th we have $ 3.7 million of state net operating loss carryforwards available as of march 29 , 2014. the carryforwards expire in varying amounts through 2034. based on all available evidence , we have determined that it is more likely than not that sufficient taxable income of the appropriate character within the carryforward period will exist for the realization of the tax benefits on existing state net operating loss carryforwards . we believe it is more likely than not that all other future tax benefits will be realized as a result of current and future income . 50 monro muffler brake , inc. and subsidiary notes to consolidated financial statements ย ( continued ) a reconciliation between the u. s. federal statutory tax rate and the effective tax rate reflected in the accompanying financial statements is as follows : replace_table_token_28_th the following is a rollforward of monro 's liability for income taxes associated with unrecognized tax benefits : replace_table_token_29_th 51 monro muffler brake , inc. and subsidiary notes to consolidated financial statements ย ( continued ) the total amount of unrecognized tax benefits was $ 5.9 million at march 29 , 2014 , the majority of which , if recognized , would affect the effective tax rate . in the normal course of business , monro provides for uncertain tax positions and the related interest and penalties , and adjusts its unrecognized tax benefits and accrued interest and penalties accordingly . during the years ended march 29 , 2014 , march 30 , 2013 and march 31 , 2012 , we recorded a benefit from the reversal of accrued interest and penalties of approximately $ .1 million , $ .2 million and $ .3 million , respectively , in income tax expense . additionally , we had approximately $ .3 million and $ .5 million of interest and penalties associated with uncertain tax benefits accrued as of march 29 , 2014 and march 30 , 2013 , respectively . monro is currently under state audit for the fiscal 2011 through 2012 tax years . it is reasonably possible that the examination phase of the audits for these years may conclude in the next 12 months , and that the related unrecognized tax benefits for tax positions taken regarding previously filed tax returns may change from those recorded as liabilities for uncertain tax positions in monro 's consolidated financial statements as of march 29 , 2014. however , based on the status of the examinations , it is not possible to estimate the effect of any amount of such change to previously recorded uncertain tax positions . we file u.s. story_separator_special_tag additionally , as discussed above , we are required to ensure that assumptions used to determine fair value in our analyses are consistent with the assumptions a hypothetical marketplace participant would use . as a result , the cost of capital and or discount rates used in our analyses may increase or decrease based on market conditions and trends , regardless of whether our actual cost of capital has changed . therefore , we may recognize an impairment of an intangible asset or assets even though realized actual cash flows are approximately equal to or greater than our previously forecasted amounts . self-insurance reserves we are largely self-insured with respect to workers ' compensation , general liability and employee medical claims . in order to reduce our risk and better manage our overall loss exposure , we purchase stop-loss insurance that covers individual claims in excess of the deductible amounts , and caps total losses in a fiscal year . we maintain an accrual for the estimated cost to settle open claims as well as an estimate of the cost of claims that have been incurred but not reported . these estimates take into consideration the historical average claim volume , the average cost for settled claims , current trends in claim costs , changes in our business and workforce , and general economic factors . these accruals are reviewed on a quarterly basis , or more frequently if factors dictate a more frequent review is warranted . for more complex reserve calculations , such as workers compensation , we use the services of an actuary on an annual basis to assist in determining the required reserve for open claims . 23 stock-based compensation the fair value of each option award is estimated on the date of grant using the black-scholes option valuation model that uses the following assumptions . expected volatilities are based on historical changes in the market price of the company 's common stock . the expected term of options granted is derived from the terms and conditions of the award , as well as historical exercise behavior , and represents the period of time that options granted are expected to be outstanding . the risk-free rate is calculated using the implied yield on zero-coupon u.s. treasury bonds with a remaining maturity equal to the expected term of the awards . we use historical data to estimate forfeitures . the dividend yield is based on historical experience and expected future changes . income taxes our provision for income taxes and effective tax rates are calculated by legal entity and jurisdiction and are based on a number of factors , including our income , tax planning strategies , differences between tax laws and accounting rules , statutory tax rates and credits , uncertain tax positions and valuation allowances . we use significant judgment and estimates in evaluating our tax positions . tax law and accounting rules often differ as to the timing and treatment of certain items of income and expense . as a result , the tax rate reflected in our tax return ( the current or cash tax rate ) is different from the tax rate reflected in our consolidated financial statements . some of the differences are permanent , while other differences are temporary as they reverse over time . we record deferred tax assets and liabilities for any temporary differences between the tax reflected in our consolidated financial statements and tax bases . we establish valuation allowances when we believe it is more-likely-than-not that some portion of our deferred tax assets will not be realized . at any one time , our tax returns for several tax years are subject to examination by u.s. federal and state taxing jurisdictions . we establish tax liabilities in accordance with the accounting guidance on income taxes . under the accounting guidance , the impact of an uncertain tax position taken or expected to be taken on an income tax return must be recognized in the financial statements at the largest amount that is more-likely-than-not to be sustained . an uncertain income tax position will not be recognized in the financial statements unless it is more-likely-than-not to be sustained . we adjust these tax liabilities , as well as the related interest and penalties , based on the latest facts and circumstances , including recently published rulings , court cases and outcomes of tax audits . to the extent our actual tax liability differs from our established tax liabilities for unrecognized tax benefits , our effective tax rate may be materially impacted . while it is often difficult to predict the final outcome of , the timing of , or the tax treatment of any particular tax position or deduction , we believe that our tax balances reflect the more-likely-than-not outcome of known tax contingencies . story_separator_special_tag on these largely fixed costs with lower comparable store sales . labor costs were relatively flat as a percentage of sales as compared to the prior year . operating expenses for fiscal 2013 were $ 204.4 million or 27.9 % of sales compared with $ 185.0 million or 26.9 % of sales for fiscal 2012. excluding the operating expenses related to the stores acquired in fiscal 2013 , operating expenses actually decreased by approximately $ 1.5 million , after adjusting for the extra week in fiscal 2012. this demonstrates that the company experienced leverage in this line on a comparable store basis through focused cost control and pay plans which appropriately adjust for performance .
| results of operations fiscal 2014 as compared to fiscal 2013 sales for fiscal 2014 increased $ 99.4 million or 13.6 % to $ 831.4 million as compared to $ 732.0 million in fiscal 2013. the increase was due to an increase of $ 110 million related to new stores , of which $ 107 million came from the fiscal 2013 and fiscal 2014 acquisitions . partially offsetting this was a decrease in comparable store sales of .5 % . additionally , there was a decrease in sales from closed stores amounting to $ 5.0 million . there were 361 selling days in both fiscal 2014 and fiscal 2013. during the year , 29 stores were added and 13 were closed . at march 29 , 2014 , we had 953 company-operated stores in operation . we believe that the slight decrease in comparable store sales for fiscal 2014 resulted primarily from continued weak economic conditions . we believe that consumers continue to defer service repairs and tire replacements , especially on higher ticket items . 24 for the year , comparable store traffic was up slightly while average ticket was down . the brake , exhaust and shock categories each increased by about 1 % on a comparable store basis for the year . the tire category declined about 1 % as consumers traded down from higher priced tires . however , tire unit sales increased approximately 1 % on a comparable store basis . harsh winter weather also negatively impacted sales during the fourth quarter of fiscal 2014 , which resulted in stores being closed for periods of time , and consumers reluctant to travel . gross profit for fiscal 2014 was $ 320.0 million or 38.5 % of sales as compared with $ 278.1 million or 38.0 % of sales for fiscal 2013. the increase in gross profit for fiscal 2014 , as a percentage of sales , is due to several factors .
| 2,337 |
million for the years ended december 31 , 2013 , 2012 and 2011 , respectively . 3 includes employer matching obligations under our defined contribution retirement plan of $ 0.2 million and $ 0.2 million as of december 31 , 2013 and 2012 , respectively . the expense recognized with respect to this plan was $ story_separator_special_tag the following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and notes thereto included in item 8 , โ financial statements and supplementary data. โ all dollar amounts presented in the tables that follow are in thousands unless otherwise indicated . certain year-over-year changes are presented as not meaningful , or โ nm , โ where disclosure of the actual value does not otherwise enhance the analysis . also , due to the combination of different units of volumetric measure and the number of decimal places presented , certain results may not calculate explicitly from the values presented in the tables . overview and executive summary we are an independent oil and gas company engaged in the exploration , development and production of oil , ngls and natural gas in various onshore regions of the united states . our current operations consist primarily of the drilling of unconventional horizontal development wells in shale formations and are currently concentrated in the eagle ford shale in south texas . we also have operations in the granite wash in the mid-continent ( primarily oklahoma ) , the haynesville shale and cotton valley in east texas and the selma chalk in mississippi . as of december 31 , 2013 , we had proved oil and gas reserves of approximately 136 mmboe . the following table sets forth certain summary operating and financial statistics for the periods presented : replace_table_token_14_th 1 excludes equity-classified share-based compensation , which is a non-cash expense , of $ 0.84 , $ 0.98 and $ 0.96 and restructuring expenses and 2013 ef acquisition transaction expenses of $ 0.38 , $ 0.20 and $ 0.30 for the years ended december 31 , 2013 , 2012 and 2011 . 2 includes the receipt of a federal income tax refund of approximately $ 32 million in the year ended december 31 , 2012 attributable to 2010 and prior years . 3 as reduced by outstanding borrowings and letters of credit and limited by financial covenants , if applicable . also , excludes an additional $ 25 million attributable to the excess of the borrowing base of $ 425 million over the current commitment of $ 400 million . 27 in 2013 , our crude oil and ngl production represented the majority of our total production consistent with our strategy to become a more liquids-focused oil and gas exploration and production company . as illustrated in the table above and as discussed further in the key developments and story_separator_special_tag were proved developed . revolver amendment and borrowing base redetermination the revolver was amended in october 2013 to increase the revolving commitment from $ 350 million to $ 400 million . concurrently , the borrowing base under the revolver was increased from $ 350 million to $ 425 million . the amendment also provides for an extension of the current maximum leverage ratio of 4.5 to 1.0 through june 30 , 2014 and allows the revolver 's administrative agent to replace any lender who fails to approve a borrowing base increase approved by lenders representing two thirds of the aggregate commitment . sale of south texas natural gas gathering assets in december 2013 , we entered into an agreement to sell our natural gas gathering assets in south texas . the sale was completed in january 2014 and provided net proceeds of approximately $ 94 million , net to our working interest . accordingly , the net carrying value of these assets is included on our consolidated balance sheet as a component of current assets . commodity hedging activities we have hedged approximately 70 percent of our estimated crude oil production for the first half of 2014 and approximately 65 percent for the second half of 2014 at a weighted-average floor price of $ 93.55 per barrel . in addition , we have hedged approximately 40 percent of our estimated natural gas production through the third quarter of 2014 at a weighted-average floor price of $ 4.13 per mmbtu and approximately 15 percent for the 2014 - 2015 winter at a weighted-average floor price of $ 4.50 per mmbtu . tender offer and redemption of the 2016 senior notes in april 2013 , we initiated the tender offer for any and all of the $ 300 million principal amount of the 2016 senior notes . holders of approximately 58 % of the 2016 senior notes tendered their notes . the total consideration payable for each $ 1,000 principal amount of those 2016 senior notes tendered was $ 1,065.34 , which included a consent payment of $ 30.00 per $ 1,000 principal amount . in april 2013 , we paid approximately $ 191 million , including accrued interest of $ 6.5 million , for the 2016 senior notes tendered . in may 2013 , we made an irrevocable election in connection with the redemption to redeem the remaining 42 % of the 2016 senior notes outstanding in accordance with the 2016 senior notes indenture . we paid a total of $ 1,061.31 per $ 1,000 principal amount of the 2016 senior notes , or approximately $ 140 million , including accrued interest of $ 5.3 million , in connection with the redemption . we recognized a loss on the extinguishment of debt of $ 29.2 million during the three months ended june 30 , 2013 in connection with the tender offer and the redemption , including non-cash charges of $ 10.0 million attributable to the write-off of unamortized debt issuance costs and the remaining debt discount associated with the 2016 senior notes . story_separator_special_tag equity-classified share-based compensation charges attributable to stock options and restricted stock units , which represent non-cash expenses , decreased during 2013 due primarily to fewer employees receiving grants . we incurred transaction costs associated with the 2013 ef acquisition including advisory , legal , due diligence and other professional fees , as well as certain integration expenses including transition accounting services , settlement statement audit fees and costs to convert acquired land and related records for use in our systems . in 2013 , we initiated a project to replace certain of our primary information technology platforms with an integrated erp system that became operational during the first quarter of 2014. accordingly , we incurred certain costs including those associated with the preliminary project analysis , data conversion from our legacy systems , backfill labor and end-user training that were not subject to capitalization . restructuring charges during the 2012 period include employee termination benefits and a provision for lease costs attributable to exit activities in connection with the sale of our appalachian assets . 33 exploration the following table sets forth the components of exploration expenses for the periods presented : replace_table_token_29_th unproved leasehold amortization declined during 2013 as costs related to successful eagle ford shale wells were transferred to proved properties . in addition , due to the significance of the unproved acreage acquired in the 2013 ef acquisition , our unproved property in the eagle ford shale is now considered a โ significant leasehold โ and is not subject to systematic amortization . for further discussion of this matter , see โ critical accounting estimates โ oil and gas properties. โ geological and geophysical costs increased during 2013 due primarily to the purchase of certain seismic data for the south texas region . delay rentals decreased during 2013 due primarily to the sale of our appalachian natural gas properties . depreciation , depletion and amortization ( dd & a ) the following table sets forth the nature of the dd & a variances for the periods presented : replace_table_token_30_th the effect of higher overall production volumes and higher depletion rates associated with oil and ngl production were the primary factors attributable to the increase in dd & a . our average dd & a rate increased due primarily to higher capitalized finding and development costs attributable to our drilling program in the eagle ford shale as well as lower natural gas reserves due to revisions . impairments the following table summarizes the impairments recorded for the periods presented : replace_table_token_31_th in 2013 , we recognized oil and gas asset impairments of $ 121.8 million in the granite wash in the mid-continent , $ 9.5 million in the marcellus shale in pennsylvania and $ 0.9 million in the selma chalk in mississippi , in each case due primarily to market declines in current and expected future commodity prices . in june 2012 , we recognized a $ 28.4 million impairment of our appalachian assets triggered by the expected disposition of those properties and a $ 75.0 million impairment of our marcellus shale assets due primarily to market declines in natural gas prices and the resultant reduction in proved natural gas reserves . we also recognized impairments of certain tubular inventory and well materials in 2012 due primarily to declines in asset quality . loss on firm transportation commitment we have a contractual commitment for certain firm transportation capacity in the appalachian region that expires in 2022. subsequent to the sale of our natural gas assets in that region in 2012 , we no longer have production to satisfy this commitment . as a result , we recorded a charge of $ 17.3 million in 2012 representing the liability for estimated discounted future net cash outflows over the remaining term of the contract . accretion of this liability for 2013 and 2012 has been recorded as a component of other revenues . 34 interest expense the following table summarizes the components of our interest expense for the periods presented : replace_table_token_32_th interest expense increased during 2013 due primarily to higher overall weighted-average debt outstanding and a larger proportion of fixed-rate debt with higher interest rates in the 2013 period as compared to a larger proportion of revolver borrowings at lower variable interest rates in 2012. the increase was partially offset by higher capitalized interest resulting from the significant increase in the value of our proved undeveloped and unproved properties following the 2013 ef acquisition . for further discussion of this matter , see โ critical accounting estimates โ oil and gas properties. โ loss on extinguishment of debt in may 2013 , we completed the tender offer and the redemption for all of our outstanding 2016 senior notes . we paid a total of $ 330.9 million including consent payments and accrued interest in connection with the tender offer and redemption and recognized a loss on the extinguishment of debt of $ 29.2 million . the loss on extinguishment of debt included non-cash charges of $ 10.0 million attributable to the write-off of unamortized debt issuance costs and the remaining debt discount associated with the 2016 senior notes . when we entered into the revolver in september 2012 , we expensed issuance costs of $ 3.2 million attributable to our previous revolving credit facility . derivatives the following table summarizes the components of our derivatives income for the periods presented : replace_table_token_33_th we paid net cash settlements of $ 1.0 million , all of which were attributable to commodity derivatives , during 2013 and $ 29.7 million , including $ 1.2 million attributable to the termination of an interest rate swap agreement , during 2012. the loss in the 2013 period is due primarily to period-end oil prices exceeding hedged prices as well as a substantially lower volume of natural gas production being hedged during 2013 period as compared to 2012. income taxes replace_table_token_34_th due to the operating losses incurred , we recognized an income tax benefit during both periods .
| results of operations that follow , crude oil and ngl production was 65 percent of our total production for 2013 and the revenues generated from liquids production represented 88 percent of our total product revenues . consistent with this strategic shift in investment and operational focus , we realized significantly higher cash operating margins . our cash operating margin increased $ 20.84 per boe , or 83 percent , to $ 46.06 per boe in 2013 from $ 25.22 per boe in 2011. due primarily to the growth in cash operating margins , our cash provided by operating activities also increased significantly each successive year , despite higher interest payment requirements associated with our increased leverage . in 2013 , cash from operating activities increased $ 116.8 million , or 81 percent , to $ 261.5 million from $ 144.7 million in 2011. our growth in crude oil and ngl production has been focused almost exclusively in the eagle ford shale in south texas . since our initial lease acquisition in this region in 2010 , we have drilled or acquired and turned in line 179 gross ( 116.7 net ) total wells ( operated and non-operated ) through february 19 , 2014. our growth plans accelerated in april 2013 with the 2013 ef acquisition and additional leasehold acquisitions , both of which increased the scope and scale of our eagle ford shale operations . accordingly , our cash paid for capital expenditures grew to $ 504.2 million , excluding the 2013 ef acquisition , in 2013 from $ 370.9 in 2012 and is projected to be up to approximately $ 640 million in 2014. this contemplates a total of up to six operated rigs in the eagle ford shale for 2014 as compared to an average of two prior to the 2013 ef acquisition .
| 2,338 |
our estimate for federal and state income taxes for the year ended december 31 , 2012 was $ 30.0 million from continuing operations as compared to $ 12.9 million for the year ended december 31 , 2011. we are allowed to deduct various items for tax reporting purposes that are capitalized for purposes of financial statement presentation . during the year ended december 31 , 2012 , the estimated effective tax rate was revised to reflect a 35 % rate for federal income taxes . the company believes that this rate more appropriately reflects the future federal rate on future earnings . the increase in the effective tax rate was applied to the january 1 , 2012 deferred income tax liability resulting in an increase to the net deferred tax liability and deferred income tax expense of $ 1.2 million . our effective tax rates differ from the u.s. statutory income tax rate primarily due to the effects of state income taxes . year ended december 31 , 2011 compared to period ended december 23 , 2010 we completed our corporate restructuring on december 23 , 2010. the operating results presented below for the audited period ended december 23 , 2010 exclude the audited eight-day period from inception through december 31 , 2010. the operating results of bcei for the eight-day period from december 23 , 2010 through december 31 , 2010 were net revenues , operating expense , and income from operations of approximately $ 1.6 million , $ 1.2 million , and $ 0.4 million , respectively , and did not include transactions that were inconsistent or unusual when compared to the results for the audited period ended december 23 , 2010. other expense during this period was primarily comprised of a $ 0.5 million unrealized loss in the fair value of commodity derivatives . 64 year ended december 31 , 2011 compared to period ended december 23 , 2010 revenues replace_table_token_27_th ( 1 ) determined using the ratio of 6 mcf of natural gas to 1 bbl of crude oil . excludes co 2 sales . ( 2 ) although we do not designate our derivatives as cash flow hedges for financial statement purposes , the derivatives do economically hedge the price we receive for crude oil and natural gas . revenues increased by 143 % to $ 105.7 million for the year ended december 31 , 2011 compared to $ 43.5 million for the period ended december 23 , 2010. oil production increased 121 % and natural gas production increased 112 % during the year ended december 31 , 2011 as compared to the period ended december 23 , 2010. the most significant components of the increased production were related to an increased drilling program and the acquisition of hec , which occurred on december 23 , 2010. our product revenues and production for the period ended december 23 , 2010 excluded hec revenues and production of $ 14.0 million and 268.2 mboe , respectively . the increase in net revenues was also the result of a 22 % increase in oil prices with a 2 % increase in natural gas prices , respectively , for an overall increase of 19 % per boe . also contributing to the increased revenue was a 106 % increase in production attributable to our drilling program . during 2011 , we drilled and completed approximately 100 wells as compared to 42 wells during 2010 . 65 operating expenses replace_table_token_28_th lease operating expenses . our lease operating expenses increased $ 6.3 million , or 53 % , to $ 18.3 million for the year ended december 31 , 2011 from $ 12.0 million for the period ended december 23 , 2010 and decreased on an equivalent basis from $ 16.02 per boe to $ 11.90 per boe . the increase in lease operating expense was related to increased production volumes due to the acquisition of hec on december 23 , 2010 and increased production attributable to our drilling program . the period ended december 23 , 2010 does not include hec lease operating expenses , which were $ 2.0 million . during the year ended december 31 , 2011 , gauging and pumping , compressor rentals , well servicing and testing , and gas plant maintenance and repairs were $ 1.8 million , $ 1.0 million , $ 1.0 million and $ 0.8 million higher , respectively , than the period ended december 23 , 2010. the decrease in lease operating expenses on an equivalent basis was primarily related to the lower operating costs of the wells acquired from hec . on an equivalent basis , the lease operating expense for the wells acquired from hec was $ 7.50 per boe during the period ended december 23 , 2010 as compared to the lease operating expense for bcec 's wells which was $ 16.02 per boe during the period ended december 23 , 2010. severance and ad valorem taxes . our severance and ad valorem taxes increased $ 4.4 million , or 303 % , to $ 5.9 million for the year ended december 31 , 2011 from $ 1.5 million for the period ended december 23 , 2010 and increased on a boe basis from $ 1.97 to $ 3.86. the increase was primarily related to a 106 % increase in production volumes and a 19 % increase in realized prices per boe during the year ended december 31 , 2011 as compared to the period ended december 23 , 2010 , and an increase in ad valorem tax of $ 2.4 million due to higher assessment values . the period ended december 23 , 2010 does not include hec severance and ad valorem tax , which were $ 0.8 million . story_separator_special_tag as a result of our corporate restructuring , we were organized as a delaware corporation subject to federal and state income taxes . during the year ended december 31 , 2011 , the estimated effective tax rate was revised to reflect significant capital expenditures in arkansas and the effective tax rate increased from 36.87 % to 37.98 % . the increase in the effective tax rate was applied to the january 1 , 2011 deferred income tax liability resulting in an increase to the net deferred tax liability and deferred income tax expense of $ 2.4 million with an additional $ 10.5 million incurred for federal and state income taxes for the year ended december 31 , 2011 for a total deferred income tax expense in our consolidated statement of operations of $ 12.9 million . we are allowed to deduct various items for tax reporting purposes that are capitalized for purposes of financial statement presentation . all income taxes for the year ended december 31 , 2011 were deferred . change in fair value of warrant put option . the fair value of the warrant put option decreased $ 34.3 million , or 100 % , to $ 0 for the year ended december 31 , 2011 from a gain of $ 34.3 million for the period ended december 23 , 2010. the decrease resulted from the exercise of the warrants on december 23 , 2010 in connection with our corporate restructuring . accretion of debt discount . our expense for accretion of debt discount decreased $ 8.9 million , or 100 % , to $ 0 for the year ended december 31 , 2011 from $ 8.9 million for the period ended december 23 , 2010. the decrease resulted from the retirement of bcec 's senior subordinated notes on december 23 , 2010 in connection with our corporate restructuring . results for discontinued operations during june of 2012 , the company began marketing , with an intent to sell , all of our oil and gas properties in california . assets are classified as held for sale when the company commits to a plan to sell the assets and there is reasonable certainty that the sale will take place within one year . the company determined that our intent to sell these properties qualifies for discontinued operations accounting and these assets are presented as discontinued operations in the company 's statements of operations . the operating results before income taxes for our california properties for the year ended december 31 , 2012 were net revenues , operating expenses , and loss from discontinued operations of $ 5.4 million , $ 6.3 million , and $ 0.9 million , respectively , as compared to net revenues , operating expenses , and loss from discontinued operations of $ 6.7 million , $ 10.3 million , $ 3.6 million , for the year ended december 31 , 2011. operating expenses for the year ended december 31 , 2012 included impairments in the amount of $ 1.6 million . sales volumes for the years ended december 31 , 2012 and 2011 were 53.7 mbbls and 66.1 mbbls , respectively . the operating results before income taxes for our california properties for the year ended december 31 , 2011 were net revenues , operating expenses , and loss from discontinued operations of $ 6.7 million , $ 10.3 million , and $ 3.6 million , respectively , as compared to net revenues , gain on the sale of the jasmin property , operating expenses , and gain from discontinued operations of $ 4.8 million , $ 4.1 million , $ 4.7 million , and $ 0.1 million for the period ended december 23 , 2010. operating expenses for the year ended december 31 , 2011 included impairments in the amount of $ 3.4 million . sales volumes for the year ended december 31 , 2011 and period ended december 23 , 2010 were 66.1 mbbls and 67.6 mbbls , respectively . 68 see note 4 to our consolidated financial statements included in item 8 of part ii of this annual report on form 10-k. liquidity and capital resources our primary sources of liquidity to date have been proceeds from our initial public offering , corporate restructuring , capital contributions from investors , borrowings under our credit facility and cash flows from operations and proceeds from the sale of non-core properties . our primary use of capital has been for the acquisition and development of oil and natural gas properties . in the second quarter 2012 , we began the divestiture process of our non-core properties in california . the california properties were treated as assets held for sale , and production , revenue and expenses associated with these properties were removed from continuing operations and reported as discontinued operations . during 2012 , we sold a majority of our properties in california , for approximately $ 9.3 million in aggregate . on july 31 , 2012 , we acquired leases in the wattenberg field from the state of colorado , state board of land commissioners . we paid approximately $ 12 million at closing and will pay approximately $ 12 million on july 31 st of each of the next four years . these future payments are secured by a letter of credit which reduced our availability under the borrowing base by $ 48 million as of december 31 , 2012. on april 6 , 2012 , the administrative agent under our credit facility was changed to keybank , national association . on may 8 , 2012 , we entered into an amendment with the lenders under our credit facility to , among other things , and ( i ) increase our credit facility to $ 600 million , and ( ii ) make changes in the covenant applicable to hedging to allow greater flexibility for management to implement comprehensive hedging plans to adequately protect our operations and capital budgets . on october
| results of operations the following discussion and analysis should be read in conjunction with our consolidated financial statements and the notes thereto contained in item 8 of part ii of this annual report on form 10-k. comparative results of operations for the period indicated are discussed below . year ended december 31 , 2012 compared to year ended december 31 , 2011 revenues replace_table_token_25_th ( 1 ) determined using the ratio of 6 mcf of natural gas to 1 bbl of crude oil . excludes co 2 sales . ( 2 ) although we do not designate our derivatives as cash flow hedges for financial statement purposes , the derivatives do economically hedge the price we receive for crude oil and natural gas . revenues increased by 119 % , to $ 231.2 million for the year ended december 31 , 2012 compared to $ 105.7 million for the year ended december 31 , 2011. oil , natural gas , and natural gas liquids production increased 147 % , 97 % , and 55 % , respectively , during the year ended december 31 , 2012 , as compared to the year ended december 31 , 2011. during the period from january 1 , 2012 through december 31 , 2012 , we drilled 108 gross ( 104.7 net ) wells in the rockies and 42 gross 37.2 wells in southern arkansas .
| 2,339 |
defined story_separator_special_tag the following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying condensed consolidated financial statements and related notes included elsewhere in this annual report on form 10-k. overview we are a medical device company focusing on the development and commercialization of our proprietary stent platform technology , mguard . mguard provides embolic protection in stenting procedures by placing a micron mesh sleeve over a stent . our initial products are marketed for use mainly in patients with acute coronary syndromes , notably acute myocardial infarction ( heart attack ) and saphenous vein graft coronary interventions ( bypass surgery ) . on march 31 , 2011 , we completed a series of share exchange transactions pursuant to which we acquired all of the capital stock of inspiremd ltd. , a company formed under the laws of the state of israel , in exchange for an aggregate of 50,666,663 shares of our common stock . as a result of these share exchange transactions , inspiremd ltd. became our wholly-owned subsidiary , we discontinued our former business and succeeded to the business of inspiremd ltd. as our sole line of business . the share exchange transactions are being accounted for as a recapitalization . inspiremd ltd. is the acquirer for accounting purposes and we are the acquired company . accordingly , the historical financial statements presented and the discussion of financial condition and results of operations herein are those of inspiremd ltd. , retroactively restated for , and giving effect to , the number of shares received in the share exchange transactions , and do not include the historical financial results of our former business . the accumulated earnings of inspiremd ltd. were also carried forward after the share exchange transactions and earnings per share have been retroactively restated to give effect to the recapitalization for all periods presented . operations reported for periods prior to the share exchange transactions are those of inspiremd ltd. recent events on october 31 , 2011 , our stockholders authorized our board of directors to amend our amended and restated certificate of incorporation to effect a reverse stock split of our common stock at a ratio of one-for-two to one-for-four , at any time prior to our 2012 annual stockholders ' meeting , the exact ratio of the reverse stock split to be determined by the board . as of the date of this prospectus , we have not effected the reverse stock split and , as such , the information with respect to our common stock in this prospectus and the accompanying financial statements and related notes does not give effect to any reverse stock split . on october 4 , 2011 , inspiremd ltd. , our wholly-owned subsidiary , entered into a clinical trial services agreement with harvard clinical research institute , inc. , pursuant to which harvard clinical research institute , inc. will conduct a study entitled โ mguard stent system clinical trial in patients with acute myocardial infarction โ on our behalf . we will pay harvard clinical research institute , inc. an estimated fee of approximately $ 10 million for conducting the study , subject to adjustment dependent upon changes in the scope and nature of the study , as well as other costs to be determined by the parties . critical accounting policies use of estimates the preparation of financial statements in conformity with u.s. gaap requires management to make estimates using assumptions that affect the reported amounts of assets and liabilities , disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expenses during the reporting periods . actual results could differ from those estimates . 38 as applicable to these consolidated financial statements , the most significant estimates and assumptions relate to revenue recognition including provision for returns , legal contingencies and estimation of the fair value of share-based compensation and convertible debt . functional currency the currency of the primary economic environment in which our operations are conducted is the u.s. dollar ( โ $ โ or โ dollar โ ) . accordingly , the functional currency of us and of our subsidiaries is the dollar . the dollar figures are determined as follows : transactions and balances originally denominated in dollars are presented in their original amounts . balances in foreign currencies are translated into dollars using historical and current exchange rates for non-monetary and monetary balances , respectively . the resulting translation gains or losses are recorded as financial income or expense , as appropriate . for transactions reflected in the statements of operations in foreign currencies , the exchange rates at transaction dates are used . depreciation and changes in inventories and other changes deriving from non-monetary items are based on historical exchange rates . fair value measurement fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date . in determining fair value , we use various valuation approaches , including market , income and or cost approaches . hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available . observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of us . unobservable inputs are inputs that reflect our assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances . the hierarchy is broken down into three levels based on the reliability of inputs . story_separator_special_tag million worth of shipments made to the distributor in poland that we recorded as deferred revenues was only recognized during the twelve months ended december 31 , 2010 as revenues . as noted above , our distributor in brazil has a contractual right to return all purchases for up to six months from the delivery date . as also noted above , due to our inability to accurately estimate the rate of return by this distributor , all sales made to it were also deferred until the six month return period elapsed . the deferred revenue of approximately $ 0.4 million recognized during the twelve months period ended december 31 , 2010 accounted for purchases made in december 2009 that were not returned and were not yet recognized as revenues . gross profit . for the twelve months ended december 31 , 2011 , gross profit ( revenue less cost of revenues ) increased 32.8 % , or approximately $ 0.7 million , to approximately $ 3.0 million from approximately $ 2.3 million during the same period in 2010. gross margin increased from 45.5 % in the twelve months ended december 31 , 2010 to 49.9 % in the twelve months ended december 31 , 2011. in addition to an increase in sales , we were able to improve our gross profit because of reduced production cost per stent driven by a reduction in price per unit from our subcontractor and economies of scale . for the twelve months ended december 31 , 2011 , our average selling price per stent recognized in revenue was $ 571 , and we recognized the sale of 10,523 stents , compared to an average price of $ 606 per stent and 8,171 stents recognized in revenue for the same period in 2010. our cost of goods sold per stent decreased from an average of $ 330 per stent recognized in revenue for the twelve months ended december 31 , 2010 to an average of $ 286 per stent for the same period in 2011. the higher price per stent for the twelve months ended december 31 , 2010 was affected by the price of stents sold in 2008 and 2009 to one of our european distributors in euros when the euro was much stronger than the u.s. dollar , at an average price of $ 997 when translated to u.s. dollars . research and development expense . for the twelve months ended december 31 , 2011 , research and development expense increased 84.9 % , or approximately $ 1.2 million , to approximately $ 2.5 million from approximately $ 1.3 million during the same period in 2010. the increase in cost resulted primarily from higher clinical trial expenses of approximately $ 1.2 million , attributable mainly to the u.s. food and drug administration clinical trial ( approximately $ 0.9 million ) and the mguard for acute st elevation reperfusion trial ( master trial ) ( approximately $ 0.3 million ) , and an increase of approximately $ 0.3 million in salaries , offset by approximately $ 0.2 million reduction in miscellaneous expenses and approximately $ 0.1 million reduction in share based compensation . research and development expense as a percentage of revenue increased to 41.2 % in 2011 from 27.0 % in 2010. selling and marketing expense . for the twelve months ended december 31 , 2011 , selling and marketing expense increased 59.6 % , or approximately $ 0.7 million , to approximately $ 2.0 million from approximately $ 1.3 million during the same period in 2010. the increase in selling and marketing expense resulted primarily from approximately $ 0.3 million of additional salaries and approximately $ 0.4 million of share based compensation of predominately newly hired sales personnel as we expanded our sales activities worldwide , and approximately $ 0.1 million of commissions pertaining mainly to our first time shipment of approximately $ 1.2 million to our distributor in india . this increase was partially offset by a decrease of approximately $ 0.1 million in advertising expenses . selling and marketing expense as a percentage of revenue increased to 32.9 % in 2011 from 25.0 % in 2010 . 42 general and administrative expense . for the twelve months ended december 31 , 2011 , general and administrative expense increased 323.6 % , or approximately $ 9.4 million , to approximately $ 12.3 million from $ 2.9 million during the same period in 2010. the increase resulted primarily from an increase in share based compensation of $ 7.5 million ( which predominately pertains to directors ' compensation ) , an increase of approximately $ 0.5 million in salary expenses ( due to an increase in employee infrastructure to accommodate and comply with securities and exchange commission standards and reporting ) , an increase in investor related activities of approximately $ 0.5 million ( due to us having been a publicly reporting company during the twelve months ended december 31 , 2011 , but not during the same period in 2010 ) , an increase of approximately $ 0.5 million in litigation expenses ( primarily due to a provision for our potential loss related to a threatened lawsuit from a finder claiming a future success fee and commissions for assistance in finding our distributor in brazil ) , approximately $ 0.3 million in legal fees ( also related primarily to compliance with securities and exchange commission standards ) , and approximately $ 0.2 million in audit fees to accommodate and comply with securities and exchange commission standards and reporting . this increase was partially offset by a decrease of approximately $ 0.1 million in miscellaneous expenses . general and administrative expense as a percentage of revenue increased to 204.4 % in 2011 from 58.6 % in 2010. financial expenses .
| results of operations twelve months ended december 31 , 2011 compared to twelve months ended december 31 , 2010 revenues . for the twelve months ended december 31 , 2011 , total revenue increased approximately $ 1.1 million , or 21.3 % , to approximately $ 6.0 million from approximately $ 4.9 million during the same period in 2010. the $ 1.1 million increase was attributable primarily to an increase in volume , as described more fully below . the following is an explanation of the approximately $ 1.1 million increase in revenue broken down by its main two components , an increase in gross revenues of approximately $ 2.5 million offset by a net decrease in deferred revenues of approximately $ 1.4 million . for the twelve months ended december 31 , 2011 , total gross revenue increased by approximately $ 2.5 million , or 77.6 % , to approximately $ 5.7 million from approximately $ 3.2 million during the same period in 2010. this increase in total gross revenue was predominantly volume based , with increased volume accounting for approximately $ 2.3 million , or approximately 72.5 % , and price increases accounting for the remaining approximately $ 0.2 million , or approximately 5.1 % . in general , we focused on opening new markets , such as india , and also increasing sales in existing markets by presenting clinical data at conferences and individual presentations to doctors about the merits of mguard tm .
| 2,340 |
principles of consolidation the consolidated financial statements include the accounts of the company and its wholly-owned subsidiaries , robotic assistance devices , inc. , on the move experience , llc and omv transports , llc . all significant intercompany accounts and transactions have been eliminated in consolidation . the consolidated financial statements reflect all adjustments , consisting of normal recurring accruals , which are , in the opinion of management , necessary for a fair presentation of such statements . cash rad considers all highly liquid investments with an original maturity of three months or less to be cash equivalents . cash and cash equivalents consist of cash on deposit with banks and money market instruments . rad places its cash and cash equivalents with high-quality , u.s. financial institutions and , to date has not experienced losses on any of its balances . accounts receivable accounts receivable are comprised of balances due from customers , net of estimated allowances for uncollectible accounts . in determining collectability , historical trends are evaluated , and specific customer issues are reviewed on a periodic basis to arrive at appropriate allowances . robot parts inventory robot parts inventory is stated at the lower of cost or market using the weighted average cost method . the company records a valuation reserve for obsolete and slow-moving inventory , relying principally on specific identification of such inventory . the company uses these robot parts in the assembly of revenue earning robots and demo robots as well as research and development . depending on use , the company will transfer the parts to the corresponding asset or expense if used in research and development . a charge to income is taken when factors that would result in a need for an increase in the valuation , such as excess or obsolete inventory , are noted . deposits deposits are comprised of deposits of $ 0 and $ 150,000 as of february 28 , 2018 and 2017 , respectively , on robots that are expected to be received within one year . revenue earning robots : revenue earning robots are stated at cost . depreciation is provided on a straight-line basis over the estimated useful life of 48 months . the company continually evaluates revenue earning robots to determine whether events or changes in circumstances have occurred that may warrant revision of the estimated useful life or whether the robot should be evaluated for possible impairment . the company uses a combination of the undiscounted cash flows and market approaches in assessing whether an asset has been impaired . the company measures impairment losses based upon the amount by which the carrying amount of the asset exceeds the fair value . fixed assets fixed assets are stated at cost . depreciation is provided on the straight-line method based on the estimated useful lives of the respective assets which range from two to five years . major repairs or improvements are capitalized . minor replacements and maintenance and repairs which do not improve or extend asset lives are expensed currently . f-8 on the move systems corp. ( f/k/a robotic assistance devices , inc. ) notes to the consolidated financial statements demo robots 4 years computer equipment 3 years office equipment 4 years vehicles 3 years leasehold improvements 5 years , the life of the lease the company periodically evaluates the fair value of fixed assets whenever events or changes in circumstances indicate that its carrying amounts may not be recoverable . upon retirement or other disposition of fixed assets , the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss , if any , is recognized in income . research and development research and development costs are expensed in the period they are incurred , unless they meet specific criteria related to technical , market and financial feasibility , as determined by management , including but not limited to the establishment of a clearly defined future market for the product , and the availability of adequate resources to complete the project . if all criteria are met , the costs are deferred and amortized over the expected useful life or written off if a product is abandoned . at february 28 , 2018 , the company had no deferred development costs . contingencies occasionally , the company may be involved in claims and legal proceedings arising from the ordinary course of its business . rad records a provision for a liability when it believes that it is both probable that a liability has been incurred , and the amount can be reasonably estimated . if these estimates and assumptions change or prove to be incorrect , it could have a material impact on rad 's financial statements . contingencies are inherently story_separator_special_tag the following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes to those financial statements that are included elsewhere in this report . our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties , such as our plans , objectives , expectations and intentions . actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors , including those set forth under the risk factors , forward-looking statements and business sections in this report . story_separator_special_tag the company uses these robot parts in the assembly of revenue earning robots and demo robots as well as research and development . depending on use , the company will transfer the parts to the corresponding asset or expense if used in research and development . a charge to income is taken when factors that would result in a need for an increase in the valuation , such as excess or obsolete inventory , are noted . revenue earning robots revenue earning robots are stated at cost . depreciation is provided on a straight-line basis over the estimated useful life of 48 months . the company continually evaluates revenue earning robots to determine whether events or changes in circumstances have occurred that may warrant revision of the estimated useful life or whether the robot should be evaluated for possible impairment . the company uses a combination of the undiscounted cash flows and market approaches in assessing whether an asset has been impaired . the company measures impairment losses based upon the amount by which the carrying amount of the asset exceeds the fair value . fixed assets fixed assets are stated at cost . depreciation is provided on the straight-line method based on the estimated useful lives of the respective assets which range from two to five years . major repairs or improvements are capitalized . minor replacements and maintenance and repairs which do not improve or extend asset lives are expensed currently . demo robots 4 years computer equipment 3 years office equipment 4 years vehicles 3 years leasehold improvements 5 years , the life of the lease the company periodically evaluates the fair value of fixed assets whenever events or changes in circumstances indicate that its carrying amounts may not be recoverable . upon retirement or other disposition of fixed assets , the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss , if any , is recognized in income . research and development research and development costs are expensed in the period they are incurred , unless they meet specific criteria related to technical , market and financial feasibility , as determined by management , including but not limited to the establishment of a clearly defined future market for the product , and the availability of adequate resources to complete the project . if all criteria are met , the costs are deferred and amortized over the expected useful life or written off if a product is abandoned . at february 28 , 2018 , the company had no deferred development costs . revenue recognition revenue is recognized when persuasive evidence of an arrangement exists , goods are delivered for rental and or services are rendered , sales price is determinable , and collection is reasonably assured . fair value of financial instruments asc topic 820 , fair value measurements and disclosures ( โ asc topic 820 โ ) provides a framework for measuring fair value in accordance with generally accepted accounting principles . asc topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date . asc topic 820 establishes a fair value hierarchy that distinguishes between ( 1 ) market participant assumptions developed based on market data obtained from independent sources ( observable inputs ) and ( 2 ) an entity 's own assumptions about market participant assumptions developed based on the best information available in the circumstances ( unobservable inputs ) . - 21 - the fair value hierarchy consists of three broad levels , which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities ( level 1 ) and the lowest priority to unobservable inputs ( level 3 ) . the three levels of the fair value hierarchy under asc topic 820 are described as follows : โ level 1 โ unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date . โ level 2 โ inputs other than quoted prices included within level 1 that are observable for the asset or liability , either directly or indirectly . level 2 inputs include quoted prices for similar assets or liabilities in active markets ; quoted prices for identical or similar assets or liabilities in markets that are not active ; inputs other than quoted prices that are observable for the asset or liability ; and inputs that are derived principally from or corroborated by observable market data by correlation or other means . โ level 3 โ inputs that are unobservable for the asset or liability . the carrying amounts of rad ' s financial assets and liabilities , such as cash , accounts receivable , prepaid expenses , accounts payable and accrued expenses , approximate their fair values because of the short maturity of these instruments . recently adopted accounting pronouncements in january 2017 , the financial accounting standards board ( โ fasb โ ) issued accounting standard update ( โ asu โ ) 2017-01 , business combinations : clarifying the definition of a business , which amends the current definition of a business . under asu 2017-01 , to be considered a business , an acquisition would have to include an input and a substantive process that together significantly contributes to the ability to create outputs . asu 2017-01 further states that when substantially all of the fair value of gross assets acquired is concentrated in a single asset ( or a group of similar assets ) , the assets acquired would not represent a business .
| results of operations the following table shows our results of operations for the year ended february 28 , 2018 , the two months ended february 28 , 2017 and period from inception ( july 26 , 2016 ) through december 31 , 2016. the historical results presented below are not necessarily indicative of the results that may be expected for any future period . replace_table_token_2_th revenue the company began to earn revenues of for the year ended february 28 , 2018 of $ 106,476 , but had no revenues for the period from inception ( july 26 , 2016 ) through december 31 , 2016 and for the two months ended february 28 , 2017 , since the company had just begun operations and was still in product development . operating expenses operating expenses for the year ended february 28 , 2018 , the two months ended february 28 , 2017 and period from inception ( july 26 , 2016 ) through december 31 , 2016 , were comprised of the following : replace_table_token_3_th - 18 - our operating expenses were comprised of general and administrative expenses , research and development , depreciation and amortization , and a loss on impairment of fixed assets . general and administrative expenses consisted primarily of professional services , automobile expenses , advertising , salaries and wages , travel expenses and rent . our operating expenses during the year ended february 28 , 2018 and the two months ended february 28 , 2017 were $ 3,578,301 and $ 81,203 , respectively .
| 2,341 |
contributions to the postretirement plans in fiscal year 2012 are anticipated to be $ 11.4 million to the qualified trusts , and $ 0.3 million paid directly to story_separator_special_tag the laclede group , inc. introduction this management 's discussion analyzes the financial condition and results of operations of the laclede group , inc. ( laclede group or the company ) and its subsidiaries . it includes management 's view of factors that affect its business , explanations of past financial results including changes in earnings and costs from the prior year periods , and their effects on the company 's overall financial condition and liquidity . the management 's discussion and analysis of financial condition and results of operations should be read in conjunction with the company 's consolidated financial statements and the notes thereto . story_separator_special_tag nevertheless , income from ler 's operations is more subject to fluctuations in market conditions than the utility 's operations . ler 's business is directly impacted by the effects of competition in the marketplace , the impact of new pipeline infrastructure , and surplus natural gas supplies on regional natural gas commodity prices . in the course of its business , ler enters into commitments associated with the purchase or sale of natural gas . many of ler 's physical purchase and sale transactions are recognized in earnings when the natural gas is delivered . however , generally accepted accounting principles ( gaap ) require that some of ler 's energy-related transactions be accounted for as derivatives , with the changes in their fair value ( representing unrealized gains or losses ) recorded in earnings in periods prior to physical delivery . because related transactions of a purchase and sale strategy may be accounted for differently , there may be timing differences in the recognition of earnings under gaap and economic earnings realized upon settlement . the company reports both gaap and net economic earnings , as discussed below . in addition to its operating cash flows , ler relies on parental guarantees to secure its purchase and sales obligations of natural gas . ler also has access to laclede group 's liquidity resources . a large portion of ler 's receivables are from customers in the energy industry . ler also enters into netting arrangements with many of its energy counterparties to reduce overall credit and collateral exposure . although ler 's uncollectible amounts are closely monitored and have not been significant , increases in uncollectible amounts from customers are possible and could adversely affect ler 's liquidity and results . ler carefully monitors the creditworthiness of counterparties to its transactions . ler performs in-house credit reviews of potential customers and may require credit assurances such as prepayments , letters of credit , or parental guarantees when appropriate . credit limits for customers are established and monitored . 27 earnings laclede group 's net income for fiscal years 2011 , 2010 , and 2009 was $ 63.8 million , $ 54.0 million , and $ 64.2 million , respectively . basic and diluted earnings per share ( eps ) were $ 2.87 and $ 2.86 , respectively , for fiscal year 2011 compared with basic and diluted earnings per share of $ 2.43 for fiscal year 2010 , and $ 2.90 and $ 2.89 , respectively , for fiscal year 2009. the laclede group reports net income and earnings per share determined in accordance with gaap . laclede group 's non-regulated subsidiary , ler , and to a lesser extent laclede gas , account for certain transactions through fair value measurements . as a result , management also uses the non-gaap measures of net economic earnings and net economic earnings per share when internally evaluating results of operations . net economic earnings exclude from net income the after-tax impacts of net unrealized gains and losses on energy-related derivatives that are required by gaap fair value accounting . this adjustment eliminates the impact of timing differences related to current changes in the fair value of financial and physical transactions prior to their completion and settlement . management believes that excluding the earnings volatility caused by recognizing changes in fair value prior to settlement provides a useful representation of the economic impact of only the actual settled transactions and their effects on results of operations . these internal non-gaap operating metrics should not be considered as an alternative to , or more meaningful than , gaap measures such as net income . while management uses these non-gaap measures to evaluate both laclede gas and ler , the net effect of unrealized gains and losses on the utility 's earnings is minimal because gains or losses on its natural gas derivative instruments are deferred pursuant to its pga clause , as authorized by the mopsc . these unrealized gains and losses result primarily from two sources : 1 ) changes in fair values of physical and or financial derivatives prior to the period of settlement ; and , 2 ) ineffective portions of accounting hedges , required to be recorded in earnings prior to settlement , due to differences in commodity price changes between the locations of the forecasted physical purchase or sale transactions and the locations of the underlying hedge instruments . unrealized gains or losses are recorded in each period until being replaced with the actual gains or losses realized when the associated physical transaction ( s ) occur . 28 reconciliations of net economic earnings and net economic earnings per share to the company 's most directly comparable gaap measures are provided below . overview โ net income ( loss ) ( millions , except per share amounts ) net economic earnings ( non-gaap ) add : unrealized gain ( loss ) on energy-related derivative contracts * net income ( gaap ) year ended september 30 , 2011 regulated gas distribution $ 46.9 $ โ $ 46.9 non-regulated gas marketing 9.0 1.4 10.4 other 6.5 โ 6.5 total $ 62.4 $ 1.4 $ 63.8 per share amounts * * $ 2.79 $ 0.07 $ 2.86 year ended september 30 , 2010 regulated gas distribution $ 36.1 story_separator_special_tag these factors were partially offset by : lower income from off-system sales and capacity release totaling $ 4.3 million ; and , the effect of lower system gas sales volumes and other variations totaling $ 2.8 million . 30 the non-regulated gas marketing segment reported net income totaling $ 13.7 million for fiscal year 2010 , a decrease in earnings of $ 17.7 million compared with fiscal year 2009. net economic earnings decreased $ 12.4 million compared with fiscal year 2009. these decreases were primarily due to ler 's significantly reduced margins on sales of natural gas . the reduced sales margins were driven primarily by narrower regional price differentials that prevailed in the marketplace during fiscal year 2010 , as compared to the favorable market conditions that existed during fiscal year 2009. on a gaap basis , the reduced sales margins also included the effect of after-tax net unrealized losses from certain of ler 's energy-related derivative contracts , totaling $ 2.0 million , recognized in earnings during fiscal year 2010 , compared with after-tax net unrealized gains , totaling $ 3.3 million , recognized during fiscal year 2009. other net income and other net economic earnings increased by $ 4.7 million in 2010 , compared with 2009. the increase was primarily due to a propane transaction in the wholesale market by laclede gas during the quarter ended december 31 , 2009 as noted above . regulated gas distribution operating revenues laclede gas passes on to utility customers ( subject to prudence review by the mopsc ) increases and decreases in the wholesale cost of natural gas in accordance with its pga clause . the volatility of the wholesale natural gas market results in fluctuations from period to period in the recorded levels of , among other items , revenues and natural gas cost expense . nevertheless , increases and decreases in the cost of gas associated with system gas sales volumes have no direct effect on net revenues and net income . 2011 vs. 2010 regulated gas distribution operating revenues for fiscal year 2011 increased $ 48.9 million compared to fiscal year 2010. temperatures experienced in the utility 's service area during 2011 were essentially normal , but 1.1 % colder than the same period last year . total system therms sold and transported were 885.4 million for fiscal year 2011 compared with 894.5 million for fiscal year 2010. total off-system therms sold and transported were 223.0 million for fiscal year 2011 compared with 71.0 million for fiscal year 2010. the increase in regulated gas distribution operating revenues was primarily attributable to the following factors : ( millions ) higher off-system sales volumes ( reflecting more favorable market conditions as described in greater detail in the results of operations ) $ 67.9 general rate increase , effective september 1 , 2010 28.0 lower wholesale gas costs passed on to utility customers ( subject to prudence review by the mopsc ) ( 20.5 ) lower system sales volumes and other variations ( 15.3 ) lower isrs revenues ( 6.2 ) lower prices charged for off-system sales ( 5.0 ) total variation $ 48.9 31 2010 vs. 2009 regulated gas distribution operating revenues for fiscal year 2010 decreased $ 189.7 million compared to fiscal year 2009 , primarily due to lower wholesale gas costs . temperatures experienced in the utility 's service area during 2010 were 1.6 % warmer than fiscal year 2009 and 2.5 % warmer than normal . total system therms sold and transported were 894.5 million for fiscal year 2010 compared with 908.0 million for fiscal year 2009. total off-system therms sold and transported were 71.0 million for fiscal year 2010 compared with 163.0 million for fiscal year 2009. the decrease in regulated gas distribution operating revenues was primarily attributable to the following factors : ( millions ) lower wholesale gas costs passed on to utility customers ( subject to prudence review by the mopsc ) $ ( 141.1 ) lower off-system sales volumes ( reflecting less favorable market conditions as described in greater detail in the results of operations ) ( 42.8 ) lower system sales volumes and other variations ( 10.2 ) higher isrs revenues 3.2 general rate increase , effective september 1 , 2010 2.5 lower prices charged for off-system sales ( 1.3 ) total variation $ ( 189.7 ) regulated gas distribution operating expenses 2011 vs. 2010 regulated gas distribution operating expenses in fiscal year 2011 increased $ 34.7 million , or 4.4 % , from fiscal year 2010. natural and propane gas expense increased $ 30.0 million from last year 's level , primarily attributable to higher off-system gas expense , partially offset by lower rates charged by our suppliers and decreased system volumes purchased for sendout . other operation and maintenance expenses increased $ 3.7 million , or 2.2 % , primarily due to higher pension expense and increased group insurance charges , partially offset by a higher rate of overheads capitalized and decreased maintenance charges . depreciation and amortization expense increased $ 1.6 million , or 4.4 % , primarily due to additional depreciable property . taxes , other than income taxes , decreased $ 0.7 million , or 1.1 % , primarily due to decreased gross receipts taxes ( attributable to decreased system sales revenues ) . 2010 vs. 2009 regulated gas distribution operating expenses in fiscal year 2010 decreased $ 191.6 million , or 19.6 % , from fiscal year 2009. natural and propane gas expense decreased $ 180.1 million from fiscal year 2009 , primarily attributable to lower rates charged by our suppliers and lower off-system gas expense . other operation and maintenance expenses decreased $ 5.1 million , or 2.9 % , primarily due to a lower provision for uncollectible accounts , reduced distribution and maintenance expenses , a lower provision for injuries and damages , and decreased charges for outside services . these factors were partially offset by the effect of a gain on the disposal of assets recorded in fiscal year 2009 and an increase in pension expense .
| results of operations overview laclede group 's earnings are primarily derived from the regulated activities of its largest subsidiary , laclede gas company ( laclede gas or the utility ) , missouri 's largest natural gas distribution company . laclede gas is regulated by the missouri public service commission ( mopsc or commission ) and serves the city of st. louis and parts of ten counties in eastern missouri . laclede gas delivers natural gas to retail customers at rates and in accordance with tariffs authorized by the mopsc . the utility 's earnings are primarily generated by the sale of heating energy . the utility 's weather mitigation rate design lessens the impact of weather volatility on laclede gas ' customers during cold winters and stabilizes the utility 's earnings by recovering fixed costs more evenly during the heating season . due to the seasonal nature of the business of laclede gas , laclede group 's earnings are typically concentrated in the november through april period , which generally corresponds with the heating season . laclede energy resources , inc. ( ler ) is engaged in the marketing of natural gas and related activities on a non-regulated basis . ler markets natural gas to both on-system utility transportation customers and customers outside of laclede gas ' traditional service territory , including large retail and wholesale customers . ler 's operations and customer base are more subject to fluctuations in market conditions than the utility . other subsidiaries provide less than 10 % of consolidated revenues . in june 2011 , the company 's board of directors named ms. suzanne sitherwood , age 51 , as successor to mr. douglas h. yaeger , who will retire on february 1 , 2012. ms. sitherwood became president of the company effective september 1 , 2011 and is expected to become chief executive officer effective upon mr. yaeger 's retirement . in connection with mr. yaeger 's transition to retirement , mr. yaeger relinquished his title of president of the company on september 1 , 2011.
| 2,342 |
the properties acquired in the acquisition are the properties that have generated the majority of the rental income for nhc for the years ended december 31 , 2012 , 2011 , and 2010. the health care properties currently owned and leased to third party operators story_separator_special_tag overview national healthcare corporation , which we also refer to as nhc or the company , is a leading provider of long-term health care services . at december 31 , 2012 we operate or manage 75 long-term health care centers with 9,460 beds in 10 states and provide various services in one additional state . these operations are provided by separately funded and maintained subsidiaries . we provide long-term health care services to patients in a variety of settings including long-term nursing centers , managed care specialty units , sub-acute care units , alzheimer 's care units , assisted living centers , independent living centers , and homecare programs . we also have a non-controlling ownership interest in a hospice care business that services nhc owned health care centers and others . in addition , we provide management services , accounting services and insurance services to third party owners of long-term health care centers . 30 executive summary earnings to monitor our earnings , we have developed budgets and management reports to monitor labor , census , and the composition of revenues . inflationary increases in our costs may cause net earnings from patient services to decline . medicare reimbursement rate changes in july 2012 , cms released its skilled nursing facility pps update for the fiscal year 2013 , which began october 1 , 2012. the notice provides a 1.8 % rate update , which reflects a 2.5 % market basket increase that is reduced under the aca by a 0.7 % multifactor productivity adjustment . cms estimates the update will increase overall payments to skilled nursing facilities in fiscal year 2013 by $ 670 million compared to fiscal year 2012 levels . the notice also provides an update to certain fiscal year 2012 policy changes involving recalibration of the parity adjustment , reallocation of group therapy time , and changes to the mds 3.0 patient assessment instrument . the effect of the 2013 pps rate update on our revenues is dependent upon our census and the mix of our patients at the pps pay rates . cms ' 2012 final rule , which began october 1 , 2011 , provided for a net 11.1 % reduction in pps payments to skilled nursing facilities . the fiscal year 2012 rule also adjusted the method by which group therapy is counted for reimbursement purposes , and changes the timing in which patients who received therapy must be reassessed for purposes of determining their rug category . we anticipated that , assuming other factors remained constant , cms 's reduced reimbursement rates for its fiscal year 2012 would have a significant and adverse effect on our results of operations when compared to the periods in cms 's fiscal year 2011. we estimated the resulting decrease in revenue would be approximately $ 24,000,000 annually , or $ 6,000,000 per quarter . furthermore , changes in government requirements for providing therapy services were estimated to increase our operating costs by approximately $ 6,000,000 annually , or $ 1,500,000 per quarter . our results differed from our estimates because of an improved patient mix and because of the implementation of cost saving measures . with the passing of the american taxpayer relief act of 2012 , the scheduled spending cuts of not more than 2 % for medicare skilled nursing facility payments were delayed until march 1 , 2013. the spending cuts will go into effect unless a new law is enacted that specifically addresses these cuts . we are unable to predict the financial impact of sequestration , if enacted , or other spending cuts congress may implement . development and growth we are undertaking to expand our long-term care operations while protecting our existing operations and markets . the following table lists our recent construction and purchase activities . replace_table_token_8_th in august 2012 , we began construction on a 90-bed skilled nursing facility in tullahoma , tennessee . this facility is expected to be completed during the third quarter of 2013. also , in november 2012 , we began construction on a 50-bed skilled nursing addition to nhc lexington in lexington , south carolina . in 2013 , we expect to begin construction of a 92-bed skilled nursing facility in sumner county , tennessee . in addition , we engaged in a joint venture with rsf partners , inc. , and flournoy development , inc. to build and operate an 85-unit assisted living community ( `` camellia walk '' ) in augusta , georgia . camellia walk should begin construction in 2013 and open in the first quarter of 2014. we also entered into a joint venture with reliant healthcare , llc to develop and operate a 14-bed psychiatric hospital focusing on geriatric care in osage beach , missouri . this project is projected to open in 2014. during 2013 we will also apply for certificates of need for additional beds in our markets and also evaluate the feasibility of expansion into new markets by building private pay health care centers or by the purchase of existing health care centers . 31 accrued risk reserves our accrued professional liability reserves , workers ' compensation reserves and health insurance reserves totaled $ 110,331,000 at december 31 , 2012 and are a primary area of management focus . we have set aside restricted cash and marketable securities to fund our professional liability and workers ' compensation reserves . as to exposure for professional liability claims , we have developed for our centers performance certification criteria to measure and bring focus to the patient care issues most likely to produce professional liability exposure , including in โ house acquired pressure ulcers , significant weight loss and numbers of falls . story_separator_special_tag as of december 31 , 2012 , we and or our managed centers are defendants in 31 such claims inclusive of years 2002 through 2012. it remains possible that those pending matters plus potential unasserted claims could exceed our reserves , which could have a material adverse effect on our financial position , results of operations and cash flows . it is also possible that future events could cause us to make significant adjustments or revisions to these reserve estimates and cause our reported net income to vary significantly from period to period . we maintain insurance coverage for incidents occurring in all providers owned or leased by us , and most providers managed by us . the coverages include both primary policies and excess policies . in all years , settlements , if any , in excess of available insurance policy limits and our own reserves would be expensed by us . credit losses certain of our accounts receivable from private paying patients and certain of our notes receivable are subject to credit losses . we have attempted to reserve for expected accounts receivable credit losses based on our past experience with similar accounts receivable and believe our reserves to be adequate . we continually monitor and evaluate the carrying amount of our notes receivable in accordance with asc topic 310 , receivables . it is possible , however , that the accuracy of our estimation process could be materially impacted as the composition of the receivables changes over time . we continually review and refine our estimation process to make it as reactive to these changes as possible . however , we can not guarantee that we will be able to accurately estimate credit losses on these balances . it is possible that future events could cause us to make significant adjustments or revisions to these estimates and cause our reported net income to vary significantly from period to period . 33 uncertain tax positions uncertain tax positions may arise where tax laws may allow for alternative interpretations or where the timing of recognition of income is subject to judgment . we believe we have adequate provisions for our uncertain tax positions including related penalties and interest . the above listing is not intended to be a comprehensive list of all of our accounting policies . in many cases , the accounting treatment of a particular transaction is specifically dictated by generally accepted accounting principles , with limited need for management ' s judgment in their application . there are also areas in which management ' s judgment in selecting any available alternative would not produce a materially different result . see our audited consolidated financial statements and notes thereto which contain accounting policies and other disclosures required by generally accepted accounting principles . story_separator_special_tag until march 1 , 2013. the spending cuts will go into effect unless a new law is enacted that specifically addresses these cuts . we are unable to predict the financial impact of sequestration , if enacted , or other spending cuts congress may implement . for 2012 , our average medicare per diem rate for skilled nursing facilities decreased 4.9 % compared to the same period in 2011. no assurances can be given as to whether congress will increase or decrease reimbursement in the future , the timing of any action or the form of relief , if any , that may be enacted . medicare โ homecare programs in january 2012 , we received a decrease in the overall hh pps base rate of 2.4 % . the 2.4 % rate reduction impacted individual providers unevenly . cms eliminated hypertension as a factor in the calculation , reduced the weights on therapy episodes , and increased the weights on non-therapy episodes . we estimated the effect of the revenue decrease for nhc homecare programs to be approximately $ 2,600,000 annually , or $ 650,000 per quarter . in november 2012 , cms issued a final rule to update and revise reimbursement rates for the calendar year 2013. the final rule includes a 2.3 % market basket increase , a 1 % reduction mandated by the aca , and a negative 1.32 % case-mix adjustment . the net effect of these changes is a 0.04 % decrease in the base rate . additionally , the wage index was updated which impacts providers differently depending on their geographic location and changes were made to outlier eligibility standards . in total , cms estimates that the effect of these changes will result in a 0.01 % reduction in reimbursement to home health providers . with the passing of the american taxpayer relief act of 2012 , the scheduled spending cuts of not more than 2 % for medicare home health payments were delayed until march 1 , 2013. the spending cuts will go into effect unless a new law is enacted that specifically addresses these cuts . we are unable to predict the financial impact of sequestration , if enacted , or other spending cuts congress may implement . 35 medicaid โ skilled nursing facilities beginning january 1 , 2012 , the state of tennessee implemented a 4.25 % rate reduction for their medicaid program . on may 14 , 2012 and effective retroactively to january 1 , 2012 , tennessee 's legislation voted to restore 1.75 % of the 4.25 % rate reduction ; thus leaving a net 2.5 % rate reduction for the first six months of 2012. effective july 1 , 2012 and for the fiscal year 2013 , the state of tennessee implemented specific individual nursing facility rate increases . we estimate the resulting increase in revenue beginning july 1 , 2012 will be approximately $ 3,500,000 annually , or $ 875,000 per quarter . in february 2012 and effective retroactively to october 1 , 2011 , the state of missouri ' s medicaid program announced a net $ 6.00 per patient day increase in their medicaid rates . we estimated the resulting increase in revenue of approximately $ 1,720,000 annually , or $ 430,000 per quarter .
| results of operations the following table and discussion sets forth items from the consolidated statements of income as a percentage of net revenues for the audited years ended december 31 , 2012 , 2011 and 2010. percentage of net revenues replace_table_token_9_th 34 the following table sets forth the increase or ( decrease ) in certain items from the consolidated statements of income as compared to the prior period . period to period increase ( decrease ) replace_table_token_10_th the overall average census in owned and leased health care centers for 2012 was 90.1 % compared to 90.6 % and 92.0 % in 2011 and 2010 , respectively . approximately 67 % of our net patient revenues are derived from medicare , medicaid , and other government programs . as discussed above in the application of critical accounting policies section , amounts earned under these programs are subject to review by the medicare and medicaid intermediaries . see application of critical accounting policies for discussion of the effects that this revenue concentration and the uncertainties related to such revenues have on our revenue recognition policies . government program financial changes cost containment will continue to be a priority for federal and state governments for health care services , including the types of services we provide . government reimbursement programs such as medicare and medicaid prescribe , by law , the billing methods and amounts that health care providers may charge and be reimbursed to care for patients covered by these programs . congress has passed a number of laws that have effected major changes in the medicare and medicaid programs . the balanced budget act of 1997 sought to achieve a balanced federal budget by , among other things , reducing federal spending on medicare and medicaid to various providers .
| 2,343 |
executive summary 2016 highlights net revenue during 2016 increased by $ 206.8 million , or 23.1 % compared to the same period in 2015. the increase in net revenue was primarily due to an increase in advertising revenue on our legacy stations of $ 85.5 million due to the election year , incremental revenue from our newly acquired stations and entities of $ 81.1 million , and an increase in retransmission compensation on our legacy stations of $ 70.5 million , primarily related to renewals of contracts providing for higher rates per subscriber . during 2016 , our board of directors declared quarterly dividends of $ 0.24 per share of our outstanding common stock , or total dividend payments of $ 29.4 million . 2016 acquisitions acquisition date purchase price north dakota february 1 , 2016 $ 44.0 million in cash four cbs affiliated full power television stations in the minot-bismarck-dickinson , nd market . des moines march 14 , 2016 $ 3.9 million in cash one cw affiliated full power television station in the des moines-ames , ia market . west virginia 1st closing on january 4 , 2016 2nd closing on january 31 , 2017 $ 130.0 million in cash , plus working capital adjustments three cbs and one nbc affiliated full power television stations in four markets . we paid $ 65.0 million for our west virginia acquisition as of the first closing funded by a combination of cash on hand and borrowings under our revolving credit facility . on august 2 , 2016 , we received approval from the fcc to acquire the stations ' remaining assets . we also obtained controlling financial interest in these stations for financial reporting purposes and consolidated these assets as of that date . on january 31 , 2017 , we completed the second closing of the acquisition and paid the remaining purchase price of $ 65.0 million , plus working capital adjustments . for additional information with respect to the above acquisitions , refer to item 1 , โ businessโrecent acquisitions โ . 2016 debt transactions in january and february 2016 , we borrowed a net amount of $ 58.0 million under our revolving credit facility to fund certain of our acquisitions . all of these borrowings were fully repaid in 2016 funded by cash from operating activities . in 2016 , we , mission and marshall paid the contractual maturities under each of our term loans totaling $ 22.1 million . on july 27 , 2016 , nexstar escrow completed the issuance and sale of $ 900.0 million of 5.625 % notes at par . these notes will mature on august 1 , 2024 and interest is payable semiannually in arrears on february 1 and august 1 of each year beginning on february 1 , 2017. the gross proceeds of the 5.625 % notes , plus our pre-funding of $ 26.7 million interest , were deposited into a segregated escrow account which could not be utilized until the escrow release conditions of the 5.625 % notes were satisfied . among other things , the escrow release conditions included the consummation of our merger with media general and our assumption of all of the obligations of nexstar escrow under the 5.625 % notes . 37 merger with media general on january 17 , 2017 , we completed the merger with media general . media general owned , operated , or serviced 79 full power television stations in 48 markets . substantially concurrent with the merger , we sold the assets of 12 full power television stations in 12 markets , of which five stations were previously owned by us and seven stations were previously owned by media general . following these transactions , we own , operate , program or provide sales and other services to 171 full power television stations in 100 markets , reaching approximately 44.7 million viewers or nearly 39 % of all u.s. television households . pursuant to the terms of the merger agreement , we paid cash consideration of approximately $ 1.4 billion , issued stock consideration of 16,231,070 shares , including the reissuance of shares from nexstar 's treasury , with a fair value of approximately $ 1.0 billion and issued 228,438 stock option replacements with an estimated fair value of $ 10.7 million on the closing date . an additional consideration in the form of a non-tradeable cvr was also issued to the shareholders and outstanding equity awards of media general . the cvr represents the right to receive a pro rata share of the net proceeds from the disposition of media general 's spectrum in the fcc auction , reduced to account for the indirect benefit that such holder will receive as a shareholder of the combined company . we anticipate to receive , later in 2017 , an estimated $ 479.0 million of gross proceeds from the disposition of media general 's spectrum in the fcc auction but we do not anticipate any disposition of nexstar 's spectrum . the value of each cvr is estimated to be worth between $ 1.70 and $ 2.10 based on the estimated gross proceeds , less estimated transaction expenses , repacking expenses and taxes . simultaneously with the closing of the merger , certain then-existing indebtedness of the company and media general was extinguished , including the company 's term loans and revolving loans with a principal balance of $ 668.8 million and $ 2.0 million , respectively , and media general 's outstanding term loans and senior unsecured notes with a principal balance of approximately $ 1.4 billion and $ 275.0 million , respectively . we inherited the $ 400.0 million 5.875 % notes issued by lin tv , which became our indirect subsidiary as of the closing date . story_separator_special_tag while the majority of local spot revenue is placed by local agencies , some advertisers place their schedules directly with the stations ' local sales staff , thereby eliminating the agency commission . each station also has an agreement with a national representative firm that provides for sales representation outside the particular station 's market . advertising schedules received through the national representative firm are for national or large regional accounts that advertise in several markets simultaneously . national representative commission rates vary within the industry and are governed by each station 's agreement . another source of revenue for the company that has grown significantly in recent years relates to retransmission of our station signals by cable , satellite and other mvpds . mvpds generally pay for retransmission rights on a rate per subscriber basis . the growth of this revenue stream has primarily related to increases in the subscriber rates paid by mvpds . most of our stations have a network affiliation agreement pursuant to which the network provides programming to the station during specified time periods , including prime time , in exchange for affiliation fees paid to the networks and the right to sell a portion of the advertising time during these broadcasts . network affiliation fees have been increasing industry wide and will continue to increase over the next several years . each station acquires licenses to broadcast programming in non-news and non-network time periods . the licenses are either purchased from a program distributor for cash and or the program distributor is allowed to sell some of the advertising inventory as compensation to eliminate or reduce the cash cost for the license . the latter practice is referred to as barter broadcast rights . barter broadcast rights are recorded at management 's estimate of the value of the advertising time exchanged using historical advertising rates , which approximates the fair value of the program material received . the programming expense is recognized over the license period or period of usage , whichever ends earlier . our primary operating expenses include employee salaries , commissions and benefits , newsgathering and programming costs . a large percentage of the costs involved in the operation of our stations and the stations we provide services to remains relatively fixed . we also guarantee all obligations incurred under mission 's and marshall 's senior secured credit facilities . mission is a guarantor of our senior secured credit facility , our 6.125 % notes and our 5.625 % but does not guarantee lin tv 's 5.875 % notes . marshall does not guarantee any debt within the group . in consideration of our guarantee of mission 's senior secured credit facility , mission has granted us purchase options to acquire the assets and assume the liabilities of each mission station , subject to fcc consent . these option agreements ( which expire on various dates between 2017 and 2024 ) are freely exercisable or assignable by us without consent or approval by mission or its shareholders . we expect these option agreements to be renewed upon expiration . we do not own mission , marshall , parker , white knight , wvmh or their television stations . however , we are deemed under u.s. gaap to have controlling financial interests in these entities because of ( 1 ) the local service agreements nexstar has with their stations , ( 2 ) our guarantees of the obligations incurred under mission 's and marshall 's senior secured credit facilities , ( 3 ) our power over significant activities affecting these entities ' economic performance , including budgeting for advertising revenue , advertising sales and , for mission , parker , white knight and wvmh , hiring and firing of sales force personnel and ( 4 ) purchase options granted by mission and white knight that permit nexstar to acquire the assets and assume the liabilities of each mission and white knight station , subject to fcc consent . in compliance with fcc regulations for all the parties , each of mission , marshall , parker , white knight and wvmh maintains complete responsibility for and control over programming , finances and personnel for their stations . 40 in connection with the merger , we have stepped into media general 's local service agreements with vies that own and operate an additional 10 stations . additionally , we have assumed media general 's rights under the purchase options granted by shield , vaughan , tamer and super towers that permit nexstar to acquire the assets and assume the liabilities of each of these vies ' stations at any time , subject to fcc consent . simultaneous with the merger , shield entered into a credit agreeme nt with a syndicate of lenders led by bank of america , n.a. , as administrative agent ( the โ shield facility โ ) . as of the closing date , the shield facility consisted of a term loan with an outstanding balance of $ 24.8 million due 2022 , which we guarantee . th erefore , the financial results and financial position of these entities have been consolidated by the nexstar in accordance with the vie accounting guidance as of january 17 , 2017. regulatory developments as a television broadcaster , the company is highly regulated and its operations require that it retain or renew a variety of government approvals and comply with changing federal regulations . in 2014 , the fcc modified its television ownership rules such that a television station licensee that sells more than 15 percent of the weekly advertising inventory of another television station in the same designated market area is deemed to have an attributable ownership interest in that station . in may 2016 , a federal court of appeal vacated this rule and remanded it to the fcc , but in august 2016 the fcc reimposed the rule . parties to existing jsas that are deemed attributable interests and do not comply with the fcc 's local television ownership rule have until september 30 , 2025 to come into compliance .
| results of operations the following table sets forth a summary of the company 's operations ( in thousands ) and each component of operating expense as a percentage of net revenue : replace_table_token_11_th 42 year ended december 31 , 2016 compared to year ended december 31 , 2015 the period-to-period comparability of our consolidated operating results is affected by acquisitions . for each quarter we present , our legacy stations include those stations that we owned or provided services to for the complete quarter in the current and prior years . for our annual and year to date presentations , we combine the legacy stations ' amounts presented in each quarter . revenue gross local advertising revenue was $ 388.2 million for the year ended december 31 , 2016 , compared to $ 369.3 million for the same period in 2015 , an increase of $ 18.9 million , or 5.1 % . gross national advertising revenue was $ 144.0 million for the year ended december 31 , 2016 , compared to $ 153.6 million for the same period in 2015 , a decrease of $ 9.6 million , or 6.2 % . the net increase in local and national advertising revenue was primarily attributable to incremental revenue from our newly acquired stations and stations we contracted with to provide programming and sales services of $ 36.2 million . our legacy stations ' local and national advertising revenue decreased by $ 26.9 million during the year ended december 31 , 2016 compared to the same period in 2015 , primarily due to changes in the mix between our legacy stations ' local , national , and political advertising revenue . our largest advertiser category , automobile , represented approximately 25.9 % and 24.6 % of our local and national advertising revenue for the years ended december 31 , 2016 and 2015 , respectively . overall , including past results of our newly acquired stations , automobile revenues were flat during the year .
| 2,344 |
( 1 ) the following financial statements of lightbridge corporation , supplemental information and report of independent registered public accounting firm are included in this form 10-k : ยท consolidated balance sheets at december 31 , 2020 and 2019 ยท consolidated statements of operations for the years ended december 31 , 2020 and 2019 ยท consolidated statements of cash flows for the years ended december 31 , 2020 and 2019 ยท consolidated statements of changes in stockholders ' equity for the years ended december 31 , 2020 and 2019 ยท notes to consolidated financial statements ยท report of bdo usa , llp dated march story_separator_special_tag the following management 's discussion and analysis of financial condition and results of operations , or md & a , is intended to help the reader understand lightbridge corporation , our operations , and our present business environment . md & a is provided as a supplement to , and should be read in conjunction with , our consolidated financial statements and the accompanying notes thereto , which are contained in part ii . item 8. financial statements and supplementary data , of this report . this discussion contains forward-looking statements that are based on our management 's current expectations , estimates , and projections for our business , which are subject to a number of risks and uncertainties . our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors , including those set forth under โ forward-looking statements โ and part i. item 1a . risk factors . this md & a consists of the following sections : 50 ยท overview of our business and recent developments โ a general overview of our business and updates ; ยท operations review โ an analysis of our consolidated results of operations for the two years presented in our consolidated financial statements . except to the extent that differences are material to an understanding of our business as a whole , we present the discussion in the md & a on a consolidated basis ; and ยท liquidity , capital resources , and financial position โ an analysis of our cash flows , and an overview of our financial position . ยท critical accounting policies , and estimates โ a discussion of accounting policies that require critical judgments and estimates ; overview of our business and recent developments our business financial information is included in part ii . item 8. financial statements and supplementary data , of this annual report on form 10-k. our company 's goal is to impact in a meaningful way the world 's climate and energy problems . we are developing and plan to commercialize innovative , proprietary nuclear fuel designs , which we expect will significantly enhance the nuclear power industry 's economics due to higher power output and improved safety margins . we are an early-stage technology company in the product development phase and are pre-revenue . our ongoing operations are currently being financed primarily by raising new equity capital . the u.s. department of energy ( doe ) , office of nuclear energy has established the gateway for accelerated innovation in nuclear ( gain ) program to provide the nuclear community with access to the technical , regulatory , and financial support necessary to move new or advanced nuclear technologies toward commercialization , while ensuring the continued safe , reliable , and economic operation of the existing nuclear reactor fleet . we were awarded a gain voucher in 2019 for the experiment design for irradiation of material samples of lightbridge metallic fuel in the advanced test reactor ( atr ) at idaho national laboratory ( inl ) . on april 22 , 2020 , we entered into a cooperative research and development agreement ( crada ) with battelle energy alliance , llc ( bea ) , the doe 's operating contractor at inl ( see recent developments section below ) . the project commenced in the second quarter of 2020 and was originally expected to be completed in the second quarter of 2021. however , because of project staffing issues at inl related to the laboratory 's covid-19 restrictions and u.s. export control matters , the project is currently expected to be completed by the end of the third quarter of 2021. our metallic fuel can be used in different types of water-cooled commercial power reactors , such as pressurized water reactors ( pwrs ) , boiling water reactors ( bwrs ) , russian designed water-water energetic reactors ( vvers ) , candu heavy water reactors , water-cooled small modular reactors ( smrs ) , as well as water-cooled research reactors . we have obtained patent validation in key countries and will continue to seek patent validation in countries that either currently operate or are expected to build and operate a large number of nuclear power reactors compatible with our fuel technology . 51 we currently expect to invest a total of $ 1.0 million to $ 1.5 million in the research and development of our nuclear fuel over the next 12 to 15 months . we have incurred net losses and negative cash flows from operations and expect this to continue for the foreseeable future . in 2021 , we will continue to evaluate spending to reduce expenses with the overall goal of commercializing our fuel with the lowest r & d cost , in order to maximize our shareholders ' value . our only source of funding in 2020 was our at-the-market ( atm ) financing arrangement with stifel , nicolaus & company . we are not currently utilizing this atm facility but the atm facility is expected to be a significant source of working capital for the company sometime later in 2021. there is no assurance that an atm financing arrangement will be available to us in the future . please see note 10. stockholders ' equity and stock-based compensation of the notes to the consolidated financial statements included in part ii . story_separator_special_tag fabrication of multiple ltas and batch reload quantities of fuel will require a dedicated pilot-scale fuel fabrication facility . we estimate the major scopes of work to establish a manufacturing capability for ltas would take 5 years to complete , with batch reload capability achieved within 8 years from the start of pilot-scale fuel fabrication facility design and construction work . these estimates assume sufficient funding availability and that the project receives prioritization by the doe . b. nuclear material/coupon sample irradiation test lightbridge 's irradiation testing program includes coupon irradiation of material samples of its uranium-zirconium fuel alloy which will allow characterization of the underlying thermophysical behavior of the fuel alloy . the design of this program is currently underway , and it is expected to yield results in approximately four years . the data obtained from this program will be a fundamental component of lightbridge 's accelerated fuel qualification approach described below as it will be used to inform and develop the physics-based models and simulations of the fuel rod behaviors . c. loop irradiation testing the purpose of the loop irradiation testing of lightbridge 's metallic fuel rod is to demonstrate the performance and behavior of the fuel rod under prototypic commercial reactor operating conditions typical of pwrs at a power level and burnup accumulation higher than the fuel would experience in normal operation in a commercial power plant . this will provide a physical demonstration of the capabilities of the fuel rod in order to ensure reactor safety . such a test is expected to provide information of sufficient detail to validate the performance of individual fuel rods such that their behavior in normal operating conditions of a regulated nuclear power plant would be sufficiently well understood to request a license amendment from the u.s. nuclear regulatory commission ( us-nrc ) for operation of a lead test assembly . 53 execution of such a loop irradiation test is expected to be performed in the atr at inl . the atr currently has limited irradiation loop test facilities and the performance of the above-mentioned test for lightbridge fuel would require installation of a new test loop with increased heat removal capability to enable the desired test conditions . preliminary discussions with inl personnel have indicated that installation of such a loop would take approximately three years ( one year for design and safety evaluation and two years for installation and startup ) . we assume an additional year of time is required , making the loop available in four years . the performance of the irradiation test is expected to take three years of in-reactor time plus an additional one year for post-irradiation examination ( pie ) , wherein analysis of the fuel rod performance and behavior is performed . these estimates result in a total time for completion of the loop irradiation test of 7-8 years . d. preparation for lead test assembly operation insertion of an lta with lightbridge 's fuel rods in a nuclear power plant requires the power plant owner to obtain approval from the us-nrc based on a safety evaluation and justification that the lta will not be detrimental to the plant 's licensed operations . this justification must address numerous technical areas ( e.g . nuclear design , mechanical design , thermal hydraulic design , materials science , reactor operations , etc . ) and include considerations of the performance of the lta itself as well as its interaction with other fuel assemblies in the reactor core which may be impacted by the presence of the lta . the safety evaluation must result in confirmation that the plant 's ability to ensure plant worker and public safety is not compromised due to the operation of the lta . this safety justification will require cooperation between lightbridge , the original fuel manufacturer , and the power plant owner . with historical approaches , the development and qualification of a nuclear fuel system can take 20-30 years as the approach has been driven largely by a cycle of physical testing and design changes based on the results of those physical tests . computer modeling and simulation has increasingly been used in support of fuel qualification efforts , but the cyclical approach continues to be the default methodology . in order to shorten the timeframe for fuel qualification , advanced nuclear fuel developers are now taking an approach that leverages significant improvements in computational capability in a methodology referred to as accelerated fuel qualification ( afq ) . the afq approach combines physics-informed modeling and simulation coupled with targeted physical testing such that the overall fuel qualification effort is reduced in terms of cost and time , with a goal of fuel qualification taking 10-15 years . lightbridge intends to leverage the afq methodology to qualify its advanced fuels . along with leveraging the afq approach , lightbridge 's u-zr fuel technology has the benefits of being previously demonstrated in operating icebreaker reactors and several aspects of the performance of the fuel have been demonstrated . this enables lightbridge to begin designing an lta , and developing the necessary computer models of the fuel behavior , prior to obtaining the results of the loop irradiation testing of the fuel rod . along with the irradiation testing and computer simulations , some physical testing of the fuel assembly design will be required . lightbridge anticipates that such โ out-of-pile ' testing to justify the lta performance will take no more than four years . 54 it is expected that the lta design effort , development of computer modeling and simulation capabilities , and performance of the lta safety justification will take 8 years . the us-nrc review and approval of the license amendment for lta insertion is expected to require two years after the license amendment is submitted . based on these activities and time estimates , lightbridge expects to have an lta of its fuel ready for insertion in a commercial reactor in the early 2030s .
| operations review consolidated results of operations during the fourth quarter for the year ended december 31 , 2020 , we identified an error related to the amortization of our capitalized patent costs . consequently , the company corrected this error by revising the december 31 , 2019 financial table numbers shown below . please see note 2. revision and correction of an immaterial error in previously issued financial statements of the notes to the consolidated financial statements included in part ii . item 8. financial statements and supplementary data , of this annual report on form 10-k for information regarding our revision of the december 31 , 2019 financial statements . the following table presents our operating results as a percentage of revenues for the years indicated : replace_table_token_9_th operating expenses general and administrative expenses general and administrative expenses consist mostly of compensation and related costs for personnel and facilities , stock-based compensation , finance , human resources , information technology , and fees for consulting and other professional services . professional services are principally comprised of legal , audit , strategic advisory services , and outsourcing services . total general and administrative expenses increased by approximately $ 2.5 million for the year ended december 31 , 2020 , as compared to the year ended december 31 , 2019. these increases included an increase in professional fees relating to the framatome arbitration of approximately $ 1.7 million , primarily due to legal fees , court filing fees , professional and expert fees . it also included an increase in total employee compensation and employee benefits of approximately $ 1.2 million , which consisted of an increase in bonuses of $ 0.4 million and an increase in employee payroll expenses of $ 0.6 million and a decrease of $ 0.2 million in management and administrative service fees charged to enfission , llc ( โ enfission โ ) .
| 2,345 |
we began reporting results in five segments for the quarter ended march 3 , 2018 : americas adhesives , eimea , asia pacific , construction adhesives and engineering adhesives . the americas adhesives , eimea and asia pacific operating segments manufacture and supply adhesives products in the assembly , packaging , converting , nonwoven and hygiene , performance wood , insulating glass , flooring , textile , flexible packaging , graphic arts and envelope markets . the construction adhesives operating segment provides floor preparation , grouts and mortars for tile setting , and adhesives for soft flooring , and pressure-sensitive adhesives , tapes and sealants for the commercial roofing industry as well as sealants and related products for heating , ventilation and air conditioning installations . the engineering adhesives operating segment provides high-performance adhesives to the transportation , electronics , medical , clean energy , aerospace and defense , appliance and heavy machinery markets . total company when reviewing our financial statements , it is important to understand how certain external factors impact us . these factors include : โ changes in the prices of our raw materials that are primarily derived from refining crude oil and natural gas , โ global supply of and demand for raw materials , โ economic growth rates , and โ currency exchange rates compared to the u.s. dollar we purchase thousands of raw materials , the majority of which are petroleum/natural gas derivatives . the price of these derivatives impacts the cost of our raw materials . however , the supply of and demand for key raw materials has a greater impact on our costs . as demand increases in high-growth areas , the supply of key raw materials may tighten , resulting in certain materials being put on allocation . natural disasters , such as hurricanes , also can have an impact as key raw material producers are shut down for extended periods of time . we continually monitor capacity utilization figures , market supply and demand conditions , feedstock costs and inventory levels , as well as derivative and intermediate prices , which affect our raw materials . with approximately 75 percent of our cost of sales accounted for by raw materials , our financial results are extremely sensitive to changing costs in this area . 17 the pace of economic growth directly impacts certain industries to which we supply products . for example , adhesives-related revenues from durable goods customers in areas such as appliances , furniture and other woodworking applications tend to fluctuate with the overall economic activity . in business components such as construction adhesives and insulating glass , revenues tend to move with more specific economic indicators such as housing starts and other construction-related activity . the movement of foreign currency exchange rates as compared to the u.s. dollar impacts the translation of the foreign entities ' financial statements into u.s. dollars . as foreign currencies weaken against the u.s. dollar , our revenues and costs decrease as the foreign currency-denominated financial statements translate into fewer u.s. dollars . the fluctuations of the euro and the chinese renminbi against the u.s. dollar have the largest impact on our financial results as compared to all other currencies . in 2018 , currency fluctuations had a negative impact on net revenue of approximately $ 2.0 million as compared to 2017. key financial results and transactions for 2018 included the following : โ net revenue increased 31.9 percent from 2017 primarily driven by a 28.3 percent increase due to acquisitions , a 3.4 percent increase in product pricing , and a 0.6 percent increase due to favorable sales mix . positive drivers of growth were partially offset by a 0.3 percent decrease in sales volume and a 0.1 percent decrease due to currency fluctuations . โ gross profit margin increased to 27.5 percent from 26.2 percent in 2018 primarily due to favorable product pricing , the impact of the royal adhesives acquisition and lower restructuring plan costs . positive drivers of growth were partially offset by higher raw material costs . โ cash flow generated by operating activities was $ 253.3 million in 2018 as compared to $ 140.8 million in 2017 and $ 195.7 million in 2016. our total year constant currency sales growth , which we define as the combined variances from sales volume , product pricing , sales mix and business acquisitions , increased 32.0 percent for 2018 compared to 2017. in 2018 , our diluted earnings per share was $ 3.29 compared to $ 1.15 in 2017 and $ 2.37 in 2016. the higher earnings per share in 2018 compared to 2017 was due to higher net revenue , lower transaction costs related to acquisitions , and one time discrete items related to u.s. tax reform , which were partially offset by higher operating expenses mainly due to the impact of acquired businesses and higher interest expense due to higher u.s. debt balances at higher interest rates from the issuance of new debt in 2017. the lower earnings per share in 2017 compared to 2016 was due to an increase in transaction costs related to acquisitions , including make-whole costs associated with the early repayment of certain outstanding debt obligations , and the implementation of the 2017 restructuring plan . change in accounting principle in the fourth quarter of 2018 , we elected to change our method of accounting for certain inventories in the united states within the company 's americas adhesives and construction adhesives segments from the last-in , first-out method ( โ lifo โ ) to weighted-average cost . we have retrospectively adjusted the consolidated financial statements for all periods presented to reflect this change . project one in december 2012 , our board of directors approved a multi-year project to replace and enhance our existing core information technology platforms . the scope for this project includes most of the basic transaction processing for the company including customer orders , procurement , manufacturing , and financial reporting . story_separator_special_tag the approach identifies a broad population of corporate bonds that meet the quality and size criteria for the particular plan . we use this approach rather than a specific index that has a certain set of bonds that may or may not be representative of the characteristics of our particular plan . a higher discount rate reduces the present value of the pension obligations . the discount rate for the u.s. pension plan was 4.51 percent at december 1 , 2018 , as compared to 3.73 percent at december 2 , 2017 and 4.10 percent at december 3 , 2016. net periodic pension cost for a given fiscal year is based on assumptions developed at the end of the previous fiscal year . a discount rate reduction of 0.5 percentage points at december 1 , 2018 would decrease u.s. pension and other postretirement plan expense less than $ 0.1 million ( pre-tax ) in fiscal 2019. discount rates for non-u.s. plans are determined in a manner consistent with the u.s. plans . the expected long-term rate of return on plan assets assumption for the u.s. pension plan was 7.75 percent in 2018 , 2017 and 2016. our expected long-term rate of return on u.s. plan assets was based on our target asset allocation assumption of 60 percent equities and 40 percent fixed-income . management , in conjunction with our external financial advisors , determines the expected long-term rate of return on plan assets by considering the expected future returns and volatility levels for each asset class that are based on historical returns and forward looking observations . for 2018 , the expected long-term rate of return on the target equities allocation was 8.25 percent and the expected long-term rate of return on the target fixed-income allocation was 5.6 percent . the total plan rate of return assumption included an estimate of the effect of diversification and the plan expense . for 2019 , the expected long-term rate of return on assets will be 7.50 percent with an expected long-term rate of return on the target equities allocation of 8.2 percent and an expected long-term rate of return on target fixed-income allocation of 5.6 percent . a change of 0.5 percentage points for the expected return on assets assumption would impact u.s. net pension and other postretirement plan expense by approximately $ 2.1 million ( pre-tax ) . management , in conjunction with our external financial advisors , uses the actual historical rates of return of the asset categories to assess the reasonableness of the expected long-term rate of return on plan assets . the most recent 10-year and 20-year historical equity returns are shown in the table below . our expected rate of return on our total portfolio is consistent with the historical patterns observed over longer time frames . replace_table_token_4_th * beginning in 2006 , our target allocation migrated from 100 percent equities to our current allocation of 60 percent equities and 40 percent fixed-income . the historical actual rate of return for the fixed income of 7.0 percent is since inception ( 12 years , 11 months ) . the expected long-term rate of return on plan assets assumption for non-u.s. pension plans was a weighted-average of 6.20 percent in 2018 compared to 6.21 percent in 2017 and 6.20 percent in 2016. the expected long-term rate of return on plan assets assumption used in each non-u.s. plan is determined on a plan-by-plan basis for each local jurisdiction and is based on expected future returns for the investment mix of assets currently in the portfolio for that plan . management , in conjunction with our external financial advisors , develops expected rates of return for each plan , considers expected long-term returns for each asset category in the plan , reviews expectations for inflation for each local jurisdiction , and estimates the effect of active management of the plan 's assets . our largest non-u.s. pension plans are in the united kingdom and germany . the expected long-term rate of return on plan assets for the united kingdom was 6.75 percent and the expected long-term rate of return on plan assets for germany was 5.75 percent . management , in conjunction with our external financial advisors , uses actual historical returns of the asset portfolio to assess the reasonableness of the expected rate of return for each plan . the projected salary increase assumption is based on historic trends and comparisons to the external market . higher rates of increase result in higher pension expenses . as this rate is also a long-term expected rate , it is less likely to change on an annual basis . in the u.s. , we have used the rate of 4.50 percent for 2018 , 2017 and 2016. benefits under the u.s. pension plan were locked-in as of may 31 , 2011 and no longer include compensation increases . the 4.50 percent rate is for the supplemental executive retirement plan only . projected salary increase assumptions for non-u.s. plans are determined in a manner consistent with the u.s. plans . 20 goodwill goodwill is the excess of cost of an acquired entity over the amounts assigned to assets acquired and liabilities assumed in a purchase business combination . goodwill is allocated to our reporting units , which are our operating segments or one level below our operating segments ( the component level ) . reporting units are determined by the discrete financial information available for the component and whether it is regularly reviewed by segment management . components are aggregated into a single reporting unit if they share similar economic characteristics . our reporting units are as follows : americas adhesives , eimea , asia pacific , flooring , roofing , specialty construction , engineering adhesives and tonsan . we evaluate our goodwill for impairment annually as of the end of our third quarter or earlier upon the occurrence of substantive unfavorable changes in economic conditions , industry trends , costs , cash flows , or ongoing declines in market capitalization .
| operating segment results we are required to report segment information in the same way that we internally organize our business for assessing performance and making decisions regarding allocation of resources . for segment evaluation by the chief operating decision maker , segment operating income is defined as gross profit less sg & a expenses . segment operating income excludes special charges , net . inter-segment revenues are recorded at cost plus a markup for administrative costs . corporate expenses are fully allocated to each operating segment . for the year ended december 2 , 2017 , we had six reportable segments : americas adhesives , eimea , asia pacific , construction adhesives , engineering adhesives and royal adhesives . as of the beginning of fiscal 2018 , in connection with the integration of the operations of royal adhesives with the company 's other segments , we modified our operating segment structure by allocating the royal adhesives segment into each of the five other segments . we began reporting results in five segments for the quarter ended march 3 , 2018 : americas adhesives , eimea , asia pacific , construction adhesives and engineering adhesives . 26 the tables below provide certain information regarding the net revenue and segment operating income ( loss ) of each of our operating segments . replace_table_token_19_th replace_table_token_20_th the following table provides a reconciliation of segment operating income to income before income taxes and income from equity method investments , as reported in the consolidated statements of income . replace_table_token_21_th 27 replace_table_token_22_th replace_table_token_23_th net revenue increased 21.2 percent in 2018 compared to 2017. the 23.9 percent increase in constant currency growth was attributable to an 18.7 percent increase in sales volume , including a 22.1 percent increase due to the royal adhesives , adecol and wisdom acquisitions , a 3.8 percent increase in product pricing and a 1.4 percent increase in sales mix .
| 2,346 |
in instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy , the level in the fair value hierarchy within which story_separator_special_tag the following discussion should be read in conjunction with the consolidated financial statements and notes thereto and the comparative summary of selected financial data appearing elsewhere in this report . historical results and trends which might appear should not be taken as indicative of future operations . our results of operations and financial condition , as reflected in the accompanying consolidated financial statements and related footnotes , are subject to management 's evaluation and interpretation of business conditions , retailer performance , changing capital market conditions and other factors which could affect the ongoing viability of our tenants . discussion regarding our results of operations for fiscal year 2018 as compared to fiscal year 2017 is included in item 7 of our annual report on form 10-k for the year ended december 31 , 2018 , filed with the sec on february 28 , 2019. executive overview weingarten realty investors is a reit organized under the texas business organizations code . we , and our predecessor entity , began the ownership of shopping centers and other commercial real estate in 1948 . our primary business is leasing space to tenants in the shopping centers we own or lease . these centers may be mixed-use properties that have both retail and residential components . we also provide property management services for which we charge fees to either joint ventures where we are partners or other outside owners . we operate a portfolio of rental properties , primarily neighborhood and community shopping centers , totaling approximately 32.5 million square feet of gross leasable area that is either owned by us or others . we have a diversified tenant base with our largest tenant comprising only 2.6 % of base minimum rental revenues during 2019 . at december 31 , 2019 , we owned or operated under long-term leases , either directly or through our interest in real estate joint ventures or partnerships , a total of 170 properties , which are located in 16 states spanning the country from coast to coast . we also owned interests in 23 parcels of land held for development that totaled approximately 11.9 million square feet at december 31 , 2019 . we had approximately 3,800 leases with 2,900 different tenants at december 31 , 2019 . rental revenue is primarily derived from operating leases with terms of 10 years or less , and may include multiple options , upon tenant election , to extend the lease term in increments up to five years . many of our leases have increasing minimum rental rates during the terms of the leases through escalation provisions . in addition , the majority of our leases provide for variable rental revenues , such as reimbursements of real estate taxes , maintenance and insurance and may include an amount based on a percentage of the tenants ' sales . our anchor tenants are supermarkets , value-oriented apparel/discount stores and other retailers or service providers who generally sell basic necessity-type goods and services . although there is a broad shift in shopping patterns , including internet shopping that continues to affect our tenants , we believe our anchor tenants , most of which have adopted omni-channel models which help drive foot traffic , combined with convenient locations , attractive and well-maintained properties , high quality retailers and a strong tenant mix , should lessen the effects of these conditions and maintain the viability of our portfolio . our goal is to remain a leader in owning and operating top-tier neighborhood and community shopping centers and mixed-use properties in certain markets of the united states . our strategic initiatives include : ( 1 ) owning quality shopping centers in preferred locations that attract strong tenants , ( 2 ) growing net income from our existing portfolio by increasing occupancy and rental rates , ( 3 ) raising net asset value and cash flow through quality acquisitions and new developments , ( 4 ) continuously redeveloping our existing shopping centers to increase cash flow and enhance the value of the centers and ( 5 ) maintaining a strong , flexible consolidated balance sheet and a well-managed debt maturity schedule . we believe these initiatives will keep our portfolio of properties among the strongest in our sector . due to current capitalization rates in the market along with the uncertainty of changes in interest rates and various other market conditions , we intend to continue to be very prudent in our evaluation of all new investment opportunities . we believe the pricing of assets that no longer meet our ownership criteria remains reasonably stable while the price of our common shares remains below our net asset value . given these conditions , we have been focused on dispositions of properties with risk factors that impact our willingness to own them going forward , and although we intend to continue with this strategy , our dispositions are expected to decrease to a normalized level in 2020. we intend to utilize the proceeds from dispositions to , among other things , fund acquisitions along with both new development and redevelopment projects . 25 as we discussed above , we continuously recycle non-core operating centers that no longer meet our ownership criteria and that will provide capital for growth opportunities . during 2019 , we disposed of real estate assets , which were owned by us either directly or through our interest in real estate joint ventures or partnerships , with our share of aggregate gross sales proceeds totaling $ 451.7 million . we have approximately $ 96 million of dispositions currently under contracts or letters of intent ; however , there are no assurances that these transactions will close at such prices or at all . story_separator_special_tag we expect rental rates to continue to increase ; however , we also expect the funding of tenant improvements and allowances will increase as well , and the variability in the mix of leasing transactions as to size of space , market , use and other factors may impact the magnitude of these increases , both positively and negatively . leasing volume is anticipated to fluctuate due to the uncertainty in tenant fallouts related to bankruptcies and tenant non-renewals . our expectation is that spnoi growth including redevelopments will average between 1.5 % to 2.5 % for 2020 assuming no significant tenant bankruptcies , although there are no assurances that this will occur . new development/redevelopment at december 31 , 2019 , we had two mixed-use projects in the washington d. c. market and a 30-story , high-rise residential tower at our river oaks shopping center in houston that were in various stages of development and are partially or wholly owned . we have funded $ 368.4 million through december 31 , 2019 on these projects , and we estimate our aggregate net investment upon completion to be $ 485.0 million . overall , the average projected stabilized return on investment for these multi-use properties , that include retail and residential components , is expected to approximate 5.5 % upon completion . we have 11 redevelopment projects in which we plan to invest approximately $ 74.2 million . upon completion , the average projected stabilized return on our incremental investment on these redevelopment projects is expected to be between 8.0 % and 12.0 % . we had approximately $ 40.7 million in land held for development at december 31 , 2019 that may either be developed or sold . while we are experiencing some interest from retailers and other market participants in our land held for development , opportunities for economically viable developments remain limited . we intend to continue to pursue additional development and redevelopment opportunities in multiple markets ; however , finding the right opportunities remains challenging . acquisitions acquisitions are a key component of our long-term growth strategy . the availability of quality acquisition opportunities remains sporadic in our targeted markets . intense competition , along with a decline in the volume of high-quality core properties on the market , has driven pricing to very high levels . we intend to remain disciplined in approaching these opportunities , pursuing only those that provide appropriate risk-adjusted returns . dispositions dispositions are also a key component of our ongoing management process where we selectively prune properties from our portfolio that no longer meet our geographic or growth targets . dispositions provide capital , which may be recycled into properties that are high barrier-to-entry locations within high growth metropolitan markets , and thus have higher long-term growth potential . additionally , proceeds from dispositions may be used to reduce outstanding debt , further deleveraging our consolidated balance sheet , to repurchase our common shares and or debt , dependent upon market prices , or to fund new development and redevelopment projects . summary of critical accounting policies our discussion and analysis of financial condition and results of operations is based on our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states of america ( โ gaap โ ) . the preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities and contingencies as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods . we evaluate our assumptions and estimates on an ongoing basis . we base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions . we believe the following critical accounting policies require more significant judgments and estimates used in the preparation of our consolidated financial statements . 28 real estate joint ventures and partnerships to determine the method of accounting for real estate joint ventures and partnerships , management determines whether an entity is a variable interest entity ( โ vie โ ) and , if so , determines which party is the primary beneficiary by analyzing whether we have both the power to direct the entity 's significant economic activities and the obligation to absorb potentially significant losses or receive potentially significant benefits . significant judgments and assumptions inherent in this analysis include the design of the entity structure , the nature of the entity 's operations , future cash flow projections , the entity 's financing and capital structure , and contractual relationships and terms . we consolidate a vie when we have determined that we are the primary beneficiary . primary risks associated with our involvement with our vies include the potential funding of the entities ' debt obligations or making additional contributions to fund the entities ' operations or capital activities . non-variable interest real estate joint ventures and partnerships over which we have a controlling financial interest are consolidated in our consolidated financial statements . in determining whether we have a controlling financial interest , we consider factors such as ownership interest , authority to make decisions , kick-out rights and substantive participating rights . real estate joint ventures and partnerships where we do not have a controlling financial interest , but have the ability to exercise significant influence , are accounted for using the equity method . management continually analyzes and assesses reconsideration events , including changes in the factors mentioned above , to determine if the consolidation treatment remains appropriate . decisions regarding consolidation of real estate joint ventures and partnerships frequently require significant judgment by our management . errors in the assessment of consolidation could result in material changes to our consolidated financial statements .
| results of operations comparison of the year ended december 31 , 2019 to the year ended december 31 , 2018 the following table is a summary of certain items in income from continuing operations from our consolidated statements of operations , which we believe represent items that significantly changed during 2019 as compared to the same period in 2018 : replace_table_token_11_th revenues the decrease in revenues of $ 44.5 million is attributable primarily to the $ 47.5 million impact of dispositions , a decrease of $ 9.1 million from the write-off of lease intangibles due to the termination of tenant leases , which includes a write-off of a $ 10.1 million below-market lease intangible in 2018 , and $ 4.3 million of revenues for real estate taxes paid directly by our tenants in 2018 that can no longer be recorded due to the adoption of the new lease accounting standard on january 1 , 2019. partially offsetting this decrease is revenue from acquisitions , as well as increases in rental rates and occupancy at our existing portfolio , new developments and redevelopments , which contributed $ 16.4 million . depreciation and amortization the decrease in depreciation and amortization of $ 26.2 million is attributable primarily to the $ 13.1 million write-off of an in-place lease intangible from the termination of a tenant lease in 2018 and disposition activities of $ 15.1 million , which is partially offset by an increase of $ 2.0 million primarily from acquisitions .
| 2,347 |
stockโbased compensation : the company accounts for stock options at fair value as prescribed in asc 718. the story_separator_special_tag and results of operations introduction the following discussion updates our plan of operations as of february 21 , 2018 for the foreseeable future . it also discusses our results of operations for the three fiscal years ended december 31 , 2017 , 2016 and 2015 and our financial condition as at december 31 , 2017 and 2016 , with a particular emphasis on the year ended december 31 , 2017. with regard to properties or projects that are not in production , we provide some details of our plan of operation . the discussion also presents certain nonโgaap financial performance measures , such as earnings from mining operations , total cash costs , total cash cost per ounce , allโin sustaining costs , allโin sustaining cost per ounce , average realized price per ounce , and cash , investments and precious metals , that are important to management in its evaluation of our operating results and which are used by management to compare our performance to what we perceive to be peer group mining companies and relied on as part of management 's decisionโmaking process . management believes these measures may also be important to investors in evaluating our performance . for a detailed description of each of the nonโgaap financial performance measures and certain limitations inherent in such measures , please see the discussion under โ nonโgaap financial performance measures โ below , on page 55. the discussion also includes references to โ advanced-stage properties โ , which are defined as properties for which advanced studies and reports have been completed indicating the presence of mineralized material or proven and probable reserves , and that have obtained or are in the process of obtaining the required permitting . our designation of certain properties as โ advanced-stage properties โ should not suggest that we have proven or probable reserves at those properties as defined by the sec industry guide 7. the information in this section should be read in conjunction with our consolidated financial statements and the notes thereto included in this annual report . reliability of information : msc , the owner of the san josรฉ mine , is responsible for and has supplied to us all reported results from the san josรฉ mine . the technical information regarding the san josรฉ mine contained herein is , with few exceptions as noted , based entirely on information provided to us by msc . our joint venture partner , a subsidiary of hochschild mining plc , and its affiliates other than msc do not accept responsibility for the use of project data or the adequacy or accuracy of this document . 38 index to management 's discussion and analysis : page 2017 operating and financial highlights 39 selected consolidated financial and operating results 40 consolidated financial performance 40 results of consolidated operations 41 liquidity and capital resources 43 results of operations 44 mexico segment 44 el gallo 1 mine operating results 44 advanced-stage properties โ el gallo 2 project 47 exploration properties โ el gallo properties 47 canada segment 48 story_separator_special_tag 10pt ; margin:0pt ; '' > ( 1 ) for a reconciliation of precious metals valued at the london p.m. fix spot price and cost , please see the discussion under โ non gaap financial performance measures โ below , on page 55. selected consolidated financial and operating results replace_table_token_13_th ( 1 ) includes attributable production from our 49 % owned san josรฉ mine . ( 2 ) silver production is presented as a gold equivalent . gold equivalent ounces calculations approximate prevailing spot prices at the beginning of the year . consolidated financial performance for the year ended december 31 , 2017 , we recorded a net loss of $ 10.6 million , or $ 0.03 per share , compared to a net income of $ 21.1 million , or $ 0.07 per share , in 2016. the $ 10.6 million net loss was primarily the result of the following factors : ยท an increase in exploration expenditures incurred at los azules project ; ยท a decrease in the profitability at the el gallo 1 mine , due to higher production costs applicable to sales , higher number of ounces processed , and the operational challenges from the mechanical failure that the crushing circuit suffered during the third quarter ; ยท production costs applicable to sales at the black fox mine were substantially equal to revenue from gold and silver sales , resulting in a negligible profit margin ; 40 ยท a decrease in net income reported by msc , due to the loss of government tax incentives since late 2016 , coupled with higher production costs applicable to sales , as a result of higher labor costs and the impact of inflation ; ยท an increase of general and administrative expenses due to the two acquisitions and financings completed in the year ; and ยท an increase in recoveries of income taxes as a result of the u.s. and argentina government tax reforms , which significantly reduced deferred tax liabilities . our cash , cash equivalents and restricted cash in 2017 was $ 37.2 million , which is a slight decrease from the $ 37.4 million in 2016. results of consolidated operations year ended december 31 , 2017 compared to 2016 revenue . consolidated gold and silver sales increased by $ 7.1 million , or 12 % , to $ 67.5 million for the year ended december 31 , 2017 , from $ 60.4 million in 2016 , mainly due to $ 11.6 million gold sales contributed by the black fox mine , which was acquired in october 2017 , partially offset by a $ 4.5 million decrease in gold and silver sales reported by the el gallo 1 mine , when compared to 2016 , as a result of fewer ounces sold . production costs applicable to sales . story_separator_special_tag million at los azules , and $ 0.2 million in corporate exploration charges . for a complete discussion on exploration costs , please refer to the exploration properties section below . property holding costs decreased by $ 0.8 million or 18 % year-over-year as a result of the reduced number of claims held in 2016 , compared to 2015 , coupled with the decline in the mexican peso . general and administrative expenses increased by 6 % in 2016 , to $ 12.7 million from $ 12.0 million in 2015 , because of changes to senior management , partly offset by the devaluation of the canadian dollar , mexican peso and argentine peso against the u.s. dollar during 2016. income from our investment in msc increased by $ 10.5 million , from $ 2.4 million in 2015 to $ 13.0 million in 2016 , due to the strong performance of the san josรฉ mine in 2016. please refer to the section results of operations โ msc below , for further details . no impairment charges were recorded in 2016 , compared to impairment charges of $ 11.8 million related to our investment in msc , and $ 50.6 million for mineral property interests and property and equipment , recorded in 2015. other income ( expenses ) other income decreased to $ 2.0 million in 2016 from $ 4.3 million in 2015 , mainly due to the net result of lower interest and other income , foreign exchange gain and the impairment of marketable securities , which were partly offset by the unrealized gain on derivatives reported during the year . interest and other income decreased by $ 1.6 million in 2016 due to an absence of the portion of insurance proceeds related to the theft of gold concentrate stolen from our refinery in mexico . in addition , foreign exchange gain decreased by $ 1.3 million mainly because of the devaluation of the mexican 42 peso affecting the vat receivable balance held in the year . finally , we recognized a $ 1.4 million gain on derivatives from our ownership of certain warrants in a publicly listed entity , acquired in 2016. recovery of income taxes recovery of income taxes decreased by $ 20.8 million , from $ 24.6 million in 2015 to $ 3.7 million in 2016 as no impairment related tax recoveries were recognized in 2016 compared to 2015. liquidity and capital resources we had working capital of $ 49.2 million at december 31 , 2017 , which consisted of $ 86.9 million of current assets and $ 37.6 million of current liabilities , compared to $ 58.0 million working capital reported at year-end 2016. within current assets we have $ 10.0 million of restricted cash , which represents funds committed to the exploration program in ontario , as a result of completing our flow-through financing . the $ 8.8 million decrease in working capital was the net result of increased cash used in operating activities , from higher production and exploration costs incurred in the year , coupled with the acquisition of the black fox complex , and property , plant and equipment , which were partly offset by the proceeds received from the equity offerings closed during the year . overall , our cash balance ( including restricted cash ) decreased slightly to $ 37.2 million in 2017 , from $ 37.4 million in 2016. we believe that our working capital at year-end 2017 is sufficient to satisfy any non-discretionary obligations due in the next 12 months , and to fund ongoing operations and corporate activities over the next 12 months . however , we continue to evaluate capital and development expenditure requirements to advance gold bar , black fox , our other timmins projects , and el gallo 2 , as well as exploration expenditures for all our operations and projects . if we make a positive decision to pursue one or more of these initiatives , the expenditures incurred may significantly exceed our working capital . in such case , we would explore several financing methods , which may include incurring debt , issuing additional equity , equipment leasing , and other forms of financing . net cash used in operations was $ 15.4 million for 2017 , while net cash provided by operations was $ 25.2 million and $ 15.6 million for 2016 , and 2015 , respectively . the significant changes from one year to the next are summarized as follows : ยท $ 95.9 million cash paid to suppliers and employees in 2017 , compared to $ 52.3 million in 2016 , and $ 55.3 million in 2015 , due to significantly higher production , exploration and other expenses ; ยท $ 12.2 million dividend received from msc in 2017 , compared to $ 17.7 million in 2016 and $ 0.5 million in 2015 ; ยท $ 5.9 million vat collected in mexico in 2017 , compared to $ 9.5 million in 2016 , and $ 6.0 million in 2015 , and ; ยท $ 67.7 million cash received from gold and silver sales in 2017 , compared to $ 59.5 million in 2016 and $ 70.2 million in 2015. cash used in investing activities was $ 34.5 million in 2017 , compared to $ 10.1 million in 2016 and $ 1.9 million in 2015 , primarily due to the following factors : ยท $ 27.3 million incurred for the acquisition of the black fox complex , and $ 0.8 million for the acquisition of lexam vg gold ; ยท additions to mineral property interests of $ 3.5 million in 2017 , compared to $ 6.0 million spent in 2016 and $ nil in 2015 ; ยท additions to property and equipment of $ 5.1 million in 2017 , primarily at our gold bar project , compared to $ 1.2 million and $ 0.8 million in 2016 and 2015 , respectively ; ยท $ 2.2 million proceeds from the sale of investments during the year ended december 31 , 2017 , compared to $ 0.5 million in 2016 and $ nil in
| black fox mine operating results 48 timmins exploration activities 49 msc segment 50 msc operating results 50 u.s.a segment 54 advanced-stage properties โ gold bar project 54 los azules segment 55 los azules exploration property 55 commitments and contingencies 55 non-gaap financial performance measures 55 critical accounting estimates 61 forward looking statements 65 risk factors impacting forward-looking statements 66 2017 operating and financial highlights 2017 highlights are included below and discussed further in consolidated performance : ยท in 2017 , we entered the canadian mining market after acquiring the lexam group of properties , located in the timmins gold district of canada . later in the year , we acquired the black fox complex , comprised of the black fox underground gold mine , the black fox stock mill , and the grey fox and froome development projects , complementing the lexam properties and enhancing our positioning in the region . ยท we began construction of the gold bar project after receiving the final permitting on november 8 , 2017. commercial production from gold bar is expected to be achieved in the first quarter of 2019 . ยท we completed a preliminary economic assessment ( โ pea โ ) for the los azules project , estimating an economical project and the opportunity for a sustainable and long-life open pit mine at current copper , gold and silver prices . ยท we completed two financings for total gross proceeds of $ 56.6 million , primarily for the purpose of funding the acquisition of the black fox complex and finance the 2018 exploration program in timmins . ยท our consolidated gold and silver sales were $ 67.5 million in 2017 , comprised of $ 55.9 million from the sale of 44,490 gold equivalent ounces by our el gallo 1 mine , and $ 11.6 million from the sale of 9,422 gold ounces by our black fox mine .
| 2,348 |
such noncontrolling interests are reported on the consolidated balance sheets within equity , separately from the company 's story_separator_special_tag the following discussion should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this report . this discussion contains forward-looking statements about our business . these statements are based on current expectations and assumptions that are subject to risks and uncertainties . actual results could differ materially because of factors discussed in `` special note about forward-looking statements '' and `` risk factors '' contained in this annual report on form 10-k and in our other reports that we file from time to time with the sec . overview diamondrock hospitality company is a lodging-focused real estate company operating as a reit for federal income tax purposes that owns a portfolio of premium hotels and resorts . as of december 31 , 2018 , we owned a portfolio of 31 premium hotels and resorts that contain 10,091 guest rooms located in 21 different markets in north america and the u.s. virgin islands . our hotel in the u.s. virgin islands , frenchman 's reef , is currently closed due to damage incurred by hurricanes irma and maria in september 2017. as an owner , rather than an operator , of lodging properties , we receive all of the operating profits or losses generated by our hotels after the payment of fees due to hotel managers , which are calculated based on the revenues and profitability of each hotel . key indicators of financial condition and operating performance we use a variety of operating and other information to evaluate the financial condition and operating performance of our business . these key indicators include financial information that is prepared in accordance with u.s. generally accepted accounting principles ( โ u.s . gaap โ ) , as well as other financial information that is not prepared in accordance with u.s. gaap . in addition , we use other information that may not be financial in nature , including statistical information and comparative data . we use this information to measure the performance of individual hotels , groups of hotels and or our business as a whole . we periodically compare historical information to our internal budgets as well as industry-wide information . these key indicators include : occupancy percentage ; average daily rate ( or adr ) ; revenue per available room ( or revpar ) ; earnings before interest , income taxes , depreciation and amortization ( or ebitda ) , ebitda re , and adjusted ebitda ; and funds from operations ( or ffo ) and adjusted ffo . occupancy , adr and revpar are commonly used measures within the hotel industry to evaluate operating performance . revpar , which is calculated as the product of adr and occupancy percentage , is an important statistic for monitoring operating performance at the individual hotel level and across our business as a whole . we evaluate individual hotel revpar performance on an absolute basis with comparisons to budget and prior periods , as well as on a company-wide basis . adr and revpar include only room revenue . room revenue comprised approximately 73 % of our total revenues for the year ended december 31 , 2018 and is dictated by demand , as measured by occupancy percentage , pricing , as measured by adr , and our available supply of hotel rooms . our adr , occupancy percentage and revpar performance may be impacted by macroeconomic factors such as u.s. economic conditions generally , regional and local employment growth , personal income and corporate earnings , office vacancy rates and business relocation decisions , airport and other business and leisure travel , new hotel construction and the pricing strategies of competitors . in addition , our adr , occupancy percentage and revpar performance is dependent on the continued success of our hotels ' global brands . we also use ebitda , ebitda re , adjusted ebitda , ffo and adjusted ffo as measures of the financial performance of our business . see โ non-gaap financial measures. โ overview of 2018 - 41 - key highlights for 2018 include the following : hotel acquisitions . in march 2018 , we acquired the 77-room landing resort & spa in south lake tahoe , california , for a total contractual purchase price of $ 42 million , and the 242-room hotel palomar in phoenix , arizona , for a total contractual purchase price of $ 80 million . in december 2018 , we acquired the 142-room cavallo point in sausalito , california , for a total contractual purchase price of $ 152 million . financing activity . on october 18 , 2018 , we entered into a new five-year $ 50 million unsecured term loan . on december 5 , 2018 , we drew down the full balance of the term loan in connection with the closing of the cavallo point acquisition . update on insurance claims as previously disclosed , we have insurance claims resulting from hurricanes that impacted frenchman 's reef and the havana cabana key west in 2017 , as well as from the 2017 wildfires in northern california that impacted the lodge at sonoma . the company is insured for up to $ 361 million for each covered event , subject to certain deductibles and other conditions . frenchman 's reef . the hotel was significantly damaged by hurricanes irma and maria in 2017 and is expected to remain closed into 2020. we submitted our insurance claim during the first quarter of 2018 and are continuing to work diligently with our insurance carriers and the u.s. virgin islands government to ensure the best outcome for our stockholders . during the year ended december 31 , 2018 , we recognized $ 16.1 million of business interruption insurance income under the insurance claim . havana cabana key west . we completed a comprehensive renovation and re-positioning of the hotel in connection with the remediation of substantial wind and water-related damage from hurricane irma . story_separator_special_tag the increase is primarily due to depreciation from our 2018 hotel acquisitions and on capital expenditures from our recent hotel renovations . - 45 - impairment losses . during the year ended december 31 , 2017 , we recorded impairment losses of $ 3.2 million . the loss is comprised of $ 1.8 million from the write-off of construction in progress that was determined not to be recoverable , $ 0.9 million from the write-off of property and equipment disposed at our hotels impacted by the hurricanes during september 2017 that is not expected to be recovered by insurance proceeds , and $ 0.5 million on a rent receivable asset related to a tenant lease at the lexington hotel new york . we did not recognize any impairment losses during the year ended december 31 , 2018 . hotel acquisition costs . all three of our 2018 hotel acquisitions are accounted for as acquisitions of assets . accordingly , all direct acquisition related costs are capitalized as a component of acquired assets . refer to note 2 for additional information on the adoption of asu no . 2017-01 on january 1 , 2018. we incurred $ 2.0 million of hotel acquisition costs during the year ended december 31 , 2017 , associated with the acquisitions of l'auberge de sedona and orchards inn sedona . corporate expenses . corporate expenses principally consist of employee-related costs , including base payroll , bonus and restricted stock . corporate expenses also include corporate operating costs , professional fees and directors ' fees . our corporate expenses increased $ 1.9 million , from $ 26.7 million for the year ended december 31 , 2017 to $ 28.6 million for the year ended december 31 , 2018 . the increase is primarily due to various drivers , including an increase in professional fees , consulting fees , and employee compensation . business interruption insurance income . in september 2017 , hurricanes irma and maria caused significant damage to frenchman 's reef and the havana cabana key west . in october 2017 , the lodge at sonoma was impacted by smoke infiltration due to the wildfires . these natural disasters resulted in lost revenue and additional expenses covered under our insurance policy . for the year ended december 31 , 2018 , we recognized $ 19.4 million of business interruption insurance income , which is in addition to $ 2.9 million of expense reimbursements from insurance recorded within other hotel expenses on our accompanying consolidated statement of operations . for the year ended december 31 , 2017 , we recognized $ 4.1 million of business interruption insurance income , which is in addition to $ 7.3 million of expense reimbursements from insurance recorded within other hotel expenses on our accompanying consolidated statement of operations . gain on property insurance settlement . in july 2018 , we settled our insurance claim for the property damage and business interruption related to the havana cabana key west . based on the settled insurance claim , we recognized a gain on insurance settlement of $ 1.7 million , which represents proceeds received in excess of the impairment loss for property damage . interest expense . our interest expense was $ 41.0 million and $ 38.5 million for the years ended december 31 , 2018 and december 31 , 2017 , respectively , and is comprised of the following ( in millions ) : replace_table_token_10_th the increase in interest expense is primarily related to the $ 200 million unsecured term loan entered into in april 2017 , the $ 50 million unsecured term loan entered into in october 2018 , which we drew down in full in december 2018 , and higher interest rates on our term loans compared with 2017. this increase is partially offset by a decrease in mortgage debt interest expense , primarily related to the repayment of the mortgage loan secured by the lexington hotel new york in april 2017. loss on early extinguishment of debt . we prepaid the $ 170.4 million mortgage loan previously secured by the lexington hotel new york on april 26 , 2017 and recognized a loss on early extinguishment of debt of approximately $ 0.3 million . income taxes . we recorded income tax expense of $ 3.1 million in 2018 and $ 10.2 million in 2017 . the 2018 income tax expense includes $ 2.6 million of income tax expense incurred on the $ 7.9 million pre-tax income of our domestic trss , foreign income tax expense of less than $ 0.1 million incurred on the $ 14.0 million pre-tax income of the trs that owns frenchman 's reef , and $ 0.5 million of corporate state income tax . the 2017 income tax expense includes $ 8.7 million of income tax expense incurred on the $ 26.9 million pre-tax income of our domestic trss and foreign income tax expense of $ 1.5 million incurred on the $ 11.4 million pre-tax income of the trs that owns frenchman 's reef . the 2017 income tax provision included a benefit of $ 4.2 million due to a remeasurement of our net deferred tax liabilities as of december 31 , 2017 as a result of the tcja , which - 46 - lowered the corporate tax rates from a maximum of 35 % to a flat rate of 21 % effective for tax years beginning after december 31 , 2017. comparison of the year ended december 31 , 2017 to the year ended december 31 , 2016 revenue . revenue consists primarily of the room , food and beverage and other operating revenues from our hotels , as follows ( in millions ) : replace_table_token_11_th our total revenues decreased $ 26.6 million from $ 896.6 million for the year ended december 31 , 2016 to $ 870.0 million for the year ended december 31 , 2017 . our total revenues include amounts that are not comparable year-over-year due to acquisitions and dispositions as follows : $ 14.1 million decrease from the orlando airport marriott , which was sold on june 8 , 2016 . $ 24.8
| results of operations the following table sets forth certain operating information for the year ended december 31 , 2018 for each of the hotels we owned during 2018 . - 42 - replace_table_token_6_th ( 1 ) frenchman 's reef was closed on september 6 , 2017 due to hurricane irma and remains closed . accordingly , there is no operating information for the year ended december 31 , 2018 . ( 2 ) the percentage change from 2017 revpar reflects the comparable period in 2017 to our 2018 ownership period for all hotels . ( 3 ) the operating statistics reflect our ownership period from march 1 , 2018 to december 31 , 2018 . ( 4 ) the operating statistics reflect our ownership period from december 10 , 2018 to december 31 , 2018 . ( 5 ) the hotel closed on september 6 , 2017 due to hurricane irma and reopened in april 2018. accordingly , the operating information reported only includes operations beginning in april 2018 . ( 6 ) the hotel closed on september 4 , 2018 for a comprehensive renovation . accordingly , the operating information presented only includes operations through the closure date . comparison of the year ended december 31 , 2018 to the year ended december 31 , 2017 revenue . revenue consists primarily of the room , food and beverage and other operating revenues from our hotels , as follows ( in millions ) : replace_table_token_7_th - 43 - our total revenues decreased $ 6.3 million from $ 870.0 million for the year ended december 31 , 2017 to $ 863.7 million for the year ended december 31 , 2018 . the decrease includes amounts that are not comparable year-over-year as follows : $ 50.1 million decrease from frenchman 's reef , which was closed on september 6 , 2017 due to hurricane irma and remained closed through the end of 2018 .
| 2,349 |
without limiting the foregoing , the words ยbelieves , ย ยanticipates , ย ยplans , ย ยexpects , ย ยseeks , ย ยestimates , ย and similar expressions are intended to identify forward-looking statements . there are a number of important factors , including competition , recruitment and dependence on key employees , impact of weather on agriculture and food production , identification and integration of acquisitions , research and development risks , patent and trade secret protection , government regulation and other risks detailed from time to time in the company 's reports on file at the securities and exchange commission , that could cause neogen corporation 's results to differ materially from those indicated by such forward-looking statements , including those detailed in this ยmanagement 's discussion and analysis of financial condition and results of operations.ย 19 in addition , any forward-looking statements represent management 's views only as of the day this report on form 10-k was first filed with the securities and exchange commission and should not be relied upon as representing management 's views as of any subsequent date . while management may elect to update forward-looking statements at some point in the future , it specifically disclaims any obligation to do so , even if its views change . critical accounting policies and estimates the discussion and analysis of the company 's financial condition and results of operations are based on the consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the united states . the preparation of these financial statements requires that management make estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses , and related disclosure of contingent assets and liabilities . on an ongoing basis , management evaluates the estimates , including but not limited to , those related to receivable allowances , inventories and intangible assets . these estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions . the following critical accounting policies reflect management 's more significant judgments and estimates used in the preparation of the consolidated financial statements . revenue recognition revenue from products and services is recognized when a purchase order has been received , the product has been shipped or the service performed , the sales price is fixed and determinable , and collection of any receivable is probable . to the extent customer payment is received before all recognition criteria have been met , these revenues are initially deferred and later recognized in the period that all recognition criteria has been met . accounts receivable allowance management attempts to minimize credit risk by reviewing customers ' credit history before extending credit and by monitoring credit exposure on a regular basis . an allowance for doubtful accounts on accounts receivable is established based upon factors surrounding the credit risk of specific customers , historical trends and other information . collateral or other security is generally not required for accounts receivable . once a receivable balance has been determined to be uncollectible , that amount is written off to the allowance for doubtful accounts . inventory a reserve for obsolete and slow moving inventory has been established and is reviewed at least quarterly based on an analysis of the inventory taking into account the current condition of the asset as well as other known facts and future plans . the amount of reserve required to record inventory at lower of cost or market may be adjusted as conditions change . product obsolescence may be caused by shelf-life expiration , discontinuance of a product line , replacement products in the marketplace or other competitive situations . goodwill and other intangible assets goodwill represents the excess of purchase price over fair value of tangible net assets of acquired businesses after amounts are allocated to other identifiable intangible assets . other intangible assets include customer relationships , trademarks , licenses , trade names , covenants not-to-compete and patents . amortizable intangible assets are amortized on either an accelerated or a straight-line basis over five to 20 years . the company reviews the carrying amounts of goodwill and other non-amortizable intangible assets annually , or when indications of impairment exist , to determine if such assets may be impaired . if the company 's qualitative assessment concludes that it is more likely than not that an impairment exists , or the company skips the qualitative assessment , then the company performs a quantitative assessment . if the carrying amounts of these assets are deemed to be less than fair value based upon a discounted cash flow analysis and comparison to comparable ebitda multiples of peer companies , such assets are reduced to their estimated fair value and a charge is made to operations . 20 long-lived assets management reviews the carrying values of its long-lived assets to be held and used , including definite-lived intangible assets , for possible impairment whenever events or changes in business conditions warrant such a review . the carrying value of a long-lived asset is considered impaired when the anticipated separately identifiable undiscounted cash flows over the remaining useful life of the asset indicate that the carrying amount of the assets may not be recoverable . in such an event , fair value is determined using discounted cash flows and if lower than the carrying value , impairment is recognized through a charge to operations . equity compensation plans share options awarded to employees and shares of stock awarded to employees under certain stock purchase plans are recognized as compensation expense based on their fair value at grant date . story_separator_special_tag also in this category , sales of drug residues products , primarily used to determine the presence of antibiotics in raw fluid milk from dairy animals , increased 3 % compared to the prior year . sales of bacterial and general sanitation products increased 6 % in fiscal 2013 , compared with fiscal 2012. within this category , general sanitation products , designed to measure environmental cleanliness , achieved growth of 7 % ; increased sales of filters and ampoule media products , the result of increased penetration in the beverage segment , more than offset lower equipment sales to international markets . the company 's line of pathogen testing products grew by 3 % in fiscal 2013 ; the new ansr pathogen detection system gained traction during the latter half of the year , assisted by a focused marketing program . dehydrated culture media and other sales increased 20 % for the year . contributions from genomics service revenues to european customers resulting from increased sales staffing and the introduction of new service offerings , led the growth in the category . sales of acumedia products to traditional markets in the u.s. were up 17 % over a weak fiscal 2012. additionally , customers affected by the aflatoxin and don outbreaks significantly increased purchases of miscellaneous lab supplies necessary for processing samples , which are recorded in this category . revenue for the animal safety segment was $ 101.4 million , an increase of 9 % compared to fiscal 2012. the acquisitions of igenity , macleod pharmaceuticals and scidera genomics contributed $ 5.8 million to revenues in this segment in fiscal 2013. life sciences and other revenues decreased 6 % in fiscal 2013 compared to fiscal 2012. within this category , racing kits were down 18 % due to state lab closures and consolidations and the continued decline of the racing industry in the u.s. food residues were down 28 % due to lower ractopamine kit sales from lost business in china as government laboratories there began purchasing kits made by chinese manufacturers ; further , a large user of this kit ceased using ractopamine , a feed additive used to promote leanness in animals in its operations , and stopped buying the company 's kits . partially offsetting these losses was a 4 % increase in sales to the forensics market . veterinary instruments and disposables revenues were down 1 % in fiscal 2013 compared to fiscal 2012. sales of detectable needles increased 11 % but were offset by the loss of business to a large customer during fiscal 2012. animal care and other revenues increased 29 % compared to the prior year . within this category , the company benefitted from sales of the veterinary antibiotic , uniprim , acquired in the macleod pharmaceuticals purchase , and a 113 % increase in the small animal supplements line due to new business captured on canine thyroid replacement products . partially offsetting these gains were a 27 % decrease in vitamin supplements , due to unusually high prior year sales caused by products coming off backorder and a decline in the number of cattle , and a 13 % decrease in hoof and leg care products , due to lower animal counts and difficult financial conditions in the dairy industry . rodenticide , insecticides and disinfectant revenues increased by 2 % compared to fiscal 2012. rodenticide sales increased 20 % due to seasonal conditions , new product formulations , marketing campaigns , and a prior year which was negatively affected by epa labeling changes . almost entirely offsetting this increase was an 11 % decrease in lower-margin sales of cleaners and disinfectants . the decrease was primarily due to competition from lower-priced generics , particularly internationally , lack of disease outbreak for most of the year , which led to lower demand , and timing of large international orders . dna testing revenues increased 9 % in fiscal 2013 compared to the prior year . the company gained new business resulting from the igenity and scidera genomics acquisitions and had strong market acceptance of new products for cattle parentage testing in the latter half of the year . 25 cost of revenues replace_table_token_6_th cost of revenues increased 27 % in fiscal 2014 and 7 % in fiscal 2013 in comparison with the prior years . this compares with revenue increases of 19 % and 13 % , respectively . expressed as a percentage of revenues , cost of revenues was 50 % , 47 % , and 50 % in fiscal years 2014 , 2013 and 2012 , respectively . the increase in cost of revenues , expressed as a percentage of sales , and the corresponding decline in gross margin percentage , in fiscal 2014 compared to fiscal 2013 , is due to the overall shift in revenues towards animal safety products , and product mix shifts within each segment . animal safety segment sales were 53 % of overall sales in fiscal 2014 , compared to 49 % in fiscal 2013. the improvement in gross margins , expressed as a percentage of sales , in fiscal 2013 compared to fiscal 2012 , was due to a higher proportion of food safety revenues to the overall total , and favorable product mix within both the animal safety and food safety segments . food safety gross margins were 63 % , 64 % and 65 % in fiscal years 2014 , 2013 and 2012 , respectively . the changes in margins between periods relate primarily to changes in product mix . in fiscal 2014 , the mix shift was primarily the result of lower sales of mycotoxin test kits , due to crops that were largely free of the natural toxins aflatoxin and deoxynivalenol , which had contributed to strong sales of the company 's mycotoxin test kits in fiscal 2013. the lower mycotoxin revenues in fiscal 2014 were replaced with higher revenues in other product lines , such as dehydrated culture media , which had lower gross margin percentages .
| results of operations executive overview neogen corporation achieved total revenue of $ 247.4 million in fiscal 2014 , a 19 % increase compared to revenue of $ 207.5 million in fiscal 2013. net income attributable to neogen for fiscal 2014 increased 4 % to $ 28.2 million , or $ 0.76 per fully diluted share , compared to $ 27.2 million , or $ 0.75 per fully diluted share , in fiscal 2013. cash flow from operations for fiscal 2014 was $ 21.7 million , compared to $ 26.6 million in fiscal 2013. the company 's food safety segment revenues were $ 116.3 million in fiscal 2014 , up 10 % compared to the prior year . animal safety segment revenues increased $ 29.7 million , or 29 % , to $ 131.1 million in fiscal 2014 as compared to fiscal 2013. in fiscal 2014 , the company benefitted from recent acquisitions , which added revenue totaling $ 23.7 million during the year . the syrvet acquisition in july 2013 helped neogen gain market share , especially internationally , in needles and other veterinary instruments . prima tech , acquired in november 2013 , offered products complementary to neogen 's existing product offerings with particular expertise and presence in medicine delivery and marking systems in the poultry and swine markets . in january 2014 neogen acquired chem-tech , a manufacturer of environmentally friendly insecticides for the animal and food industries ; this business has enhanced the company 's biosecurity product portfolio for animal protein producers . consolidated gross margins decreased from 52.8 % in fiscal 2013 to 49.6 % in fiscal 2014 , due primarily to acquisitions in the animal safety segment , which has lower margins overall than the food safety segment . additionally , fiscal 2013 gross margins were unusually high due to favorable product mix within each of the food safety and animal safety segments .
| 2,350 |
some of the information contained in this discussion and analysis or set forth elsewhere in this report , including information with respect to our plans and strategy for our business and related financing , includes forward-looking statements that involve risks and uncertainties . you should read the ยrisk factorsย section in part 1ยitem 1a . of this report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis . overview we are a cancer therapeutics company committed to discovering , developing and commercializing targeted cancer therapies to impact patients ' lives . our product candidates are directed against important mechanisms , or targets , known or believed to be involved in cancer . our proprietary human response platformย , a novel method of building preclinical models of human cancer , provides us with unique insights into cancer biology and is being leveraged in the discovery and clinical development of our cancer therapeutics . tivozanib , our lead product candidate , which we partnered with astellas pharma inc. , or astellas , in 2011 , is a potent , selective , long half-life inhibitor of all three vascular endothelial growth factor , or vegf , receptors that is designed to optimize vegf blockade while minimizing off-target toxicities . our clinical trials of tivozanib to date have demonstrated a favorable safety and efficacy profile for tivozanib . in january 2012 , we announced top-line data from our global , phase 3 clinical trial comparing the efficacy and safety of tivozanib with nexavar ยฎ ( sorafenib ) , an approved therapy for first-line treatment in renal cell carcinoma , or rcc , which we refer to as the tivo-1 study . the tivo-1 study is being conducted in patients with advanced clear cell rcc who have undergone a prior nephrectomy ( kidney removal ) and who have not received any prior vegf- and mtor-targeted therapy . in this trial , we measured , among other things , each patient 's progression-free survival , or pfs , which refers to the period of time that began when a patient entered the clinical trial and ended when either the patient died or the patient 's cancer had grown by a specified percentage or spread to a new location in the body . pfs is the primary endpoint in the tivo-1 study . in the tivo-1 study , tivozanib demonstrated a statistically significant improvement in pfs with a median pfs of 11.9 months compared to a median pfs of 9.1 months for nexavar in the overall study population . tivozanib also demonstrated a statistically significant improvement in pfs with a median pfs of 12.7 months compared to a median pfs of 9.1 months for nexavar in the pre-specified subpopulation of patients who received no prior systemic anti-cancer therapy for metastatic disease , a subpopulation that comprised approximately 70 % of the total study population . in the tivo-1 study , tivozanib demonstrated a well-tolerated safety profile consistent with the results from our tivozanib phase 2 clinical trial in patients with advanced rcc ; the most commonly reported side effect was hypertension , a well established on-target and manageable effect of vegf receptor inhibitors . the most common treatment-related side effects seen in the phase 2 clinical trial were hypertension ( 44.9 % ) and dysphonia , or hoarseness of voice ( 21.7 % ) . additionally , the incidence of other side effects in the phase 2 clinical trial that are commonly associated with other vegf receptor inhibitors , such as diarrhea , rash , mucositis , stomatitis , fatigue , and hand-foot syndrome , was relatively low . in addition to the tivo-1 study , we are evaluating tivozanib in multiple phase 1 and phase 2 clinical trials including our baton ( biomarker assessment of tivozanib in oncology ) program , a series of clinical trials assessing tivozanib biomarkers in solid tumors . the baton trials include baton-rcc , a phase 2 exploratory biomarker study in patients with advanced rcc , which completed enrollment in early 2012. the second baton study underway is baton-crc , a phase 2 clinical trial evaluating tivozanib in combination with modified folfox6 ( mfolfox6 ) compared to avastin ยฎ ( bevacizumab ) in combination with mfolfox6 as first-line therapy in patients with advanced metastatic colorectal cancer , or crc . additionally , we expect to initiate further clinical evaluation of tivozanib in breast cancer in 2012 as part of our baton program . 79 we expect that the results of all of our phase 1 and phase 2 trials will help to inform our clinical development plans for tivozanib as a monotherapy and in combination with other anti-cancer therapies in multiple cancer indications . we acquired exclusive rights to develop and commercialize tivozanib worldwide outside of asia pursuant to a license agreement we entered into with kirin brewery co. ltd. ( now kyowa hakko kirin ) , or khk , in 2006. under the license agreement , we obtained an exclusive license to research , develop , manufacture and commercialize tivozanib , pharmaceutical compositions thereof and associated biomarkers for the diagnosis , prevention and treatment of any and all human diseases and conditions outside of asia . khk has retained all rights to tivozanib in asia . we have obligations to make milestone and royalty payments to khk . the royalty rates range from the low to mid-teens as a percentage of our net sales of tivozanib . we are also obligated to pay a specified percentage of certain amounts we receive from any third party sublicensees , including astellas . as discussed below under the heading ยstrategic partnerships , ย we entered into a strategic collaboration with astellas in which we have agreed to share responsibility , including all profits and losses , with astellas for continued development and commercialization of tivozanib in north america and europe . story_separator_special_tag strategic partnerships kyowa hakko kirin in december 2006 , we entered into a license agreement with khk under which we obtained an exclusive license , with the right to grant sublicenses subject to certain restrictions , to research , develop , manufacture and commercialize tivozanib , pharmaceutical compositions thereof and associated biomarkers . our exclusive license covers all territories in the world , except for asia . khk has retained rights to tivozanib in asia . under the license agreement , we obtained exclusive rights in our territory under certain khk patents , patent applications and know-how related to tivozanib , to research , develop , make , have made , use , import , offer for sale , and sell tivozanib for the diagnosis , prevention and treatment of any and all human diseases and conditions . upon entering into the license agreement with khk , we made a one-time cash payment in the amount of $ 5.0 million . under our license agreement with khk , we may be required to make up to an aggregate of $ 50.0 million in future milestone payments upon the achievement of specified regulatory milestones , pay tiered royalty payments on net sales we make of tivozanib in our territory ranging from the low to mid teens as a percentage of our net sales of tivozanib , and 81 pay 30 % of certain amounts we receive under our collaboration and license agreement with astellas , which we describe below , in connection with astellas ' development and commercialization activities outside of north america and asia related to tivozanib , other than amounts we receive in respect of research and development funding or equity investments , subject to certain limitations . in march 2010 , we made a $ 10.0 million milestone payment to khk in connection with the dosing of the first patient in our phase 3 clinical trial of tivozanib . we also recorded $ 22.5 million of research and development expense in the year ended december 31 , 2011 associated with the payment made to khk related to the up-front license payment received under the collaboration and license agreement with astellas which we entered into in february 2011. astellas pharma in february 2011 , we entered into a collaboration and license agreement with astellas and certain of its indirect wholly-owned subsidiaries in connection with which we and astellas will develop and commercialize tivozanib for the treatment of a broad range of cancers , including rcc , and breast and colorectal cancers . under the terms of the collaboration agreement , we and astellas will share responsibility for continued development and commercialization of tivozanib in the united states , mexico and canada , or north america , and in europe under the joint development plan and joint commercialization plan , respectively . throughout the rest of the world ( which excludes north america , europe and asia ) , which we refer to as the royalty territory , astellas has an exclusive , royalty-bearing license to develop and commercialize tivozanib . our plan to commercialize tivozanib in collaboration with astellas , as described herein , is subject to our and astellas 's receipt of necessary regulatory approvals from the food and drug administration , or fda , and foreign regulatory authorities based upon favorable results in clinical trials . there can be no assurance that such approvals will be obtained . assuming successful approvals of tivozanib by applicable regulatory agencies , we will hold all marketing authorizations in north america , including any new drug application in the united states , and astellas will hold all marketing authorizations in the rest of the world , other than asia . assuming successful approvals of tivozanib by applicable regulatory agencies , we , as the lead commercialization party in north america , will have lead responsibility for formulating the commercialization strategy for north america under the joint commercialization plan , with each of us and astellas responsible for conducting fifty percent ( 50 % ) of the sales efforts and medical affairs activities in north america . astellas will have lead responsibility for commercialization activities in europe under the joint commercialization plan , and we will be responsible for conducting fifty percent ( 50 % ) of the medical affairs activities in the major european countries . all costs associated with each party 's conduct of development and commercialization activities ( including clinical manufacturing and commercial manufacturing costs , if any ) in north america ( including any regulatory milestones and royalties associated with tivozanib in north america which may become payable by us to khk under our license agreement with khk ) , and any resulting profits or losses , will be shared equally between the parties . all costs associated with each party 's conduct of development and commercialization activities ( including clinical manufacturing and commercial manufacturing costs , if any ) in europe , and any resulting profits or losses , will be shared equally between the parties . as between the parties , we will remain responsible for complying with our sublicense revenue sharing obligations , if any , to khk under our license agreement with khk in connection with the development and commercialization of tivozanib outside of north america . we are responsible for manufacturing , through our third party manufacturer , all of astellas 's requirements for tivozanib pursuant to a clinical supply agreement which we have entered into with astellas , and a commercial supply agreement which the parties are currently negotiating . 82 each party is obligated to use commercially reasonable efforts to develop and commercialize tivozanib in each of the united states , mexico and canada , and to develop and commercialize tivozanib in each european country specified in the agreement . astellas is also obligated to use commercially reasonable efforts to develop and commercialize tivozanib in each country in the royalty territory .
| results of operations comparison of years ended december 31 , 2011 and 2010 the following tables summarize the results of our operations for each of the years ended december 31 , 2011 and 2010 , together with the changes in those items in dollars and as a percentage : replace_table_token_9_th replace_table_token_10_th 99 revenue . revenue for the year ended december 31 , 2011 was $ 164.8 million compared to $ 44.7 million for the year ended december 31 , 2010 , an increase of approximately $ 120.2 million , or 269 % . the increase is primarily attributable to $ 120.6 million in revenue recognized in connection with our agreement with astellas ; an increase of $ 13.4 million in revenue from osi primarily related to the recognition of revenue related to osi 's option exercise in november 2010 under our research and license agreement ; $ 7.0 million in revenue recognized in connection with the up-front license payment from centocor related to the ron program ; and $ 1.8 million in research and development funding from centocor . these increases were partially offset by a decrease of $ 22.6 million in revenue earned under our license agreement with merck due to its termination in december 2010. research and development . research and development expenses for the year ended december 31 , 2011 were $ 101.7 million compared to $ 86.3 million for the year ended december 31 , 2010 , an increase of $ 15.4 million , or 18 % .
| 2,351 |
in addition , asc 280-10-50-34 , as well as rule 3-03 ( e ) of regulation s-x , requires us to recast financial information from prior years for segments if we change our internal organization in a way that effects the compositions of our reportable segments . our operating segments were previously organized and managed under five business segments : ( a ) cash advance , ( b ) atm , ( c ) check services , ( d ) games , and ( e ) other . during the first quarter of 2015 , we changed our organizational structure as part of our transformation to a games and payments company providing solutions to the gaming industry . accordingly , since the first quarter of 2015 , we have reported our financial performance , and organized and managed our operations , across the following two business segments : ( a ) games , and ( b ) payments . each of these segments is monitored by our management for performance against its internal forecast and is consistent with our internal management reporting . we have presented prior period amounts to conform to the way we now internally manage and monitor segment performance beginning in 2015. this change in segment reporting had no impact on our consolidated financial statements . business combinations . we apply the provisions of the fasb asc 805 , โ business combinations โ , in the accounting for acquisitions . it requires us to recognize separately from goodwill the assets acquired and the liabilities assumed , at their acquisition date fair values . goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed . significant estimates and 50 assumptions are required to value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration , where applicable . these estimates are preliminary and typically include the calculation of an appropriate discount rate and projection of the cash flows associated with each acquired asset over its estimated useful life . as a result , during the measurement period , which may be up to one year from the acquisition date , the company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill . in addition , deferred tax assets , deferred tax liabilities , uncertain tax positions and tax related valuation allowances assumed in connection with a business combination are initially estimated as of the acquisition date . we reevaluate these items quarterly based upon facts and circumstances that existed as of the acquisition date and any adjustments to its preliminary estimates are recorded to goodwill , in the period of identification , if identified within the measurement period . upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed , whichever comes first , any subsequent adjustments are recorded to the consolidated statements of ( loss ) income and comprehensive ( loss ) income . acquisitionโrelated costs . we recognize a liability for acquisitionโrelated costs when the expense is incurred . acquisitionโrelated costs include , but are not limited to : financial advisory , legal and debt fees ; accounting , consulting , and professional fees associated with due diligence , valuation and integration ; severance ; and other related costs and adjustments . property , equipment and leased assets . we have approximately $ 98.4 million in net property , equipment and leased assets on our consolidated balance sheets at december 31 , 2016. property , equipment and leased assets are stated at cost , less accumulated depreciation , computed using the straight-line method over the lesser of the estimated life of the related assets , generally two to five years , or the related lease term . player terminals and related components and equipment are included in our rental pool . the rental pool can be further delineated as โ rental pool โ deployed , โ which consists of assets deployed at customer sites under participation arrangements , and โ rental pool โ undeployed , โ which consists of assets held by us that are available for customer use . rental pool โ undeployed consists of both new units awaiting deployment to a customer site and previously deployed units currently back with us to be refurbished awaiting re-deployment . routine maintenance of property , equipment and leased gaming equipment is expensed in the period incurred , while major component upgrades are capitalized and depreciated over the estimated remaining useful life of the component . sales and retirements of depreciable property are recorded by removing the related cost and accumulated depreciation from the accounts . gains or losses on sales and retirements of property are reflected in our consolidated statements of ( loss ) income and comprehensive ( loss ) income . property , equipment and leased assets are reviewed for impairment whenever events or circumstances indicate that their carrying amounts may not be recoverable . impairment is indicated when undiscounted future cash flows do not exceed the asset 's carrying value . goodwill . we had approximately $ 640.5 million of goodwill on our consolidated balance sheets at december 31 , 2016 resulting from acquisitions of other businesses . all of our goodwill was subject to our annual goodwill impairment testing . we test for impairment annually on a reporting unit basis , at the beginning of our fourth fiscal quarter , or more often under certain circumstances . the annual impairment test is completed using either : a qualitative step 0 assessment based on reviewing relevant events and circumstances ; or a quantitative step 1 assessment , which determines the fair value of the reporting unit , using an income approach that discounts future cash flows based on the estimated future results of our reporting units and a market approach that compares market multiples story_separator_special_tag in addition , asc 280-10-50-34 , as well as rule 3-03 ( e ) of regulation s-x , requires us to recast financial information from prior years for segments if we change our internal organization in a way that effects the compositions of our reportable segments . our operating segments were previously organized and managed under five business segments : ( a ) cash advance , ( b ) atm , ( c ) check services , ( d ) games , and ( e ) other . during the first quarter of 2015 , we changed our organizational structure as part of our transformation to a games and payments company providing solutions to the gaming industry . accordingly , since the first quarter of 2015 , we have reported our financial performance , and organized and managed our operations , across the following two business segments : ( a ) games , and ( b ) payments . each of these segments is monitored by our management for performance against its internal forecast and is consistent with our internal management reporting . we have presented prior period amounts to conform to the way we now internally manage and monitor segment performance beginning in 2015. this change in segment reporting had no impact on our consolidated financial statements . business combinations . we apply the provisions of the fasb asc 805 , โ business combinations โ , in the accounting for acquisitions . it requires us to recognize separately from goodwill the assets acquired and the liabilities assumed , at their acquisition date fair values . goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed . significant estimates and 50 assumptions are required to value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration , where applicable . these estimates are preliminary and typically include the calculation of an appropriate discount rate and projection of the cash flows associated with each acquired asset over its estimated useful life . as a result , during the measurement period , which may be up to one year from the acquisition date , the company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill . in addition , deferred tax assets , deferred tax liabilities , uncertain tax positions and tax related valuation allowances assumed in connection with a business combination are initially estimated as of the acquisition date . we reevaluate these items quarterly based upon facts and circumstances that existed as of the acquisition date and any adjustments to its preliminary estimates are recorded to goodwill , in the period of identification , if identified within the measurement period . upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed , whichever comes first , any subsequent adjustments are recorded to the consolidated statements of ( loss ) income and comprehensive ( loss ) income . acquisitionโrelated costs . we recognize a liability for acquisitionโrelated costs when the expense is incurred . acquisitionโrelated costs include , but are not limited to : financial advisory , legal and debt fees ; accounting , consulting , and professional fees associated with due diligence , valuation and integration ; severance ; and other related costs and adjustments . property , equipment and leased assets . we have approximately $ 98.4 million in net property , equipment and leased assets on our consolidated balance sheets at december 31 , 2016. property , equipment and leased assets are stated at cost , less accumulated depreciation , computed using the straight-line method over the lesser of the estimated life of the related assets , generally two to five years , or the related lease term . player terminals and related components and equipment are included in our rental pool . the rental pool can be further delineated as โ rental pool โ deployed , โ which consists of assets deployed at customer sites under participation arrangements , and โ rental pool โ undeployed , โ which consists of assets held by us that are available for customer use . rental pool โ undeployed consists of both new units awaiting deployment to a customer site and previously deployed units currently back with us to be refurbished awaiting re-deployment . routine maintenance of property , equipment and leased gaming equipment is expensed in the period incurred , while major component upgrades are capitalized and depreciated over the estimated remaining useful life of the component . sales and retirements of depreciable property are recorded by removing the related cost and accumulated depreciation from the accounts . gains or losses on sales and retirements of property are reflected in our consolidated statements of ( loss ) income and comprehensive ( loss ) income . property , equipment and leased assets are reviewed for impairment whenever events or circumstances indicate that their carrying amounts may not be recoverable . impairment is indicated when undiscounted future cash flows do not exceed the asset 's carrying value . goodwill . we had approximately $ 640.5 million of goodwill on our consolidated balance sheets at december 31 , 2016 resulting from acquisitions of other businesses . all of our goodwill was subject to our annual goodwill impairment testing . we test for impairment annually on a reporting unit basis , at the beginning of our fourth fiscal quarter , or more often under certain circumstances . the annual impairment test is completed using either : a qualitative step 0 assessment based on reviewing relevant events and circumstances ; or a quantitative step 1 assessment , which determines the fair value of the reporting unit , using an income approach that discounts future cash flows based on the estimated future results of our reporting units and a market approach that compares market multiples
| results of operations year ended december 31 , 2016 compared to the year ended december 31 , 2015 the following table presents our consolidated results of operations ( in thousands ) * : replace_table_token_5_th * rounding may cause variances . total revenues total revenues increased by $ 32.5 million , or 4 % , to $ 859.5 million for the year ended december 31 , 2016 , as compared to the prior year period . this was due to increased payments revenues , slightly offset by lower games revenues . games revenues decreased by $ 1.2 million , or 1 % , to $ 213.3 million for the year ended december 31 , 2016 , as compared to the prior year period . this was primarily due to a lower daily win per unit on leased games , partially offset by an increase in unit sales and average sales price per unit . payments revenues increased by $ 33.6 million , or 5 % , to $ 646.2 million for the year ended december 31 , 2016 , as compared to the prior year period . this was primarily due to higher atm transaction volume and fees , including an increase in transaction volume from atm portfolios acquired in late 2015 . 46 costs and expenses games cost of revenues ( exclusive of depreciation and amortization ) increased by $ 3.3 million , or 7 % , to $ 50.3 million for the year ended december 31 , 2016 , as compared to the prior year period . this was primarily due to higher costs associated with the increased unit sales volume . payments cost of revenues ( exclusive of depreciation and amortization ) increased by $ 35.3 million , or 8 % , to $ 498.7 million for the year ended december 31 , 2016 , as compared to the prior year period . this was primarily due to the atm portfolio acquisitions and higher commission expense on atm revenues .
| 2,352 |
the following table provides our marketplace and other revenue under our previous and current presentation : replace_table_token_7_th ( 3 ) includes total stock-based compensation expense as follows : replace_table_token_8_th ( 4 ) includes the impact of $ 0.2 million in restructuring and other exit income recognized in the year ended december 31 , 2018 and $ 13.9 million in restructuring and other exit costs recognized in the year ended december 31 , 2017 . for a summary of restructuring and other exit costs ( income ) , see โ note 17โrestructuring and other exit costs ( income ) โ in the notes to consolidated financial statements . ( 5 ) in the year ended december 31 , 2019 , we recognized an income tax benefit associated with stock-based compensation of $ 16.3 million and research and development credit of $ 9.9 million . although these items are recurring in nature , the amount of the benefit derived is largely dependent on several factors , including our stock price and certain research and development expenses incurred in any given year . in the year ended december 31 , 2018 , we recognized an income tax benefit associated with the release of a valuation allowance on certain deferred tax assets . the valuation allowance release resulted in a non-recurring benefit for income taxes of $ 23.4 million for the year ended december 31 , 2018 . in the year ended december 31 , 2017 , we recognized an income tax benefit associated with the enactment of the tax cuts and jobs act ( the โ tcja โ ) . as a result of the tcja , our deferred taxes at december 31 , 2017 have been revalued at the reduced 21 % corporate income tax rate . the revaluation resulted in a non-recurring benefit for income taxes of approximately $ 31.1 million for the year ended december 31 , 2017 . replace_table_token_9_th ( 1 ) the financial results of reverb have been included in our consolidated results from august 15 , 2019 ( the date of acquisition ) . 52 replace_table_token_10_th ( 1 ) the financial results of reverb have been included in our consolidated results from august 15 , 2019 ( the date of acquisition ) . ( 2 ) $ 2.7 million of restructuring-related stock-based compensation expense has been excluded from the year ended december 31 , 2017 , and is included in the restructuring and other exit costs ( income ) line . replace_table_token_11_th ( 1 ) the financial results of reverb have been included in our consolidated results from august 15 , 2019 ( the date of acquisition ) . ( 2 ) in september 2019 , we issued $ 650.0 million aggregate principal amount of 0.125 % convertible senior notes due 2026 ( the โ 2019 notes โ ) in a private placement to qualified institutional buyers pursuant to rule 144a under the securities act of 1933 , as amended ( the โ securities act โ ) . in march 2018 , we issued $ 345.0 million aggregate principal amount of 0 % convertible senior notes due 2023 ( the โ 2018 notes โ ) in a private placement to qualified institutional buyers pursuant to the securities act . for more information on the 2019 and 2018 notes , see โ note 13โdebt โ in the notes to consolidated financial statements . 53 item 7. management ' s discussion and analysis of financial condition and results of operations . you should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes and other financial information included elsewhere in this annual report on form 10-k . this discussion , particularly information with respect to our outlook , our plans and strategy for our business and our performance and future success , includes forward-looking statements that involve risks and uncertainties . our actual results could differ materially from those discussed below . factors that could cause or contribute to these differences include those discussed below and elsewhere in this annual report , particularly in the โ risk factors โ section . for more information regarding key factors affecting our performance , see โ key factors affecting our performance โ below . overview business etsy operates two-sided online marketplaces that connect millions of passionate and creative buyers and sellers . our mission is to โ keep commerce human , โ and we 're committed to using the power of business and technology to strengthen communities and empower people around the world . our primary marketplace , etsy.com , is the global destination for unique and creative goods . the etsy marketplaceconnects creative entrepreneurs with thoughtful consumers looking for items that are intended to be special , reflect their sense of style , or represent a meaningful occasion.our sellers are the heart and soul of etsy , and our technology platform allows our sellers to turn their creative passions into economic opportunity . we have a seller-aligned business model : we make money when our sellers make money . we offer etsy sellers a marketplace with millions of buyers along with a range of seller tools and services that are specifically designed to help our creative entrepreneurs generate more sales and scale their businesses . we are focused on attracting potential buyers to the etsy marketplace for those โ special โ purchaseoccasions that happen throughout the year , and for everyday items that have meaning . we are deepening engagement with our existing buyers by inspiring purchases across our many retail categories and special occasions . special purchases for use in the every day include handmade or vintage unique clothing , accessories , household items , or furniture that the buyer wants to reflect her sense of style . special purchase occasions can occur many times throughout the year and include shopping for special occasions that reflects an individual 's unique style ; gifting that demonstrates thought and care ; and celebrations that express creativity and fun . story_separator_special_tag we also launched a regional sales feature , which allows for etsy sellers to set a country-specific sale , with a focus on their domestic listings . as of the end of the year , 65 % of u.s. buyer gms shipped for free , 74 % of u.s. listing views were eligible to ship for free , and 48 % of orders were delivered with free shipping . we made progress simplifying our marketing tools for etsy sellers to enable them to more easily invest in their growth . in the third quarter of 2019 , we streamlined promoted listings , etsy 's onsite ads platform , and google shopping , an off-site marketing tool for etsy.com sellers , into one unified ad platform , called etsy ads . etsy ads enables etsy sellers to set a budget and etsy then allocates that budget between channels , targeting optimal return on seller spend . with the initial launch of etsy ads , our promoted listings service was no longer offered as a standalone advertising option during the fourth quarter of 2019. we progressed on our impact goals , including our ecological goal to build long-term resilience by eliminating our carbon impacts and fostering responsible resource use . in february 2019 , we began offsetting 100 % of carbon emissions generated by shipping on etsy.com , which represent 97 % of our total measured emissions . we have also focused on growth investments , such as our migration to google cloud . in 2019 , we achieved significant milestones in the process by beginning to serve our search traffic from google cloud and migrating a majority of our systems to google cloud , including our machine learning efforts . as a result of migrating our etsy.com search efforts to google cloud , we were able to make the foundational upgrade to our ranking algorithms for the etsy marketplace . we spent approximately $ 30 million on cloud migration costs in 2019 , which includes 55 implementation costs and costs related to cloud usage for growth initiatives , and completed the migration in february 2020. while our etsy ads platform delivered positive returns for many etsy sellers and revenue growth for etsy in the fourth quarter of 2019 , we will be iterating on our advertising offerings to help sellers more effectively drive traffic to their listings . in the second quarter of 2020 , etsy is planning to launch a new advertising service for etsy sellers , called offsite ads . etsy will pay the upfront costs to promote etsy sellers ' listings on multiple internet platforms without any upfront costs for sellers . when a shopper clicks on an online offsite ad featuring a seller 's listing and purchases from their shop , the seller will pay etsy an advertising fee on that order - only when they make a sale . the etsy ads service will be a dedicated on-site advertising program for sellers to promote their listings to shoppers on etsy . debt in september 2019 , we issued $ 650.0 million aggregate principal amount of the 2019 notes in a private placement to qualified institutional buyers pursuant to the securities act . the initial conversion price of the 2019 notes represented a premium of approximately 47.5 % over the price of our common stock . the net proceeds from the sale of the 2019 notes were $ 639.5 million after deducting the initial purchasers ' discount and offering expenses . the 2019 notes will mature on october 1 , 2026 , unless earlier converted , redeemed or repurchased . we used $ 76.2 million of the net proceeds from the 2019 notes offering to enter into separate capped call transactions ( โ 2019 capped call transactions โ ) with certain financial institutions . the 2019 capped call transactions effectively increase the premium for conversion of the 2019 notes at maturity to 100 % and are generally expected to reduce potential dilution to our common stock upon any conversion of the 2019 notes and offset any payments we make upon conversion . in addition , we used $ 124.5 million of the net proceeds from the 2019 notes to repurchase 2,094,196 shares of our common stock . we intend to use the remainder of the net proceeds from the 2019 notes offering for general corporate purposes . on february 25 , 2019 , we entered into a $ 200.0 million senior secured revolving credit facility pursuant to a credit agreement with several lenders ( the โ 2019 credit agreement โ ) . the 2019 credit agreement will mature in february 2024 . the 2019 credit agreement includes a letter of credit sublimit of $ 30.0 million and a swingline loan sublimit of $ 10.0 million . for more information on the 2019 notes , 2019 capped call transactions , and 2019 credit agreement , see โ note 13โdebt โ in the notes to consolidated financial statements . reclassification of revenue categories in the fourth quarter of 2019 , we reclassified other revenue to marketplace revenue . the following table provides our marketplace revenue and other revenue under our previous and current presentation for the years ended december 31 , 2018 and 2017 : replace_table_token_12_th 56 key operating and financial metrics we collect and analyze operating and financial data to evaluate the health and performance of our business and allocate our resources ( such as capital , people , and technology investments ) . the financial results of reverb have been included in our consolidated financial results from august 15 , 2019 ( the date of acquisition ) . we are providing etsy.com standalone information in certain instances where particularly relevant . the unaudited non-gaap financial measure and key operating and financial metrics we use are : replace_table_token_13_th ( 1 ) gms for the year ended december 31 , 2019 , includes reverb 's gms of $ 242.4 million . percent international gms includes reverb 's percent international gms of 18 % for the year ended december 31 , 2019 .
| results of operations the following tables show our results of operations for the periods presented and express the relationship of certain line items as a percentage of revenue for those periods . the period-to-period comparison of financial results is not necessarily indicative of future results . replace_table_token_21_th 69 comparison of years ended december 31 , 2019 and 2018 revenue replace_table_token_22_th gms increased $ 1.0 billion , or 26.5 % , to $ 5.0 billion in the year ended december 31 , 2019 , which included $ 242.4 million related to the results of reverb , compared to the year ended december 31 , 2018 . on a currency-neutral basis ( excluding the direct impact of currency translation on gms from goods that are not listed in u.s. dollars ) gms growth for the year ended december 31 , 2019 would have been 27.5 % , or approximately 100 basis points higher than the reported 26.5 % growth . supporting this growth in gms , active sellers increased 27.6 % to 2.7 million , driven in large part by growth in international sellers and the acquisition of reverb , and active buyers increased 17.5 % to 46.4 million at december 31 , 2019 compared to december 31 , 2018 . in the year ended december 31 , 2019 , gms from new buyers grew 16 % year-over-year and represented approximately 17 % of overall gms , a decrease compared to last year . in the year ended december 31 , 2019 , gms from existing buyers grew 37 % year-over-year and represented approximately 83 % of overall gms , an increase compared to last year . we anticipate continued visit growth and improved conversion in 2020. we believe conversion improvements will be driven primarily by product launches enhancing the buyer experience .
| 2,353 |
the company 's sole component of accumulated other comprehensive income/loss is unrealized gains/losses on afs securities . derivative financial instruments and hedging we account for derivatives in accordance with fasb literature on accounting for derivative instruments and hedging activities . when we enter into a derivative contract , we designate the derivative as held for trading , an economic hedge , or a qualifying hedge as detailed in the literature . the designation may change based upon management 's reassessment or changing circumstances . derivatives utilized by the company include interest story_separator_special_tag the company the company is a savings and loan holding company chartered as a corporation in the state of maryland in 1990. it conducts business primarily through four subsidiaries , the bank , sbi , mid-md , and hyatt commercial . hyatt commercial conducts business as a commercial real estate brokerage and property management company . sbi holds mortgages that do not meet the underwriting criteria of the bank and is the parent company of crownsville , which does business as annapolis equity group and acquires real estate for syndication and investment purposes . the bank has five branches in anne arundel county , maryland , which offer a full range of deposit products , and originate mortgages in its primary market of anne arundel county , maryland and , to a lesser extent , in other parts of maryland , delaware , and virginia . 22 overview the company provides a wide range of personal and commercial banking services . personal services include mortgage and consumer lending as well as deposit products such as personal internet banking and online bill pay , checking accounts , individual retirement accounts , money market accounts , and savings and time deposit accounts . commercial services include commercial secured and unsecured lending services as well as business internet banking , corporate cash management services , and deposit services . the company also provides atms , credit cards , debit cards , safe deposit boxes , and telephone banking , among other products and services . we have experienced a slightly improved level of profitability in our core operations in 2017 , primarily due to the payoff of high-costing fhlb advances , a reversal of the provision for loan losses , and decreased noninterest expense . our net income before income taxes amounted to $ 7.8 million in 2017 , compared to $ 5.5 million in 2016. the interest rate spread between our cost of funds and what we earn on loans has increased somewhat from 2016 levels due primarily to the payoff of the higher-costing fhlb advances . during 2017 , we recorded higher income tax provision due to the enactment of the tax act in december 2017. the effect of the revised corporate tax rates was a reduction of $ 1.9 million in our net deferred tax asset at december 31 , 2017 , which was recorded through the income tax provision . the company expects to experience similar stable market conditions during 2018. if interest rates increase , demand for borrowing may decrease and our interest rate spread could decrease . we will continue to manage loan and deposit pricing against the risks of rising costs of our deposits and borrowings . interest rates are outside of our control , so we must attempt to balance the pricing and duration of the loan portfolio against the risks of rising costs of our deposits and borrowings . the reduction in the corporate income tax rate from 34 % to 21 % in 2018 should positively affect net income . the continued success and attraction of anne arundel county , maryland and vicinity , will also be important to our ability to originate and grow mortgage loans and deposits , as will our continued focus on maintaining low overhead . if the market and or economy worsens , our business , financial condition , results of operations , access to funds , and the price of our stock could be materially and adversely impacted . critical accounting policies our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the u.s. ( โ gaap โ ) and follow general practices within the industry in which we operate . application of these principles requires management to make estimates , assumptions , and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes . these estimates , assumptions , and judgments are based on information available as of the date of the consolidated financial statements ; accordingly , as this information changes , the consolidated financial statements could reflect different estimates , assumptions , and judgments . certain policies inherently have a greater reliance on the use of estimates , assumptions , and judgments and , as such , have a greater possibility of producing results that could be materially different than originally reported . estimates , assumptions , and judgments are necessary when assets and liabilities are required to be recorded at fair value , when a decline in the value of an asset not carried on the consolidated financial statements at fair value warrants an impairment write-down or valuation reserve to be established , or when an asset or liability needs to be recorded contingent upon a future event . carrying assets and liabilities at fair value inherently results in more financial statement volatility . when applying accounting policies in such areas that are subjective in nature , management must use its best judgment to arrive at the carrying value of certain assets and liabilities . below is a discussion of our critical accounting policies . securities we designate securities into one of three categories at the time of purchase . debt securities that we have the intent and ability to hold to maturity are classified as held to maturity ( โ htm โ ) and recorded at amortized cost . debt and equity securities are classified as trading if bought and held principally for the purpose of sale in the near term . story_separator_special_tag these qualitative factors include , but are not limited to : ยท levels and trends in delinquencies and nonaccruals ; ยท inherent risk in the loan portfolio ; ยท trends in volume and terms of the loan ; ยท effects of any change in lending policies and procedures ; ยท experience , ability , and depth of management ; ยท national and local economic trends and conditions ; ยท effect of any changes in concentration of credit ; and ยท industry conditions . 24 we assign risk ratings to the loans in our portfolio . these credit quality risk ratings include regulatory classifications of special mention , substandard , doubtful , and loss . loans classified special mention have potential weaknesses that deserve management 's close attention . if uncorrected , the potential weaknesses may result in deterioration of the repayment prospects . loans classified substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt . they include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged , if any . loans classified doubtful have all the weaknesses inherent in loans classified substandard with the added characteristic that collection or liquidation in full , on the basis of current conditions and facts , is highly improbable . loans classified as a loss are considered uncollectible and are charged to the allowance . loans not classified are rated pass . with respect to all loan segments , we do not charge off a loan , or a portion of a loan , until one of the following conditions have been met : ยท the property collateralizing the loan has been foreclosed upon . at the time of foreclosure , a charge-off is recorded for the difference between the recorded amount of the loan and the net value of the underlying collateral ; ยท an agreement to accept less than the recorded balance of the loan has been made with the borrower . once an agreement has been finalized and any proceeds from the borrower are received , a charge-off is recorded for the difference between the recorded amount of the loan and the net value of the underlying collateral ; or ยท the collateral valuation on a collateral dependent impaired loan is less than the recorded balance . the loan is charged off for accounting purposes by the amount of the difference between the recorded balance and collateral value . real estate acquired through foreclosure real estate acquired through or in the process of foreclosure is recorded at fair value less estimated disposal costs . management periodically evaluates the recoverability of the carrying value of the real estate acquired through foreclosure using estimates as described under โ allowance for loan losses โ above . in the event of a subsequent change in fair value , the carrying amount is adjusted to the lesser of the new fair value , less disposal costs , or the carrying value recorded at acquisition . the amount of the change is charged or credited to noninterest expense . expenses on real estate acquired through foreclosure incurred prior to the disposition of the property , such as maintenance , insurance , and taxes , and physical security , are charged to expense . material expenses that improve the property to its best use are capitalized to the property . if a foreclosed property is sold for more or less than the carrying value , a gain or loss is recognized upon the sale of the property . deferred income taxes deferred income taxes are recognized for the tax consequences of temporary differences between financial statement carrying amounts and the tax bases of assets and liabilities . deferred income taxes are provided on income and expense items when they are reported for financial statement purposes in periods different from the periods in which these items are recognized in the income tax returns . deferred tax assets are recognized only to the extent that it is more likely than not that such amounts will be realized based upon consideration of available evidence , including tax planning strategies and other factors . we use the liability method of accounting for income taxes . under this method , deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases . deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled . deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion of the deferred tax asset will not be realized . we exercise significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets . these judgments may require us to make projections of future taxable income and or to carryback to taxable income in prior years . the judgments and estimates we make in determining our deferred tax assets , which are inherently subjective , are reviewed on a continual basis as regulatory and business factors change . any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets . further , a reduction in the statutory income tax rate would require a charge to income tax expense in the year the reduced income tax rate becomes effective . the tax act was signed into law in december 2017 which reduced the corporate federal statutory tax rate from 34 % to 21 % . u.s. gaap requires the impact of the tax act to be accounted for in the period of enactment . as such , the company was required to write down the value of its net deferred tax assets as of december 31 , 2017 to reflect the reduction in the corporate tax rate for future periods .
| results of operations net income net income decreased by $ 12.7 million , or 81.9 % , to $ 2.8 million for 2017 , compared to $ 15.5 million for 2016. basic and diluted income per share decreased to $ 0.21 and $ 0.21 , respectively , for 2017 , compared to $ 1.16 and $ 1.15 , respectively , for 2016. during 2016 , we reversed the valuation allowance against our net deferred tax asset , which resulted in a one-time significant income tax benefit . as an offset to the increased tax expense for 2017 , we recognized an increase in net interest income , a decrease in noninterest expenses , and an increase in the reversal of the provision for loan losses in 2017 compared to 2016. additionally , in 2017 we recognized an additional $ 1.9 million in tax expense associated with the revaluation of our net deferred tax asset brought about by the reduced corporate tax rates in the tax act . net interest income net interest income , which is interest earned net of interest expense , increased by $ 2.4 million , or 10.8 % , to $ 24.6 million for 2017 , compared to $ 22.2 million for 2016. the increase in net interest income was due to an increase in the average yield on interest-earning assets , an increase in the average balance of interest-earning assets , a decrease in the average balance of interest-bearing liabilities , and a decrease in the average rate on interest-bearing liabilities .
| 2,354 |
the company amortizes its intellectual property/know-how intangible asset on a straight-line basis with an estimated economic life of seven years . amortization expense was approximately $ 6.0 million for the year ended december 27 , 2013 and $ 3.8 for the six months ended december 28 , 2012. the company had no amortization in 2011 story_separator_special_tag this section and other parts of this annual report on form 10-k contain forward-looking statements that involve risks and uncertainties . forward-looking statements can also be identified by words such as ยanticipate , ย ยbelieve , ย ยestimate , ย ยexpect , ย ยintend , ย ยmay , ย ยmight , ย ยplan , ย ยproject , ย ยwill , ย ยwould , ย ยshould , ย ยcould , ย ยcan , ย ยpredict , ย ยpotential , ย ยcontinue , ย ยobjective , ย and similar terms . forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements . factors that might cause such differences include , but are not limited to , those discussed in ยitem 1a ย risk factorsย above . the following discussion should be read in conjunction with the consolidated financial statement and notes thereto included in item 8 of this report . we assume no obligation to revise or update any forward-looking statements for any reason , except as required by law . overview we are a leading developer and supplier of critical subsystems , primarily for the semiconductor capital equipment industry . we also leverage the specialized skill sets required to support semiconductor capital equipment to serve the technologically similar markets in the flat panel , medical , energy and research industries , collectively referred to as ยother addressed industriesย . we develop , design , prototype , engineer , manufacture and test subsystems which are highly specialized and tailored to specific steps in the semiconductor manufacturing process as well as the manufacturing process in other addressed industries . our revenue is derived primarily from the sale of gas delivery systems and other critical subsystems including chemical mechanical planarization ( ยcmpย ) subsystems , chemical delivery modules , top-plate assemblies , frame assemblies , process modules and other high level assemblies . our sales were $ 444.0 million for fiscal year 2013 , $ 403.4 million for fiscal year 2012 , and $ 452.6 million for fiscal year 2011. our three largest customers in fiscal year 2013 were applied materials , inc. , lam research corporation and asm international , each of which accounted for more than 10 % of our total sales in fiscal year 2013. our three largest customers in 2012 were applied materials , inc. , lam research corporation and intuitive surgical , two of which each accounted for 10 % or more of our total sales for fiscal year 2012. our three largest customers in 2011 were applied materials , inc. , lam research corporation and fei company , two of which each accounted for 10 % or more of our total sales for fiscal year 2011. as a group , these customers accounted for 81 % , 80 % and 68 % of the company 's sales for fiscal years 2013 , 2012 and 2011 , respectively . effective as of the end of the first quarter of 2012 , we agreed to terminate our arrangement with fei corporation , whereby fei would take back the manufacturing process they had been outsourcing to us since 2008. as part of an arrangement , we agreed to assist fei during the transition period through our third quarter of fiscal 2012 and , as a result , recorded revenue totaling $ 2.1 million related to these efforts during that timeframe , offset by associated costs . we announced in the third quarter of fiscal 2012 that one of our larger semiconductor equipment customers has decided to in-source a portion of their gas panel business . while this decision did not have a material impact on our revenue in fiscal 2012 , we estimated the impact for fiscal year 2013 to be in the range of 7 % to 9 % of our revenue in fiscal 2013 . 29 results of operations the following table sets forth income statement data for the periods indicated as a percentage of revenue : replace_table_token_5_th fiscal year 2013 compared with fiscal year 2012 sales sales for fiscal year 2013 increased $ 40.6 million , or 10.1 % to $ 444.0 million from $ 403.4 million for fiscal year 2012. the increase in sales during the fiscal year 2013 was due primarily to our acquisition of ait in july 2012 which resulted in the inclusion of sales of $ 122.4 million from ait , compared to $ 63.8 million of sales from ait for fiscal year 2012. sales for uct when excluding sales from ait were lower during the twelve months ended december 27 , 2013 when compared to fiscal year 2012 due to factors including the termination of our arrangement with fei at the end of the first quarter of 2012 , the determination by one of our larger semiconductor equipment customers to in-source a portion of their gas panel business , as well as an overall downturn in the semiconductor industry beginning in the third quarter of 2012 which did not impact ait until the beginning of the fourth quarter of 2012. we expect sales to increase modestly in the first quarter of 2014 as compared to the fourth quarter of 2013. cost of goods sold consists primarily of purchased materials , inventory reserves and labor and overhead , including depreciation , associated with the design and manufacture of products sold . story_separator_special_tag accordingly , no provisions for u.s. taxes have been provided thereon . in addition , if we change our intent to reinvest our undistributed foreign earnings indefinitely or if a greater amount of undistributed earnings are needed than the previously anticipated remaining unremitted foreign earnings , we could be required to accrue or pay u.s. taxes on some or all of these undistributed earnings . on september 13 , 2013 , the u.s. treasury department and the irs issued final regulations that address costs incurred in acquiring , producing , or improving tangible property ( the ยtangible property regulationsย ) . the tangible property regulations are generally effective for tax years beginning on or after january 1 , 2014 , and may be adopted in earlier years . management has reviewed its capitalization methodology and determined that there was no impact to our consolidated financial position or results of operations for fiscal year 2013 nor do we believe any impact in the future would be material . fiscal year 2012 compared with fiscal year 2011 sales sales for fiscal year 2012 decreased $ 49.2 million , or 10.9 % , to $ 403.4 million from $ 452.6 million for fiscal year 2011. the sales decline primarily reflected a decrease in semiconductor revenues resulting from the semiconductor industry downturn which began during the third quarter of fiscal 2011 as well as the softness in the energy industry , partially offset by the inclusion of sales of $ 63.8 million due to the acquisition of ait for the period july 3 , 2012 through december 28 , 2012. in addition , sales to fei decreased in fiscal 2012 to approximately $ 11.7 million from $ 32.0 million in fiscal 2011 , due to the termination of our relationship with fei in fiscal 2012. gross profit cost of goods sold consists primarily of purchased materials , inventory reserves and labor and overhead , including depreciation , associated with the design and manufacture of products sold . gross profit for fiscal year 2012 decreased to $ 55.8 million , or 13.8 % of sales , from $ 59.0 million , or 13.0 % of sales , for fiscal year 2011. our gross margin increased in fiscal 2012 from the comparable period in 2011 due primarily to a sales mix which included higher margin products , certain improvements in operational efficiencies at our manufacturing locations , favorable work order variances and a reduction in floor stock costs , partially offset by in an increase in inventory reserves . research and development expense research and development expense consists primarily of activities related to new component testing and evaluation , test equipment and fixture development , product design , and other product development activities . research and development expense for fiscal year 2012 was $ 5.1 million , or 1.3 % of sales , compared to $ 5.6 million , or 1.2 % of sales for fiscal year 2011. the decrease in expense for fiscal 2012 , as compared to fiscal 2011 , was primarily due to a reduction in expenses which are allocated from cost of sales to research and development activities . 32 sales and marketing expense sales and marketing expense consists primarily of salaries and commissions paid to our sales and service employees , salaries paid to our engineers who work with the sales and service employees to help determine the components and configuration requirements for new products and other costs related to the sales of our products . sales and marketing expense for fiscal year 2012 decreased $ 0.2 million to $ 7.0 million , or 1.7 % of sales , compared to $ 7.3 million , or 1.6 % of sales , for fiscal year 2011. the decrease in expense was primarily due to a reduction in commission expense resulting from reduced sales . general and administrative expense general and administrative expense consists primarily of salaries and overhead associated with our administrative staff and professional fees . general and administrative expense for fiscal year 2012 increased approximately $ 10.2 million , or 45.2 % to $ 32.9 million , or 8.1 % of sales , compared with $ 22.6 million , or 5.0 % of sales , for fiscal year 2011. the increase when comparing fiscal 2012 with fiscal 2011 was primarily due to ( a ) amortization of finite-lived intangibles associated with the ait acquisition of approximately $ 3.8 million , ( b ) the inclusion of ait 's general and administrative expenses since the date of acquisition of approximately $ 4.7 million and ( c ) , an increase in stock compensation costs of approximately $ 0.7 million . acquisition costs acquisition costs were approximately $ 2.4 million , or 0.6 % of sales , in fiscal 2012 which are costs associated with our purchase of ait and consist primarily of professional fees and services in connection with the acquisition . interest and other income ( expense ) , net interest and other income ( expense ) , net for fiscal year 2012 was $ ( 1.6 ) million compared to $ ( 1.1 ) million for fiscal year 2011 primarily due to the increase in debt in the third quarter of 2012 resulting from the acquisition of ait . income tax provision our effective tax rate for fiscal year 2012 was a provision of 23.1 % compared to a benefit of 5.8 % for fiscal year 2011. the change in respective rates reflected , primarily , changes in our deferred tax assets and our accrual for uncertain tax positions , as well as a change in the geographic mix of worldwide earnings and financial results for the for fiscal year 2012 compared to fiscal year 2011. our effective tax rate was lower than the statutory rate for fiscal 2012 primarily due to the geographic distribution of our world-wide earnings in foreign jurisdictions with lower tax rates .
| unaudited quarterly financial results the following table sets forth statement of operations data for the periods indicated . the information for each of these periods is unaudited and has been prepared on the same basis as our audited consolidated financial statements included herein and includes all adjustments , consisting only of normal recurring adjustments that we consider necessary for a fair presentation of our unaudited operations data for the periods presented . historical results are not necessarily indicative of the results to be expected in the future ( in thousands , except per share data ) : replace_table_token_6_th 36 ( 1 ) earnings per share is calculated independently each quarter and for the full year based upon their respective weighted average shares outstanding . therefore , the sum of the quarterly earnings per share may not equal the annual earnings per share reported . ( 2 ) results from our acquisition of ait are included from the date of acquisition on july 1 , 2012 and for all periods in 2013 . ( 3 ) see note 12 to the notes to consolidated financial statements in our annual report on form 10-k for the fiscal year ended december 28 , 2012 filed with the sec on march 3 , 2013 for a reconciliation of these amounts ( if any ) to the amounts in the respective quarterly reports on form 10-q in which they were originally reported . liquidity and capital resources we have required capital principally to fund our acquisitions and working capital needs , satisfy our debt obligations , maintain our equipment and purchase new capital equipment .
| 2,355 |
stock-based compensation โ stock-based compensation is measured at the grant date , based on the calculated fair value of the award , and is recognized as an expense over the requisite service period ( generally the vesting period of the grant ) . see note 10 for additional information . variable interest entities โ once an entity is determined to be a variable interest entity ( vie ) , the party with the controlling financial interest , the primary beneficiary , is required to consolidate it . the company has three franchisees with notes payable to the company . these franchisees are vie 's , however , the owners of the franchise operations are the primary beneficiaries of the entities , not the company . therefore they are not required to be consolidated . fair value of financial instruments โ fair value , is defined under a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements . fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date . valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs . the following three levels of inputs may be used to measure fair value and requires that the assets or liabilities carried at fair value are disclosed by the input level under which they were valued . level 1 : quoted market prices in active markets for identical assets and liabilities . level 2 : observable inputs other than defined in level 1 , such as quoted prices for similar assets or liabilities ; quoted prices in markets that are not active ; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities . level 3 : unobservable inputs that are not corroborated by observable market data . non-controlling interests - the equity interests of the unrelated limited partners and members are shown on the accompanying consolidated balance sheet in the stockholders ' equity section as a non-controlling interest and is adjusted each period to reflect the limited partners ' and members ' share of the net income or loss as well as any cash distributions to the limited partners and members for the period . the limited partners ' and members ' share of the net income or loss in the partnership is shown as non-controlling interest income or expense in the accompanying consolidated statement of operations . all inter-company accounts and transactions are eliminated . prior to the acquisition of bdi our non-controlling interest consisted of one joint venture partnership involving good times restaurants , as part of the acquisition of bdi ( see note 2 below ) additional non-controlling interests were acquired in three joint venture partnerships . recent accounting pronouncements โ in april 2015 , the financial accounting standards board ( โ fasb โ ) issued guidance which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the related debt story_separator_special_tag the following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this annual report on form 10-k . overview we operate as two reportable business segments : good times burgers and frozen custard restaurants ( โ good times โ ) and bad daddy 's burger bar restaurants ( โ bad daddy 's โ ) . all of our good times restaurants compete in the quick-service drive-through dining industry while our bad daddy 's restaurants compete in the full-service upscale casual dining industry . we believe that providing this additional financial information for each of our brands will provide a better understanding of our overall operating results . refer to note 12 , segment reporting , in the notes to our consolidated financial statements for more information . the following tables present information about our reportable segments for the respective periods : replace_table_token_5_th restaurant operating costs are expressed as a percentage of restaurant sales ( 1 ) for fiscal year 2015 , the information includes revenues and costs related to the acquisition of bdi in may 2015 . 26 good times restaurants : we currently operate twenty-seven company-owned and joint venture good times restaurants โ all in the state of colorado . in addition we have eleven good times franchise restaurants , nine operating in colorado and two in wyoming . same store sales at our good times restaurants increased 14.6 % in fiscal 2014 compared to fiscal 2013 , and increased 6.9 % in fiscal 2015 compared to fiscal 2014. these results reflect the continuation of the positive momentum we have experienced since fiscal 2011. the increase in fiscal 2015 is comprised of an approximate 3.5 % increase in menu pricing and an approximate 3.4 % increase in customer traffic . our outlook for fiscal 2016 for good times is cautiously optimistic based on the last five years of positive sales trends ; however , our sales trends are influenced by many factors . we are continuing to manage our marketing communications to balance growth in customer traffic and the average customer expenditure . we plan to open one additional good times restaurant in fiscal 2016. bad daddy 's restaurants : we currently operate twelve company-owned and joint venture bad daddy 's restaurantsโfive in colorado and seven in north carolina . we also license one restaurant in north carolina and have a franchise restaurant in south carolina and a franchise restaurant in tennessee . the north carolina restaurants were all acquired in the acquisition of bdi in may 2015 , as described below . story_separator_special_tag $ 2,502,000 of the $ 4,215,000 increase was attributable to the north carolina bdi restaurants acquired in may 2015. the remaining increase of $ 1,713,000 was attributable to the two bad daddy 's restaurants open the entire fiscal year and one new bad daddy 's restaurant that opened in january 2015. payroll and other employee benefit costs : for fiscal 2015 , payroll and other employee benefit costs increased $ 5,472,000 from $ 8,915,000 ( 32.6 % of restaurant sales ) in fiscal 2014 to $ 14,387,000 ( 33.1 % of restaurant sales ) . good times payroll and other employee benefit costs were $ 8,967,000 ( 31.4 % of restaurant sales ) in fiscal 2015 , up from $ 8,092,000 ( 31.7 % of restaurant sales ) in fiscal 2014. the $ 875,000 increase in payroll and other employee benefit expenses is primarily due to the increase in restaurant sales . because payroll costs are semi-variable in nature , they normally decrease as a percentage of restaurant sales when there is an increase in restaurant sales . payroll and other employee benefits increased approximately $ 529,000 in fiscal 2015 due to two new restaurants opened in the fiscal year , one in november 2014 and one in may 2015. bad daddy 's payroll and other employee benefit costs were $ 5,420,000 ( 36.1 % of restaurant sales ) for fiscal 2015 up from $ 823,000 ( 45.6 % of restaurant sales ) in fiscal 2014 . $ 2,582,000 of the $ 4,597,000 increase was attributable to the north carolina bdi restaurants acquired in may 2015. the remaining increase of $ 2,015,000 was attributable to the two bad daddy 's restaurants open the entire fiscal year and one new bad daddy 's restaurant that opened in january 2015. occupancy and other operating costs : for fiscal 2015 , occupancy and other operating costs increased $ 2,580,000 from $ 4,599,000 ( 16.8 % of restaurant sales ) in fiscal 2014 to $ 7,179,000 ( 16.5 % of restaurant sales ) . good times occupancy and other operating costs were $ 4,768,000 ( 16.7 % of restaurant sales ) in fiscal 2015 , up from $ 4,237,000 ( 16.6 % of restaurant sales ) in fiscal 2014. the $ 530,000 increase in occupancy and other costs is primarily attributable to : ยท increase of $ 300,000 in occupancy and other restaurant operating costs due to the two new restaurants opened in fiscal 2015 . 28 ยท increases in various other restaurant operating costs of $ 230,000 at existing restaurants comprised primarily of repairs and maintenance , restaurant supplies and bank fees . occupancy costs may increase as a percent of sales as new company-owned restaurants are developed due to higher rent associated with sale-leaseback operating leases , as well as increased property taxes on those locations . bad daddy 's occupancy and other operating costs were $ 2,411,000 ( 16.1 % of restaurant sales ) for fiscal 2015 up from $ 362,000 ( 20.1 % of restaurant sales ) in fiscal 2014 . $ 1,186,000 of the $ 2,049,000 increase was attributable to the north carolina bdi restaurants acquired in may 2015. the remaining increase of $ 863,000 was attributable to the two bad daddy 's restaurants open the entire fiscal year and one new bad daddy 's restaurant that opened in january 2015. new store preopening costs : in fiscal 2015 , we incurred $ 784,000 of preopening costs compared to $ 669,000 in fiscal 2014. good times preopening costs related to the two new restaurants was $ 172,000 for fiscal 2015. bad daddy 's preopening costs were $ 612,000 for fiscal 2015 compared to $ 663,000 in fiscal 2014. all of the preopening costs are related to the newly-developed bad daddy 's restaurants . depreciation and amortization costs : for fiscal 2015 , depreciation and amortization costs increased $ 610,000 from $ 636,000 in fiscal 2014 to $ 1,246,000. good times depreciation costs increased $ 115,000 from $ 563,000 in fiscal 2014 to $ 678,000 in fiscal 2015 , primarily due to the two new restaurants opened in fiscal 2015. bad daddy 's depreciation costs increased $ 495,000 from $ 73,000 in fiscal 2014 to $ 568,000 in fiscal 2015 , $ 239,000 of the increase was attributable to the north carolina bdi restaurants acquired in may 2015. story_separator_special_tag and negative covenants , including without limitation , annual covenants to maintain certain insurance coverage and to maintain a certain debt service coverage ratio , leverage ratio , and quick ratio . at september 30 , 2015 the company was in compliance with all the required covenants . cash flows : net cash provided by operating activities was $ 3,168,000 for fiscal 2015 compared to net cash provided by operating activities of $ 1,438,000 in fiscal 2014. the increase in net cash provided by operating activities for fiscal 2015 was the result of a net loss of $ 300,000 and non-cash reconciling items totaling $ 3,468,000 ( comprised principally of 1 ) depreciation and amortization of $ 1,332,000 ; 2 ) $ 478,000 of stock option compensation expense ; 3 ) an increase in our accretion for deferred rent of $ 234,000 ; 4 ) a $ 1,442,000 increase in accounts payable ; and 5 ) net decreases in operating assets and liabilities totaling $ 18,000 ) . net cash used in investing activities in fiscal 2015 was $ 23,715,000 compared to net cash used in investing activities of $ 3,849,000 in fiscal 2014. fiscal 2015 primarily reflects the acquisition of bdi of $ 17,612,000 ( net of cash acquired in the transaction ) and $ 1,521,000 in sale leaseback proceeds and purchases of property and equipment .
| general and administrative costs : for fiscal 2015 , general and administrative costs increased $ 1,298,000 from $ 2,803,000 ( 10.1 % of total revenues ) in fiscal 2014 to $ 4,101,000 ( 9.3 % of total revenue ) . the $ 1,298,000 increase in general and administrative expenses in fiscal 2015 is primarily attributable to : ยท increase in payroll and employee benefit costs of $ 577,000 ยท increase in incentive stock compensation cost of $ 315,000 ยท net increases in all other expenses of $ 406,000. general and administrative costs will continue to increase as we build up our infrastructure to support the growth of both of our brands . advertising costs : for fiscal 2015 , advertising costs increased $ 276,000 from $ 988,000 ( 3.6 % of restaurant sales ) in fiscal 2014 to $ 1,264,000 ( 2.9 % of restaurant sales ) . good times advertising costs increased $ 241,000 from $ 947,000 ( 3.7 % of restaurant sales ) in fiscal 2014 to $ 1,188,000 ( 4.1 % of restaurant sales ) in fiscal 2015. good times advertising costs consists primarily of contributions made to the advertising materials fund and a regional advertising cooperative based on a percentage of restaurant sales . we anticipate that in fiscal 2016 good times advertising costs will remain consistent with fiscal 2015 as a percentage of restaurant sales and will consist primarily of cable television advertising , social media and on-site and point-of-purchase merchandising totaling approximately 4 % of restaurant sales . bad daddy 's advertising costs were $ 76,000 ( 0.5 % of restaurant sales ) in fiscal 2015 compared to $ 40,000 ( 2.3 % of restaurant sales ) in fiscal 2014. the north carolina bdi restaurants acquired in may 2015 accounted for $ 29,000 of the increase . bad daddy 's advertising costs consist primarily of menu development , printing costs and local store marketing .
| 2,356 |
the following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes included elsewhere in this annual report on form 10-k. this discussion contains forward-looking statements that involve risks and uncertainties . our actual results could differ materially from the forward-looking statements included herein . factors that could cause or contribute to such differences include , but are not limited to , those identified below and those discussed in the section entitled โ risk factors โ and elsewhere in this annual report on form 10-k. overview we are the leading saas provider of core systems for the p & c insurance industry . we have achieved our leadership position by combining over twenty years of deep domain expertise with the differentiated saas capabilities and low-code configurability of our technology platform . we believe we are the first company to provide carriers with an end-to-end suite of enterprise-scale core system software that is purpose-built as a saas solution . our product portfolio is built on our modern technology foundation , the duck creek platform , and works cohesively to improve the operational efficiency of carriers ' core processes ( policy administration , claims management and billing ) as well as other critical functions . the duck creek platform enables our customers to be agile and rapidly capitalize on market opportunities , while reducing their total cost of technology ownership . our deep understanding of the p & c insurance industry has enabled us to develop a single , unified suite of insurance software products that is tailored to address the key challenges faced by carriers . our solutions promote carriers ' nimbleness by enabling rapid integration and streamlining the ability to capture , access and utilize data more effectively . the duck creek suite includes several products that support the p & c insurance process lifecycle , such as : duck creek policy : enables carriers to develop and launch new insurance products and manage all aspects of policy administration , from product definition to quoting , binding and servicing duck creek billing : supports fundamental payment and invoicing capabilities ( such as billing and collections , commission processing , disbursement management and general ledger capabilities ) for all insurance lines and bill types duck creek claims : supports the entire claims lifecycle from first notice of loss through investigation , payments , negotiations , reporting and closure in addition , we offer other innovative solutions , such as duck creek rating , duck creek insights , duck creek digital engagement , duck creek distribution management , duck creek reinsurance management , duck creek anywhere managed integrations and duck creek industry content , which provide additional features and functionalities that further help our customers meet the increasing and evolving demands of the p & c industry . our customers purchase and deploy duck creek ondemand , our saas solution , either individually or as a suite . we sell our saas solutions through recurring fee arrangements where revenue is recognized on a monthly basis following deployment to the customer , which we refer to as subscription revenue . substantially all of our new bookings come from the sale of saas subscriptions of duck creek ondemand . for the years ended august 31 , 2020 , 2019 and 2018 , saas acv bookings represented 96 % , 86 % and 71 % of our total acv bookings , respectively . historically , we have also sold our products through perpetual and term license arrangements , most commonly installed on-premise , where license revenue is typically recognized in full upon delivery of the software to the customer . we generally price our saas and license arrangements at individually negotiated rates based on the amount of a customer 's dwp that will be managed by our solutions with pre-determined fee adjustments as the customer 's dwp increases over the term of the contract , which typically ranges from three to seven years for our saas arrangements . we typically invoice our customers monthly , in advance , for saas fees whereas our term licenses are typically invoiced annually , in advance . the total cost of a perpetual license is billed in full upon contract signing . 55 we also derive revenue from maintenance and support services on our perpetual and term license products ( primarily software updates , rights to unspecified software upgrades on a when-and-if-available basis and remote support services ) . we recognize revenue on a monthly basis as maintenance and support services are provided to customers . we generate revenue by providing professional services for both our saas solutions and perpetual and term license products ( primarily related to implementation services ) to the extent requested by our customers . the vast majority of our professional services revenue is recognized on a time and materials basis as the work is delivered to our customers . our customers may also choose to obtain implementation services through our network of third-party si partners who provide implementation and other related services to our customers . our partnerships with leading sis allow us to grow our business more efficiently by giving us scale to service our growing customer base . we continue to grow our services organization , including increasing the number of qualified consultants we employ and investing time and resources to develop relationships with new si partners in existing and new markets . we sell our products and services to a wide variety of carriers , including many of the largest and most recognizable brands in the p & c insurance industry , as well as smaller national and regional carriers . our direct sales team focuses on obtaining new customers , which includes carriers that currently operate internally developed or competing systems , as well as selling into our existing customer base , which includes marketing our saas solutions to our term and perpetual license customers to drive adoption of our saas solutions and cross-selling additional applications . story_separator_special_tag we will continue to invest in duck creek ondemand , including through our new saas operations center and continued growth in the number of our cloud and saas operations experts , to further our goal of delivering the best experience for our saas customers . personnel related costs of our saas operations team is the fastest growing component of our cost of subscription revenue . our cost of subscription revenue totaled $ 34.9 million , $ 24.2 million , and $ 22.3 million in fiscal 2020 , 2019 and 2018. investment in technology and research and development efforts . we are committed to continuing to deliver market-leading software to carriers and believe that maintaining our product leadership is critical to driving further revenue growth . as a result , we intend to continue to make significant investments in our research and development efforts to extend the functionality and breadth of our current solutions as well as develop and launch new products and tools to address the evolving needs of the p & c insurance industry . our research and development expenses totaled $ 44.1 million , $ 35.9 million , and $ 36.1 million in fiscal 2020 , 2019 and 2018 , respectively . we expect research and development expenses to increase in absolute dollars for the foreseeable future . pursuing acquisitions . we have acquired and successfully integrated several businesses complementary to our own to enhance our software and technology capabilities . we intend to continue to pursue targeted acquisitions that further complement our product portfolio or provide us access to new markets . for example , in august 2016 , we acquired agencyport software , a provider of intuitive , digital experiences between carriers and their agents , brokers , consumers and policyholders ; in january 2017 , we acquired yodil , llc , a pioneer in insurance data management solutions ; in october 2018 , we acquired outline systems llc , a provider of p & c distribution channel management software and longstanding member of our partner ecosystem ; and in june 2019 , we acquired the cederight products business , a provider of reinsurance management software , from datacede llc . as a result of the contributions of these businesses and any future businesses we may acquire , our results of operations may not be comparable between periods . for fiscal 2020 and 2018 , we did not engage in any acquisition activity . in fiscal 2019 cash consideration for acquisitions was $ 11.6 million . 57 mix of professional services revenue . our professional services teams ensure the successful configuration and integration of our solutions , and provide continuous support to our customers . we recognize most of our professional services revenue during initial deployment , and recognize additional revenue for services provided over the lifetime of a customer 's use of our software . over time , a customer 's spend on professional services decreases as a percentage of their overall spend with us . in addition , although we plan on increasing our professional services headcount in the long-term , we expect to shift an increasing percentage of implementation work to our network of third-party sis to better enable us to meet growing market demand . as a result , we expect our overall professional services revenue to increase in absolute dollars due to the growth in the number of our saas customers , but to decrease as a percentage of total revenue . for the fiscal 2020 , 2019 and 2018 , our professional services revenue was $ 94.1 million , $ 77.7 million , and $ 70.2 million , respectively . covid-19 expenses . in march 2020 , we implemented various measures in response to the ongoing covid-19 pandemic to ensure the safety of our employees . over a two-day period , we shifted 100 % of our employee base to work from home and suspended international and domestic travel . as a result , we experienced a decrease in our sales and marketing expenses for the year ended august 31 , 2020 primarily related to a decrease in travel costs . we expect this trend to continue at least in the near term , however such savings may be offset by increased costs when employees return to work and we implement measures to ensure their safety . components of results of operations revenue we generate our revenue from selling subscriptions to our saas solutions , licensing our term and perpetual software applications , providing maintenance and support services ( primarily software updates , rights to unspecified software upgrades on a when-and-if-available basis and remote support services ) to our term and perpetual license customers and providing professional services ( primarily related to implementation services ) to the extent requested by either our saas or term and perpetual license customers . we generally price our saas and licenses arrangements based on the amount of a customer 's dwp that will be managed by our software solutions and may include volume-based pricing for customers managing a higher amount of dwp with our solutions . our saas and license contracts generally include provisions for additional fees when the amount of the customer 's dwp managed by our software solutions exceed agreed-upon caps within defined reporting periods , which are recognized on an as incurred basis . software revenue is comprised of subscription revenue and revenue from licenses and maintenance and support services . total revenue is comprised of software revenue plus revenue from our professional services . subscription our subscription revenue is comprised of fees from customers accessing our duck creek ondemand platform and other saas solutions . revenue for a reporting period is generally recognized ratably in proportion to the total contractual dwp , beginning when the service has been made available to the customer . our subscription revenue accounted for 71 % , 60 % and 47 % of software revenue during fiscal 2020 , 2019 and 2018 , respectively .
| results of operations comparison of fiscal years ended august 31 , 2020 , 2019 and 2018 the following table sets forth our consolidated results of operations for the periods indicated , expressed in total dollar terms and as a percentage of total revenue : replace_table_token_2_th 61 revenue subscription fiscal 2020 compared to fiscal 2019. subscription revenue increased $ 28.1 million , or 50 % , in fiscal 2020 versus fiscal 2019 due to a combination of sales to new customers and increased revenue generated from existing customers , which includes full year impact of prior year sales , sales of new services to existing customers and contractual growth . fiscal 2019 compared to fiscal 2018. subscription revenue increased $ 13.5 million , or 32 % , in fiscal 2019 versus fiscal 2018 due to a combination of sales to new customers and increased revenue generated from existing customers , which includes full year impact of prior year sales , sales of new services to existing customers and contractual growth . license fiscal 2020 compared to fiscal 2019 . license revenue decreased $ 3.9 million , or ( 28 % ) , in fiscal 2020 versus fiscal 2019 primarily due to a decrease in multi-year license deals and fees related to growth in dwp for license customers as a result of our shift to selling our saas solutions to new customers . fiscal 2019 compared to fiscal 2018 . license revenue decreased $ 7.2 million , or ( 34 % ) , in fiscal 2019 versus fiscal 2018 primarily due to our focus on selling our saas solutions to new customers and the revisions to contracting practices in fiscal 2018 to sell our term licenses with an initial two-year committed term and optional annual renewals instead of our historical three to six year committed terms .
| 2,357 |
during the years ended december 31 , 2013 , 2012 , and 2011 , the company received the following cash distributions from its investment in kwr for the settlement of hedges , refinancing of property level debt , and operating distributions : replace_table_token_36_th the cash received as a result of unwinding kwr 's hedges will not be realized in our statement of operations until the underlying investment is substantially liquidated . 62 kennedy-wilson holdings , inc. and subsidiaries notes to consolidated financial statementsโ ( continued ) december 31 , 2013 , 2012 and 2011 note conversion into real estate during the year , the company and its equity partners converted three mortgage notes into real estate owned . as a result story_separator_special_tag the following discussion and analysis should be read in conjunction with the financial statements and related notes and the other financial information appearing elsewhere in this report . this discussion and analysis contains forward-looking statements that involve risks , uncertainties and assumptions . see the section title `` forward-looking statements '' for more information . actual results could differ materially from those anticipated in the forward-looking statements as a result of many factors , including those discussed in โ risk factors โ on page 7 and elsewhere in this report . unless specifically noted otherwise , as used throughout this management 's discussion and analysis section , kennedy-wilson holdings , inc. is referred to as โ kennedy wilson โ or `` kwh '' , and kennedy-wilson holdings , inc. and its subsidiaries are collectively referred to as `` the company , โ โ we , โ โ us โ or โ our โ , unless the context requires otherwise . overview kennedy wilson is a vertically integrated global real estate investment and services company . for over 35 years , we have owned and operated real estate related investments on behalf of our shareholders and our clients with offices in the united states , united kingdom , ireland , spain and japan . our operations are defined by two core business segments , kw investments and kw services , which work closely together to identify attractive investment markets and opportunities across the world : kw investments - we invest in various types of real estate investments through our investments business , either on our own or with strategic partners , where we are typically the general partner , with a promoted interest in the profits of the business beyond our ownership percentage . the main types of real estate we invest in are listed below : commercial we source , acquire , and finance various types of commercial real estate that includes office , industrial , retail , and mixed-use assets . multifamily we focus primarily on apartments in supply-constrained , infill markets . we pursue multifamily acquisition opportunities where we can unlock value through a myriad of strategies , including institutional management , asset rehabilitation , repositioning and creative recapitalization . loan originations / discounted loan purchases we originate and or acquire loans secured by real estate . our originations and acquisitions include individual notes on all real estate property types as well as portfolios of loans purchased from financial institutions , corporations and government agencies . residential , hotel , and other in certain cases , we may pursue for sale housing acquisition opportunities , including land for entitlements , finished lots , urban infill condominium site and partially finished and finished condominium projects . this group also includes our investment in hotels and our investments in marketable securities . kw services - our services business offers a comprehensive line of real estate services for the full lifecycle of real estate ownership . below are the product types we offer through the kw services segment : investment management we provide acquisition , asset management and disposition services to our equity partners as well as to third parties . property services this division manages commercial real estate for third-party clients , fund investors , and investments held by the company . in addition to earning property management fees , consulting fees , lease commissions , construction management fees , disposition fees , and accounting fees , the property services group gives kennedy wilson insight into local markets and potential acquisitions . research 25 meyers research llc ( โ meyers โ ) , a kennedy wilson company , is a premier consulting practice and the industry 's leading provider of data and analytics for the residential real estate development and new home construction industry . meyers ' proprietary ipad application , zonda , launched in 2013 and provides market insight for the homebuilding industry with real-time data on over 250 metrics impacting the housing market on a national and local level . auction and conventional sales the auction and conventional sales group provides innovative marketing and sales strategies for all types of commercial and residential real estate , including single family homes , mixed-use developments , estate homes , multifamily dwellings , new home projects , conversions and scattered properties . brokerage the brokerage group specializes in innovative marketing programs tailored to client objectives for all types of investment grade and income producing real estate . financial measures and descriptions our key financial measures and indicators are discussed below . please refer to the critical accounting policies in the notes to the consolidated financial statements for additional detail regarding the gaap recognition policies associated with the captions described below . revenues management and leasing fees - management and leasing fees are primarily comprised of base asset management fees and performance based fees generated by our investment management division , property management fees generated by our property services division , leasing fees generated by our brokerage and auction divisions , and consulting fees generated by meyers . commissions - commission revenue consists of acquisition fees generated by our investment management division and sales commissions generated by our brokerage division . story_separator_special_tag we do not adjust ebitda for gains or losses on the extinguishment of mortgage debt as we are in the business of purchasing discounted notes secured by real estate and , in connection with these note purchases , we may resolve these loans through discounted payoffs with the borrowers . our management believes ebitda is useful in evaluating our operating performance compared to that of other companies in our industry because the calculation of ebitda generally eliminates the effects of financing and income taxes and the accounting effects of capital spending and acquisitions . adjusted ebitda ( 1 ) - represents ebitda , as defined above , adjusted to exclude acquisition and merger related expenses and stock based compensation expense . our management uses adjusted ebitda to analyze our business because it adjusts ebitda for items we believe do not have an accurate reflection of the nature of our business going forward . additionally , we believe adjusted ebitda is useful to investors to assist them in getting a more accurate picture of our results from operations . such items may vary for different companies for reasons unrelated to overall operating performance . 27 ( 1 ) ebitda , as defined above , is not a recognized term under gaap and does not purport to be an alternative to net earnings as a measure of operating performance or to cash flows from operating activities as a measure of liquidity . additionally , ebitda is not intended to be a measure of free cash flow available for management 's discretionary use , as it does not consider certain cash requirements such as interest payments , tax payments and debt service requirements . our presentation of ebitda has limitations as an analytical tool , and you should not consider it in isolation or as a substitute for analysis of our results as reported under gaap . ebitda is not calculated under gaap and should not be considered in isolation or as a substitute for net income , cash flows or other financial data prepared in accordance with gaap or as a measure of our overall profitability or liquidity . such items may vary for different companies for reasons unrelated to overall operating performance . adjusted ebitda represents ebitda , as defined above , adjusted to exclude corporate merger and acquisition related expenses and share based compensation expense for the company . such items may vary for different companies for reasons unrelated to overall operating performance . however , ebitda and adjusted ebitda are not recognized measurements under gaap and when analyzing our operating performance , readers should use ebitda and adjusted ebitda in addition to , and not as an alternative for , net income as determined in accordance with gaap . because not all companies use identical calculations , our presentation of ebitda and adjusted ebitda may not be comparable to similarly titled measures of other companies . furthermore , ebitda and adjusted ebitda are not intended to be a measure of free cash flow for our management 's discretionary use , as it does not consider certain cash requirements such as tax and debt service payments . the amounts shown for ebitda and adjusted ebitda also differ from the amounts calculated under similarly titled definitions in our debt instruments , which are further adjusted to reflect certain other cash and non-cash charges and are used to determine compliance with financial covenants and our ability to engage in certain activities , such as incurring additional debt and making certain restricted payments . story_separator_special_tag style= '' line-height:120 % ; padding-top:12px ; text-align : justify ; text-indent:48px ; font-size:10pt ; '' > compensation and related expenses increased by $ 9.3 million due to an increase in personnel , particularly due to our growth and expansion in the united kingdom and ireland , to source and execute on acquisition opportunities . additionally , accrued discretionary compensation increased in connection with the increase in investments ebitda . general and administrative expenses increased by $ 2.9 million primarily due to increased travel and rental expense relating to our growing operations in the united kingdom and ireland . rental operating expenses increased by $ 14.4 million and depreciation and amortization increased by $ 11.2 million due to the acquisitions during 2013 and the end of 2012. during the year ended december 31 , 2013 we sold 44 condominium units which resulted in $ 7.9 million of sale-related costs . during the year ended december 31 , 2012 , we sold five condominium units which resulted in $ 2.2 million of sale-related costs . services segment operating expenses 30 operating expenses ( excluding depreciation and amortization expense ) for the year ended december 31 , 2013 were approximately $ 40.7 million as compared to $ 33.1 million for the same period in 2012 . the increase is attributable to the following : compensation and related expenses increased by $ 6.0 million due to an increase in personnel and in accrued discretionary compensation . as a result of the expansion in our meyers group , we increased our head count in order to service the demand of our customers in the capital sourcing and real estate research for the single-family homebuilding and multifamily apartment industries . additionally , due to the growth in our services ebitda there was an increase in our accrued discretionary compensation . general and administrative expenses increased by $ 2.5 million primarily due to the growth of the company specifically in the united kingdom , ireland , and meyers . commissions and marketing expenses decreased by $ 1.0 million due to the decrease in auction sales previously discussed . corporate operating expenses operating expenses ( excluding depreciation and amortization expense ) for the year ended december 31 , 2013 were approximately $ 21.9 million as compared to $ 16.7 million for the same period in 2012 .
| results of operations the following table sets forth items derived from our consolidated statement of operations for the years ended december 31 , 2013 , 2012 , and 2011 : 28 replace_table_token_9_th โ ( 1 ) ( 2 ) see non-gaap measures section for definition of ebitda and adjusted ebitda the following compares results of operations for the years ended december 31 , 2013 and december 31 , 2012 and years ended december 31 , 2012 and december 31 , 2011 . our consolidated financial results and comparison of the years ended december 31 , 2013 and 2012 our revenues for the years ended december 31 , 2013 and 2012 were $ 121.2 million and $ 64.1 million . total operating expenses for the same periods were $ 149.1 million and $ 91.5 million , respectively . net loss attributable to our common shareholders was $ 14.5 million and $ 3.9 million in 2013 and 2012 , respectively . ebitda was $ 177.6 million and $ 92.1 million in 2013 and 2012 , respectively . adjusted ebitda was $ 185.1 million and $ 100.2 million in 2013 and 2012 , respectively . the company 29 achieved a 93 % increase in ebitda and a 85 % increase in adjusted ebitda for the year ended december 31 , 2013 as compared to the same period in 2012 . revenues investments segment revenues rental and other income increased to $ 43.0 million in 2013 from $ 8.5 million in 2012 . the $ 34.5 million increase is due to $ 18.1 million in rental income from new acquisitions and consolidations in 2013 and $ 16.3 million from properties acquired at the end of 2012. during the year ended december 31 , 2013 , we sold 44 condominium units generating $ 10.1 million of proceeds from the sale of real estate .
| 2,358 |
the compensation committee has reviewed and discussed the ยcompensation discussion and analysisย section of this form 10-k with management , including our chief executive officer and our story_separator_special_tag condition and results of operations overview independence holding company , a delaware corporation ( nyse : ihc ) , is a holding company principally engaged in the life and health insurance business through : ( i ) its insurance companies , standard security life insurance company of new york ( `` standard security life '' ) , madison national life insurance company , inc. ( `` madison national life '' ) , and independence american insurance company ( ยindependence americanย ) ; and ( ii ) its marketing and administrative companies , including ihc specialty benefits inc. and ihc carrier solutions , inc. ihc also owns a significant equity interest in : ( i ) ebix health exchange holdings , llc ( ยebix health exchangeย ) , an administration exchange for health insurance ; and ( ii ) an equity interest in a managing general underwriter ( ยmguย ) that writes medical stop-loss . on march 31 , 2016 , the company sold ihc risk solutions , llc ( ยrisk solutionsย ) , an mgu that was its principal source of medical stop-loss business . in addition , all of the in-force medical stop-loss business of standard security life and independence american produced by risk solutions was 100 % co-insured as of january 1 , 2016 and ihc 's block of medical stop-loss business is in run-off . standard security life , madison national life and independence american are sometimes collectively referred to as the ยinsurance groupย . ihc and its subsidiaries ( including the insurance group ) are sometimes collectively referred to as the `` company '' , or ยihcย , or are implicit in the terms ยweย , ยusย and ยourย . ihc 's health insurance products serve niche sectors of the commercial market through multiple classes of business and varied distribution channels . medical stop-loss was marketed to employer groups that self-insure their medical risks . with regard to those persons in the growing individual market , ihc 's products offer coverage for individuals and families with short-term needs , and fixed indemnity limited benefit and scheduled benefit plans through multiple distribution partners . we offer pet insurance for dogs and cats in all 50 states through select distributors . our fixed indemnity limited benefit product is primarily purchased by hourly workers and others who are generally not eligible for coverage under their employer 's group medical plan . the dental and vision products are marketed to large and small groups as well as individuals . with respect to ihc 's life and disability business , madison national life has historically sold almost all of this business through one distribution source specializing in serving school districts and municipalities . while management considers a wide range of factors in its strategic planning and decision-making , underwriting profit is consistently emphasized as the primary goal in all decisions as to whether or not to increase our retention in a core line , expand into new products , acquire an entity or a block of business , or otherwise change our business model . management 's assessment of trends in healthcare and morbidity , with respect to specialty medical , disability and new york short-term disability ( ยdblย ) ; mortality rates with respect to life insurance ; and changes in market conditions in general play a significant role in determining the rates charged , deductibles and attachment points quoted , and the percentage of business retained . ihc also seeks transactions that permit it to leverage its vertically integrated organizational structure by generating fee income from production and administrative operating companies as well as risk income for its carriers . management has always focused on managing the costs of its operations . the following is a summary of key performance information and events : results of operations are summarized as follows for the periods indicated ( in thousands ) : replace_table_token_5_th ยท income from continuing operations of $ 1.27 per share , diluted , for the year ended december 31 , 2016 compared to $ 1.58 per share , diluted , for the same period in 2015. o net income for the year ended december 31 , 2015 includes a $ 6.7 million gain , net of tax , resulting from the deconsolidation of a subsidiary and corresponding joint venture transaction . see discussion on gain on sale of subsidiary to joint venture . o net income for the year ended december 31 , 2015 includes a gain of $ 3.3 million , net of tax , on the sale of the infrastructure associated with the administration of substantially all of our individual life and annuity policies ceded . see discussion on other income . ยท consolidated investment yield ( on an annualized basis ) of 2.7 % in 2016 compared to 2.8 % in 2015 ; and ยท book value of $ 25.53 per common share at december 31 , 2016 compared to $ 18.73 at december 31 , 2015. the following is a summary of key performance information by segment : ยท the medical stop-loss segment reported income before taxes of $ 16.7 million for the year ended december 31 , 2016. income from the medical stop-loss segment in 2016 is principally due to ceding commissions on coinsurance due to the sale of risk solutions and exit from the medical stop-loss business . premiums earned and amounts recorded for benefits , claims and reserves in the medical stop-loss segment during 2016 represent the activity of the remaining blocks of medical stop-loss business in run-off . in 2015 , the medical stop-loss segment reported income before taxes of $ 18.8 million . ยท the company has renamed its ยfully insuredย segment ยspecialty healthย . specialty health more accurately reflects the niche nature of the products that ihc markets in this segment and continues to expand into since its exit from the major medical market . story_separator_special_tag many factors could affect these reserves , including economic and social conditions , frequency and severity of claims , medical trend resulting from the influences of underlying cost inflation , changes in utilization and demand for medical services , and changes in doctrines of legal liability and damage awards in litigation . therefore , the company 's reserves are necessarily based on estimates , assumptions and analysis of historical experience . the company 's results depend upon the variation between actual claims experience and the assumptions used in determining reserves and pricing products . reserve assumptions and estimates require significant judgment and , therefore , are inherently uncertain . the company can not determine with precision the ultimate amounts that will be paid for actual claims or the timing of those payments . the company 's estimate of loss represents management 's best estimate of the company 's liability at the balance sheet date . loss reserves differ for short-duration and long-duration insurance policies , including annuities . reserves are based on approved actuarial methods , but necessarily include assumptions about expenses , mortality , morbidity , lapse rates and future yield on related investments . all of the company 's short-duration contracts are generated from its accident , health , term life , disability and pet insurance business , and are accounted for based on actuarial estimates of the amount of loss inherent in that period 's claims , including losses incurred for which claims have not been reported . short-duration contract loss estimates rely on actuarial observations of ultimate loss experience for similar historical events . the company believes that its liability for policy benefits and claims is reasonable and adequate to satisfy its ultimate liability . the company primarily uses its own loss development experience , but will also supplement that with data from its outside actuaries , reinsurers and industry loss experience as warranted . to illustrate the impact that loss ratios have on the company 's loss reserves and related expenses , each hypothetical 1 % change in the loss ratio for the health business ( i.e. , the ratio of insurance benefits , claims and settlement expenses to earned health premiums ) for the year ended december 31 , 2016 , would increase reserves ( in the case of a higher ratio ) or decrease reserves ( in the case of a lower ratio ) by approximately $ 2.5 million with a corresponding increase or decrease in the pre-tax expense for insurance benefits , claims and reserves in the consolidated statement of income . depending on the circumstances surrounding a change in the loss ratio , other pre-tax amounts reported in the consolidated statement of income could also be affected , such as amortization of deferred acquisition costs and commission expense . the liability for policy benefits and claims by segment is as follows ( in thousands ) : replace_table_token_9_th replace_table_token_10_th specialty health for the specialty health business , incurred but not reported ( ยibnrย ) claims liabilities plus expected development on reported claims are calculated using standard actuarial methods and practices . the ยprimaryย assumption in the determination of specialty health reserves is that historical claim development patterns are representative of future claim development patterns . factors that may affect this assumption include changes in claim payment processing times and procedures , changes in time delay in submission of claims , and the incidence of unusually large claims . liabilities for policy benefits and claims for specialty health medical and disability coverage are computed using completion factors and expected net loss ratios derived from actual historical premium and claim data . the reserving analysis includes a review of claim processing statistical measures and large claim early notifications ; the potential impacts of any changes in these factors are not material . the company has business that is serviced by third-party administrators . from time to time , there are changes in the timing of claims processing due to any number of factors including , but not limited to , system conversions and staffing changes during the year . these changes are monitored by the company and the effects of these changes are taken into consideration during the claim reserving process . other than these considerations , there have been no significant changes to methodologies and assumptions from the prior year . while these calculations are based on standard methodologies , they are estimates based on historical patterns . to the extent that actual claim payment patterns differ from historical patterns , such estimated reserves may be redundant or inadequate . the effects of such deviations are evaluated by considering claim backlog statistics and reviewing the reasonableness of projected claim ratios . other factors which may affect the accuracy of policy benefits and claim estimates include the proportion of large claims which may take longer to adjudicate , changes in billing patterns by providers and changes in claim management practices such as hospital bill audits . since our analysis considered a variety of outcomes related to these factors , the company does not believe that any reasonably likely change in these factors will have a material effect . disability the company 's disability business is comprised of group disability and dbl . the two ยprimaryย assumptions on which disability policy benefits and claims are based are : ( i ) morbidity levels ; and ( ii ) recovery rates . if morbidity levels increase , for example due to an epidemic or a recessionary environment , the company would increase reserves because there would be more new claims than expected . in regard to the assumed recovery rate , if disabled lives recover more quickly than anticipated then the existing claims reserves would be reduced ; if less quickly , the existing claims reserves would be increased . advancements in medical treatments could affect future recovery , termination , and mortality rates . with respect to dbl , the liability for policy benefits and claims for the most recent quarter of earned premium is established using a net loss ratio methodology .
| results of operations results of operations for the year ended december 31 , 2016 compared to the year ended december 31 , 2015 information by business segment for the periods indicated is as follows ( in thousands ) : replace_table_token_11_th replace_table_token_12_th premiums earned in 2016 , premiums earned decreased $ 216.8 million over the comparable period of 2015. the decrease is primarily due to : ( i ) a decrease of $ 197.7 million in the stop loss segment as a result of the sale of risk solutions and exit from the medical stop-loss business , further described in note 3 ; ( ii ) a decrease of $ 17.5 million in the specialty health segment principally as a result of a $ 26.8 million decrease in premiums from exiting the major medical line , a $ 11.9 million decrease in the fixed indemnity limited benefit line due to the cancellation of a distribution source , and a $ 1.4 million decrease in international medical business premiums due to lower retention , partially offset by premium increases in the short-term medical , pet and occupational accident lines of business of $ 17.7 million , $ 4.7 million and $ 1.6 million , respectively , as a result of higher volume ; and ( iii ) a decrease of $ 11.8 million in the individual life , annuities and other segment as a result of this business being in run-off ; partially offset by ( iv ) a $ 10.2 million increase in earned premiums from the group disability , life , annuities and dbl segment primarily due to increased volume and retention in the ltd and group term life lines and increased volume in dbl business . net investment income total net investment income decreased $ 0.7 million . the overall annualized investment yields for the year ended december 31 , 2016 and 2015 were 2.7 % and 2.8 % , respectively .
| 2,359 |
the corporation and its subsidiaries offer a full range of personal and business banking services , consumer and commercial loans , equipment leasing , mortgages , insurance and wealth management services , including investment management , trust and estate administration , retirement planning , custody services , and tax planning and preparation from 43 banking locations , six wealth management offices and two insurance and risk management locations in the following counties : montgomery , chester , delaware , philadelphia , and dauphin counties in pennsylvania ; new castle county in delaware ; and mercer and camden counties in new jersey . the common stock of the corporation trades on the nasdaq stock market ( โ nasdaq โ ) under the symbol bmtc . the corporation operates in a highly competitive market area that includes local , national and regional banks as competitors along with savings banks , credit unions , insurance companies , trust companies , registered investment advisors and mutual fund families . the corporation and its subsidiaries are regulated by many agencies including the securities and exchange commission ( โ sec โ ) , nasdaq , federal deposit insurance corporation ( โ fdic โ ) , the federal reserve and the pennsylvania department of banking and securities . the goal of the corporation is to become the preeminent community bank and wealth management organization in the philadelphia area . since january 1 , 2010 , the corporation and bank completed the following ten acquisitions : domenick & associates ( โ domenick โ ) - may 1 , 2018 royal bancshares of pennsylvania , inc. ( `` rbpi '' ) - december 15 , 2017 ( the `` rbpi merger '' ) harry r. hirshorn & company , inc. ( `` hirshorn '' ) - may 24 , 2017 robert j. mcallister agency , inc. ( `` rjm '' ) - april 1 , 2015 continental bank holdings , inc. ( `` cbh '' ) - january 1 , 2015 ( the cbh merger ) powers craft parker and beard , inc. ( `` pcpb '' ) - october 1 , 2014 first bank of delaware ( `` fbd '' ) - november 17 , 2012 davidson trust company ( `` dtc '' ) - may 15 , 2012 the private wealth management group of the hershey trust company ( `` pwmg '' ) - may 11 , 2011 first keystone financial , inc. ( `` fkb '' ) - july 1 , 2010 for a more complete discussion regarding certain of these acquisitions , see item 1 โ business โ business combinations beginning at page 3 in this form 10-k. results of operations the following is management 's discussion and analysis of the significant changes in the financial condition , results of operations , capital resources and liquidity presented in the accompanying consolidated financial statements . the corporation 's consolidated financial condition and results of operations are comprised primarily of the bank 's financial condition and results of operations . current performance does not guarantee , and may not be indicative of , similar performance in the future . for more information on the factors that could affect performance , see โ special cautionary notice regarding forward looking statements โ immediately following the index at the beginning of this document . the geographic information required by item 101 ( d ) of regulation s-k promulgated under the securities exchange act of 1934 , as amended , is impracticable for the corporation to calculate ; however , the corporation does not believe that a material amount of revenue in any of the last three years was attributable to customers outside of the united states , nor does it believe that a material amount of its long-lived assets , in any of the past three years , was located outside of the united states . 30 critical accounting policies , judgments and estimates the accounting and reporting policies of the corporation and its subsidiaries conform to u.s. generally accepted accounting principles ( โ gaap โ ) . all inter-company transactions are eliminated in consolidation and certain reclassifications are made when necessary in order to conform the previous years ' consolidated financial statements to the current year 's presentation . in preparing the consolidated financial statements , management is required to make estimates and assumptions that affect the reported amount of assets and liabilities as of the dates of the balance sheets and revenues and expenditures for the periods presented . therefore , actual results could differ from these estimates . the allowance for loan and lease losses ( the โ allowance โ ) the allowance involves a higher degree of judgment and complexity than other significant accounting policies . the allowance is estimated with the objective of maintaining a reserve level believed by management to be sufficient to absorb estimated credit losses present in the loan portfolio as of the reporting date . management 's determination of the adequacy of the allowance is based on frequent evaluations of the loan and lease portfolio and other relevant factors . consideration is given to a variety of factors in establishing the estimate . quantitative factors in the form of historical charge-off rates by portfolio segment are considered . in connection with these quantitative factors , management establishes what it deems to be an adequate look-back period ( โ lbp โ ) for the charge-off history . as of december 31 , 2018 , management utilized a five-year lbp , which it believes adequately captures the trends in charge-offs . in addition , management develops an estimate of a loss emergence period ( โ lep โ ) for each segment of the loan portfolio . the lep estimates the time between the occurrence of a loss event for a borrower and an actual charge-off of a loan . as of december 31 , 2018 , management utilized a two-year lep for its commercial loan segments and a one-year lep for its consumer loan segments based on analyses of actual charge-offs tracked back in time to the triggering event for the eventual loss . story_separator_special_tag return on average equity ( `` roe '' ) and return on average assets ( `` roa '' ) for the year ended december 31 , 2018 , were 11.78 % and 1.47 % , respectively , as compared to 5.76 % and 0.67 % , respectively , for the same period in 2017. contributing to the net income increase were increases of $ 34.4 million and $ 16.9 million in net interest income and noninterest income , respectively , and a decrease of $ 20.1 million in income tax expense , offset by increases of $ 25.9 million and $ 4.6 million in noninterest expense and provision , respectively . tax-equivalent net interest income of $ 149.9 million for the year ended december 31 , 2018 increased $ 34.0 million as compared to $ 115.9 million for the year ended december 31 , 2017 . the increase primarily related to the increase of $ 47.6 million in tax-equivalent interest and fees on loans and leases partially offset by the increase of $ 11.9 million in interest expense on deposits . average loans and leases for the year ended december 31 , 2018 increased $ 691.3 million from the same period in 2017 and experienced a 48 basis point increase in tax-equivalent yield . the increase in average loans and leases was partially related to the loans and leases acquired in the rbpi merger which initially increased loans and leases by $ 566.2 million , as well as organic loan growth between the periods . average interest-bearing deposits for the year ended december 31 , 2018 increased $ 604.0 million from the same period in 2017 and experienced a 36 basis point increase in rates paid . the increase in average interest-bearing deposits was partially related to the interest-bearing deposits assumed in the rbpi merger , which initially totaled $ 494.8 million . 32 the provision of $ 7.2 million for the year ended december 31 , 2018 increased $ 4.6 million as compared to $ 2.6 million for the year ended december 31 , 2017 . primary contributors to the increased provision were the $ 2.7 million increase in net loan and lease charge-offs as well as the additional allowance associated with increased loan volume . noninterest income of $ 76.0 million for the year ended december 31 , 2018 increased $ 16.9 million , or 28.5 % , as compared to $ 59.1 million for the year ended december 31 , 2017 . other operating income increased $ 6.2 million , primarily due to the $ 4.0 million increase in recoveries of purchase accounting fair value marks resulting from the pay off of purchased credit impaired loans acquired in the rbpi merger . fees for wealth management services increased $ 3.6 million , primarily related to the $ 460.8 million increase in wealth assets under management , administration , supervision and brokerage from $ 12.97 billion at december 31 , 2017 to $ 13.43 billion at december 31 , 2018 . capital markets revenue increased $ 2.5 million , primarily related to a full year of operations for our capital markets group , which was formed during the second quarter on 2017. insurance commissions increased $ 2.2 million partially due to the may 2017 hirshorn acquisition and the may 2018 domenick acquisition , in addition to organic growth . noninterest expense of $ 140.3 million for the year ended december 31 , 2018 increased $ 25.9 million , or 22.6 % , as compared to $ 114.4 million for the year ended december 31 , 2017 . these increases were largely due to the additional expenses associated with the staff and facilities assumed in the rbpi merger and to a lesser extent , recruiting efforts of certain key leadership positions as well as increases in our incentive accruals . balance sheet asset quality as of december 31 , 2018 remains stable , with nonperforming loans and leases comprising 0.37 % of portfolio loans and leases as compared to 0.26 % of portfolio loans and leases as of december 31 , 2017. the allowance of $ 19.4 million was 0.57 % of portfolio loans and leases as of december 31 , 2018 , as compared to $ 17.5 million , or 0.53 % of portfolio loans and leases at december 31 , 2017. total portfolio loans and leases of $ 3.43 billion as of december 31 , 2018 increased $ 141.3 million , or 4.3 % , from $ 3.29 billion as of december 31 , 2017. increases of $ 134.1 million , $ 35.5 million , $ 29.1 million , and $ 8.7 million in commercial mortgages , residential mortgages , leases and consumer loans , respectively , were offset by decreases of $ 31.4 million , $ 23.7 million , and $ 10.9 million in construction loans , commercial and industrial loans , and home equity loans and lines , respectively . investment securities available for sale of $ 737.4 million as of december 31 , 2018 increased $ 48.2 million , or 7.0 % , from $ 689.2 million as of december 31 , 2017. increases of $ 44.8 million , $ 14.9 million , and $ 2.6 million in u.s. government and agency securities , mortgage-backed securities , and collateralized mortgage obligations , respectively , were partially offset by decreases of $ 10.0 million and $ 3.5 million in state & political subdivision securities and other investments , respectively . total deposits of $ 3.60 billion as of december 31 , 2018 increased $ 225.3 million , or 6.7 % , from $ 3.37 billion as of december 31 , 2017. increases of $ 183.4 million , $ 153.3 million , and $ 10.5 million in interest-bearing demand accounts , wholesale time deposits , and retail time deposits , respectively , were partially offset by decreases of $ 91.5 million , $ 23.2 million , and $ 7.2 million in savings accounts , noninterest-bearing demand accounts , and wholesale non-maturity deposits , respectively .
| summary of interest rate simulation replace_table_token_8_th the above interest rate simulation suggests that the corporation 's balance sheet is asset sensitive as of december 31 , 2018 in the +100 basis point scenario , demonstrating that a 100 basis point increase in interest rates would have a positive impact on net interest income over the next 12 months . the balance sheet is less asset sensitive in a rising-rate environment as of december 31 , 2018 than it was as of december 31 , 2017. the decrease is related to a change on the mix and repricing characteristics of the retail deposits as well as an increase in fixed rate assets as a percentage of total assets . the improvement of the change in the 100 basis point decrease in rate is related to the bank 's less asset sensitive position as previously described . the interest rate simulation is an estimate based on assumptions , which are derived from past behavior of customers , along with expectations of future behavior relative to interest rate changes . in today 's economic environment and the emergent from an extended period of very low interest rates , the reliability of management 's assumptions in the interest rate simulation model is more uncertain than in prior years . actual customer behavior , as it relates to deposit activity , may be significantly different than expected behavior , which could cause an unexpected outcome and may result in lower net interest income than that derived from the analysis referenced above . gap analysis the interest sensitivity , or gap analysis , identifies interest rate risk by showing repricing gaps in the corporation 's balance sheet . all assets and liabilities are reflected based on behavioral sensitivity , which is usually the earliest of : repricing , maturity , contractual amortization , prepayments or likely call dates .
| 2,360 |
the following discussion and analysis is intended to address the significant factors affecting our consolidated statements of income for the years 2011 through 2013 and consolidated statements of financial condition as of december 31 , 2012 and 2013. when we use the terms `` first midwest , '' the `` company , '' `` we , '' `` us , '' and `` our , '' we mean first midwest bancorp , inc. , a delaware corporation , and its consolidated subsidiaries . when we use the term `` bank , '' we are referring to our wholly owned banking subsidiary , first midwest bank . management 's discussion and analysis should be read in conjunction with the consolidated financial statements , accompanying notes thereto , and other financial information presented in this form 10-k. our results of operations are affected by various factors , many of which are beyond our control , including interest rates , local and national economic conditions , business spending , consumer confidence , legislative and regulatory changes , and changes in real estate and securities markets . our management evaluates performance using a variety of qualitative and quantitative metrics . the primary quantitative metrics used by management include : pre-tax , pre-provision operating earnings ย pre-tax , pre-provision operating earnings , a non-gaap financial measure , reflects our operating performance before the effects of credit-related charges , securities gains , losses , and impairments , and certain unusual , infrequent , or non-recurring revenues and expenses . we believe this metric is useful because it helps investors to assess the company 's operating performance . a reconciliation of pre-tax , pre-provision operating earnings to gaap can be found in table 1. net interest income ย net interest income , our primary source of revenue , equals the difference between interest income and fees earned on interest-earning assets and interest expense incurred on interest-bearing liabilities . net interest margin ย net interest margin equals net interest income divided by total average interest-earning assets . noninterest income ย noninterest income is the income we earn from fee-based revenues , investment in bank-owned life insurance ( `` boli '' ) and other income , and non-operating revenues . asset quality ย asset quality represents an estimation of the quality of our loan portfolio , including an assessment of the credit risk related to existing and potential loss exposure , and can be evaluated using a number of quantitative measures , such as non-performing loans to total loans . regulatory capital ย our regulatory capital is currently classified in one of the following two tiers : ( i ) tier 1 capital consists of common equity , retained earnings , qualifying non-cumulative perpetual preferred stock , and qualifying trust-preferred securities , less goodwill and most intangible assets , and ( ii ) tier 2 capital includes qualifying subordinated debt and the allowance for credit losses , subject to limitations . a condensed review of operations for the fourth quarter of 2013 is included in the section titled `` fourth quarter 2013 vs. fourth quarter 2012 '' of this item 7. the summary provides an analysis of the quarterly earnings performance for the fourth quarter of 2013 compared to the same period in 2012. unless otherwise stated , all earnings per common share data included in this section and throughout the remainder of this discussion are presented on a fully diluted basis . 37 cautionary statement regarding forward-looking statements this report , as well as our other filings with the sec or our communications with stockholders , may contain forward-looking statements within the safe harbor provisions of the private securities litigation reform act of 1995 ( `` pslra '' ) . these statements involve known and unknown risks , uncertainties , and other factors that may cause actual results to be materially different from any results , levels of activity , performance , or achievements expressed or implied by any forward-looking statement . these factors include , among other things , the factors listed below . in some cases , we identified forward-looking statements by such words or phrases as `` will likely result , '' `` is confident that , '' `` remains optimistic about , '' `` expects , '' `` should , '' `` could , '' `` seeks , '' `` may , '' `` will continue to , '' `` believes , '' `` anticipates , '' `` predicts , '' `` forecasts , '' `` estimates , '' `` projects , '' `` potential , '' `` intends , '' or similar expressions identifying forward-looking statements within the meaning of the pslra , including the negative of those words and phrases . these forward-looking statements are not historical facts , but instead are based on management 's current views and assumptions regarding future events , future business conditions , outcomes , and our outlook for the company based on currently available information . we wish to caution readers not to place undue reliance on any such forward-looking statements as we do not undertake any obligation to update them to reflect circumstances or events that occur after the date on which the forward-looking statement is made . in connection with the safe harbor provisions of the pslra , we are hereby identifying important factors that could affect our financial performance and could cause our actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any forward-looking statements . among the factors that could have an impact on our ability to achieve operating results , growth plan goals , and the beliefs expressed or implied in forward-looking statements are : management 's ability to reduce and effectively manage interest rate risk and the impact of interest rates in general on the volatility of our net interest income . asset and liability matching risks and liquidity risks . fluctuations in the value of our investment securities . the ability to attract and retain senior management experienced in banking and financial services . story_separator_special_tag these lower yields were partially offset by a decline in the rates paid for interest-bearing liabilities , including a 2 basis point decline on 41 interest-bearing transactional deposits , a 28 basis point decline on time deposits , and a 3 basis point decline on senior and subordinated debt . the provision for loan and covered loan losses was $ 16.3 million for 2013 compared to $ 158.1 million for 2012. the higher provision for loan and covered loan losses for the year ended december 31 , 2012 resulted from the additional provision of $ 62.3 million recorded as a result of moving $ 172.5 million of loans to held-for-sale status in anticipation of the bulk loan sales and the related charge-offs of $ 80.3 million . refer to the section titled `` loan portfolio and credit quality '' of this item 7 for additional discussion of the provision for loan and covered loan losses . total noninterest income for 2013 rose 28.1 % compared to 2012 , driven primarily by certain balance sheet repositioning activities , which mainly impacted the securities and boli portfolios . these activities were executed to take advantage of changing market conditions , strengthen capital , and better position the company to benefit from a rising interest rate environment . these activities included : the sale of our $ 4.2 million investment in textura corporation ( `` textura '' ) for $ 38.2 million , resulting in a gain of $ 34.0 million . textura completed an initial public offering ( `` ipo '' ) of common stock during the second quarter of 2013. at june 30 , 2013 , we reclassified our investment in textura 's common stock from an equity investment to available-for-sale and valued it using the closing stock price reported by the new york stock exchange . initially , we were restricted from selling any of our shares for six months following the completion of the ipo . during the third quarter of 2013 , textura completed a secondary offering and certain stockholders , including the company , were permitted to sell their shares . therefore , we sold all of our common shares in textura . the company has no other similar investments . we hold a warrant to purchase 20,000 shares of textura common stock . the termination of two forward commitments with the fhlb to borrow a total of $ 250 million for a 5-year period beginning in 2014 at a weighted average interest rate of approximately 2.0 % resulting in a gain of $ 7.8 million . this termination was executed to take advantage of a temporary rise in interest rates and an expectation that future liquidity needs could be better managed through maturities of securities , continued growth in our deposit base , and other similar low rate borrowings . the voluntary modification of crediting rate terms and the underlying cash surrender value ( `` csv '' ) of approximately $ 100 million of lower yielding boli policies , resulting in a $ 13.3 million write-down . this write-down represents the difference between the book value and the fair value of the underlying investments and was previously being amortized in other noninterest income , offsetting boli income and any insurance proceeds received . this action gives the company the flexibility to reinvest these assets in longer duration securities at higher yields to enhance boli income . a discussion of net interest income and noninterest income and expense is presented in the following section titled `` earnings performance '' of this item 7. as of december 31 , 2013 , our securities portfolio totaled $ 1.2 billion , rising 3.4 % from december 31 , 2012. the current year growth resulted primarily from the redeployment of cash and cash equivalents into purchases of collateralized mortgage obligations ( `` cmos '' ) and other mortgage-backed securities ( `` mbss '' ) . these increases were partially offset by maturities and calls of municipal securities . for a detailed discussion of our securities portfolio , refer to the section titled `` investment portfolio management '' of this item 7. total loans , excluding covered loans , of $ 5.6 billion as of december 31 , 2013 reflected growth of $ 390.3 million , or 7.5 % , from december 31 , 2012. the loan portfolio benefited from well-balanced corporate loan growth reflecting credits of varying size and diverse geographic locations within our markets . for a discussion of our loan portfolio , see the section titled `` loan portfolio and credit quality '' of this item 7. as of december 31 , 2013 , non-performing assets , excluding covered loans and covered oreo , declined by 14.5 % compared to december 31 , 2012. improvement in non-performing assets and related credit metrics resulted primarily from management 's continued focus on credit remediation . refer to the section titled `` loan portfolio and credit quality '' of this item 7 for additional discussion of non-performing assets . average funding sources for 2013 increased $ 156.7 million compared to the year ended december 31 , 2012 , primarily from growth in transactional deposits , which more than offset a reduction in higher-costing time deposits . 42 average senior and subordinated debt decreased $ 18.4 million from 2012 driven by the repurchase and retirement of $ 24.0 million of junior subordinated debentures during the fourth quarter of 2013. for a discussion of our funding sources , see the section titled `` funding and liquidity management '' of this item 7. performance overview for 2012 compared with 2011 the net loss applicable to common shareholders for 2012 was $ 20.7 million , or $ 0.28 per share .
| investment portfolio valuation summary ( dollar amounts in thousands ) replace_table_token_14_th portfolio composition as of december 31 , 2013 , our securities portfolio totaled $ 1.2 billion , rising 3.4 % from december 31 , 2012 , following a 4.1 % increase from december 31 , 2011. the current year growth resulted primarily from the redeployment of cash and cash equivalents into purchases of cmos and other mbss , net of maturities and calls of municipal securities . as of december 31 , 2013 , approximately 96 % of our $ 1.1 billion available-for-sale portfolio was comprised of u.s. agency securities , municipals , cmos , and other mbss . the remainder of the portfolio was comprised of six cdos with a fair value of $ 18.3 million and an aggregate unrealized loss of $ 28.2 million , and miscellaneous other securities with a fair value of $ 20.6 million . investments in municipal securities comprised 43.6 % , or $ 504.8 million , of the total securities portfolio as of december 31 , 2013. the majority consists of general obligations of local municipalities , compared to state issued debt . our municipal securities portfolio has historically experienced very low default rates and provides a predictable cash flow . table 8 securities effective duration analysis ( dollar amounts in thousands ) replace_table_token_15_th n/m ย not meaningful . ( 1 ) the effective duration represents the estimated percentage change in the fair value of the securities portfolio given a 100 basis point increase or decrease in interest rates . this measure is used to evaluate the portfolio 's price volatility at a single point in time and is not intended to be a precise predictor of future fair values since those values will be influenced by a number of factors .
| 2,361 |
plan category number of securities to be issued upon exercise of outstanding options , warrants and rights ( a ) weighted average exercise price of outstanding options , warrants and rights ( b ) number of securities remaining available for future issuance under equity compensation plans ( excluding securities reflected in column ( a ) ) ( 1 ) ( c ) equity compensation plans approved by security holders 120,800 $ 11.28 476,300 equity compensation plans not approved by security holders - - - total 120,800 $ 11.28 476,300 ( 1 ) represents shares remaining available for issuance under the 2005 stock awards plan and the 2011 stock option plan . non-employee directors are paid an annual retainer of $ 35,000 , and each director has the opportunity to elect to receive $ 15,000 of the retainer in restricted stock . for 2011 , each director elected to receive $ 15,000 of the annual retainer in restricted stock . the number of restricted shares is determined by the average of the high and low stock price on the day prior to the annual meeting of shareholders . for 2011 , five non-employee directors each received 998 story_separator_special_tag critical accounting policies and estimates management 's discussion and analysis of financial condition and results of operations discusses the company 's consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states of america . the preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period . on an on-going basis , management evaluates its estimates and judgments based on historical experience and on various other factors that are believed to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions . management believes the following critical accounting policies , among others , affect its more significant judgments and estimates used in the preparation of the company 's consolidated financial statements . allowance for doubtful accounts the company maintained allowances for doubtful accounts , $ 1,203,000 as of december 31 , 2011 , for estimated losses resulting from the inability of its customers to make required payments and for disputed claims and quality issues . the allowance is based upon a review of outstanding receivables , historical collection information and existing economic conditions . the company performs periodic credit evaluations of its customers ' financial condition and generally does not require collateral . receivables are generally due within 30 to 45 days . delinquent receivables are written off based on individual credit evaluations and specific circumstances of the customer . inventory reserves the company establishes a reserve for estimated obsolescence or unmarketable inventory in an amount equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and current market conditions . as of december 31 , 2011 , the company has $ 2,699,000 accrued for inventory obsolescence and market reserves . if actual market conditions are less favorable than those estimated by management , additional inventory reserves may be required . environmental reserves as noted in note 5 to the consolidated financial statements included in item 8 of this form 10-k , the company has accrued $ 640,000 as of december 31 , 2011 , in environmental remediation costs which , in management 's best estimate , are sufficient to satisfy anticipated costs of known remediation requirements as outlined in note 5. expenditures related to costs currently accrued are not discounted to their present values and are expected to be made over the next three to four years . however , as a result of the evolving nature of the environmental regulations , the difficulty in estimating the extent and necessary remediation of environmental contamination , and the availability and application of technology , the estimated costs for future environmental compliance and remediation are subject to uncertainties and it is not possible to predict the amount or timing of future costs of environmental matters which may subsequently be determined . changes in information known to management or in applicable regulations may require the company to record additional remediation reserves . impairment of long-lived assets the company continually reviews the recoverability of the carrying value of long-lived assets . long-lived assets are reviewed for impairment when events or changes in circumstances , also referred to as โ triggering events โ , indicate that the carrying value of a long-lived asset or group of assets ( the โ assets โ ) may no longer be recoverable . triggering events include : a significant decline in the market price of the assets ; a significant adverse change in the operating use or physical condition of the assets ; a significant adverse change in legal factors or in the business climate impacting the assets ' value , including regulatory issues such as environmental actions ; the generation by the assets of historical cash flow losses combined with projected future cash flow losses ; or the expectation that the assets will be sold or disposed of significantly before the end of the useful life of the assets . the company concluded that there were no indications of impairment requiring further testing during the year ended december 31 , 2011 . 15 if the company concluded that , based on its review of current facts and circumstances , there were indications of impairment , testing of the applicable assets would be performed . story_separator_special_tag accounts receivable increased by $ 6,609,000 in 2011 , net of reserves , as a result of the higher metals segment sales activity during the fourth quarter of 2011 compared to the same period of 2010 , combined with an increased number of days sales outstanding for fabrication sales . higher priced special alloy inventory purchases made during the fourth quarter of 2011 increased the accounts payable balance at the end of 2011 by $ 2,369,000 when compared to the 2010 year-end balance . operating cash flows were favorably affected by higher accrued expenses at the end of 2011 compared to the end of 2010 of $ 1,806,000 , as profit based incentives increased $ 1,019,000 reflecting higher profits earned and advances from customers ( prepayments from customers used to purchase raw materials required for piping systems projects ) increased $ 470,000 in 2011 compared to 2010. cash flows used in operating activities during 2010 totaled $ 6,048,000 compared to cash flows provided by continuing operations during 2009 of $ 19,903,000 , or a decline in cash flows of $ 25,951,0000 from 2009 to 2010. cash flows provided by discontinued operations for 2009 was $ 286,000. cash flows in 2010 were generated from net income totaling $ 6,676,000 before depreciation and amortization expense of $ 2,642,000. cash flows were adversely affected in 2010 by a $ 8,849,000 increase in the company 's inventories as inventories increased , net of reserves , from $ 25,504,000 at the end of 2009 to $ 34,353,000 at the end of 2010. substantially all of the increase occurred in the metals segment to support higher 2011 sales projections . accounts receivable increased by $ 5,932,000 in 2010 , net of reserves , reflecting a 46 percent increase in sales in the fourth quarter of 2010 over the fourth quarter of 2009. in addition , accounts payable increased $ 4,092,000 in 2010 , resulting primarily from the timing of the receipt of and payment for stainless steel raw materials by the metals segment at year end . also negatively impacting cash flows in 2010 was a decline in accrued expenses at the end of 2010 compared to the end of 2009 of $ 2,514,000 , as advances from customers ( prepayments from customers used to purchase raw materials required for piping systems projects ) declined $ 1,679,000 and a customer product claim was paid during 2010 for $ 1,900,000. these amounts were partially offset by higher accruals for profit based incentives of $ 552,000 reflecting higher profits earned in 2010 compared to 2009. in 2011 , the company 's current assets increased $ 17,132,000 and current liabilities increased $ 4,020,000 , from the year ended 2010 amounts , which caused working capital for 2011 to increase by $ 13,112,000 to $ 56,344,000 from the 2010 total of $ 43,232,000. the current ratio for the year ended december 31 , 2011 , increased to 4.1:1 from the 2010 year-end ratio of 4.0:1. the company also used cash during 2011 for investing activities to fund capital expenditures of $ 3,185,000. financing activities during 2011 generated $ 8,431,000 through net borrowings on long-term debt and the company paid a $ 0.25 dividend on december 5 , 2011 amounting to $ 1,580,000. the company expects that along with the existing amount of cash on hand , cash flows from 2012 operations and available borrowings will be sufficient to make debt payments ( if any ) , fund estimated 2012 capital expenditures of $ 3,700,000 and have sufficient resources to expand into other business opportunities . on june 30 , 2010 , the company entered into a credit agreement with a regional bank to provide a $ 20,000,000 line of credit that expires on june 30 , 2013. this agreement was amended by the bank on august 19 , 2011 to extend the maturity date of the credit agreement by one additional year to june 30 , 2014. none of the other terms of the credit agreement were modified . the company 's previous debt facility , with a different lender , was going to expire at the end of 2010. interest on the new credit agreement is calculated using the one month libor rate , plus a pre-defined spread , which is determined by the company 's total funded debt to ebitda ratio . borrowings under the line of credit are limited to an amount equal to a borrowing base calculation that includes eligible accounts receivable , inventories and cash surrender value of the company 's life insurance . additionally , the credit facility requires an agreement not to pledge the fixed assets of the company . covenants under the debt agreement include maintaining a certain funded debt to ebitda ratio , a minimum tangible net worth , and total liabilities to tangible net worth ratio . the company is also limited to a maximum amount of capital expenditures per year , which is sufficient for the company 's projected needs . management does not believe that these covenants and restrictions will have an adverse effect on its operations . 17 story_separator_special_tag affected the fourth quarter shipments , with non-commodity unit volumes increasing 33 percent for the quarter while commodity unit volumes increased eight percent . special alloy product shipments surpassed prior year levels as a result of increased customer projects and distributor restocking . the improved unit volumes for the year and fourth quarter are also the result of increased market share in north america and strong increases in international sales . pipe manufacturing operating margins strengthened throughout the year due to the favorable product mix while fabrication margins were under pressure from underutilized capacity in the market . increased fabrication quote activity could indicate a turnaround in their sales and profitability . operating income increased for the segment despite nickel prices falling for most of the year . as nickel prices decrease , selling prices are reduced accordingly while material costs reflect the higher priced inventory .
| results of operations comparison of 2011 to 2010 - consolidated for the fiscal year ending december 31 , 2011 , the company generated net earnings of $ 5,797,000 , or $ 0.91 per share , on sales of $ 170,575,000 , compared to net earnings of $ 4,034,000 , or $ 0.64 per share , on sales of $ 151,121,000 in the prior year . the company generated net earnings of $ 1,017,000 , or $ 0.16 per share , on sales of $ 40,241,000 in the fourth quarter of 2011 , compared to net earnings of $ 1,462,000 , or $ 0.23 per share , on sales of $ 37,639,000 in the fourth quarter of 2010. consolidated gross profits increased 33 percent to $ 21,090,000 in 2011 , compared to $ 15,916,000 in 2010 , and , as a percent of sales , increased to twelve percent of sales in 2011 compared to eleven percent of sales in 2010. for the fourth quarter of 2011 , consolidated gross profits was $ 4,783,000 , an increase of ten percent from the fourth quarter of 2010 of $ 4,336,000. consolidated gross profits were twelve percent of sales for the fourth quarter of 2011 and 2010. the increases in dollars and in percentage of sales were attributable to the metals segment as discussed in the metals segment comparison of 2011 to 2010 below . consolidated selling , general and administrative expense for 2011 increased by $ 2,560,000 , compared to 2010 , and was seven percent of sales for 2011 , up from six percent for 2010. these costs increased $ 1,325,000 during the fourth quarter of 2011 compared to the same period of 2010 and increased to nine percent of sales from six percent of sales for the fourth quarters of 2011 and 2010 , respectively .
| 2,362 |
the company used $ 15.4 million of the proceeds from this offering to pay the net cost of purchased convertible note hedges that was partially offset by the proceeds from the separate sale of warrants , as described below under ยnote hedge and warrant arrangements.ย the company has used , and expects to continue story_separator_special_tag forward looking statements forward looking statements in this annual report on form 10-k which include , without limitation , statements relating to the company 's plans , strategies , objectives , expectations , intentions , projections and other information regarding future performance , are made pursuant to the safe harbor provisions of the private securities litigation reform act of 1995. the words ยmayย , ยwillย , ยcouldย , ยplansย , ยintendsย , ยseeksย , ยbelievesย , ยanticipatesย , ยexpectsย , ยestimatesย , ยjudgmentย , ยgoalย , and variations of these words and similar expressions , are intended to identify forward-looking statements . these forward-looking statements reflect the company 's current views with respect to future events and financial performance and are subject to certain risks and uncertainties that are difficult to predict , including , without limitation , product demand , competitive pressures and pricing declines in the company 's wireless and data communications markets , the timing of customer approvals of new product designs , intellectual property infringement claims , interruption or failure of our internet-based systems used to wirelessly configure and communicate with the tracking and monitoring devices that we sell , our potential needs for additional capital and other risks and uncertainties that are set forth under the caption in part i , item 1a of this annual report on form 10-k ( risk factors ) . such risks and uncertainties could cause actual results to differ materially and adversely from historical or anticipated results . although the company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions , it can give no assurance that its expectations will be attained . the company undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements , except as required by law . given these risks and uncertainties , readers are cautioned not to place undue reliance on such forward-looking statements . story_separator_special_tag appropriate level of tax reserves to maintain for ยuncertain tax positionsย . asc topic 740 uses a two-step approach in which a tax benefit is recognized if a position is more likely than not to be sustained . the amount of the benefit is then measured as the highest tax benefit that is greater than 50 % likely to be realized upon settlement . at february 28 , 2017 , the company had unrecognized tax benefits for uncertain tax positions of $ 1.0 million . impairment assessments of goodwill , purchased intangible assets and other long-lived assets at february 28 , 2017 , the company had $ 73.0 million in goodwill , $ 67.2 million in other intangible assets and $ 21.2 million in net property , equipment and improvements in its consolidated balance sheet . all goodwill and other intangible assets are attributable to the wireless datacom segment . the company makes judgments about the recoverability of goodwill , other intangible assets and other long-lived assets whenever events or changes in circumstances indicate that an impairment in the remaining value of the assets recorded on the balance sheet may exist . the company performs its goodwill impairment test in the fourth fiscal quarter of each year . beyond this , if an event occurs or circumstances change between annual tests that would more likely than not reduce the fair value of a reporting unit below its carrying value , goodwill would be evaluated for impairment . in the event an indicator of impairment exists , in order to estimate the fair value of long-lived assets , the company would make various assumptions about the future prospects for the business that the asset relates to , considers market factors specific to that business and estimates future cash flows to be generated by that business . these assumptions and estimates are necessarily subjective and are based on management 's best estimates given the information available at the time such estimates are made . based on these assumptions and estimates , the company determines whether it needs to record an impairment charge to reduce the value of the asset stated on the balance sheet to reflect its estimated fair value determined by a discounted cash flow analysis . assumptions and estimates about future values and remaining useful lives are complex and often subjective . they can be affected by a variety of factors , including external factors such as industry and economic trends , and internal factors such as changes in the company 's business strategy and its internal forecasts . although management believes the assumptions and estimates that have been made in the past have been reasonable and appropriate , different assumptions and estimates could materially impact the company 's reported financial results . more conservative assumptions of the anticipated future benefits from these businesses could result in impairment charges in the statement of operations , and lower asset values on the balance sheet . conversely , less conservative assumptions could result in smaller or no impairment charges . 23 stock-based compensation expense the company measures stock-based compensation expense at the grant date , based on the fair value of the award , and recognizes the expense over the employee 's requisite service ( vesting ) period using the straight-line method . the measurement of stock-based compensation expense is based on several criteria including , but not limited to , the valuation model used and associated input factors , such as expected term of the award , stock price volatility , risk free interest rate and forfeiture rate . certain of these inputs are subjective to some degree and are determined based in part on management 's judgment . the company recognizes the compensation expense on a straight-line basis for its graded-vesting awards . story_separator_special_tag specifically , the company has latitude in establishing price ; it can change the product offering ; it has discretion in supplier selection ; it is involved in the determination of product or service specifications ; it bears the credit risk ; and the amount that it earns on each contract is not fixed . 24 results of operations , fiscal years 2015 through 2017 the following table sets forth the percentage of revenues represented by items included in the company 's consolidated statements of income for the three most recent years : replace_table_token_4_th the company 's revenue , gross profit and operating income by business segment for the last three years are as follows : replace_table_token_5_th 25 replace_table_token_6_th fiscal year 2017 compared to fiscal year 2016 revenue wireless datacom revenue increased by $ 94.6 million , or 39 % , to $ 336.0 million in fiscal 2017 compared to $ 241.4 million last year . this increase was due to the revenue contribution of lojack , which was acquired in march 2016 and which accounted for revenue of $ 117.5 million in fiscal 2017 , partially offset by a decrease in mobile resource management ( ยmrmย ) product revenues due to macroeconomic conditions that negatively impacted demand for fleet telematics products during the year . satellite revenue decreased by $ 24.3 million , or 62 % , to $ 15.1 million in fiscal 2017 compared to $ 39.3 million last year . this decline was due to the closure of this business effective august 31 , 2016 , for the reasons explained above . gross profit and gross margins wireless datacom gross profit increased by $ 47.6 million to $ 139.6 million in fiscal 2017 from $ 92.0 million last year due to higher revenue , as described above . wireless datacom gross margin increased to 41.6 % in fiscal 2017 from 38.1 % last year primarily due to higher margins for the lojack business . satellite gross profit decreased by $ 7.3 million to $ 3.7 million in fiscal 2017 compared to $ 11.0 million last year , and satellite 's gross margin decreased to 24.7 % in fiscal 2017 from 27.9 % last year . these decreases were due to lower revenue resulting from the closing of the satellite business at the end of the fiscal 2017 second quarter . operating expenses consolidated research and development ( ยr & dย ) expense increased to $ 22.0 million in fiscal 2017 from $ 19.8 million last year due primarily to lojack r & d expense . consolidated selling expenses increased by $ 25.7 million to $ 49.0 million in fiscal 2017 from $ 23.4 million in fiscal 2016 due primarily to the lojack acquisition , which accounted for $ 23.8 million of the increase . the remaining increase was due to higher payroll expense as a result of additional sales and marketing personnel and stock compensation expenses . consolidated general and administrative expenses ( ยg & aย ) increased by $ 32.0 million to $ 57.1 million in fiscal 2017 compared to $ 25.1 million in fiscal 2016 due primarily to the g & a expenses of lojack , which accounted for $ 20.7 million of the increase . also , transaction and integration expenses for the lojack acquisition were $ 4.5 million and $ 2.0 million in fiscal years 2017 and 2016 , respectively . the remaining increase in g & a expenses for fiscal 2017 was due to higher legal expenses related to two patent infringement lawsuits and a litigation provision of $ 7.2 million recorded in fiscal 2017 related to the omega patents llc patent infringement case . in fiscal 2016 , a litigation provision of $ 2.9 million was recorded for this lawsuit . higher stock compensation expenses in fiscal 2017 also contributed to the increase in g & a expenses . amortization of intangibles increased from $ 6.6 million in fiscal 2016 to $ 15.1 million in fiscal 2017 due to the amortization of new intangibles associated with the acquisition of lojack in the fiscal 2017 first quarter . 26 non-operating expense , net investment income was $ 1.7 million in fiscal 2017 compared to investment income of $ 1.9 million last year . in fiscal 2017 , there was investment income on cash equivalents and marketable securities of $ 0.6 million , investment income of $ 0.9 million on deferred compensation plan rabbi trust assets and other investment income of $ 0.2 million . in fiscal 2016 , there was investment income on cash equivalents and marketable securities of $ 0.8 million and a gain of $ 1.4 million on 850,100 shares of lojack common stock purchased in the open market in november and december 2015. offsetting the fiscal 2016 income from these investments was a loss on deferred compensation plan rabbi trust assets of $ 0.4 million . the company is informally funding its deferred compensation plan obligations by making cash deposits to a rabbi trust that are invested in various equity , bond and money market mutual funds in generally the same proportion as investment elections made by the participants for their compensation deferrals . interest expense increased to $ 9.9 million in fiscal 2017 compared to $ 7.6 million last year due to a full year of interest expense in fiscal 2017 on the convertible notes issued in may 2015 versus 9.5 months of interest expense in fiscal 2016. income tax provision the company had an income tax benefit of $ 1.6 million and an effective tax rate of 19.1 % in fiscal 2017. the income tax benefit was impacted by the geographic mix of earnings ( losses ) as a result of the acquisition of lojack in fiscal 2017 and a $ 1.4 million increase in the deferred tax assets valuation allowance as a result of the company 's assessment of the future realizability of its deferred tax assets . in fiscal 2016 , the company recorded an income tax provision of $ 4.6 million and an effective tax rate of 20.5 % .
| overview the company is a leading provider of internet of things ( iot ) enablement solutions for a broad array of mobile and fixed applications serving multiple vertical markets worldwide . the company was organized into two segments during fiscal 2017 - wireless datacom , comprising all of our current operations and satellite , a legacy business that we brought to a close effective august 31 , 2016. since september 1 , 2016 , our business operates under a single segment ย wireless datacom . in march 2016 , the company acquired all outstanding common stock of lojack , a global leader in products and services for tracking and recovering cars , trucks and other valuable mobile assets . lojack became a component of the company 's wireless datacom business segment . 21 wireless datacom our wireless datacom segment offers solutions for mobile resource management ( mrm ) and applications for the broader iot market , enabling customers to optimize their operations by collecting , monitoring and efficiently reporting business-critical data and desired intelligence from high-value remote , and often mobile assets . our extensive portfolio of software applications , scalable cloud service enablement platforms , and intelligent communications device platforms streamline otherwise complex iot deployments for our customers . we are focused on delivering software services and product solutions globally for fortune 2000 global enterprise customers in the transportation , government , construction , automotive and energy vertical markets . in addition , we anticipate new opportunities and future growth in insurance and vehicle telematics , industrial machine telematics , as well as other emerging technology applications . satellite prior to the closure of the company 's satellite business , products of this business segment were sold to echostar , an affiliate of dish network , for incorporation into complete subscription satellite television systems .
| 2,363 |
although the information is based on our current expectations , actual results could vary from expectations stated in this report . numerous factors will affect our actual results , some of which are beyond our control . these include the breadth and duration of the current economic recession and its impact on our tenants , the strength of commercial and industrial real estate markets , market conditions affecting tenants , competitive market conditions , interest rate levels , volatility in our stock price and capital market conditions . you are cautioned not to place undue reliance on this information , which speaks only as of the date of this report . we assume no obligation to update publicly any forward-looking information , whether as a result of new information , future events , or otherwise , except to the extent we are required to do so in connection with our ongoing requirements under federal securities laws to disclose material information . for a discussion of important risks related to our business , and related to investing in our securities , including risks that could cause actual results and events to differ materially from results and events referred to in the forward-looking information , see item 1a : risk factors and the discussion under the captions โ โforward-looking statements โ above and โ โliquidity and capital resources โ below . in light of these risks , uncertainties and assumptions , the forward-looking events discussed in this report might not occur . 37 executive summary through our interest in hudson pacific properties , l.p. ( our operating partnership ) and its subsidiaries , at december 31 , 2013 our consolidated office portfolio consisted of approximately 5.3 million square feet , and our media and entertainment portfolio consisted of 0.9 million square feet . as of december 31 , 2013 , our consolidated stabilized office portfolio was 95.4 % leased ( including leases not yet commenced ) . our media and entertainment properties were 69.9 % leased for the trailing 12-month period ended december 31 , 2013 . current year acquisitions , dispositions , repositionings and financings . acquisitions . 3401 exposition boulevard acquisition on may 22 , 2013 , the company acquired 3401 exposition blvd . in santa monica , california for $ 25.7 million ( before closing costs and prorations ) from watt investment partners . 3401 exposition blvd . is expected to consist of approximately 63,376 square feet of creative office space . pinnacle ii acquisition on november 8 , 2012 , the company entered into a joint venture with mdp/worthe to acquire the pinnacle , a two-building ( pinnacle i and pinnacle ii ) , 625,091 square-foot office property located in burbank , california . the acquisition of the 393,777 square-foot pinnacle i building by the joint venture closed on november 8 , 2012 for a purchase price of $ 212.5 million , $ 129.0 million of which was financed with a new ten-year project loan . on june 14 , 2013 , the 231,314 square-foot pinnacle ii building was contributed to the joint venture by mdp/worthe subject to an existing $ 89.1 million project loan bearing interest at a fixed annual rate of 6.313 % and maturing on september 6 , 2016. other than for purposes of funding closing costs and prorations , the company did not make a capital contribution in connection with the contribution of the pinnacle ii building to the joint venture , but the company 's ownership interest in the joint venture was adjusted from 98.25 % to 65.00 % to reflect the contribution of the pinnacle ii by mdp/worthe , with the remaining 35.00 % owned by mdp/worthe . with the closing of this transaction , the joint venture owns both buildings for a combined purchase price of $ 342.5 million , subject to $ 218.1 million of project financing . seattle acquisition on july 31 , 2013 , the company acquired a 848,001 square-foot office portfolio in seattle , washington from spear street capital for approximately $ 368.4 million ( net of certain credits and before closing costs and prorations ) . the purchase price was paid from a combination of cash-on-hand ( including funds from the 1031 exchange of city plaza ) , borrowings under the company 's corporate unsecured credit facility , and the asset-level financing described below . the seattle portfolio consists of the following : a two-building , 484,463 square-foot waterfront property located in the pioneer square submarket of downtown seattle , referred to as the first & king property . this property is 88.2 % leased to tenants such as capital one/ing direct , emc corporation and nuance communications ; a 189,762 square-foot class-a office building located in the south lake union submarket of downtown seattle , referred to as the met park north property . this building is 94.6 % leased , with 72.4 % of the building to be occupied by amazon.com , inc. under a ten-year lease that commenced in november 2013 ; and a 173,776 square-foot building located in the edmonds/lynnwood submarket of seattle 's northend , referred to as the northview property . this building is 88.6 % leased to tenants such as automatic data processing , inc. and the federal emergency management agency . 1861 bundy acquisition on september 27 , 2013 , the company acquired 1861 bundy drive in los angeles , california for $ 11.5 million ( before closing costs and prorations ) . 1861 bundy drive is expected to consist of approximately 36,474 square feet of creative office space and be part of the company 's element la property . dispositions . we disposed of one property in 2013. city plaza disposition 38 on july 12 , 2013 , the company sold its city plaza property for approximately $ 56.0 million ( before certain credits , prorations , and closing costs ) . story_separator_special_tag from the acquisition of our first property in february 2007 through december 2013 , we have acquired or developed properties totaling an aggregate of approximately 7.7 million square feet . we intend to pursue acquisitions of additional properties as a key part of our growth strategy , often including properties that may have substantial vacancy , which enables us to increase cash flow through lease-up . we expect to continue to acquire properties subject to existing mortgage financing and other indebtedness or to incur indebtedness in connection with acquiring or refinancing these properties . debt service on such indebtedness will have a priority over any dividends with respect to our common or series b preferred stock and our common and series a preferred units . rental revenue the amount of net rental revenue generated by the properties in our portfolio depends principally on our ability to maintain the occupancy rates of currently leased space and to lease currently available space and space that becomes available from lease terminations . as of december 31 , 2013 , the percent leased for our stabilized office properties was approximately 95.4 % ( or 90.1 % , excluding leases signed but not commenced as of that date ) , and the percent leased for the media and entertainment properties ( based on 12-month trailing average ) was approximately 69.9 % . the amount of rental revenue generated by us also depends on our ability to maintain or increase rental rates at our properties . we believe that the average rental rates for our office properties are generally below the current average quoted market rate . we believe the average rental rates for our media and entertainment properties are generally equal to current average quoted market rates . negative trends in one or more of these factors could adversely affect our rental revenue in future periods . future economic downturns or regional downturns affecting our submarkets or downturns in our tenants ' industries that impair our ability to renew or re-let space and the ability of our tenants to fulfill their lease commitments , as in the case of tenant bankruptcies , could adversely affect our ability to maintain or increase rental rates at our properties . in addition , growth in rental revenue will also partially depend on our ability to acquire additional properties that meet our investment criteria . conditions in our markets the properties in our portfolio are all located in california and pacific northwest submarkets . positive or negative changes in economic or other conditions in california or pacific northwest , including state budgetary shortfalls , employment rates , natural hazards and other factors , may impact our overall performance . operating expenses our operating expenses generally consist of utilities , property and ad valorem taxes , insurance and site maintenance costs . increases in these expenses over tenants ' base years are generally passed on to tenants in our full-service gross leased properties and are generally paid in full by tenants in our net lease properties . certain of our properties have been reassessed for property tax purposes as a result of our initial public offering or their subsequent acquisition and other reassessments remain pending . in the case of completed reassessments , the amount of property taxes we pay reflects the valuations established with 40 the county assessors for the relevant locations of each property as of the initial public offering or their subsequent acquisition . with respect to pending reassessments , we similarly expect the amount of property taxes we pay to reflect the valuations established with such county assessors . taxable reit subsidiary as part of the formation transactions , we formed hudson pacific services , inc. , or our services company , a maryland corporation that is wholly owned by our operating partnership . we have elected , together with our services company , to treat our services company as a taxable reit subsidiary for federal income tax purposes , and we may form additional taxable reit subsidiaries in the future . our services company generally may provide both customary and non-customary services to our tenants and engage in other activities that we may not engage in directly without adversely affecting our qualification as a reit . our services company and its wholly owned subsidiaries provide a number of services to certain tenants at our media and entertainment properties and , from time to time , one or more taxable reit subsidiaries may provide services to our tenants at these and other properties . in addition , our operating partnership has contributed some or all of its interests in certain wholly owned subsidiaries or their assets to our services company . we currently lease space to wholly owned subsidiaries of our services company at our media and entertainment properties and may , from time to time , enter into additional leases with one or more taxable reit subsidiaries . any income earned by our taxable reit subsidiaries will not be included in our taxable income for purposes of the 75 % or 95 % gross income tests , except to the extent such income is distributed to us as a dividend , in which case such dividend income will qualify under the 95 % , but not the 75 % , gross income test . because a taxable reit subsidiary is subject to federal income tax , and state and local income tax ( where applicable ) , as a regular c corporation , the income earned by our taxable reit subsidiaries generally will be subject to an additional level of tax as compared to the income earned by our other subsidiaries . critical accounting policies investment in real estate properties the properties in our portfolio are carried at cost , less accumulated depreciation and amortization . we account for the cost of an acquisition , including the assumption of liabilities , to the acquired tangible assets and identifiable intangibles based on their estimated fair values in accordance with gaap .
| results of operations the following table identifies each of the properties in our portfolio acquired through december 31 , 2013 and their date of acquisition . replace_table_token_14_th ( 1 ) these properties are owned by our joint venture with mdp/worthe . as of december 31 , 2012 , we owned a 98.25 % interest in the joint venture , which owned pinnacle i as of that date . on june 14 , 2013 , mdp/worthe contributed its interest in pinnacle ii to the joint venture , which reduced our interest in the joint venture to 65.0 % . all amounts and percentages used in this discussion of our results of operations are calculated using the numbers presented in the financial statements contained in this report rather than the rounded numbers appearing in this discussion . 44 comparison of the year ended december 31 , 2013 to the year ended december 31 , 2012 revenue total office revenue . total office revenue consists of rental revenue , tenant recoveries , and parking and other revenue . total office revenues increased $ 45.1 million , or 37.5 % , to $ 165.4 million for the twelve months ended december 31 , 2013 compared to $ 120.3 million for the twelve months ended december 31 , 2012 . the period-over-period changes in the items that comprise total revenue are attributable primarily to the factors discussed below . during the twelve months ended december 31 , 2013 , the company entered into an agreement to sell its city plaza property in orange , california . accordingly , the city plaza property was reclassified as held for sale and its financial results are accounted for as discontinued operations for the twelve months ended december 31 , 2013 and december 31 , 2012 . office rental revenue . office rental revenue includes rental revenues from our office properties and percentage rent on retail space contained within those properties .
| 2,364 |
the company 's operations are organized and managed based on similar product offerings and end markets , and are reported to senior management as the following seven segments : automotive oem ; food equipment ; test & measurement and electronics ; welding ; polymers & fluids ; construction products ; and specialty products . due to the large number of diverse businesses and the company 's decentralized operating structure , the company does not require its businesses to provide detailed information on operating results . instead , the company 's corporate management collects data on several key measurements : operating revenue , operating income , operating margin , overhead costs , number of months on hand in inventory , days sales outstanding in accounts receivable , past due receivables and return on invested capital . these key measures are monitored by management and significant changes in operating results versus current trends in end markets and variances from forecasts are discussed with operating unit management . the itw business model the powerful and highly differentiated itw business model is the company 's core source of value creation . this business model is the company 's competitive advantage and defines how itw creates value for its shareholders and comprises three unique elements : itw 's 80/20 front-to-back process is the operating system that is applied in every itw business . initially introduced as a manufacturing efficiency tool in the 1980s , itw has continually refined , improved and expanded 80/20 into a proprietary , holistic business management process that generates significant value for the company and its customers . through the application of data driven insights generated by 80/20 practice , itw focuses on its largest and best opportunities ( the โ 80 โ ) and eliminates cost , complexity and distractions associated with the less profitable opportunities ( the โ 20 โ ) . 80/20 enables itw businesses to consistently achieve world-class operational excellence in product availability , quality , and innovation , while generating superior financial performance ; customer-back innovation has fueled decades of profitable growth at itw . the company 's unique innovation approach is built on insight gathered from the 80/20 front-to-back process . working from the customer back , itw businesses position themselves as the go-to problem solver for their โ 80 โ customers . itw 's innovation efforts are focused on understanding customer needs , particularly those in โ 80 โ markets with solid long-term growth fundamentals , and subsequently creating unique solutions to address those needs . these customer insights and learnings drive innovation at itw and have contributed to a portfolio of approximately 18,000 granted and pending patents ; itw 's decentralized , entrepreneurial culture enables itw businesses to be fast , focused , and responsive . itw businesses have significant flexibility within the framework of the itw business model to customize their approach in order to best serve their specific customers ' needs . itw colleagues recognize their unique responsibilities to execute the company 's strategy and values . as a result , the company maintains a focused and simple organizational structure that , combined with outstanding execution , delivers best-in-class services and solutions adapted to each business ' customers and end markets . enterprise strategy in late 2012 , itw began its strategic framework transitioning the company on its current path to fully leverage the compelling performance potential of the itw business model . since then , itw has made considerable progress in its path to full potential . the roots of itw 's enterprise strategy began in late 2011 / early 2012 , when the company undertook a complete review of its performance . focusing on its businesses delivering consistent above-market growth with best-in-class margins and returns , itw developed a strategy to replicate that performance across its operations . 19 based on this rigorous evaluation , itw determined that solid and consistent above-market organic growth must be the core growth engine to deliver world-class financial performance and compelling long-term returns for its shareholders . to shift its primary growth engine to organic , the company began executing a multi-step approach . the first step was to narrow the focus and improve the quality of itw 's business portfolio . as part of the portfolio management initiative , itw exited businesses that were operating in commoditized market spaces and prioritized sustainable differentiation as a must-have requirement for all itw businesses . this process included both divesting entire businesses and exiting commoditized product lines and customers inside otherwise highly differentiated itw divisions . as a result of this work , itw 's business portfolio now has significantly higher organic growth potential . itw segments and divisions now possess attractive and differentiated product lines and end markets as they continue to improve operating margins and generate price/cost increases . the company achieved this through product line simplification , or eliminating the complexity and overhead costs associated with smaller product lines and customers , while supporting and growing the businesses ' largest / most profitable customers and product lines . step two , business structure simplification , was implemented to simplify and scale-up itw 's operating structure to support increased engineering , marketing , and sales resources , and , at the same time , improve global reach and competitiveness , all of which were critical to driving accelerated organic growth . itw now has 87 scaled-up divisions with significantly enhanced focus on growth investments , core customers and products , and customer-back innovation . the strategic sourcing initiative established sourcing as a core strategic and operational capability at itw . story_separator_special_tag in addition , positive operating leverage of 70 basis points was offset by unfavorable price/cost of 40 basis points and the dilutive impact of 30 basis points from the ef & c acquisition . on december 22 , 2017 , the `` tax cuts and jobs act '' ( the โ act โ ) was enacted in the united states . the provisions of the act significantly revised the u.s. corporate income tax rules . as a result , the company recorded a one-time income tax charge of $ 658 million during the fourth quarter of 2017. refer to note 6. income taxes in item 8. financial statements and supplementary data for further information . diluted earnings per share ( eps ) of $ 4.86 included the unfavorable impact of $ 1.90 for the previously discussed one-time tax charge and the favorable impact of $ 0.17 for the confidential legal settlement . excluding these two items , eps of $ 6.59 increased 15.6 % . free cash flow was $ 2.1 billion for 2017 and included the impact from an additional discretionary pension contribution of $ 115 million in the second quarter of 2017. refer to the cash flow section of liquidity and capital resources for a reconciliation of this non-gaap measure . the company repurchased approximately 7.1 million shares of its common stock in 2017 for approximately $ 1.0 billion . the company increased the quarterly dividend by 20.0 % in 2017. total cash dividends of $ 941 million were paid in 2017. adjusted after-tax return on average invested capital was 24.3 % , an increase of 220 basis points . refer to the adjusted after-tax return on average invested capital section of liquidity and capital resources for a reconciliation of this non-gaap measure . 23 results of operations by segment the reconciliation of segment operating revenue and operating income to total operating revenue and operating income is as follows : replace_table_token_7_th replace_table_token_8_th segments are allocated a fixed overhead charge based on the segment 's revenue . expenses not charged to the segments are reported separately as unallocated . because the unallocated category includes a variety of items , it is subject to fluctuations on a quarterly and annual basis . unallocated in 2017 includes the favorable impact from the previously discussed confidential legal settlement . automotive oem this segment is a global , niche supplier to top tier oems , providing unique innovation to address pain points for sophisticated customers with complex problems . businesses in this segment produce components and fasteners for automotive-related applications . this segment primarily serves the automotive original equipment manufacturers and tiers market . products in this segment include : plastic and metal components , fasteners and assemblies for automobiles , light trucks and other industrial uses . 24 the results of operations for the automotive oem segment for 2018 , 2017 and 2016 were as follows : 2018 compared to 2017 replace_table_token_9_th operating revenue increased due to the favorable effect of foreign currency translation . organic revenue was flat compared to worldwide auto builds which declined 1 % . product line simplification activities reduced organic revenue growth by 120 basis points . โฆ north american organic revenue increased 3.0 % compared to north american auto builds which declined 1 % . auto builds for the detroit 3 , where the company has higher content , were flat . โฆ european organic revenue declined 2.7 % compared to european auto builds which declined 1 % due to customer mix . organic revenue was negatively impacted by the new emissions testing requirements in europe which disrupted auto production in the second half of 2018 . โฆ asia pacific organic revenue decreased 0.7 % . china organic revenue grew 2.6 % versus chinese auto builds which declined 4 % , as auto production in china softened during the second half of 2018. operating margin was 22.5 % in 2018. the decrease of 30 basis points was primarily due to unfavorable price/cost of 130 basis points , partially offset by benefits from the company 's enterprise initiatives . 2017 compared to 2016 replace_table_token_10_th operating revenue increased due to the ef & c acquisition , higher organic revenue and the favorable effect of foreign currency translation . organic revenue grew 4.1 % as a result of penetration gains , exceeding auto build growth of 2 % . โฆ european organic revenue growth of 8.3 % exceeded european auto builds which grew 3 % . โฆ asia pacific organic revenue increased 9.5 % . china organic revenue growth of 16.6 % exceeded chinese auto build growth of 2 % . auto builds of foreign automotive manufacturers in china , where the company has higher content , grew 5 % . โฆ north american organic revenue decreased 1.1 % versus total north american auto builds which declined 4 % . auto build growth for the detroit 3 , where the company has higher content , declined 7 % . operating margin of 22.8 % decreased 130 basis points primarily driven by the dilutive impact of 120 basis points from the ef & c acquisition , unfavorable price/cost of 120 basis points and higher restructuring expenses , partially offset by positive operating leverage of 60 basis points and the net benefits from the company 's enterprise initiatives and cost management of 90 basis points . 25 food equipment this segment is a highly focused and branded industry leader in commercial food equipment differentiated by innovation and integrated service offerings . this segment primarily serves the food service , food institutional/restaurant and food retail markets . products in this segment include : warewashing equipment ; cooking equipment , including ovens , ranges and broilers ; refrigeration equipment , including refrigerators , freezers and prep tables ; food processing equipment , including slicers , mixers and scales ; kitchen exhaust , ventilation and pollution control systems ; and food equipment service , maintenance and repair .
| consolidated results of operations the company delivered solid financial results in 2018 despite some near-term market challenges in the second half of the year . while overall market conditions in north america were solid , auto production in europe and china and demand levels in various international end markets served by the specialty products segment softened during the second half of the year . the primary driver of the company 's financial performance is the continued successful execution of enterprise initiatives and continued focus on the highly differentiated itw business model . in 2018 , five of seven segments achieved worldwide organic revenue growth while two segments were flat . all segments had operating margin above 21 % for 2018. the company does not believe that recently imposed tariffs in 2018 have had a material impact on its operating results . however , the impact of tariffs and global trade policies could increase in the future . the company will continue to evaluate the impact of enacted and proposed tariffs on its businesses , as well as pricing actions to mitigate the impact of raw material cost increases resulting from these tariffs . the company presents certain financial measures in fiscal year 2017 excluding the $ 658 million tax charge related to the `` tax cuts and jobs act '' and the benefit of a favorable $ 95 million legal settlement . these non-gaap measures are consistent with the way management analyzes and assesses the company 's operating performance . the company believes these non-gaap measures enhance investors ' understanding of the company 's underlying financial performance , as well as their ability to compare the company 's financial results and overall performance to that of its peers .
| 2,365 |
revenues and expenses we generate revenues primarily from filmed entertainment box office receipts and concession sales with additional revenues from screen advertising sales and other revenue streams , such as transactional fees , vendor marketing promotions , studio trailer placements , meeting rentals and electronic video games located in some of our theatres . ncm provides our domestic theatres with various forms of in theatre advertising . we also offer alternative entertainment , such as live and pre-recorded sports programs , concert events , the metropolitan opera , in-theatre gaming and other special events in our theatres through our joint venture , ac jv , llc . our flix media initiative has also allowed us to expand our screen advertising and alternative content within our international circuit and to other international exhibitors . films leading the box office during the year ended december 31 , 2018 included black panther , avengers : infinity war , incredibles 2 , jurassic world : fallen kingdom , aquaman , deadpool 2 , dr. seuss ' the grinch , mission impossible โ fallout , ant-man and the wasp , solo : a star wars story , venom , a quiet place , crazy rich asians , halloween , bumblebee , ralph breaks the internet , fantastic beasts : the crimes of grindelwald , mary poppins returns , a star is born , bohemian rhapsody and other films , as well as the carryover of the greatest showman , jumanji : welcome to the jungle and star wars : the last jedi . films scheduled for release during 2019 include avengers : endgame , star wars : episode ix , the lion king , frozen 2 , toy story 4 , aladdin , captain marvel , it 2 , spider-man : far from home , the secret life of pets 2 , joker , dumbo , and godzilla 2 among other films . film rental costs are variable in nature and fluctuate with our admissions revenues . film rental costs as a percentage of revenues are generally higher for periods in which more blockbuster films are released . advertising costs , which are expensed as incurred , are primarily related to campaigns for new and renovated theatres , loyalty and membership programs and brand advertising that vary depending on the timing of such campaigns . concession supplies expense is variable in nature and fluctuates with our concession revenues and product mix . we negotiate prices for concession supplies directly with concession vendors and manufacturers to obtain volume rates . although salaries and wages include a fixed cost component ( i.e . the minimum staffing costs to operate a theatre facility during non-peak periods ) , salaries and wages move in relation to revenues as theatre staffing is adjusted to respond to changes in attendance . in some international locations , staffing levels are also subject to local regulations . facility lease expense is primarily a fixed cost at the theatre level as most of our facility leases require a fixed monthly minimum rent payment . certain leases are subject to percentage rent only , while others are subject to percentage rent in addition to their fixed monthly rent if a target annual performance level is achieved . facility lease expense as a percentage of revenues is also affected by the number of theatres under operating leases , the number of theatres under capital and finance leases and the number of owned theatres . 25 utilities and other costs include both fixed and variable costs and primarily consist of utilities , expenses for projection and sound equipment maintenance and monitoring , property taxes , janitorial costs , repairs , maintenance and security services . general and administrative expenses are primarily fixed in nature and consist of the costs to support the overall management of the company , including salaries and wages , incentive compensation and benefit costs for our corporate office personnel , facility expenses for our corporate offices , consulting fees , legal fees , audit fees , supplies and other costs that are not specifically associated with the operations of our theatres . critical accounting policies we prepare our consolidated financial statements in conformity with generally accepted accounting principles in the u.s. , or u.s. gaap . as such , we are required to make certain estimates and assumptions that we believe are reasonable based upon the information available . these estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented . the significant accounting policies , which we believe are the most critical to aid in fully understanding and evaluating our reported consolidated financial results , include the following : revenue and expense recognition our patrons often have the option to purchase movie tickets well in advance of a movie showtime or right before the movie showtime , or at any point in between those two timeframes depending on seat availability . we recognize such admissions revenues when the showtime for a purchased movie ticket has passed . concession revenues are recognized when sales are made at the registers . other revenues primarily consist of screen advertising and other revenue streams , such as transactional fees , vendor marketing promotions , studio trailer placements , meeting rentals and electronic video games located in some of our theatres . screen advertising revenues are recognized over the period that the related advertising is delivered on-screen or in-theatre . we sell gift cards and discount ticket vouchers , the proceeds from which are recorded as current liabilities . revenues for gift cards and discount ticket vouchers are recognized when they are redeemed for movie tickets or concession items . we offer a subscription program in the u.s. whereby patrons can pay a monthly fee to receive a monthly credit for use towards a future movie ticket purchase . we record the monthly subscription program fees as current liabilities and record admissions revenues as the credits are redeemed for movie tickets . story_separator_special_tag 27 impairment of long-lived assets we review long-lived assets for impairment indicators on a quarterly basis or whenever events or changes in circumstances indicate the carrying amount of the assets may not be fully recoverable . we also perform a full quantitative impairment evaluation on an annual basis . we assess many factors including the following to determine whether to impair individual theatre assets : actual theatre level cash flows ; budgeted theatre level cash flows ; theatre property and equipment carrying values ; amortizing intangible asset carrying values ; the age of a recently built theatre ; competitive theatres in the marketplace ; the impact of recent ticket price changes ; the impact of recent theatre remodels or other substantial improvements ; available lease renewal options ; and other factors considered relevant in our assessment of impairment of individual theatre assets . long-lived assets are evaluated for impairment on a theatre basis , which we believe is the lowest applicable level for which there are identifiable cash flows . the impairment evaluation is based on the estimated undiscounted cash flows from continuing use through the remainder of the theatre 's useful life . the remainder of the theatre 's useful life correlates with the remaining lease period , which includes the probability of the exercise of available renewal periods for leased properties and the lesser of twenty years or the building 's remaining useful life for owned properties . if the estimated undiscounted cash flows are not sufficient to recover a long-lived asset 's carrying value , we then compare the carrying value of the asset group ( theatre ) with its estimated fair value . when estimated fair value is determined to be lower than the carrying value of the asset group ( theatre ) , the asset group ( theatre ) is written down to its estimated fair value . significant judgment is involved in estimating cash flows and fair value . fair value is determined based on a multiple of cash flows , which was six and a half times for the evaluations performed during 2016 , 2017 and 2018. management 's estimates , which fall under level 3 of the u.s. gaap fair value hierarchy as defined by fasb asc topic 820-10-35 , are based on historical and projected operating performance , recent market transactions and current industry trading multiples . the long-lived asset impairment charges recorded during each of the periods presented are specific to theatres that were directly and individually impacted by increased competition , adverse changes in market demographics , or adverse changes in the development or the conditions of the areas surrounding the theatre . impairment of goodwill and intangible assets we evaluate goodwill for impairment annually during the fourth quarter or whenever events or changes in circumstances indicate the carrying value of the goodwill may not be fully recoverable . we evaluate goodwill for impairment at the reporting unit level and we have allocated goodwill to the reporting unit based on an estimate of its relative fair value . management considers the reporting unit to be each of its twenty regions in the u.s. and seven of its international countries with honduras , el salvador , nicaragua , costa rica , panama and guatemala considered one reporting unit ( the company does not have goodwill recorded for all of its international locations ) . under asc topic 350 , goodwill , intangibles and other ( โ asc topic 350 โ ) , we may perform a qualitative impairment assessment or a quantitative impairment assessment of our goodwill . a quantitative analysis requires us to estimate the fair value of each reporting unit and compare it with its carrying value . if the carrying value of the reporting unit exceeds its estimated fair value , goodwill would be written down such that the carrying value would equal estimated fair value . fair value is determined based on a multiple of cash flows , which was eight times for the evaluations performed during 2017 and 2018. significant judgment is involved in estimating cash flows and fair value . management 's estimates , which fall under level 3 of the u.s. gaap 28 fair value hierarchy as defined by fasb asc topic 820-10-35 , are based on historical and projected operating performance , recent market transactions and current industry trading multiples . a qualitative assessment includes consideration of historical and expected future industry performance , estimated future performanc e of the company , current industry trading multiples and other economic factors , and a review of current carrying values compared to estimated fair values as determined during our most recent quantitative assessment . we performed a qualitative assessment for all reporting units for the year ended december 31 , 2016. we performed a quantitative goodwill impairment analysis for all reporting units during the year ended december 31 , 2017. for the year ended december 31 , 2018 , we performed a quantitative goodwill assessment for three new domestic reporting units and a qualitative assessment for all other reporting units . as of december 31 , 2018 , the estimated fair value of our goodwill for each reporting unit exceeded its carrying value by more than 10 % , with the exception of one reporting unit , whose fair value exceeded its carrying value by approximately 9 % . we did not record any goodwill impairment charges as a result of the assessments performed during the years ended december 31 , 2016 , 2017 and 2018. tradename intangible assets are tested for impairment at least annually during the fourth quarter or whenever events or changes in circumstances indicate the carrying value may not be fully recoverable . under asc topic 350 , we can elect to perform a qualitative or quantitative impairment assessment for our tradename intangible assets . a quantitative tradename impairment assessment includes comparing the carrying values of tradename assets to an estimated fair value .
| results of operations the following table sets forth , for the periods indicated , the amounts for certain items reflected in our consolidated statements of income along with each of those items as a percentage of revenues . replace_table_token_8_th ( 1 ) all costs are expressed as a percentage of total revenues , except film rentals and advertising , which are expressed as a percentage of admissions revenues and concession supplies , which are expressed as a percentage of concession revenues . 32 comparis on of years ended december 31 , 2018 and december 31 , 2017 revenues . total revenues increased $ 230.2 million to $ 3,221.8 million for 2018 from $ 2,991.6 million for 2017 , representing a 7.7 % increase . the table below , presented by reportable operating segment , summarizes our year-over-year revenue performance and certain key performance indicators that impact our revenues . replace_table_token_9_th ( 1 ) revenue and attendance amounts in millions . average ticket price is calculated as admissions revenues divided by attendance . concession revenues per patron is calculated as concession revenues divided by attendance . ( 2 ) u.s. operating segment revenues include eliminations of intercompany transactions with the international operating segment . see note 19 of our consolidated financial statements . ( 3 ) constant currency revenue amounts , which are non-gaap measurements , were calculated using the average exchange rates for the corresponding months for 2017. we translate the results of our international operating segment from local currencies into u.s. dollars using currency rates in effect at different points in time . significant changes in foreign exchange rates from one period to the next can result in meaningful variations in reported results . we are providing constant currency amounts for our international operating segment to present a period-to-period comparison of business performance without the impact of foreign currency fluctuations . u.s .
| 2,366 |
the standard is effective for public companies for annual periods beginning after december 15 , 2015. the company adopted the guidance on january 1 , 2016 on a retrospective basis and reclassed $ 2.8 million from โ deposits and other assets โ to โ long-term debt โ on the balance sheet as of december 31 , 2015. the company 's unamortized story_separator_special_tag 83 the following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the notes to those financial statements appearing elsewhere in this annual report on form 10-k. this discussion contains forward-looking statements that involve significant risks and uncertainties . as a result of many factors , such as those set forth in part i , item 1a . risk factors , of this annual report on form 10-k , our actual results may differ materially from those anticipated in these forward-looking statements . we are a global biopharmaceutical company focused on the discovery , development and commercialization of novel medicines using our expertise in rna biology . we have discovered all of our compounds currently under development using our proprietary technologies . we plan to continue to develop these compounds both on our own and through selective collaboration arrangements with leading pharmaceutical and biotechnology companies . our internally discovered pipeline addresses multiple therapeutic areas , including rare disorders and oncology . during the year ended december 31 , 2016 , we recognized $ 81.4 million in sales of translarna tm ( ataluren ) , our lead product , for the treatment of nonsense mutation duchenne muscular dystrophy , or nmdmd . translarna is currently available in over 25 countries on a commercial basis or through a reimbursed early access program , or eap . we hold worldwide commercialization rights to translarna for all indications in all territories . translarna received marketing authorization from the european commission in august 2014 for the treatment of nmdmd in ambulatory patients age 5 years and over in the 31 member states of the european economic area , or eea . nmdmd is a rare , life threatening disorder . our marketing authorization in the eea is subject to annual review and renewal by the european commission following reassessment by the european medicines agency , or ema , of the benefit-risk balance of the authorization , which we refer to as the annual ema reassessment . this marketing authorization is further subject to a specific obligation to conduct and submit the results of a18-month , placebo-controlled trial , followed by an 18-month open-label extension , which we refer to together as study 041. the final report on the trial and open-label extension is to be submitted by us to the ema by the end of the third quarter of 2021. each country , including each member state of the eea , has its own pricing and reimbursement regulations . in order to commence commercial sale of product pursuant to our translarna marketing authorization in any particular country in the eea , we must finalize pricing and reimbursement negotiations with the applicable government body in such country . as a result , our commercial launch will continue to be on a country-by-country basis . we also have made , and expect to continue to make , product available under eap programs , both in countries in the eea and other territories . our ability to negotiate , secure and maintain reimbursement for product under commercial and eap programs can be subject to challenge in any particular country and can also be affected by political , economic and regulatory developments in such country . translarna is an investigational new drug in the united states . during the first quarter of 2017 , we filed a new drug application , or nda , for translarna for the treatment of nmdmd over protest with the united states food and drug administration , or fda . the fda has granted a standard review for the nda and has set a target review date under the prescription drug user fee act , or pdufa , of october 24 , 2017. the pdufa date is the goal date for the fda to complete its review of the nda , however , such date is not binding on the agency and there can be no assurance that the fda will complete its review of our nda by the pdufa goal date . filing over protest is a procedural path permitted by fda regulations that allows a company to have its nda filed and reviewed when there is a disagreement with regulators over the acceptability of the nda submission . the nda , which seeks approval of translarna for the treatment of nmdmd in the united states , was initially submitted by us in december 2015. in february 2016 , following our initial submission , we received a refuse to file letter from the fda stating that our nda was not sufficiently complete to permit a substantive review . specifically , we were notified in the letter that , in the view of the fda , both the phase 2b and phase 3 act dmd trials were negative and do not provide substantial evidence of effectiveness and that our nda did not contain adequate information regarding the abuse potential of translarna . additionally , the fda stated that we had proposed a post-hoc adjustment of act dmd that eliminates data from a majority of enrolled patients . story_separator_special_tag โ to date , we have financed our operations primarily through our offering of 3.00 % convertible senior notes due august 15 , 2022 , or the convertible notes offering , our public offerings of common stock in february 2014 and in october 2014 , our initial public offering of common stock in june 2013 , private placements of our preferred stock , collaborations , bank debt and convertible debt financings and grants and clinical trial support from governmental and philanthropic organizations and patient advocacy groups in the disease areas addressed by our product candidates . as of december 31 , 2016 , we had an accumulated deficit of $ 735.1 million . we had a net loss of $ 142.1 million and $ 170.4 million for the fiscal years ended december 31 , 2016 and 2015 , respectively . 85 we anticipate that our expenses will further increase in connection with the expansion of our global infrastructure as we continue to establish an international presence and commercialize translarna for the treatment of nmdmd , including sales and marketing , legal and regulatory , distribution and manufacturing and administrative and employee-based expenses . in addition to the foregoing , we expect to continue to incur significant costs in connection with study 041 and our open label extension trials of translarna for the treatment of nmdmd as well as our studies for nmmps i , nonsense mutation aniridia and nonsense mutation dravet syndrome/cdkl5 . we also expect to incur ongoing research and development expenses for our other product candidates , including our cancer stem cell program . in addition , we may incur substantial costs in connection with our efforts to advance our regulatory submissions . we have begun seeking and intend to continue to seek marketing authorization for translarna for the treatment of nmdmd in territories outside of the eea and we may also seek marketing authorization for translarna for other indications . these efforts may significantly impact the timing and extent of our commercialization expenses . we may seek to expand and diversify our product pipeline through opportunistically in-licensing or acquiring the rights to products , product candidates or technologies and we may incur expenses , including with respect to transaction costs , subsequent development costs or any upfront , milestone or other payments or other financial obligations associated with any such transaction , which would increase our future capital requirements . with respect to our outstanding convertible notes , cash interest payments are payable on a semi-annual basis in arrears , which will require total funding of $ 4.5 million annually . furthermore , as a result of our initial public offering in june 2013 , we have incurred and expect to continue to incur additional costs associated with operating as a public company . these costs include significant legal , accounting , investor relations and other expenses that we did not incur as a private company . additionally , we could be forced to expend significant resources in the defense of the pending securities class action lawsuits brought against us and certain of our executives , as described under part i , item 3. legal proceedings in this annual report on form 10-k. see also , โ the price of our common stock may be volatile and fluctuate substantially , which could result in substantial losses for purchasers of our common stock and lawsuits against us and our officers and directors โ under part i , item 1a . risk factors - risks related to our common stock . we will need to generate significant revenues to achieve and sustain profitability , and we may never do so . accordingly , we may need to obtain substantial additional funding in connection with our continuing operations . adequate additional financing may not be available to us on acceptable terms , or at all . if we are unable to raise capital when needed or on attractive terms , we could be forced to delay , reduce or eliminate our research and development programs or our commercialization efforts . story_separator_special_tag the potential benefits of our product and product candidates over other therapies ; our ability to market , commercialize and achieve market acceptance for our product or any of our product candidates that we are developing or may develop in the future , including our ability to negotiate pricing and reimbursement terms acceptable to us ; clinical trial results ; the terms and timing of regulatory approvals ; and the expense of filing , prosecuting , defending and enforcing patent claims and other intellectual property rights . a change in the outcome of any of these variables with respect to the development of translarna or any other product candidate could mean a significant change in the costs and timing associated with the development of that product candidate . for example , if the ema or fda or other regulatory authority were to require us to conduct clinical trials beyond those which we currently anticipate will be required for the completion of clinical development of translarna or any other product candidate or 87 if we experience significant delays in enrollment in any of our clinical trials , we could be required to expend significant additional financial resources and time on the completion of clinical development . selling , general and administrative expense selling , general and administrative expenses consist primarily of salaries and other related costs for personnel , including share-based compensation expenses , in our executive , legal , commercial , business development , finance , accounting , information technology and human resource functions . other selling , general and administrative expenses include facility-related costs not otherwise included in research and development expense ; advertising and promotional expenses ; costs associated with industry and trade shows ; and professional fees for legal services , including patent-related expenses , accounting services , miscellaneous selling costs and finishing costs incurred to direct product to commercial use .
| financial operations overview to date , our net product sales have consisted solely of sales of translarna for the treatment of nmdmd in territories outside of the u.s. our process for recognizing revenue is described below under โ critical accounting policies and significant judgments and estimatesโrevenue recognition โ . roche and the sma foundation collaboration . in november 2011 , we entered into a license and collaboration agreement , or licensing agreement , with roche and the sma foundation pursuant to which we are collaborating with roche and the sma foundation to further develop and commercialize compounds identified under our spinal muscular atrophy program with the sma foundation . the research component of this agreement terminated effective december 31 , 2014. the licensing agreement included a $ 30 million upfront payment made in 2011 which was recognized on a deferred basis over the research term , and the potential for up to $ 460 million in milestone payments and royalties on net sales . in august 2013 , we announced the selection of a development candidate , rg7800 . the achievement of this milestone triggered a $ 10.0 million payment to us from roche , which we recorded as collaboration revenue for the year ended december 31 , 2013. in january 2014 , we initiated a phase 1 clinical program for rg7800 , which triggered a $ 7.5 million milestone payment to us from roche which we recorded as collaboration revenue for the year ended december 31 , 2014. in november 2014 , we announced that our joint development program in spinal muscular atrophy ( sma ) with roche and the sma foundation ( smaf ) has started a phase 2 study for rg7800 in adult and pediatric patients . the achievement of this milestone triggered a $ 10 million payment to us from roche which we recorded as collaboration revenue for the year ended december 31 , 2014. grant revenue .
| 2,367 |
dealers either remit payment upon receipt of the product or finance their inventory through third-party floor plan lenders , who pay marine products generally within ten days of delivery of the products to the dealers . we manage our company by focusing on the execution of the following business and financial strategies : โ manufacturing high-quality , stylish , and innovative powerboats for our dealers and retail consumers , โ providing our independent dealer network appropriate incentives , training , and other support to enhance their success and their customers ' satisfaction , thereby facilitating their continued relationship with us , โ managing our production and dealer order backlog to optimize operating results and reduce risk in the event of a downturn in sales of our products , โ maintaining a flexible , variable cost structure which can be reduced quickly when deemed appropriate , โ focusing on the competitive nature of the boating business and designing our products and strategies in order to grow and maintain profitable market share , โ monitoring the recreational boat market for strong complementary product lines which we may enter through new product development or acquisition , โ extending our brand name recognition to enhance the success of new boat models that complement our existing offerings , โ improving our sales and profits by increasing the utilization of our manufacturing capacity , โ monitoring the activities and financial condition of our dealers and of the third-party floor plan lenders who finance our dealers ' inventories , โ maximizing stockholder return by optimizing the balance of cash invested in the company 's productive assets , the payment of dividends to stockholders , and the repurchase of the company 's common stock on the open market , and โ aligning the interests of our management and stockholders . in implementing these strategies and attempting to optimize our financial returns , management closely monitors dealer orders and inventories , the production mix of various models , and indications of near term demand such as consumer confidence , interest rates , dealer orders placed at our annual dealer conferences , and retail attendance and orders at annual winter boat show exhibitions . we also consider trends related to certain key financial and other data , including our historical and forecasted financial results , market share , unit sales of our products , average selling price per boat , and gross profit margins , among others , as indicators of the success of our strategies . marine products ' financial results are affected by consumer confidence โ because pleasure boating is a discretionary expenditure , interest rates โ because many retail customers finance the purchase of their boats , and other socioeconomic and environmental factors such as availability of leisure time , consumer preferences , demographics and the weather . during 2016 , several segments of the recreational boating industry improved due to stable consumer confidence and improving residential real estate markets , as well as a stable financing environment for dealers and consumers . overall industry retail sales of outboard recreational boats improved during 2016 , although sterndrive unit sales declined . our net sales improved in 2016 compared to 2015 due to higher unit sales of our robalo sport fishing boats , coupled with higher unit sales of our chaparral h2o models and sales of our suncoast outboard models . we achieved higher net sales , as well as increased gross profit and operating profit in 2016 compared to 2015. management will continue to monitor retail demand among the various segments in the recreational boat market , dealer inventory levels and the availability of dealer and consumer financing for the purchase of our products and adjust our production levels as deemed appropriate . we continuously monitor our market share in the 18 to 33 foot sterndrive category as one indicator of the success of our strategies and the market 's acceptance of our products . for the nine months ended september 30 , 2016 ( latest data available to us ) , chaparral 's market share in the 18 to 33 foot sterndrive category was 14.7 percent compared to 13.9 percent during the same period in 2015 ; the highest market share in this category . chaparral 's market share in the 18 to 20 foot category was 10.1 percent during this period in 2016 , and its market share in the 21 to 33 foot category was 17.4 percent . chaparral 's market share concentrations within these size ranges has remained relatively consistent during the past several years . for the nine months ended september 30 , 2016 , robalo 's share of the 16 to 30 foot outboard sport fishing boat market was 4.6 percent . for the same period , chaparral 's share of the 20 to 24 foot jet boat market was approximately 8.9 percent . we will continue to monitor our market share and believe it to be important , but we believe that maximizing profitability takes precedence over growing our market share . furthermore , as we continue to expand the breadth of our product offerings within our core category and new categories , we consider our overall market share across the various powerboat categories to be of greater importance to the long-term health of our company than our market share within any specific type of recreational boat . 20 outlook we believe that recreational boating retail demand in many segments of the industry is improving . attendance and sales during the 2017 winter boat shows have been moderately higher than the 2016 winter boat show season , residential real estate markets have improved , consumer confidence has stabilized , and fuel prices have declined . we also believe that there is improved demand from consumers who have delayed purchasing a boat over the past few years due to economic uncertainty . story_separator_special_tag during 2016 , the company made cash contributions of $ 180 thousand to this plan in order to achieve the company 's funding objective . we expect that additional contributions by the company to the retirement income plan of approximately $ 200 thousand will be made in 2017. on january 24 , 2017 , the board of directors approved a quarterly dividend of $ 0.07 per common share payable march 10 , 2017 to stockholders of record at the close of business on february 10 , 2017. the company has an agreement with one employee that provides for a monthly payment to the employee equal to 10 percent of profits ( defined as pretax income before goodwill amortization and certain allocated corporate expenses ) . in addition the company had an agreement with another employee for prior years and through approximately march 31 , 2016 under the same terms . in january 2008 , the board of directors authorized an additional 3,000,000 shares that the company may repurchase for a total aggregate authorization of 8,250,000 shares . the company repurchased 11,027 shares in the open market during 2016. as of december 31 , 2016 , the company has repurchased under this program a total of 5,391,270 shares in the open market and there are 2,858,730 shares that remain available for repurchase . the company has entered into agreements with third-party floor plan lenders where it has agreed , in the event of default by a dealer , to repurchase mpc boats repossessed from the dealer . these arrangements are subject to maximum repurchase amounts and the associated risk is mitigated by the value of the boats repurchased . there were no material repurchases of dealer inventory during 2016 or 2015. see further information regarding repurchase obligations in โ note 9 : commitments and contingencies โ of the consolidated financial statements . the company believes that the liquidity provided by its existing cash and cash equivalents , marketable securities , and cash expected to be generated from operations will provide sufficient capital to meet its requirements for at least the next twelve months . the company 's decisions about the amount of cash to be used for investing and financing purposes are influenced by its capital position and the expected amount of cash to be provided by operations . contractual obligations the following table summarizes the company 's contractual obligations as of december 31 , 2016 : replace_table_token_6_th ( 1 ) operating leases represent agreements for warehouse space , various office and operating equipment . ( 2 ) as part of the normal course of business the company enters into purchase commitments to manage its various operating needs . however , the company does not have any obligations that are non-cancelable or subject to a penalty if canceled . ( 3 ) the company has agreements with various third-party lenders where it guarantees varying amounts of debt for qualifying dealers on boats in dealer inventory . as of december 31 , 2016 , there are no payables outstanding to floor plan lenders . fair value measurements the company 's assets and liabilities measured at fair value are classified in the fair value hierarchy ( level 1 , 2 or 3 ) based on the inputs used for valuation . assets and liabilities that are traded on an exchange with a quoted price are classified as level 1. assets and liabilities that are valued using significant observable inputs in addition to quoted market prices are classified as level 2. the company currently has no assets or liabilities measured on a recurring basis that are valued using unobservable inputs and therefore no assets or liabilities measured on a recurring basis are classified as level 3. for defined benefit plan and supplemental executive retirement plan ( โ serp โ ) investments measured at net asset value , the values are computed using inputs such as cost , discounted future cash flows , independent appraisals and market based comparable data or on net asset values calculated by the fund and not publicly available . 24 off balance sheet arrangements to assist dealers in obtaining financing for the purchase of its boats for inventory , the company has entered into agreements with various third-party floor plan lenders whereby the company guarantees varying amounts of debt for qualifying dealers on boats in dealer inventory . the company 's obligation under these guarantees becomes effective in the case of a default under the financing arrangement between the dealer and the third-party lender . the agreements typically provide for the return of all repossessed boats in โ new and unused โ condition subject to normal wear and tear , as defined , to the company , in exchange for the company 's assumption of specified percentages of the debt obligation on those boats , up to certain contractually determined dollar limits which vary by lender . there were no material repurchases of inventory under contractual agreements during 2016 or 2015. management continues to monitor the risk of additional defaults and resulting repurchase obligation based primarily upon information provided by the third-party floor plan lenders and to adjust the guarantee liability at the end of each reporting period based on information reasonably available at that time . as of december 31 , 2016 , the company believes the fair value of its remaining guarantee liability is immaterial . see further information regarding repurchase obligations in โ note 9 : commitments and contingencies โ of the consolidated financial statements . the company currently has an agreement with one of the floor plan lenders whereby the contractual repurchase obligation is limited to a maximum of 16 percent of the average net receivables financed by the floor plan lender for dealers during the prior 12 month period , which was $ 9.8 million as of december 31 , 2016. t he company has contractual repurchase agreements with additional lenders with an aggregate maximum repurchase obligation of approximately $ 6.9 million , with various expiration and cancellation terms of less than one year .
| results of operations replace_table_token_4_th year ended december 31 , 2016 compared to year ended december 31 , 2015 net sales . marine products ' net sales increased by $ 34.3 million or 16.6 percent in 2016 compared to 2015. the increase was primarily due to a 17.8 percent increase in the number of boats sold , as well as an increase in parts and accessories sales , partially offset by a 3.0 percent decrease in the average gross selling price per boat . unit sales increased due to higher sales of our robalo outboard sport fishing boats , as well as increased unit sales of our chaparral h20 models and suncoast outboards . average selling prices decreased primarily due to a model mix which included higher sales of our value priced h2o models . domestic net sales were $ 220.1 million , an increase of 19.2 percent compared to the prior year . international sales decreased 5.0 percent during 2016 compared to 2015 primarily due to the strength of the u.s. dollar . cost of goods sold . cost of goods sold increased 16.2 percent in 2016 compared to 2015. as a percentage of net sales , cost of goods sold increased to 79.1 percent in 2016 , compared to 78.8 percent in 2015 , primarily due to a model mix which included increased sales of our smaller models , partially offset by improved manufacturing efficiencies due to higher production volumes . selling , general and administrative expenses . selling , general and administrative expenses increased 17.9 percent in 2016 compared to 2015 primarily due to an increase in warranty expense , coupled with costs that vary with sales , such as sales commissions .
| 2,368 |
the information required by item 13 is incorporated by reference to the sections entitled โ corporate governance โ and โ certain transactions and business relationships โ in our definitive proxy statement relating to our 2013 annual meeting of stockholders . item 14. principal accounting fees and services the information required by item 14 is incorporated by reference to the section entitled โ independent registered public accounting firm โ in our definitive proxy statement relating to our 2013 annual meeting of stockholders . 40 part iv item 15. exhibits , financial statement schedules . ( a ) documents filed as part of this report . ( 1 ) financial statements . the following financial statements are included in part ii , item 8 of this annual report on form 10-k : report of eide bailly , llp on consolidated financial statements as of november 30 , 2012 and 2011 consolidated balance sheets as of november 30 , 2012 and 2011 consolidated statements of operations for each of the two years in the period ended november 30 , 2012 and 2011 consolidated statements of stockholders ' equity for each of the two years in the period ended november 30 , 2012 and 2011 consolidated statements of cash flows for each of the two years in the period ended november 30 , 2012 and 2011 notes to consolidated financial statements ( 2 ) financial statement schedules . not applicable . ( 3 ) exhibits . see โ exhibit index to form 10-k โ immediately following the signature page of this form 10-k 41 signatures pursuant to the requirements of section 13 or 15 ( d ) of the securities exchange act of 1934 , the registrant has duly caused this report to be signed on its behalf by the undersigned , thereunto duly authorized . art's-way manufacturing co. , inc. date : february 26 , 2013 carrie l. majeski carrie l. majeski president , chief executive officer and interim chief financial officer power of attorney each person whose signature appears below constitutes carrie l. majeski his or her true and lawful attorney-in-fact and agent , with full power of substitution and resubstitution , for him or her and in his or her name , place and stead , in any and all capacities , to sign any or all amendments to this annual report on form 10-k and to file the same , with all exhibits thereto , and other documents in connection therewith , with the securities and exchange commission , granting unto said attorney-in-fact and agent , full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises , as fully to all intents and purposes as he or she might or could do in person , hereby ratifying and confirming all said attorney-in-fact and agent , or her substitute or substitutes , may lawfully do or cause to be done by virtue thereof . pursuant to the requirements of the securities exchange act of 1934 , this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated . date : february 26 , 2013 carrie l. majeski carrie l. majeski president , chief executive officer and interim chief financial officer date : february 26 , 2013 dean j. droegemueller dean j. droegemueller , director of finance ( principal accounting officer ) date : february 26 , 2013 j. ward mcconnell , jr. j. ward mcconnell , jr. , chairman , director date : february 26 , 2013 joseph r. dancy joseph r. dancy , director date : february 26 , 2013 fred w. krahmer fred w. krahmer , director date : february 26 , 2013 james e. lynch james e. lynch , director date : february 26 , 2013 douglas r. mcclellan douglas r. mcclellan , director date : february 26 , 2013 marc h. mcconnell marc h. mcconnell , vice chairman , director date : february 26 , 2013 thomas e. buffamante thomas e. buffamante , director date : february 26 , 2013 david r. castle david r. castle , director 42 exhibit index art's-way manufacturing co. , inc. form 10-k for fiscal year ended november 30 , 2012 exhibit no . description 3.1 certificate of incorporation of art's-way manufacturing co. , inc.โ incorporated by reference to exhibit 3.1 to the company 's quarterly report on form 10-q for the quarter year ended may 31 , 2012 . 3.2 certificate of amendment to the certificate of incorporation of art's-way manufacturing co. , inc. โ incorporated by reference to exhibit 3.2 to the company 's quarterly report on form 10-k for the quarter ended may 31 , 2012 . 3.3 bylaws of art's-way manufacturing co. , inc.โ incorporated by reference to exhibit 3.2 to the company 's annual report on form 10-k for the fiscal year ended november 30 , 2008 . 3.4 amendments to bylaws of art's-way manufacturing co. , inc. โ incorporated by reference to exhibit 3.1 to the company 's story_separator_special_tag . this report contains forward-looking statements that involve significant risks and uncertainties . the following discussion , which focuses on our results of operations , contains forward-looking information and statements . actual events or results may differ materially from those indicated or anticipated , as discussed in the section entitled โ forward looking statements. โ the following discussion of our financial condition and results of operations should also be read in conjunction with our financial statements and notes to financial statements contained in item 8 of this report . 11 financial position we believe that our consolidated balance sheet indicates a strong financial position . story_separator_special_tag the written agreement with the customer specifies that the goods will be delivered on a schedule to be determined by the customer , with a final specified delivery date , and that we will segregate the goods from our inventory , such that they are not available to fill other orders . this agreement also specifies that the buyer is required to purchase all goods manufactured under this agreement . title of the goods will pass to the buyer when the goods are complete and ready for shipment , per the customer agreement . at the transfer of title , all risks of ownership have passed to the buyer , and the buyer agrees to maintain insurance on the manufactured items that have not yet been shipped . we have operated using bill and hold agreements with certain customers for many years , with consistent satisfactory results for both buyer and seller . the credit terms on this agreement are consistent with the credit terms on all other sales . all risks of loss are shouldered by the buyer , and there are no exceptions to the buyer 's commitment to accept and pay for these manufactured goods . revenues recognized at the completion of production in 2012 and 2011 were approximately $ 937,000 and $ 532,000 , respectively . our modular buildings segment is in the construction industry , and , as such , accounts for long-term contracts on the percentage-of-completion method . revenue and gross profit are recognized as work is performed based on the relationship between actual costs incurred and total estimated costs at completion . contract losses are recognized when current estimates of total contract revenue and contract cost indicate a loss . estimated contract costs include any and all costs appropriately allocable to the contract . the provision for these contract losses will be the excess of estimated contract costs over estimated contract revenues . costs and profit in excess of amounts billed are classified as current assets and billings in excess of cost and profit are classified as current liabilities . stock-based compensation stock-based compensation expense reflects the fair value of stock-based awards measured at the grant date and recognized over the relevant vesting period . we estimate the fair value of each stock-based award on the measurement date using the black-scholes option valuation model which incorporates assumptions as to stock price volatility , the expected life of the options , risk-free interest rate and dividend yield . restricted stock awards are valued at market value at day of grant . story_separator_special_tag revenues and operations . similar to other farm equipment manufacturers , we are affected by items unique to the farm industry , including fluctuations in farm income resulting from the change in commodity prices , crop damage caused by weather and insects , government farm programs , interest rate fluctuations , and other unpredictable variables . management believes that our business is dependent on the farming industry for the bulk of our sales revenues . as such , our business tends to reap the benefits of increases in farm net income , as farmers tend to purchase equipment in lucrative times and forgo purchases in less profitable years . direct government payments are declining and costs of agricultural production are increasing ; therefore , we anticipate that further increases in the value of production will benefit our business , while any future decreases in the value of production will decrease farm net income and may harm our financial results . as with other farm equipment manufacturers , we depend on our network of dealers to influence customers ' decisions , and dealer influence is often more persuasive than a manufacturer 's reputation or the price of the product . 14 seasonality sales of our agricultural products are seasonal ; however , we have tried to decrease this impact of seasonality through the development of beet harvesting machinery coupled with private labeled products , as the peak periods for these different products occur at different times . we believe that our pressurized vessel sales are not seasonal . our modular building sales are somewhat seasonal , and we believe that this is due to the budgeting and funding cycles of the universities that commonly purchase our modular buildings . we believe that this cycle can be offset by building backlogs of inventory and through increased sales to other public and private sectors . liquidity and capital resources our main source of funds during fiscal 2012 was cash from operating activities , which totaled $ 5,004,000 for the fiscal year ending november 30 , 2012. approximately $ 748,000 of cash used by operations resulted from the increase of accounts receivable , and $ 131,000 resulted from the increase of inventories . accounts payable and accrued liabilities increased by $ 2,388,000. art's-way used $ 800,000 of cash to update facilities , equipment , and invest in assets for leases . art's-way also used $ 2,663,000 in cash to pay down the line of credit , notes payable , and to pay dividends to its shareholders . we have a $ 6,000,000 revolving line of credit with west bank , pursuant to which we had borrowed $ 0 and $ 1,389,000 as of november 30 , 2012 and november 30 , 2011 , respectively . in addition , we have four term loans from west bank , which had outstanding principal balances of $ 2,435,000 , $ 1,027,000 , $ 1,168,000 and $ 1,875,000 as of november 30 , 2012. we have also received funds pursuant to three promissory notes from the iowa department of economic development . these notes had outstanding principal balances of $ 42,000 , $ 15,000 , and $ 49,000 as of november 30 , 2012. we have obtained two loans relating to our production facility in west union , iowa . the iowa finance authority loan balance was $ 1,027,000 as of november 30 , 2012. the interest-free loan from the
| results of operations fiscal year ended november 30 , 2012 compared to fiscal year ended november 30 , 2011 our consolidated net sales totaled $ 36,457,000 for the fiscal year ended november 30 , 2012 , which represents a 32.0 % increase from our consolidated net sales of $ 27,620,000 in 2011. our consolidated gross profit increased from 25.4 % in 2011 to 27.5 % in 2012 or from $ 7,007,000 to $ 10,032,000 , respectively . our consolidated expenses increased by 12.4 % , from $ 5,077,000 in 2011 to $ 5,704,000 in 2012. because the majority of our corporate general and administrative expenses are borne by our agricultural products segment , that segment represented $ 4,572,000 of our total consolidated operating expenses , while our pressurized vessels and modular buildings segments represented $ 273,000 and $ 859,000 of the total , respectively . our consolidated operating income for the 2012 fiscal year was $ 4,328,000 , which represents a 124 % increase from our consolidated operating income of $ 1,930,000 for the 2011 fiscal year . our agricultural products and modular buildings segments provided operating income of $ 2,373,000 and $ 2,082,000 , respectively , in 2012. our pressurized vessels segment had an operating loss of $ ( 127,000 ) . consolidated net income for the 2012 fiscal year was $ 2,665,000 , compared to $ 1,249,000 in the 2011 fiscal year , an increase of $ 1,416,000 , or 113.4 % . this increase is primarily a result of the increase in net sales and operating income in the agricultural products and modular buildings segments , as discussed below . our effective tax rates for the years ending november 30 , 2012 and 2011 were 33.2 % and 21.0 % , respectively , an increase of 12.2 % . the 12.2 % increase was due to reduction of r & d tax credits and effect of prior year adjustments recognized in fiscal year 2011 . 13 agricultural products .
| 2,369 |
selected quarterly financial data - unaudited the selected quarterly financial data for the periods ended december 31 , 2017 , and 2016 , have been derived from the company 's unaudited financial statements and include all adjustments , consisting only of normal recurring adjustments , necessary for a fair presentation of the results of the interim periods . certain quarterly amounts may differ from full year totals due to rounding . replace_table_token_25_th f- 25 replace_table_token_26_th major variances for 2017 as compared to 2016 include increased sales volumes in 2017 , mitigated by lower average sales prices . our operating expenses declined in 2017 primarily due to lower legal costs , mitigated by stock option expense and bonuses . we also incurred impairment costs in 2016. f- 26 item 9. changes in and disagreements with accountants on accounting and financial disclosure . there were no reportable disagreements with accountants on accounting and financial disclosures . item 9a . controls and procedures . disclosure controls and procedures pursuant to rule 13a-15 ( b ) under the securities exchange act of 1934 ( the ยexchange actย ) , management , with the participation of our president , chairman , and chief executive officer , thomas j. shaw ( the ยceoย ) , and our vice president and chief financial officer , douglas w. cowan ( the ยcfoย ) , acting in their capacities as our principal executive and financial officers , evaluated the effectiveness of our disclosure controls and procedures , as defined in rule 13a-15 ( e ) under the exchange act . the term disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by us in our periodic reports is : i ) recorded , processed , summarized , and reported within the time periods specified in the securities and exchange commission 's ( the ยsecย ) rules and forms ; and ii ) accumulated and communicated to our management , including our principal executive and principal financial officers , as appropriate to allow timely decisions regarding required disclosure . based upon this evaluation , the ceo and cfo concluded that , as of december 31 , 2017 , our disclosure controls and procedures were effective . management 's annual report on internal control over financial reporting management is responsible for establishing and maintaining adequate internal control over our financial reporting as defined in rule 13a-15 ( f ) under the exchange act . the term internal control over financial reporting means a process designed by , or under the supervision of , our principal executive and principal financial officers and effected by story_separator_special_tag forward-looking statement warning certain statements included by reference in this filing containing the words ยcould , ย ยmay , ย ยbelieves , ย ยanticipates , ย ยintends , ย ยexpects , ย and similar such words constitute forward-looking statements within the meaning of the private securities litigation reform act . any forward-looking statements involve known and unknown risks , uncertainties , and other factors that may cause our actual results , performance , or achievements to be materially different from any future results , performance , or achievements expressed or implied by such forward-looking statements . such factors include , among others , our ability to maintain liquidity , our maintenance of patent protection , the impact of current and future court decisions regarding current litigation , our ability to maintain favorable third party manufacturing and supplier arrangements and relationships , foreign trade risk , our ability to quickly increase capacity in response to an increase in demand , our ability to access the market , our ability to maintain or lower production costs , our ability to continue to finance research and development as well as operations and expansion of production , the impact of larger market players , specifically bd , in providing devices to the safety market , and other factors referenced in item 1a . risk factors . given these uncertainties , undue reliance should not be placed on forward-looking statements . overview we have been manufacturing and marketing our products since 1997. safety syringes comprised 89.9 % of our sales in 2017. we also manufacture and market the easypoint ยฎ , blood collection tube holder , iv safety catheter , and vanishpoint ยฎ blood collection set . we currently provide other safety medical products in addition to safety products utilizing retractable technology . one such product is the patient safe ยฎ syringe , which is uniquely designed to reduce the risk of bloodstream infections associated with catheter hub contamination . in the second quarter of 2016 , we began selling the easypoint ยฎ needle . easypoint ยฎ needles made up 6.0 % of revenues in 2017. the easypoint ยฎ is a retractable needle that can be used with luer lock syringes , luer slip syringes , and prefilled syringes to give injections . the easypoint ยฎ needle can also be used to aspirate fluids and collect blood . based on industry-wide trends , we anticipate that demand may increase for the easypoint ยฎ needle . historically , unit sales have increased in the latter part of the year due , in part , to the demand for syringes during the flu season . our products have been and continue to be distributed nationally and internationally through numerous distributors . although we have made limited progress in some areas , such as the alternate care market , our volumes are not as high as they should be given the nature and quality of our products and the federal and state legislation requiring the use of safe needle devices . the alternate care market is composed of facilities that provide long-term nursing and out-patient surgery , emergency care , physician services , health clinics , and retail pharmacies . story_separator_special_tag 11 we continue to pursue various strategies to have better access to the hospital market , as well as other markets , including attempting to gain access to the market through our sales efforts , our innovative technology , introduction of new products , and , when necessary , litigation . we have reported in the past that our progress is limited principally due to the practices engaged in by bd , the dominant maker and seller of disposable syringes . we initiated an antitrust and false advertising lawsuit in 2007 against bd . although a district court judgment in 2015 awarded us $ 340 million in antitrust damages from bd and the fifth circuit affirmed a finding of false advertising liability against bd , we were ultimately awarded a take nothing judgment in august 2017 and the case was dismissed . we have filed for appeal . our litigation expenses were significantly less in 2017 than previous years and we have expanded our sales and marketing staff in an effort to gain market share . costs related to additional compensation , bonuses to ms. larios and mr. cowan , and stock option expense related to options granted in 2016 affected 2017 results . in january 2018 , congress imposed another two-year moratorium on the 2.3 % medical device excise tax imposed by internal revenue code section 4191. thus , the medical device excise tax will not go into effect until january 1 , 2020. in 2016 , we granted a right to three of our executive officers to purchase shares directly from the company . thomas j. shaw exercised such right on january 12 , 2017 , buying two million shares at market price for an aggregate purchase price of $ 1.78 million and purchased one million shares at market price on august 23 , 2017 for an aggregate purchase price of $ 570,100. we received approximately $ 1 million from our insurance carrier in the second quarter of 2017 and used these funds to repair our buildings from earlier storm damage . product purchases from our chinese manufacturers have enabled us to increase manufacturing capacity with little capital outlay and have provided a competitive manufacturing cost . in 2017 , our primary chinese manufacturer produced approximately 90.4 % of our vanishpoint ยฎ syringes . in the event that we become unable to purchase products from our chinese manufacturers , we would need to find an alternate manufacturer for the blood collection set , iv catheter , patient safe ยฎ syringe , 0.5ml insulin syringe , 0.5ml autodisable syringe , and 2ml , 5ml , and 10ml syringes and we would increase domestic production for the 1ml and 3ml syringes . in 1995 , we entered into a license agreement with thomas j. shaw for the exclusive right to manufacture , market , and distribute products utilizing automated retraction technology . this technology is the subject of various patents and patent applications owned by mr. shaw . the license agreement generally provides for quarterly payments of a 5 % royalty fee on gross sales . with increased volumes , our manufacturing unit costs have generally tended to decline . factors that could affect our unit costs include increases in costs by third party manufacturers , changing production volumes , costs of petroleum products , and transportation costs . increases in such costs may not be recoverable through price increases of our products . story_separator_special_tag share was positively affected by our acquisition of 200,000 shares of iv class b convertible preferred stock . under the guidelines of asc 260-10-s99-2 , effect on the calculation of earnings per share for the redemption or induced conversion of preferred stock , we reflected the gain on extinguishment of this preferred stock in net income per common stockholder used to calculate earnings per share . this accounting treatment had the effect of increasing the income applicable to common shareholders by $ 2.3 million in 2015 which had a material effect on the determination of earnings per share for that year . the loss from operations was $ 3.2 million in 2015 compared to an operating loss of $ 3.5 million in 2016 . 13 cash flow from operations was a negative $ 795 thousand for 2016 due to our net loss , mitigated by noncash expense consisting principally of depreciation , impairment of assets , share based compensation , and reduced working capital . liquidity and capital resources at the present time , management does not intend to publicly raise equity capital . due to the funds received from prior litigation , we have sufficient cash reserves and intend to rely on operations , cash reserves , and debt financing , when available , as the primary ongoing sources of cash . our ability to obtain additional funds through loans is uncertain . historical sources of liquidity we have historically funded operations primarily from the proceeds from revenues , private placements , litigation settlements , and loans . internal sources of liquidity margins and market access to routinely achieve positive or break even quarters , we need increased access to hospital markets which has been difficult to obtain . we will continue to attempt to gain access to the market through our sales efforts , innovative technology , the introduction of new products , and , when necessary , litigation . we continue to focus on methods of upgrading our manufacturing capability and efficiency in order to reduce costs . fluctuations in the cost and availability of raw materials and inventory and our ability to maintain favorable manufacturing arrangements and relationships could result in the need to manufacture all ( as opposed to 17.1 % ) of our products in the u.s. this could temporarily increase unit costs as we ramp up domestic production . the mix of domestic and international sales affects the average sales price of our products . generally , the higher the ratio of domestic sales to international sales ,
| results of operations the following discussion contains trend information and other forward-looking statements that involve a number of risks and uncertainties . our actual future results could differ materially from our historical results of operations and those discussed in the forward-looking statements . all period references are to our fiscal years ended december 2017 , 2016 , or 2015. dollar amounts have been rounded for ease of reading . comparison of year ended december 31 , 2017 and year ended december 31 , 2016 domestic sales accounted for 78.3 % and 88.2 % of the revenues in 2017 and 2016 , respectively . domestic revenues increased 2.7 % principally due to increased sales of easypoint ยฎ and the blood collection set . domestic unit 12 sales increased 7.1 % . domestic unit sales were 69.5 % of total unit sales for 2017. international revenues increased from $ 3.5 million in 2016 to $ 7.5 million in 2017 , primarily due to increased volumes mitigated by lower average prices . overall unit sales increased 28.3 % . our international orders may be subject to significant fluctuation over time . such orders may fluctuate due to health initiatives at various times as well as economic conditions . cost of manufactured product increased $ 4.7 million principally due to higher volumes . royalty expense increased $ 337 thousand due to increased gross sales . gross profit margins decreased from 34.7 % in 2016 to 28.9 % in 2017 principally due to a larger portion of international sales which bear a lower average sales price .
| 2,370 |
these escrows consist of principal and interest escrows , capital improvement reserves , repair reserves , real estate tax and insurance reserves and tenant reserves . the corresponding liability is recorded in `` other liabilities `` in the consolidated balance story_separator_special_tag the following discussion provides the reader a narrative from the perspective of management and should be read in conjunction with our consolidated financial statements and related notes included in item 8 , `` financial statements and supplementary data '' of this annual report on form 10-k. overview the size and composition of our portfolio depend on investment strategies implemented by our manager , the accessibility to capital and overall market conditions , including availability of attractively priced target assets and financing . our objective is to provide an attractive risk adjusted return to our stockholders over the long term . our manager has built a diversified portfolio of our target assets to better enable us to deliver attractive returns through market cycles . our portfolio is mainly comprised of agency cmbs , non-agency cmbs , residential whole loans , residential bridge loans and commercial loans . to a lesser extent , we have investments in agency rmbs , non-agency rmbs , gse risk sharing securities and abs investments secured by a portfolio of private student loans . in addition , our holdings include two securitized commercial loans from the two consolidated vie . we use leverage as part of our business strategy in order to increase potential returns to our stockholders . we accomplish this by borrowing against existing investments primarily through repurchase agreements . we may also change our financing strategy and leverage without the consent of our stockholders . we operate and elected to be taxed as a reit , commencing with our taxable year ended december 31 , 2012. we generally will not be subject to u.s. federal income taxes on our taxable income to the extent that we annually distribute , in accordance with the reit regulations , all of our net taxable income to stockholders and maintain our intended qualification as a reit . certain of our non-qualifying investments were held in our taxable reit subsidiary or `` trs '' . net income generated in our trs is taxable and subject to federal , state and local income tax at the applicable corporate tax rates . we also intend to operate our business in a manner that will permit us to maintain our exemption from registration under the 1940 act . factors impacting our operating results our business is affected by general u.s. residential and commercial real estate fundamentals and the overall u.s. and international economic environment . in particular , our strategy is influenced by the specific characteristics of these markets , including but not limited to interest rate levels and credit spreads . our operating results can be affected by a number of factors and primarily depend on , among other things , the size of our investment portfolio , our net interest income , changes in the market value of our investments , derivative instruments and to a lesser extent realized gains and losses on the sale of our investments and termination of our derivative instruments . our overall performance is also impacted by the supply and demand for our target assets in the market , the terms and availability of financing for such assets , general economic conditions , the impact of u.s government actions that affect the real estate and mortgage sectors , and the unanticipated credit events experienced by borrowers whose loans are included in our mbs , as well as our residential whole loan , residential bridge loan and commercial loan borrowers . our net interest income , which includes the amortization of purchase premiums and accretion of discounts , will vary primarily as a result of changes in interest rates , defaults and loss severity rates , borrowing costs , and prepayment speeds on our mbs and other target assets ( as defined herein ) investments . similarly , the overall value of our investment portfolio will be impacted by these factors as well as changes in the value of residential and commercial real estate and continuing regulatory changes . see the item 1a . `` risk factors '' in this annual report on form 10-k for additional factors that may impact our operating results . recent market conditions our business is affected by general u.s. residential real estate fundamentals , domestic and foreign commercial real estate fundamentals and the overall u.s. and international economic environment . in particular , our strategy is influenced by the specific characteristics of these markets , including but not limited to prepayment rates and interest rate levels . we expect the results of our operations to be affected by various factors , many of which are beyond our control . 33 during the fourth quarter of 2018 , we saw credit spreads and spreads on agency mbs widened coupled with interest rate volatility . we were prepared for the move in interest rates as we actively limited our duration gap . our net `` duration gap '' on agency rmbs , agency cmbs , which is a measure of the risk due to mismatches that can occur between the interest rate sensitivity of our assets and liabilities , inclusive of hedges , was a negative 0.25 years as of december 31 , 2018. although there was a modest benefit from declining interest rates , the spread widening on our agency cmbs portfolio overshadowed this benefit resulting in a negative economic return ( the change in book value plus dividends ) for the fourth quarter of 3.3 % , and a decline in our book value of 6.1 % . we believed the agency rmbs sector was at risk for further spread widening in the longer term due to the federal reserve 's balance sheet normalization plan . story_separator_special_tag when the fair value of an investment security is less than its amortized cost at the balance sheet date , the security is considered impaired , and the impairment is designated as either โ temporary โ or โ other-than-temporary. โ when a security is impaired , an otti is considered to have occurred if ( i ) if we intend to sell the security ( i.e. , a decision has been made as of the reporting date ) or ( ii ) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis . if we intend to sell the security or if it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis , the entire amount of the impairment loss , if any , is recognized in earnings as otti and the cost basis of the security is adjusted to its fair value . additionally , for securities accounted for under asc 325-40 an otti is deemed to have occurred when there is an adverse change in the expected cash flows to be received and the fair value of the security is less than its carrying amount . in determining whether an adverse change in cash flows occurred , the present value of the remaining cash flows , as estimated at the initial transaction date ( or the last date previously revised ) , is compared to the present value of the expected cash flows at the current reporting date . the estimated cash flows reflect those a โ market participant โ would use and are discounted at a rate equal to the current yield used to accrete interest income . any resulting otti adjustments are reflected in โ other than temporary impairment โ in our consolidated statements of operations . increases in interest income may be recognized on a security on which we have previously recorded an otti charge if the cash flow of such security subsequently improves . in addition , unrealized losses on our agency securities , with explicit guarantee of principal and interest by the governmental sponsored entity ( `` gse '' ) , are not credit losses but rather were due to changes in interest rates and prepayment expectations . these securities would not be considered other than temporarily impaired provided we did not intend to sell the security . residential whole loans investments in residential whole loans are recorded in accordance with asc 310-20 , `` nonrefundable fees and other costs '' . we have chosen to make the fair value election pursuant to asc 825 for our entire residential whole-loan portfolio . residential whole loans are recorded at fair value with periodic changes in fair market value being recorded in earnings as a component of `` unrealized gain ( loss ) , net '' . all other costs incurred in connection with acquiring residential whole loans or committing to purchase these loans are charged to expense as incurred . on a quarterly basis , we evaluate the collectability of both interest and principal of each loan , if circumstances warrant , to determine whether such loan is impaired . a loan is impaired when , based on current information and events , it is probable that we will be unable to collect all amounts due according to the existing contractual terms . when a loan is impaired , we do not record 35 an allowance for loan loss as we have elected the fair value option . however , income recognition is suspended for loans at the earlier of the date at which payments become 90-days past due or when , in the opinion of management , a full recovery of income and principal becomes doubtful . when the ultimate collectability of the principal of an impaired loan is in doubt , all payments are applied to principal under the cost recovery method . when the ultimate collectability of the principal of an impaired loan is not in doubt , contractual interest is recorded as interest income when received , under the cash basis method until an accrual is resumed when the loan becomes contractually current and performance is demonstrated to be resumed . a loan is written off when it is no longer realizable and or legally discharged . residential bridge loans for the bridge loans acquired prior to october 25 , 2017 , we did not elect the fair value option pursuant to asc 825 and accordingly these loans are recorded at their principal amount outstanding , net of any premium or discount in the consolidated balance sheets . commencing with purchases subsequent to october 25 , 2017 , we decided to elect the fair value option pursuant to asc 825 to be consistent with the accounting of our other investments , which are all carried at fair value . these loans are recorded at fair value with periodic changes in fair market value being recorded in earnings as a component of `` unrealized gain ( loss ) , net '' . all other costs incurred in connection with acquiring the residential bridge loans or committing to purchase these loans are charged to expense as incurred . a loan is impaired when , based on current information and events , it is probable that we will be unable to collect all amounts due according to the existing contractual terms . we evaluate each of residential bridge loans that we did not elect the fair value option on a quarterly basis . these loans are individually specific as they relate to the borrower , collateral type , interest rate , ltv and term as well as geographic location . we evaluate the collectability of both principal and interest of each loan . when a loan is impaired , the impairment is then measured based on fair value of the collateral , since these loans are collateral dependent .
| results of operations general our operating results mainly depend upon the difference between the yield on our investments , the cost of our borrowing , including our hedging activities , the composition and changes in market prices of our portfolio and our expenses . for the year ended december 31 , 2018 , we generated net income of $ 26.4 million or $ 0.61 per basic and diluted weighted common share , compared to net income of $ 85.1 million or $ 2.03 per basic and diluted weighted common share for the year ended december 31 , 2017 . our results of operations , for the year ended december 31 , 2018 , was negatively impacted by wider spreads on our agency portfolio . our credit sensitive portfolio continued to perform well with the favorable environment in both residential and commercial real estate markets . comparison of the year ended december 31 , 2018 to the year ended december 31 , 2017 48 net interest income the following tables set forth certain information regarding our net interest income on our investment portfolio for the years ended december 31 , 2018 and december 31 , 2017 ( dollars in thousands ) : replace_table_token_21_th replace_table_token_22_th 49 ( 1 ) average cost of funds does not include the interest expense related to our derivatives . in accordance with gaap , such costs are included in `` gain ( loss ) on derivative instruments , net '' in the consolidated statements of operations . ( 2 ) the convertible senior unsecured notes , net are reflected at the balance as of december 31 , 2017. the average cost of financing is calculated based on annualized interest expense divided by the average carrying value for the period outstanding . ( 3 ) since we do not apply hedge accounting , our net interest margin is this table does not reflect the benefit of our interest rate swaps .
| 2,371 |
in such a situation , the company may be required to pay income taxes , even though significant operating loss and tax credit carryforwards exist . additionally , any future financing could result in a change in control , as defined by sections 382 and 383 of the code , which could further limit the company 's use of its operating loss and tax credit carryforwards . in determining the tax provisions for story_separator_special_tag you should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes appearing elsewhere in this annual report on form 10-k. some of the information contained in this discussion and analysis or set forth elsewhere in this report , including information with respect to our plans and strategy for our business and related financing , includes forward-looking statements that involve risks and uncertainties . you should read the โ risk factors โ section in part i , item 1a . of this annual report on form 10-k for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis . overview we are a clinical stage biopharmaceutical company applying our extensive knowledge of deuterium chemistry to discover and develop novel small molecule drugs . selective incorporation of deuterium into known molecules has the potential , on a case-by-case basis , to provide better pharmacokinetic or metabolic properties , thereby enhancing their clinical safety , tolerability or efficacy . our approach typically starts with previously studied compounds , including approved drugs , that we believe may be improved with deuterium substitution . our technology provides the opportunity to develop products that may compete with the non-deuterated drug in existing markets or to leverage its known activity to expand into new indications and may enable compounds not otherwise well-suited for human drug development to be clinically developed . our deuterated chemical entity platform , or dce platformยฎ , has broad potential across numerous therapeutic areas . as discussed in detail in part i , item 1. above , we have a robust pipeline of wholly owned programs which includes clinical stage candidates targeting autoimmune and cns disorders , and a number of preclinical compounds that we are currently assessing . since our inception in 2006 , we have devoted substantially all of our resources to our research and development efforts , including activities to develop our dce platform and our core capabilities in deuterium chemistry , identify potential product candidates , undertake nonclinical studies and clinical trials , manufacture clinical trial material in compliance with cgmps , provide general and administrative support for these operations and establish our intellectual property . we have generated an accumulated deficit of $ 194.7 million since inception through december 31 , 2019 and will require substantial additional capital to fund our research and development . we do not have any products approved for sale and have not generated any revenue from product sales . we have funded our operations primarily through the public offering and private placement of our equity , debt financing and funding from collaborations , patent assignments and other arrangements . in march 2015 , we sold 3,300,000 shares of common stock at a price to the public of $ 15.15 per share , resulting in net proceeds to us of $ 46.7 million , after deducting the underwriting discounts , commissions and offering-related transaction costs . during january 2020 , we completed an underwriting public offering pursuant to which we sold 5,735,283 shares of common stock at the public offering price of $ 9.92 per share . in addition , we sold to a certain existing investor pre-funded warrants to purchase up to an aggregate of 1,800,000 shares of common stock at a purchase price of $ 9.919 per pre-funded warrant , which represents the per share public offering price for the common stock less the $ 0.001 per share exercise price for each pre-funded warrant . the aggregate gross proceeds we received from the public offering was $ 74.7 million , before deducting underwriting discounts and commissions and other offering related expenses of $ 4.8 million . on march 3 , 2017 , we entered into the vertex agreement with vertex , pursuant to which we agreed to sell and assign to vertex ctp-656 , now known as vx-561 , and other cystic fibrosis assets of ours for up to $ 250.0 million , subject to the satisfaction of certain closing conditions . on july 25 , 2017 , the transaction contemplated by the vertex agreement closed , and vertex paid us $ 160.0 million in cash consideration , with $ 16.0 million initially held in escrow , which was released to us in february 2019. additional information concerning the sale of ctp-656 is discussed in note 12 to the consolidated financial statements appearing elsewhere in this annual report on form 10-k. our operating results may fluctuate significantly from year to year , depending on the timing and magnitude of cash payments received pursuant to collaboration and licensing arrangements and other agreements and the timing and magnitude of clinical trial and other development activities under our current development programs . we generated net losses of $ 78.2 million and $ 56.0 million for the years ended december 31 , 2019 and 2018 , respectively . we expect to continue to incur significant expenses and operating losses for at least the next several years . we expect our expenses will increase substantially in connection with our ongoing activities as we continue research and development efforts and develop and conduct additional nonclinical studies and clinical trials with respect to our product candidates . 57 we do not expect to generate revenue from product sales unless and until we , or our collaborators , obtain marketing approval for one or more of our product candidates , which we expect will take a number of years and is subject to significant uncertainty . story_separator_special_tag research and development costs are expensed as incurred . costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites . a significant portion of our research and development costs have been external costs , which we track on a program-by-program basis . these external costs include fees paid to investigators , consultants , central laboratories and contract research organizations in connection with our clinical trials , and costs related to acquiring and manufacturing clinical trial materials . our internal research and development costs are primarily personnel-related costs , depreciation and other indirect costs . we do not track our internal research and development expenses on a program-by-program basis , as they are deployed across multiple projects under development . the successful development of any of our product candidates is highly uncertain . as such , at this time , we can not reasonably predict with certainty the duration and completion costs of the current or future clinical trials of any of our product candidates or if , when or to what extent we will generate revenues from the commercialization and sale of any of our product candidates that obtain marketing approval . we may never succeed in achieving regulatory approval for any of our product candidates . the duration , costs and timing of clinical trials and development of our product candidates will depend on a variety of factors , including : the scope and rate of progress of our ongoing as well as any additional clinical trials and other research and development activities ; conduct of and results from ongoing as well as any additional clinical trials and research and development activities ; significant and changing government regulation ; the terms and timing and receipt of any regulatory approvals ; the performance of our collaborators ; our ability to manufacture any of our product candidates that we are developing or may develop in the future ; and the expense and success of filing , prosecuting , defending and enforcing any patent claims and other intellectual property rights , including potential claims that we infringe other parties ' intellectual property . a change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the cost and timing associated with the development of that product candidate . for example , if the fda or another regulatory authority were to require us to conduct clinical trials or other research and development activities beyond those that we currently anticipate will be required for the completion of clinical development of a product candidate , or if we experience significant delays in enrollment in any of our clinical trials , we could be required to expend significant additional financial resources and time on the completion of clinical development . 59 research and development activities are central to our business model . product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development , due to the increased size and duration of later-stage clinical trials and the manufacturing that is typically required for those later-stage clinical trials . we expect research and development costs to increase significantly for the foreseeable future as our product candidate development programs progress , but we do not believe that it is possible at this time to accurately project total program-specific expenses through commercialization . there are numerous factors associated with the successful commercialization of any of our product candidates , including future trial design and various regulatory requirements , many of which can not be determined with accuracy at this time based on our stage of development . additionally , future commercial and regulatory factors beyond our control will impact our clinical development programs and plans . general and administrative expenses general and administrative expenses consist primarily of salaries and related costs for personnel , including stock-based compensation and travel expenses for our employees in executive , operational , finance , legal , business development and human resource functions . other general and administrative expenses include facility-related costs , depreciation and other expenses not allocated to research and development expense and professional fees for directors , accounting and legal services and expenses associated with obtaining and maintaining patents . in both 2019 and 2018 , we incurred expenses for intellectual property matters related to ctp-543 . we anticipate that our general and administrative expenses will increase in the future as our pipeline grows and matures . additionally , if and when we believe that a regulatory approval of the first product candidate that we intend to commercialize on our own appears likely , we anticipate an increase in payroll and related expenses as a result of our preparation for commercial operations , especially as it relates to the sales , marketing and distribution of our product candidates . investment income investment income consists of interest income earned on cash equivalents and investments . the amount of investment income earned in any particular period may vary primarily as a result of the amount of cash equivalents and investments held during the period and the types of securities included in our portfolio during the period . our current investment policy is to maintain a diversified investment portfolio of u.s. government-backed securities and money market mutual funds consisting of u.s. government-backed securities . unrealized loss on marketable equity securities unrealized loss on marketable equity securities consists of changes in the fair value of shares of common stock of processa held by us , as discussed further in note 12 to the consolidated financial statements appearing elsewhere in this annual report on form 10-k. income taxes we record a provision or benefit for income taxes on pre-tax income or loss based on our estimated effective tax rate for the year .
| results of operations discussion of the year ended december 31 , 2019 the following table summarizes our results of operations for the year ended december 31 , 2019 . 62 replace_table_token_2_th license and research and development revenue license and research and development revenue was $ 1.1 million for the year ended december 31 , 2019. the revenue recognized in 2019 was primarily a result of the license agreement , or the cipla agreement , entered into in the first quarter of 2019 with cipla technologies llc , or cipla . we recognized $ 1.0 million in revenue associated with this arrangement for the year ended december 31 , 2019. for additional details related to the cipla agreement , see note 12 to the consolidated financial statements appearing elsewhere in this annual report on form 10-k. the decrease in license and research and development revenue compared to $ 10.5 million for the year ended december 31 , 2018 is due to the upfront consideration received from processa of 2,090,301 shares of its common stock with a fair value of $ 10.5 million on the date of the transaction , which was recorded in fiscal year 2018. for additional details related to the transaction with processa , see note 12 to the consolidated financial statements appearing elsewhere in this annual report on form 10-k. as of december 31 , 2019 , we had deferred revenue of : $ 7.8 million related to our collaboration with celgene corporation , or celgene , consisting of $ 1.3 million related to the r & d services performance obligation , $ 0.1 million related to the supply performance obligation and $ 6.4 million related to the first and second discount performance obligations ; and $ 2.8 million related to a payment received from glaxosmithkline , or gsk .
| 2,372 |
impairment of long-lived assets we review long-lived assets for impairment when events change or story_separator_special_tag the following discussion and analysis of our financial condition and results of operations should be read in conjunction with item 1a risk factors and our consolidated financial statements and related notes included elsewhere in this annual report on form 10-k. the following discussion and analysis presents financial information denominated in millions of dollars which can lead to differences from rounding when compared to similar information contained in the consolidated financial statements and related notes which are primarily denominated in thousands of dollars . executive summary we are the world 's leading cloud software company powering social good . serving the entire social good communityโnonprofits , foundations , corporations , education institutions , healthcare institutions and individual change agentsโwe connect and empower organizations and individuals to increase their impact through software , services , expertise , and data intelligence . our portfolio is tailored to the unique needs of vertical markets , with solutions for fundraising and crm , marketing , advocacy , peer-to-peer fundraising , corporate social responsibility , school management , ticketing , grantmaking , financial management , payment processing , and analytics . serving the industry for more than three decades , we are headquartered in charleston , south carolina and have operations in the united states , australia , canada and the united kingdom . as of december 31 , 2017 , we had over 40,000 customers . our revenue is primarily generated from the following sources : ( i ) charging for the use of our software solutions in cloud-based and hosted environments ; ( ii ) providing transaction and payment processing services ; ( iii ) providing professional services including implementation , training , consulting , analytic , and other services ; and ( iv ) ; providing software maintenance and support services . during 2017 , we continued to execute on our four-point growth strategy targeted to drive an extended period of solution and service innovation , quality enhancement , increasing operating efficiency and financial performance : four-point growth strategy 1. integrated and open solutions in the cloud we will continue to transition our business to predominantly serve customers through a subscription-based cloud delivery model , enabling lower cost of entry , greater scalability and lower total cost of ownership to our customers . there is a concerted effort underway to optimize our portfolio of solutions and integrate powerful capabilities โ such as built-in data , analytics , payment processing and tailored user-specific experiences โ to bring even greater value and performance to our customers . during 2017 , we introduced sky ai and sky analytics , the intelligence engine behind the growing number of insights integrated into blackbaud cloud software solutions , powered by artificial intelligence including machine learning , cognitive technology , predictive analytics and other advanced technologies . with sky ai and sky analytics , we are enabling data-driven decisions by pairing one of the industry 's largest data sets with an advanced set of integrated ai capabilities , ultimately having greater impact on our customers and their missions . for example , affluence insight , a new donor management segmentation tool enables the identification of annual , mid-level and major gift prospects . it offers the ability to use ai-powered analytics to identify high-value donor prospects and predict a prospect 's likelihood to give . these embedded intelligence capabilities are one outcome of blackbaud 's intelligence for good approach โ combining ai , analytics and big data and expertise to drive insight for our customers across our solution portfolio . we also made several portfolio announcements during 2017 , ranging from solution integrations , to new capabilities for existing solutions , to new solution introductions . replace_table_token_32_th blackbaud , inc. 2. drive sales effectiveness we are making investments to increase the effectiveness of our sales organization , with a focus on enabling our expanding sales teams with the talent , processes and tools to accelerate our revenue growth and improve effectiveness . in 2017 , we created a new senior vice president of global sales position to lead sales effectiveness across the organization . we continued to make investments in our sales , marketing and customer success organizations and improved our market coverage by deploying these resources into key markets , while bifurcating sales to focus on either finding new customers or cultivating existing customers . in addition , we are continuing to optimize our go-to-market sales strategies such as offering solutions and services tailored to the needs of customers operating within vertical markets including k-12 private schools , foundations , higher education and healthcare institutions , among others . our sales teams are now fully running and managed on a common sales operating model . this includes common procedures , training , key operating metrics , compensation plans and reporting , which is driving increased productivity . 3. expand tam into near adjacencies with acquisitions and product investments we will continue to evaluate compelling opportunities to acquire companies and acquire or build technologies and services . we will be guided by our acquisition criteria for considering attractive assets that expand our total addressable market ( `` tam '' ) , provide entry into new and near adjacencies , accelerate our shift to the cloud , accelerate revenue growth , are accretive to margins and present synergistic opportunities . in 2017 , we launched blackbaud labs as a means to incubate new ideas and foster our strong culture of innovation and creativity , with the sole focus of bringing new capabilities to market organically . we also announced the promotion of our new senior vice president of corporate strategy and business development , who led the effort for many of our acquisitions , including our 2017 acquisitions , academicworks and justgiving . academicworks is the market leader in scholarship management for higher education and k-12 institutions , foundations , and grant-making institutions . story_separator_special_tag during 2017 , we generated $ 176.3 million in cash flow from operations , had net cash outlays of $ 146.8 million for the acquisitions of academicworks and justgiving , returned $ 23.1 million to stockholders by way of dividends and had cash outlays of $ 38.6 million for purchases of property and equipment and capitalized software development costs . results of operations change in reportable segments prior to the fourth quarter of 2017 , we operated in three business segments : ( i ) gmg ( ii ) emg and ( iii ) img . as discussed above , we have centralized our business operations over the last few years to allow us to gain productivity , efficiency and scalability . areas of our operations we have centralized , include , but are not limited to , marketing , finance , sales excellence , human resources , corporate it , legal and contracting , real estate and facilities , research and development , customer support , customer success , product management , professional services and training services . with our organizational model now largely complete , we made changes to our internal reporting structure in the fourth quarter of 2017 to better support and assess the operations of our business going forward . as a result , we now have one operating and reportable segment . see note 2 of our consolidated financial statements in this report for additional information . comparison of 2017 to 2016 and 2016 to 2015 during 2017 , 2016 and 2015 , we acquired companies that provided us with strategic opportunities to expand our tam and share of the philanthropic giving market through the integration of complementary solutions and services to serve the changing needs of our customers . the following are the companies we acquired and their respective acquisition dates : giving limited ( `` justgiving '' ) โ october 2 , 2017 ; academicworks , inc. ( `` academicworks '' ) โ april 3 , 2017 ; good+geek , inc. , ( `` attentive.ly '' ) โ july 11 , 2016 ; and smart , llc ( `` smart tuition '' ) โ october 2 , 2015. we have included the results of operations of acquired companies in our consolidated results of operations from the date of their respective acquisition . we determined that the justgiving , academicworks and attentive.ly acquisitions were not material business combinations ; therefore , revenue and earnings since the acquisition date and pro forma information are not required or presented . because we have integrated the operations of smart tuition into ours , it is impracticable to determine amounts of revenue and operating costs attributable solely to this acquired company for 2017 and 2016. see note 3 to our consolidated financial statements in this report for a summary of these acquisitions . replace_table_token_37_th blackbaud , inc. story_separator_special_tag light , sans-serif ; font-size:8pt ; font-weight : bold ; '' > blackbaud , inc. replace_table_token_41_th ( 1 ) the individual amounts for each year may not sum to maintenance gross profit due to rounding . maintenance revenue is comprised of annual fees derived from maintenance contracts associated with new software licenses and annual renewals of existing maintenance contracts . these contracts provide customers with updates , enhancements and certain upgrades to our software solutions and online , telephone and email support . maintenance contracts are typically renewed on an annual basis . cost of maintenance is primarily comprised of compensation costs for customer support personnel , third-party contractor expenses , third-party royalty costs , allocated depreciation , facilities and it support costs , amortization of intangible assets from business combinations , amortization of software development costs and other costs incurred in providing support and services to our customers . 2017 vs. 2016 the decrease in maintenance revenue during 2017 , when compared to 2016 , was primarily comprised of ( i ) reductions in maintenance from contracts that were migrated to a cloud-based subscription or not renewed and reductions in contracts with existing customers of $ 30.3 million ; partially offset by ( ii ) incremental maintenance from new customers associated with new license contracts and increases in contracts with existing customers of $ 10.7 million ; and ( iii ) incremental maintenance from contractual inflationary rate adjustments of $ 0.9 million . cost of maintenance increased during 2017 , when compared to 2016 , primarily as a result of an increase in compensation costs of $ 1.0 million , driven by a refinement in the method in which we allocate customer support costs between cost of maintenance and cost of subscriptions . maintenance gross margin decreased during 2017 , when compared to 2016 , primarily due to the increase in maintenance customer support costs combined with the decline in maintenance revenue as discussed above . 2016 vs. 2015 the decrease in maintenance revenue during 2016 , when compared to 2015 , was primarily related to a reduction in maintenance contracts associated with our on-premises raiser 's edge and financial edge solutions as customers migrated to our cloud-based nxt solutions , partially offset by increases in maintenance contracts associated with blackbaud enterprise crm . the decrease in maintenance revenue during 2016 was primarily comprised of ( i ) $ 23.2 million of reductions in maintenance from contracts that were migrated to a cloud-based subscription or not renewed and reductions in contracts with existing customers ; partially offset by ( ii ) $ 15.3 million of incremental maintenance from new customers associated with new license contracts and increases in contracts with existing customers ; and ( iii ) $ 1.0 million of incremental maintenance from contractual inflationary rate adjustments . cost of maintenance decreased during 2016 , when compared to 2015 , primarily as a result of a decrease in compensation costs of $ 4.9 million , from a shift in support headcount from maintenance towards sales , marketing and customer success expense , and a shift in the volume of customer support requests from maintenance towards subscriptions .
| operating results replace_table_token_38_th ( 1 ) included in subscriptions revenue for 2016 was $ 39.3 million attributable to the inclusion of smart tuition . included in subscriptions revenue for 2015 was $ 8.3 million attributable to the inclusion of smart tuition . ( 2 ) the individual amounts for each year may not sum to subscriptions gross profit due to rounding . subscriptions revenue is comprised of revenue from charging for the use of our subscription-based software solutions , which includes providing access to cloud-based solutions and hosting services , access to certain data services and our online subscription training offerings , revenue from payment processing services , as well as variable transaction revenue associated with the use of our solutions . we continue to experience growth in sales of our cloud-based solutions and hosting services as we meet the demand of our customers that increasingly prefer cloud-based subscription offerings , including existing customers that are migrating from on-premises solutions to our cloud-based solutions . in addition , we have experienced growth in our payment processing services from the continued shift to online giving , further integration of these services to our existing solution portfolio and the sale of these services to new and existing customers . recurring subscription contracts are typically for a term of three years at contract inception with one to three-year renewals thereafter . we intend to continue focusing on innovation , quality and integration of our subscription solutions , which we believe will drive subscriptions revenue growth .
| 2,373 |
in addition to circuit protection products and solutions , the company offers electronic reed switches and sensors , automotive sensors for comfort and safety systems and a comprehensive line of highly reliable electromechanical and electronic switch and control devices for commercial and specialty vehicles , as well as protection relays and power distribution centers for the safe control and distribution of electricity . the company has a network of global engineering centers and labs that develop new products and product enhancements , provides customer application support and test products for safety , reliability , and regulatory compliance . the company 's devices protect products in virtually every market that uses electrical energy , from various electronic devices to automobiles to industrial equipment . the company conducts its business through three reportable segments , which are defined by markets and consist of electronics , automotive , and industrial . the company 's customer base includes oems , tier one automotive suppliers , and distributors . story_separator_special_tag sales net sales for 2016 of $ 1,056.2 million increased $ 188.3 million , or 22 % , compared to the prior year , reflecting $ 170.2 million of incremental revenues from businesses acquired over the previous two years as well as organic growth in the electronics and automotive segments , partially offset by lower sales from the industrial segment due to weaker end markets . the company also experienced $ 7.3 million in unfavorable foreign currency effects in 2016 compared to 2015 primarily resulting from sales denominated in chinese renminbi . the increase in sales in 2016 reflects a $ 75.2 million , or 22 % , increase in automotive segment sales and a $ 129.7 million , or 32 % , increase in electronics segment sales , partially offset by a $ 16.6 million , or 14 % , decrease in industrial segment sales . gross profit gross profit was $ 413.1 million , or 39.1 % of sales , in 2016 , compared to $ 330.5 million , or 38.1 % of sales , in 2015. gross profit for 2016 was negatively impacted by $ 10.8 million of charges primarily related to the inventory step-up from the acquisition of polyswitch and to a lesser extent the on portfolio and menber 's acquisitions . gross profit for 2015 was negatively impacted by $ 5.2 million of charges related to the transfer of the company 's reed switch production from the u.s. and china to the philippines . operating expenses total operating expense was $ 282.5 million , or 26.7 % of net sales , for 2016 compared to $ 226.3 million , or 26.1 % of net sales , for 2015. operating expense in 2016 included $ 39.1 million of charges primarily consisting of acquisition and integration costs of $ 21.4 million and $ 14.8 million of charges related to the impairment of the custom products reporting unit . operating expense in 2015 included $ 39.9 million of charges , primarily related to the u.s. pension settlement of $ 31.9 million and restructuring and acquisition costs of $ 8.0 million . operating income operating income was $ 130.6 million , or 12.4 % of net sales , in 2016 compared to $ 104.2 million , or 12.0 % of net sales , in the prior year . the increase in operating income in the current year was due primarily to higher revenue as well as the factors affecting operating expenses discussed above . interest expense was $ 8.6 million in 2016 compared to $ 4.1 million in 2015 and is primarily related to the company 's increased borrowing to fund acquisitions . foreign exchange ( gain ) loss was $ 0.5 million of loss in 2016 compared to $ 1.5 million of gain in 2015. the fluctuation in foreign exchange was primarily attributable to changes in the value of the euro , philippine peso and chinese renminbi against the u.s. dollar in 2016 and 2015 . 20 other expense ( income ) , net other expense ( income ) , net , consisting of interest income , royalties and non-operating income was $ 1.7 million of income in 2016 compared to $ 5.4 million of income in 2015. the year-over-year decrease in income primarily reflects lower interest income in 2016. income taxes income tax expense was $ 18.8 million with an effective tax rate of 15.2 % in 2016 compared to income tax expense of $ 26.1 million with an effective tax rate of 24.4 % in 2015. the effective tax rates for these periods are lower than the u.s. statutory tax rate primarily due to income earned in lower tax jurisdictions and , with respect to the 2016 period , a one-time deduction with respect to the stock of one of the company 's affiliates partially offset by the impact of the impairment of goodwill for which no tax benefit was recorded and taxes on unremitted earnings , and , with respect to the 2015 period , the impact of a pension settlement partially offset by the impact from the restructuring of the legal ownership of the company 's mexican manufacturing operations . segment information the company reports its operations by the following segments : electronics , automotive and industrial . segment information is described more fully in note 14 , segment information , of the notes to consolidated financial statements included in this annual report . the following table is a summary of the company 's net sales by segment : replace_table_token_6_th electronics segment the electronics segment , which accounted for approximately 51 % of total sales in 2016 , has produced modest organic revenue growth over the last few years . in 2016 , sales increased $ 129.7 million , or 32 % , compared to the prior year , reflecting $ 110.0 million of sales from businesses acquired in 2016 as well as organic growth in sensor products and to a lesser extent passive and semiconductor products . operating margins also improved in 2016 compared to 2015 due to better leverage from the higher sales , as well as favorable product and regional mix . story_separator_special_tag replace_table_token_8_th 22 sales net sales increased $ 15.9 million , or 2 % , to $ 867.9 million for 2015 compared to $ 852.0 million in 2014 due primarily to strong growth in the automotive segment and improvement in the industrial segment partially offset by lower sales in the electronics segment . the company also experienced $ 38.9 million in unfavorable foreign currency effects in 2015 compared to 2014 primarily resulting from sales denominated in the euro . excluding currency effects , net sales increased $ 54.7 million , or 6 % , in 2015 compared to 2014. the increase in sales in 2015 reflects a $ 14.5 million , or 4 % , increase in automotive segment sales and a $ 5.9 million , or 5 % , increase in industrial segment sales , partially offset by a $ 4.6 million , or 1 % , decrease in electronics segment sales . gross profit gross profit was $ 330.5 million , or 38.1 % of sales , in 2015 , compared to $ 324.4 million , or 38.1 % of sales , in 2014. gross profit for 2015 was negatively impacted by $ 5.3 million of charges related to costs incurred to transfer of the company 's reed switch production from the u.s. and china to the philippines . gross profit for 2014 was negatively impacted by $ 2.8 million for accounting adjustments related to the symcom inventory which had been stepped up to fair value at the acquisition date as required by purchase accounting rules . additionally , 2014 gross profit was negatively impacted by $ 2.7 million in severance charges . these severance charges primarily related to post-hamlin acquisition reorganization changes . excluding the impact of these charges , gross profit was $ 335.8 million , or 38.7 % of sales , in 2015 compared to $ 329.9 million , or 38.7 % of sales , in 2014. operating expenses total operating expense was $ 226.3 million , or 26.1 % of net sales , for 2015 compared to $ 190.6 million , or 22.4 % of net sales , for 2014. operating expense in 2015 included $ 39.9 million of charges that primarily related to u.s. pension settlement and wind-up costs of $ 31.9 million and restructuring and acquisition costs of $ 8.0 million . operating expense in 2014 included $ 3.5 million in restructuring , acquisition , and impairment costs , $ 2.2 million of which was to effect changes in the company 's legal structure . excluding these charges , total operating expense was $ 186.4 million , or 21.5 % of net sales , for 2015 compared to $ 187.1 million , or 22.0 % of net sales , in 2014. operating income operating income was $ 104.2 million , or 12.0 % of net sales , in 2015 compared to $ 133.8 million , or 15.7 % of net sales , in the prior year . the decrease in operating income in the current year was due primarily to the factors affecting operating expenses discussed above . interest expense was $ 4.1 million in 2015 compared to $ 4.9 million in 2014 and is primarily related to the company 's increased borrowings to fund acquisitions . the lower interest expense in 2015 resulted from lower average debt balances compared to the prior year . foreign exchange ( gain ) loss was $ 1.5 million of gain in 2015 compared to $ 3.9 million of loss in 2014. the fluctuation in foreign exchange was primarily attributable to changes in the value of both the euro and the philippine peso against the u.s. dollar in 2015 and 2014. other expense ( income ) , net other expense ( income ) , net , consisting of interest income , royalties , and non-operating income was $ 5.4 million of income in 2015 compared to $ 6.6 million of income in 2014. the year-over-year decrease in income primarily reflects lower interest income in 2015. income taxes income tax expense was $ 26.1 million in 2015 compared to $ 33.5 million in 2014. the 2015 effective income tax rate was 24.4 % compared to 25.5 % in 2014. the lower effective tax rate in 2015 is primarily related to more income earned in lower-tax jurisdictions in 2015 compared to 2014 and the impact of a pension settlement , partially offset by the impact from the restructuring of the legal ownership of the company 's mexican manufacturing operations . 23 segment information the following table is a summary of the company 's net sales by segment : replace_table_token_9_th electronics segment the decrease in electronics sales primarily resulted from net unfavorable currency effects of $ 11.7 million in 2015. excluding currency effects , electronics sales increased $ 7.2 million , or 2 % , compared to 2014 reflecting solid growth for passive components offset by lower sensor sales . strong sales of electronic products in europe and china helped to offset continued adjustments in channel inventory and capacity constraints for our electronic sensor products as the company continues to transfer production from the u.s. and china to the philippines . automotive segment the increase in automotive sales was primarily due to strong growth for automotive sensor products . sales in the commercial vehicle market were up slightly compared to 2014 as continued strength in the heavy truck market was offset by general market weakness in construction , agriculture , and the global mining industry . automotive sales were negatively impacted by net unfavorable currency effects of $ 22.4 million in 2015 compared to 2014 , primarily resulting from sales denominated in the euro . excluding currency effects , automotive sales increased $ 37.0 million , or 11 % compared to 2014. industrial segment the increase in industrial sales was primarily from higher custom and power fuse sales which were offset by lower relay sales . the industrial segment experienced net unfavorable currency effects of $ 4.7 million , primarily from sales denominated in canadian dollars and the euro . excluding currency effects , industrial sales increased $ 10.6 million , or 9 % , compared to 2014.
| executive summary we experienced strong performance improvements in 2016 including crossing the milestone of $ 1 billion in revenue and recognizing record earnings and cash flow . we made substantial progress in growth from our strategic 2016 acquisitions which contributed approximately $ 250 million in annualized revenue . we are well positioned for success with our updated strategy , which focuses on accelerated organic growth , while continuing to add acquisitions aligned to our core circuit protection , sensor , and power control platforms . for 2016 , we recognized net sales of $ 1,056.2 million , a 22 % increase versus the prior year period . acquisitions contributed significantly to the growth in revenue . organic growth was due to growth in most end markets across our electronics segment as well as our automotive fuses and sensor business . this was partially offset by declines in our industrial segment and our commercial vehicle products business within our automotive segment . we recognized net income of $ 104.5 million , an increase of 29.2 % . diluted eps was $ 4.60 , a 29.2 % increase over last year . 18 business outlook and key trends & events we continually look for ways to improve the efficiency and performance of our operations . certain trends have affected our results of operations for 2016 compared to 2015 and 2014. these trends , as well as the key trends that we expect will impact our future results of operations , are as follows . โ business acquisitions โ the company continues to review its existing product portfolio and looks for additional strategic acquisitions that complement existing product offerings or provide for further expansion of its portfolio . during 2016 and 2015 , the company completed the following acquisitions : โ o n august 29 , 2016 , the company acquired the on portfolio for $ 104.0 million .
| 2,374 |
once our broadband access products are deployed , the service provider can offer voice , high-definition and ultra-high-definition video , high-speed internet access and business class services to their customers . our ethernet switching products provide a high-performance and manageable solution that bridges the gap from carrier access technologies to the core network . our products support pure ethernet switching as well as layer 3 ip and mpls and are currently being developed for deployment as part of sdns . our mobile backhaul products provide a robust , manageable and scalable solution for mobile operators that enable them to upgrade their mobile backhaul systems and migrate from 3g networks to lte and beyond . our mobile backhaul products may be collocated at the ran bs and can aggregate multiple ran bs into a single backhaul for delivery of mobile traffic to the ran network controller . we provide standard ethernet/ip or mpls interfaces and interoperate with other vendors in these networks . our fiberlan portfolio of polan products are designed for enterprise , campus , hospitality , and entertainment arena usage . our fiberlan portfolio includes our high-performance , high-bandwidth gpon olts connected to the industry 's most diverse ont product line , which include units with integrated poe to power a wide range of poe-enabled access devises . our sdn and nfv strategy is to develop tools and building blocks that will allow service providers to migrate their networks ' full complement of legacy control plane and data plane devices to a centralized intelligent controller that can reconfigure the services of the hundreds of network elements in real time for more controlled and efficient provision of bandwidth and latency across the network . the migration move to sdn and nfv will provide better service for end customers and a more efficient and cost-effective use of hardware resources for service providers . going forward , our key financial objectives include the following : increasing revenue while continuing to carefully control costs ; continued investments in strategic research and product development activities that will provide the maximum potential return on investment ; and minimizing consumption of our cash and cash equivalents . 27 merger on september 9 , 2016 , we acquired dns through the merger of a wholly owned subsidiary of zhone technologies , inc. with and into dns , with dns surviving as our wholly owned subsidiary . in connection with the merger , zhone technologies , inc. changed its name to dasan zhone solutions , inc. at the effective time of the merger , all issued and outstanding shares of capital stock of dns held by its sole shareholder , dni , were canceled and converted into the right to receive shares of our common stock in an amount equal to 58 % of the issued and outstanding shares of our common stock immediately following the merger . accordingly , at the effective time of the merger , we issued 9,493,016 shares ( post reverse stock split ) of our common stock to dni as consideration in the merger , of which 949,302 shares ( post reverse stock split ) are being held in escrow as security for claims for indemnifiable losses in accordance with the merger agreement relating to the merger . as a result , immediately following the effective time of the merger , dni held 58 % of the outstanding shares of our common stock and the holders of our common stock immediately prior to the merger retained , in the aggregate , 42 % of the outstanding shares of our common stock . see note 2 to the consolidated financial statements set forth in part ii , item 8 of this report for additional information regarding the merger . common control transaction on december 31 , 2017 , dns ( a wholly owned subsidiary of ours ) acquired 100 % and 99.99 % of the common stock of d-mobile limited ( โ d-mobile โ ) and dasan india private limited ( dasan india ) , respectively , from dni . d-mobile and dasan india are resellers of our products in taiwan and india , respectively . the consideration payable by us to dni for the common stock is the net book value of d-mobile and dasan india at december 31 , 2017 , subject to final adjustments . the net book value of d-mobile and dasan india was an aggregate of $ 0.8 million . we accounted for these transactions as common control transactions , with the net assets transferred recorded at historical cost . the transactions did not result in a change in reporting entity and hence were accounted for prospectively . items affecting comparability of our financial results as discussed in note 2 to the consolidated financial statements set forth in part ii , item 8 of this report , the merger has been accounted for as a reverse acquisition under which dns was considered the accounting acquirer of legacy zhone . as such , our financial results presented in this annual report on form 10-k reflect the operating results of dns and its consolidated subsidiaries for the year-ended december 31 , 2015 and for the period from january 1 , 2016 through september 8 , 2016 and the operating results of both dns and legacy zhone and their respective consolidated subsidiaries for all periods from and after september 9 , 2016. our balance sheet as of december 31 , 2016 included the fair value of the assets and liabilities of legacy zhone as of the effective date of the merger . those assets include the fair value of acquired intangible assets and goodwill . the year ended december 31 , 2017 was the first fiscal year in which our financial results reflected a full year of operating results for both dns and legacy zhone and their respective consolidated subsidiaries . due to the foregoing , our financial results for the year ended december 31 , 2017 are not comparable to our financial results for prior years . story_separator_special_tag installation services are based on daily rate per person and vary according to the complexity of the products being installed . training , education and installation service arrangements are typically not material , are short term in nature and are largely completed shortly after delivery of the product . extended warranty services are priced based on the type of product and are sold in one to five year durations . extended warranty services include the right to warranty coverage beyond the standard warranty period . in substantially all of the arrangements with multiple deliverables pertaining to arrangements with these services , we have used and intend to continue using vsoe to determine the selling price for the services . we determine vsoe based on our normal pricing practices for these specific services when sold separately . 29 allowances for sales returns and doubtful accounts we record an allowance for sales returns for estimated future product returns related to current period product revenue . the allowance for sales returns is recorded as a reduction of revenue and an allowance against our accounts receivable . we base our allowance for sales returns on periodic assessments of historical trends in product return rates and current approved returned products . if the actual future returns were to deviate from the historical data on which the reserve had been established , our future revenue could be adversely affected . we record an allowance for doubtful accounts for estimated losses resulting from the inability of customers to make payments for amounts owed to us . the allowance for doubtful accounts is recorded as a charge to general and administrative expenses . we base our allowance on periodic assessments of our customers ' liquidity and financial condition through analysis of information obtained from credit rating agencies , financial statement reviews and historical collection trends . additional allowances may be required in the future if the liquidity or financial condition of our customers deteriorates , resulting doubts about their ability to make payments . inventories inventories are stated at the lower of cost or market , with cost being determined using the first-in , first-out ( fifo ) method . in assessing the net realizable value of inventories , we are required to make judgments as to future demand requirements and compare these with the current or committed inventory levels . once inventory has been written down to its estimated net realizable value , its carrying value can not be increased due to subsequent changes in demand forecasts . to the extent that a severe decline in forecasted demand occurs , or we experience a higher incidence of inventory obsolescence due to rapidly changing technology and customer requirements , we may incur significant charges for excess inventory . goodwill and other acquisition-related intangible assets goodwill and other acquisition-related intangible assets not subject to amortization are tested annually for impairment using a two-step approach , and are tested for impairment more frequently if events and circumstances indicate that the asset might be impaired . an impairment loss is recognized to the extent that the carrying amount exceeds the asset 's fair value . in the application of the impairment testing , we are required to make estimates of future operating trends and resulting cash flows and judgments on discount rates and other variables . actual future results and other assumed variables could differ from these estimates . our future operating performance will be impacted by the future amortization of intangible assets , potential charges related to purchased in-process research and development for future acquisitions , and potential impairment charges related to goodwill . accordingly , the allocation of the purchase price of the acquired companies to intangible assets and goodwill has a significant impact on our future operating results . the allocation process requires management to make significant estimates and assumptions , including estimates of future cash flows expected to be generated by the acquired assets and the appropriate discount rate for these cash flows . should different conditions prevail , we would have to perform an impairment review that might result in material write-downs of intangible assets and or goodwill . other factors we consider important which could trigger an impairment review , include , but are not limited to , significant changes in the manner of use of our acquired assets , significant changes in the strategy for our overall business or significant negative economic trends . if this evaluation indicates that the value of an intangible asset may be impaired , an assessment of the recoverability of the net carrying value of the asset over its remaining useful life is made . if this assessment indicates that the cost of an intangible asset is not recoverable , based on the estimated undiscounted future cash flows or other comparable market valuations of the entity or technology acquired over the remaining amortization period , the net carrying value of the related intangible asset will be reduced to fair value and the remaining amortization period may be adjusted . due to uncertain market conditions and potential changes in our strategy and product portfolio , it is possible that forecasts used to support our intangible assets may change in the future , which could result in additional non-cash charges that would adversely affect our results of operations and financial condition . business combination we allocate the fair value of purchase consideration to the tangible assets acquired , liabilities assumed and intangible assets acquired based on their estimated fair values . the excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill . when determining the fair values of assets acquired and liabilities assumed , management makes significant estimates and assumptions , especially with respect to intangible assets and certain tangible assets such as inventory acquired as part of the merger . critical estimates in valuing certain tangible and intangible assets include but are not limited to future expected cash flows from the underlying assets and discount rates .
| results of operations results include the operating results of legacy zhone from and after september 9 , 2016. therefore , our financial results for the year ended december 31 , 2017 are not comparable to our financial results for prior years . we list in the table below the historical consolidated statement of comprehensive income ( loss ) as a percentage of total net revenue for the periods indicated . replace_table_token_5_th 2017 compared with 2016 net revenue the year ended december 31 , 2017 was the first year in which our financial results reflected a full year of operating results for both dns and legacy zhone and their respective consolidated subsidiaries . net revenue improved compared to prior years reflecting the combined company 's broad base of geographic regions and product categories . across international markets , asia-pacific ( including korea ) contributed approximately 55 % of net revenue in 2017. we are seeing strong customer tractions in emea and latin america , which collectively accounted for approximately 23 % of 2017 net revenue . our north america region accounted for approximately 22 % of 2017 net revenue . from a product net revenue perspective , we are seeing a broad based strength across our five solution offerings ( broadband access , ethernet switching , mobile backhaul , polan and sdn ) . information about our net revenue for products and services for 2017 and 2016 is summarized below ( in millions ) : 32 replace_table_token_6_th information about our net revenue for north america and international markets for 2017 and 2016 is summarized below ( in millions ) : replace_table_token_7_th net revenue increased 64 % or $ 96.8 million to $ 247.1 million for 2017 compared to $ 150.3 million for 2016 . the increase in net revenue was primarily due to 2017 being the first fiscal year in which our financial results reflected a full year of the combined operating results of dns and legacy zhone .
| 2,375 |
we help customers reimagine the future of work by providing a comprehensive secure digital workspace that unifies the apps , data and services people need to be productive , and simplifies it 's ability to adopt and manage complex cloud environments . we market and license our solutions through multiple channels worldwide , including selling through resellers and direct over the web . our partner community comprises thousands of value-added resellers , or vars known as citrix solution advisors , value-added distributors , or vads , systems integrators , or sis , independent software vendors , or isvs , original equipment manufacturers , or oems and citrix service providers , or csps . we are a delaware corporation incorporated on april 17 , 1989. story_separator_special_tag from our csp offerings . summary of results for the year ended december 31 , 2017 compared to the year ended december 31 , 2016 , we delivered the following financial performance : product and license revenue decreased 2.9 % to $ 857.3 million ; software as a service revenue increased 30.5 % to $ 175.8 million ; license updates and maintenance revenue increased 4.6 % to $ 1.7 billion ; professional services revenue increased 0.4 % to $ 131.7 million ; gross margin as a percentage of revenue decreased 0.8 % to 84.4 % ; operating income increased 1.9 % to $ 571.0 million ; and diluted earnings per share from continuing operations decreased 95.3 % to $ 0.14 . the decrease in our product and licenses revenue was primarily driven by lower overall sales of our networking products . our software as a service revenues increased due to increased sales of our content collaboration offerings and our workspace services offerings delivered via the cloud . the increase in license updates and maintenance revenue was primarily due to increased sales of software maintenance revenues across our workspace services and networking products , partially offset by a decrease in our subscription advantage product , which has reached end of sale , and our technical support as customers continue to migrate to our new software maintenance solutions . professional services revenue remained consistent when comparing 2017 to 2016 . we currently expect total revenue to increase when comparing the first quarter of 2018 to the first quarter of 2017. in addition , when comparing the 2018 fiscal year to the 2017 fiscal year , we currently expect total revenue to increase . gross margin remained consistent when comparing 2017 to 2016 . the increase in operating income when comparing 2017 to 2016 was primarily due to an increase in revenues . the decrease in diluted earnings per share when comparing 2017 to 2016 was primarily due to an increase in tax expense due to charges related to the estimated impact from the enactment of the tax cuts and jobs act ( the `` 2017 tax act โ ) that was signed on december 22 , 2017 . 32 2017 business combination on january 3 , 2017 , we acquired all of the issued and outstanding securities of unidesk corporation ( โ unidesk โ or the `` 2017 business combination '' ) . we acquired unidesk to enhance our application management and delivery offerings . the total cash consideration for this transaction was $ 60.4 million , net of $ 2.7 million of cash acquired . transaction costs associated with the acquisition were not significant . we have included the effect of the unidesk acquisition in our results of operations prospectively from the date of acquisition . 2016 business combination on september 7 , 2016 , we acquired all of the issued and outstanding securities of a privately-held company . the acquisition provides a software solution that cuts the cost of desktop and application virtualization and delivers workspace performance by accelerating desktop logon and application response times for any microsoft windows-based environment . the total cash consideration for this transaction was approximately $ 11.5 million , net of $ 0.8 million cash acquired . transaction costs associated with the acquisition were not significant . the assets related to this acquisition primarily include $ 8.2 million of product technology identifiable intangible assets with a four year life and goodwill of $ 4.7 million . 2016 asset acquisition on january 8 , 2016 , we acquired certain monitoring technology assets from a privately-held company for total cash consideration of $ 23.6 million . the acquisition provides a monitoring solution for citrix 's solutions as it relates to microsoft windows applications and desktop delivery . the identifiable intangible assets acquired related primarily to product technologies . 2016 divestiture on february 29 , 2016 , we sold our cloudplatform and cloudportal business manager solutions to persistent telecom solutions , inc. the agreement included contingent consideration in the form of an earnout provision based on revenue for a period of five years following the closing date . any income associated with the contingent consideration will be recognized if the earnout provisions are met . no earnout provisions were met during the years ended december 31 , 2017 and december 31 , 2016 . therefore , no income was recognized during the years ended december 31 , 2017 and 2016 , respectively . critical accounting policies and estimates our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states . the preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses , and related disclosure of contingent liabilities . we base these estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances , and these estimates form the basis for our judgments concerning the carrying values of assets and liabilities that are not readily apparent from other sources . we periodically evaluate these estimates and judgments based on available information and experience . story_separator_special_tag vsoe of selling price is based on the price charged when the element is sold separately . in determining vsoe , we require that a substantial majority of the selling prices fall within a reasonable range based on historical discounting trends for specific solutions and services . tpe of selling price is established by evaluating competitor solutions or services in stand-alone sales to similarly situated customers . however , as our solutions contain a significant element of proprietary technology and our solutions offer substantially different features and functionality , the comparable pricing of solutions with similar functionality typically can not be obtained . additionally , as we are unable to reliably determine what competitors products ' selling prices are on a stand-alone basis , we are not typically able to determine tpe . the estimate of selling price is established considering multiple factors including , but not limited to , pricing practices in different geographies and through different sales channels and competitor pricing strategies . for our non-software transactions , we allocate the arrangement consideration based on the relative selling price of the deliverables . for our hardware appliances , we use esp as our selling price . for our support and services , we generally use 34 vsoe as our selling price . when we are unable to establish selling price using vsoe for our support and services , we use esp in our allocation of arrangement consideration . our content collaboration ( formerly data ) solutions are considered hosted service arrangements per the authoritative guidance ; accordingly , fees related to online service agreements are recognized ratably over the contract term . in addition , saas revenues may also include set-up fees , which are recognized ratably over the contract term or the expected customer life , whichever is longer . see notes 2 and 18 to our consolidated financial statements included in this annual report on form 10-k for the year ended december 31 , 2017 for further information on our revenue recognition . valuation and classification of investments the authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date ( an exit price ) . our available-for-sale investments are measured to fair value on a recurring basis . in addition , we hold investments that are accounted for based on the cost method . these investments are periodically reviewed for impairment and when indicators of impairment exist , are measured to fair value as appropriate on a non-recurring basis . in determining the fair value of our investments we are sometimes required to use various alternative valuation techniques . the authoritative guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available . the authoritative guidance establishes a three-tier fair value hierarchy , which prioritizes the inputs used in measuring fair value as follows : level 1 , observable inputs such as quoted prices in active markets for identical assets or liabilities , level 2 , inputs , other than quoted prices in active markets , that are observable either directly or indirectly , and level 3 , unobservable inputs in which there is little or no market data , which requires us to develop our own assumptions . observable inputs are those that market participants would use in pricing the asset or liability that are based on market data obtained from independent sources , such as market quoted prices . when level 1 observable inputs for our investments are not available to determine their fair value , we must then use other inputs which may include indicative pricing for securities from the same issuer with similar terms , yield curve information , benchmark data , prepayment speeds and credit quality or unobservable inputs that reflect our estimates of the assumptions market participants would use in pricing the investments based on the best information available in the circumstances . when valuation techniques , other than those described as level 1 are utilized , management must make estimations and judgments in determining the fair value for its investments . the degree to which management 's estimation and judgment is required is generally dependent upon the market pricing available for the investments , the availability of observable inputs , the frequency of trading in the investments and the investment 's complexity . if we make different judgments regarding unobservable inputs , we could potentially reach different conclusions regarding the fair value of our investments . after we have determined the fair value of our investments , for those that are in an unrealized loss position , we must then determine if the investment is other-than-temporarily impaired . we review our investments quarterly for indicators of other-than-temporary impairment . this determination requires significant judgment and if different judgments are used the classification of the losses related to our investments could differ . in making this judgment , we employ a systematic methodology that considers available quantitative and qualitative evidence in evaluating potential impairment of our investments . if the carrying value of an available-for-sale investment exceeds its fair value , we evaluate , among other factors , general market conditions , the duration and extent to which the fair value is less than carrying value our intent to retain or sell the investment and whether it is more likely than not that we will not be required to sell the investment before the recovery of its amortized cost basis , which may not be until maturity . we also consider specific adverse conditions related to the financial health of and business outlook for the issuer , including industry and sector performance , rating agency actions and changes in credit default swap levels .
| executive summary our solutions mobilize desktops , apps and data to help our customers drive value . we continue driving innovation in the datacenter with our solutions across both physical and software defined networking platforms while powering some of the world 's largest clouds and giving enterprises the capabilities to combine best-in-class application networking services on a single , consolidated footprint . on january 31 , 2017 , we completed the spin-off of our goto business ( the โ spin-off โ ) and subsequent merger of that business with logmein . in connection with the spin-off , we distributed approximately 26.9 million shares of getgo common stock to our stockholders of record as of the close of business on january 20 , 2017. we delivered the shares of getgo common stock to our transfer agent , who held such shares for the benefit of our stockholders . immediately thereafter , merger sub was merged with and into getgo , with getgo continuing as a wholly owned subsidiary of logmein ( the โ merger โ ) . as a result of the merger , each share of getgo common stock was converted into the right to receive one share of logmein common stock . as a result of these transactions , our stockholders received approximately 26.9 million shares of logmein common stock in the aggregate , or 0.171844291 of a share of logmein common stock for each share of citrix common stock held of record by our stockholders as of the close of business on january 20 , 2017. no fractional shares of logmein were issued , and our stockholders instead received cash in lieu of any fractional shares . the consolidated financial statements included in this annual report on form 10-k and related financial information reflect the goto business operations , assets and liabilities , and cash flows as discontinued operations for all periods presented .
| 2,376 |
โ this annual report on form 10-k , including this management 's discussion and analysis of financial condition and results of operations ( `` md & a '' ) , contains forward-looking statements within the meaning of the private securities litigation reform act of 1995 , section 21e of the u.s. securities exchange act of 1934 , as amended ( the exchange act ) , and section 27a of the u.s. securities act of 1933 , as amended ( `` the securities act '' ) , and is subject to the safe harbors created by those sections . all statements other than statements of historical facts are statements that could be deemed forward-looking statements . the following md & a is intended to help readers understand our results of operations and financial condition , and is provided as a supplement to , and should be read in conjunction with , our consolidated financial statements and the accompanying notes to our consolidated financial statements under part ii , item 8 of this annual report on form 10-k. all dollar and percentage comparisons made herein refer to the year ended december 31 , 2020 ( `` fiscal 2020 '' ) compared with the year ended december 31 , 2019 ( `` fiscal 2019 '' ) , unless otherwise noted . please refer to part ii , item 7 of our annual report on form 10-k for fiscal 2019 , filed with the securities exchange commission ( `` sec '' ) on february 26 , 2020 , for a comparative discussion of our fiscal 2019 financial results as compared to year ended december 31 , 2018 ( `` fiscal 2018 '' ) . see `` forward-looking statements . '' overview we are a leading developer , marketer and distributor of branded performance apparel , footwear and accessories . the brand 's moisture-wicking fabrications are engineered in many different designs and styles for wear in nearly every climate to provide a performance alternative to traditional products . our products are sold worldwide and worn by athletes at all levels , from youth to professional , on playing fields around the globe , as well as by consumers with active lifestyles . our digital strategy is focused on engaging with these consumers and increasing awareness and sales of our products . we believe that our net revenues have been driven by a growing interest in performance products and the strength of the under armour brand in the marketplace . our long-term growth strategy is focused on increased sales of our products through ongoing product innovation , investment in our distribution channels and international expansion . while we plan to continue to invest in growth , we also plan to improve efficiencies throughout our business as we seek to gain scale through our operations and return on our investments . fiscal 2020 performance financial highlights for fiscal 2020 as compared to fiscal 2019 include : net revenue s decreased 15 % . wholesale revenues decrease d 25 % and direct-to-consumer revenues increased 2 % , driven by growth in our e-commerce business . apparel revenue decreased 17 % . footwear revenue declined 14 % a nd accessories revenue was relatively flat . revenue in our north america segm ent declined 19 % . revenue in our asia-pacific , emea and latin america segments decreased 1 % , 4 % and 16 % , respectively . gross margin inc reased 140 basis points . selling , general and administrative expen se decreased 3 % . a large majority of our products are sold in north america ; however , we believe our products appeal to athletes and consumers around the globe . internationally , our net revenues are generated primarily from a mix of sales to retailers and distributors in our wholesale channel and sales through our direct-to-consumer channels . we believe there is an increasing recognition of the health benefits of an active lifestyle . we believe this trend provides us with an expanding consumer base for our products . we also believe there is a continuing shift in consumer demand from traditional non-performance products to performance products , which are intended to provide better performance by wicking perspiration away from the skin , helping to regulate body temperature and 31 enhancing comfort . we plan to continue to grow our business over the long term through increased sales of our apparel , footwear and accessories , expansion of our wholesale distribution , growth in our direct-to-consumer sales channel and expansion in international markets . although we believe these trends will facilitate our growth , we also face potential challenges that could limit our ability to take advantage of these opportunities or negatively impact our financial results , including , among others , the risk of general economic or market conditions that could affect consumer spending and the financial health of our retail customers . for example , recent and ongoing developments regarding covid-19 may negatively impact our results of operations . additionally , we may not be able to successfully execute on our long-term strategies , or successfully manage the increasingly complex operations of our global business effectively . although we have implemented restructuring plans in the past and may implement additional plans in the future , we may not fully realize the expected benefits of these plans or other operating or cost-saving initiatives . in addition , we may not consistently be able to anticipate consumer preferences and develop new and innovative products that meet changing preferences in a timely manner . furthermore , our industry is very competitive , and competition pressures could cause us to reduce the prices of our products or otherwise affect our profitability . we also rely on third-party suppliers and manufacturers outside the u.s. to provide fabrics and to produce our products , and disruptions to our supply chain could harm our business . for a more complete discussion of the risks facing our business , refer to the โ risk factors โ section included in item 1a . story_separator_special_tag as we navigated these unprecedented circumstances , we continued to focus on preserving our liquidity and managing our cash flows through certain preemptive actions designed to enhance our ability to meet our short-term liquidity needs , including amending our credit agreement to provide temporary relief from or revisions to certain of our financial covenants in the near-term , providing us with improved access to liquidity during this time period and completing a sale of $ 500 million of convertible senior notes . additional actions include , among others , reductions to our discretionary spending and changes to our investment strategies , negotiating payment terms with our vendors , including revised lease terms with landlords in the form of rent deferrals or rent waivers , reductions in compensation costs , including through temporary reductions in pay , layoffs and decreases in incentive compensation , and limiting certain marketing and capital expenditures . further , in connection with global legislation , including the coronavirus aid , relief , and economic security ( `` cares '' ) act , we recognized certain incentives totaling $ 9.0 million for fiscal 2020. these incentives were recorded as a reduction of the associated costs which we incurred within selling , general and administrative expenses in the consolidated statements of operations . we do expect the pandemic to continue to have a material impact on our financial condition , results of operations and cash flows from operations into 2021 as compared to the end of 2020. specifically , we experienced timing impacts from covid-19 , related to customer order flow and changes in supply chain timing , which resulted in more planned spring product deliveries shifting from the fourth quarter of 2020 to early 2021. further , we could experience material impacts , in addition to those noted above , including , but not limited to , increased sales-related reserves , increased charges from allowance for doubtful accounts , charges from adjustments of the carrying amount of inventory , increased cost of product , costs to alter production plans , changes in the designation of our hedging instruments , volatility in our effective tax rate and impacts to cash flows from operations due to delays in cash receipts from customers . the extent of the impact of the covid-19 pandemic on our operational and financial performance depends on future developments outside of our control , including the duration and spread of the pandemic and related actions taken by federal , state and local government officials , and international governments to prevent disease spread and the pace of vaccination efforts . given that the current circumstances are dynamic and highly uncertain , we can not reasonably estimate the impact of future store closures and shopping behaviors , including the related impact on store traffic patterns , conversion or overall consumer demand . for a more complete discussion of the covid-19 related risks facing our business , refer to the โ risk factors โ section included in item 1a . segment presentation and marketing corporate other consists largely of general and administrative expenses not allocated to an operating segment , including expenses associated with centrally managed departments such as global marketing , global it , global supply chain , innovation and other corporate support functions ; costs related to our global assets and global marketing , costs related to our headquarters ; restructuring and impairment related charges ; and certain foreign currency hedge gains and losses . 33 2020 restructuring on march 31 , 2020 , our board of directors approved a restructuring plan ( `` 2020 restructuring plan '' ) designed to rebalance our cost base to further improve profitability and cash flow generation . we identified further opportunities and on september 2 , 2020 , our board of directors approved a $ 75 million increase to the restructuring plan , resulting in an updated 2020 restructuring plan of approximately $ 550 million to $ 600 million of total estimated pre-tax restructuring and related charges . the restructuring and related charges primarily consist of up to approximately : $ 219 million of cash restructuring charges , comprised of up to : $ 61 million in facility and lease termination costs , $ 30 million in employee severance and benefit costs , and $ 128 million in contract termination and other restructuring costs ; and $ 381 million of non-cash charges comprised of an impairment of $ 291 million related to our new york city flagship store and $ 90 million of intangibles and other asset related impairments . we recorded $ 472.7 million and $ 183.1 million of restructuring and related impairment charges for fiscal 2020 and fiscal 2018 , respectively . there were no restructuring charges incurred during fiscal 2019. the summary of the costs recorded during fiscal 2020 as well as our current estimates of the amount expected to be incurred in connection with the 2020 restructuring plan is as follows : restructuring and related impairment charges recorded estimated restructuring and related impairment charges ( 1 ) ( in thousands ) year ended december 31 , 2020 ( a ) remaining to be incurred ( b ) total ( a+b ) costs recorded in cost of goods sold : contract-based royalties $ 11,608 โ 11,608 inventory write-offs 768 3,400 4,168 total costs recorded in cost of goods sold 12,376 3,400 15,776 costs recorded in restructuring and impairment charges : property and equipment impairment 29,280 8,098 37,378 intangible asset impairment 4,351 โ 4,351 right-of-use asset impairment 293,495 โ 293,495 employee related costs 28,579 1,421 30,000 contract exit costs ( 2 ) 79,008 89,992 169,000 other asset write off 13,074 15,926 29,000 other restructuring costs 12,564 8,436 21,000 total costs recorded in restructuring and related impairment charges 460,351 123,873 584,224 total restructuring and impairment charges $ 472,727 $ 127,273 $ 600,000 ( 1 ) estimated restructuring and related impairment charges to be incurred reflect the high-end of the range of the estimated remaining charges expected to be recorded by us in connection with the restructuring plan .
| consolidated results of operations year ended december 31 , 2020 compared to year ended december 31 , 2019 net revenues decreased $ 792.5 million , or 15 % , to $ 4,474.7 million in fiscal 2020 from $ 5,267.1 million in fiscal 2019. net revenues by product category are summarized below : replace_table_token_6_th ( 1 ) corporate other revenues consist of foreign currency hedge gains and losses related to revenues generated by entities within our geographic operating segments , but managed through our central foreign exchange risk management program . the decrease in net sales was primarily driven by a unit sales decline in apparel , footwear and accessories across all categories due to decreased demand , primarily related to impacts of covid-19 including cancellations of orders by wholesale customers , closures of brand and factory house stores and lower traffic upon store re-openings , and a unit sales decrease of off-price sales within our wholesale channel . the decrease was partially offset by growth in the e-commerce business and sale of specialty products , such as sports masks , within our accessories category . license revenues decreased $ 33 million , or 23.8 % , to $ 105.8 million in fiscal 2020 from $ 138.8 million in fiscal 2019 driven primarily by lower contractual royalty minimums , decreased revenue from our licensing partners in north america due to softer demand as a result of impacts of covid-19 . further , fiscal 2019 included one-time settlements with two of our north american partners .
| 2,377 |
in addition , we design , source , market and sell branded fashion handbags , apparel and accessories , as well as private label fashion handbags and accessories . we market and sell our products through better department stores , major department stores , mid-tier department stores , specialty stores , luxury retailers , value priced retailers , national chains , mass merchants , and online retailers , throughout the united states , canada , mexico and certain other european nations . in addition , our products are marketed through our retail stores and our e-commerce websites within the united states , canada and mexico , our joint ventures in europe , south africa , israel , taiwan and china , and under special distribution arrangements in certain european countries , the middle east , south and central america , oceania and various countries in asia . our product lines include a broad range of contemporary styles designed to establish or capitalize on market trends , complemented by core product offerings . we have established a reputation for design creativity and our ability to offer quality products in popular styles at accessible price points , delivered in an efficient manner and time frame . our business comprises five distinct segments : wholesale footwear , wholesale accessories/apparel , retail , first cost and licensing . our wholesale footwear segment includes the following brands : steve madden women'sยฎ , madden girlยฎ , steve madden men'sยฎ , maddenยฎ , reportยฎ , dolce vitaยฎ , dv dolce vitaยฎ , mad loveยฎ , steven by steve maddenยฎ , supergaยฎ ( under license ) , anne kleinยฎ ( under license ) , betsey johnsonยฎ , betseyvilleยฎ , steve madden kidsยฎ , greatsยฎ and blondoยฎ , and includes our international business and certain private label footwear business . our wholesale accessories/apparel segment includes steve maddenยฎ , big buddhaยฎ , betsey johnsonยฎ , steven by steve maddenยฎ , madden girlยฎ , luv betseyยฎ , anne kleinยฎ ( under license ) , cejonยฎ , bb dakotaยฎ , bb dakota x steve madden , and cupcakes & cashmereยฎ ( under license ) brands and includes our international business and certain private label accessories business . steven madden retail , inc. , our wholly owned retail subsidiary , that comprises our retail segment , operates steve madden , steven , superga and international retail stores , as well as steve madden , superga , betsey johnson , blondo , dolce vita , greats and bb dakota e-commerce websites . the first cost segment represents activities of a subsidiary that earns commissions for serving as a buying agent for footwear products under private labels for many u.s. large mass-market merchandisers , shoe chains and other value priced retailers . our licensing segment is engaged in the licensing of steve maddenยฎ , steven by steve maddenยฎ and madden girlยฎ trademarks for use in connection with the manufacture , marketing and sale of apparel , outerwear , hosiery , jewelry , watches , eyeglasses , sunglasses , hair accessories , umbrellas , bedding and bath , and luggage . in addition , we license the betsey johnsonยฎ trademark for use in connection with the manufacture , marketing and sale of women 's and children 's apparel , hosiery , fragrance and beauty , sleepwear , swimwear , activewear , jewelry , hair accessories , watches , slippers , bedding and bath , luggage , umbrellas and medical scrubs . we also license the dolce vitaยฎ trademark for use in connection with the manufacture , marketing and sale of swimwear and the freebird by stevenยฎ trademark for operation of retail stores . dividends a quarterly cash dividend of $ 0.15 per share on our outstanding shares of common stock was paid on march 27 , 2020. at the end of march 2020 , in response to the covid-19 pandemic , as a precautionary measure our board of directors temporarily suspended the payments of dividends . the aggregate cash dividends paid for the twelve months ended december 31 , 2020 was $ 12,459. on february 24 , 2021 , our board of directors approved the reinstatement of a quarterly cash dividend . the quarterly dividend of $ 0.15 per share is payable on march 26 , 2021 to stockholders of record as of the close of business on march 16 , 2021. reclassifications certain reclassifications were made to prior years ' amounts to conform to the 2020 presentation . executive summary in december 2019 , covid-19 emerged and spread worldwide . the world health organization declared covid-19 a 26 pandemic in march 2020 , resulting in federal , state and local governments and private entities mandating various restrictions , including the closure of non-essential businesses , travel restrictions , restrictions on public gatherings , stay-at-home orders and advisories and quarantining of people who may have been exposed to the virus . after closely monitoring and taking into consideration the guidance from federal , state and local governments , in march 2020 , we temporarily closed all of our stores and our corporate offices in the u.s. and the vast majority of our stores and offices globally . as of august 2020 , the vast majority of our stores and corporate offices in the u.s. and globally reopened . these and other factors have had and may continue to have a material impact on our business , results of operations , financial position and cash flow . story_separator_special_tag operating expenses decreased to $ 2,395 in 2020 from $ 15,618 in 2019. operating expenses in 2020 , included a benefit associated with the recovery from the payless shoesource bankruptcy of $ 1,081 and in 2019 included charges to bad debt expenses associated with the payless shoesource bankruptcy of $ 10,355. income from operations was $ 1,507 for the year ended december 31 , 2020 compared to a loss from operations of $ 8,177 in 2019. licensing segment : licensing fee income generated by the licensing segment accounted for $ 8,969 , or 0.7 % of total revenue , and $ 11,581 , or 0.6 % of total revenue for the years ended december 31 , 2020 and 2019 , respectively , which represents a $ 2,612 , or 22.6 % , decrease . operating expenses decreased to $ 3,191 in 2020 from $ 3,477 in 2019. during the year ended december 31 , 2020 , income for the licensing segment amounted to $ 5,778 as compared to the prior year income of $ 8,104. year ended december 31 , 2019 vs. year ended december 31 , 2018 consolidated : total revenue for the year ended december 31 , 2019 increased by 6.5 % to $ 1,787,157 from $ 1,677,734 for fiscal 2018. net sales for fiscal 2019 increased by 6.9 % to $ 1,768,135 from $ 1,653,609 for fiscal 2018. commission and licensing fee income for fiscal 2019 decreased by 21.2 % to $ 19,022 from $ 24,125 for fiscal 2018. for the year ended december 31 , 2019 , gross margin as a percentage of total revenue increased to 38.4 % in the current year compared to 38.2 % in the prior year . for the year ended 2019 , gross margin included a charge of $ 386 related to a termination of a joint venture . operating expenses increased in 2019 to $ 503,270 , or 28.2 % of total revenue , from $ 466,781 , or 27.8 % of total revenue , in 2018. in addition , in 2019 impairments of intangibles of $ 4,050 were recorded . also in 2019 , impairments for lease right-of-use assets of $ 1,883 were recorded . the effective tax rate for the year ended december 31 , 2019 decreased to 21.8 % compared to 26.4 % in the same period of 2018 primarily due to the year-over-year benefit resulting from the exercising and vesting of share-based awards , a decrease in the state taxes incurred , a decrease in prepaid tax adjustments , and an increase in 2019 pre-tax income in 30 jurisdictions with low tax rates . net income attributable to steven madden , ltd. for the year ended december 31 , 2019 increased to $ 141,311 compared to $ 129,136 for the year ended december 31 , 2018. wholesale footwear segment : revenue generated by the wholesale footwear segment was $ 1,112,091 , or 62.2 % of total revenue , and $ 1,058,366 , or 63.1 % , of our total revenue for the years ended december 31 , 2019 and 2018 , respectively . the increase in net revenue was primarily driven by strong growth in steve madden women 's , along with the full year of recognizing revenue for the anne klein brand and an increase in our private label business , partially offset by not recognizing sales to payless shoesource in the first half of 2019 compared to the first half of 2018. gross profit margin in 2019 was 33.6 % , while gross profit margin in 2018 was 32.7 % . the increase in gross profit margin of 90 basis points was primarily attributable to strong growth in steve madden women 's , along with not recognizing sales to the low-margin payless shoesource customer . operating expenses increased to $ 206,055 , or 18.5 % of revenue , in 2019 compared to $ 205,771 , or 19.4 % of revenue , in the same period of 2018. recorded in the wholesale footwear segment was a $ 4,050 impairment charge for the brian atwood trademark impacting operating income for 2019. the increase in operating expenses primarily resulted from higher payroll and related expenses , warehouse and distribution expenses and other selling expenses associated with higher sales and the addition of the anne klein footwear business . income from operations increased to $ 163,482 for 2019 compared to $ 140,138 for 2018. wholesale accessories/apparel segment : revenue generated by the wholesale accessories/apparel segment accounted for $ 334,862 , or 18.7 % , and $ 300,091 , or 17.9 % , of total revenue for the years ended december 31 , 2019 and 2018 , respectively . the increase in revenue was primarily due to growth in our steve madden branded handbags , the full year of recognizing sales for the anne klein brand , as well as the addition of the bb dakota apparel business . gross profit margin in the wholesale accessories/apparel segment decreased to 29.3 % in 2019 from 30.6 % in the prior year period . the 1.3 % decrease in gross margin resulted from tariffs imposed on accessories when compared to 2018. in the year ended december 31 , 2019 , operating expenses increased to $ 75,676 , or 22.6 % of revenue , compared to $ 64,647 , or 21.5 % of revenue , in the year ended december 31 , 2018. the increase primarily resulted from higher payroll related expenses associated with the increase in sales , as well as the addition of the bb dakota apparel business . also , contributing to the increase were higher warehouse and distribution expenses , other selling expenses and marketing expenses all based on higher sales volume .
| results of operations ( $ in thousands ) year ended december 31 , 2020 vs. year ended december 31 , 2019 consolidated : total revenue for the year ended december 31 , 2020 decreased by 32.8 % to $ 1,201,814 from $ 1,787,157 for fiscal 2019 , with decreases in all segments as a result of the impact of the covid-19 pandemic . for the year ended december 31 , 2020 , gross profit was $ 464,541 , or 38.7 % of total revenue , as compared to $ 686,017 , or 38.4 % of total revenue , in the prior year . the increase in gross profit as a percentage of total revenue was primarily due to the shift in sales to our higher-margin e-commerce business . operating expenses in 2020 were $ 414,978 , or 34.5 % of total revenue , as compared $ 503,270 , or 28.2 % of total revenue , in 2019. the increase in operating expenses as a percentage of total revenue was primarily attributable to a deleverage on a lower sales base , but was also impacted by the impairment of lease right-of-use assets and store fixed assets , early lease termination and modification charges , and restructuring and other related charges as a result of the covid-19 pandemic . the increase was partially offset by our reduction in workforce , furloughs , temporary salary reductions and reduced discretionary spending as a result of our initiatives to control expenses , along with the change in valuation of contingent considerations . in addition , for the years 2020 and 2019 , impairments of intangibles of $ 44,273 and $ 4,050 were recorded , respectively . also in 2020 and 2019 , impairments for lease right-of-use assets and store fixed assets of $ 36,895 and $ 1,883 were recorded , respectively . the effective tax rate for the year ended december 31 , 2020 increased to 39.0 % compared to 21.8 % last year .
| 2,378 |
as of december 31 , 2014 , the remaining balance of $ 11,333 related to the original u.s. long-term note outstanding is considered current because the term of the note expires in june 2015. collateralized long-term note โin october 2014 story_separator_special_tag the following discussion and analysis of our financial condition and results of operations should be read in conjunction with item 6 , `` selected financial data '' and our consolidated financial statements and related notes included in this annual report on form 10-k. this discussion contains forward-looking statements that involve risks and uncertainties . our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors including , but not limited to , those discussed under item 1a , `` risk factors . '' overview we develop and manufacture a broad line of high-performance fiber lasers , fiber amplifiers and diode lasers that are used in numerous applications , primarily in materials processing . we sell our products globally to original equipment manufacturers ( `` oems '' ) , system integrators and end users . we market our products internationally primarily through our direct sales force . we are vertically integrated such that we design and manufacture most of our key components used in our finished products , from semiconductor diodes to optical fiber preforms , finished fiber lasers and amplifiers . we also manufacture certain complementary products used with our lasers , including optical delivery cables , fiber couplers , beam switches , optical processing heads and chillers . in addition , we offer laser-based systems for certain markets and applications . description of our net sales , costs and expenses net sales . we derive net sales primarily from the sale of fiber lasers and amplifiers . we also sell diode lasers , communications systems , laser systems and complementary products . we sell our products through our direct sales organization and our network of distributors and sales representatives , as well as system integrators . we sell our products to oems that supply materials processing laser systems , communications systems and medical laser systems to end users . we also sell our products to end users that build their own systems which incorporate our products or use our products as an energy or light source . our scientists and engineers work closely with oems , systems integrators and end users to analyze their system requirements and match appropriate fiber laser or amplifier specifications . our sales cycle varies substantially , ranging from a period of a few weeks to as long as one year or more , but is typically several months . sales of our products generally are recognized upon shipment , provided that no obligations remain and collection of the receivable is reasonably assured . our sales typically are made on a purchase order basis rather than through long-term purchase commitments . we develop our products to standard specifications and use a common set of components within our product architectures . our major products are based upon a common technology platform . we continually enhance these and other products by improving their components and developing new components and new product designs . the average selling prices of our products generally decrease as the products mature . these decreases result from factors such as decreased manufacturing costs and increases in unit volumes , increased competition , the introduction of new products and market share considerations . in the past , we have lowered our selling prices in order to penetrate new markets and applications . furthermore , we may negotiate discounted selling prices from time to time with certain customers that purchase multiple units . cost of sales . our cost of sales consists primarily of the cost of raw materials and components , direct labor expenses and manufacturing overhead . we are vertically integrated and currently manufacture all critical components for our products as well as assemble finished products . we believe our vertical integration allows us to increase efficiencies , leverage our scale and lower our cost of sales . cost of sales also includes personnel costs and overhead related to our manufacturing and engineering operations , related occupancy and equipment costs , shipping costs and reserves for inventory obsolescence and for warranty obligations . inventories are written off and charged to cost of sales when identified as excess or obsolete . due to our vertical integration strategy and ongoing investment in plant and machinery , we maintain a relatively high fixed manufacturing overhead . we may not adjust these fixed costs quickly enough to adapt to rapidly changing market conditions . our gross margin is therefore significantly affected by our sales volume and the corresponding utilization of capacity and absorption of fixed manufacturing overhead expenses . sales and marketing . our sales and marketing expense consists primarily of costs related to compensation , trade shows , professional and technical conferences , travel , facilities , depreciation of equipment used for demonstration purposes and other marketing costs . 34 research and development . our research and development expense consists primarily of compensation , development expenses related to the design of our products and certain components , the cost of materials and components to build prototype devices for testing and facilities costs . costs related to product development are recorded as research and development expenses in the period in which they are incurred . general and administrative . our general and administrative expense consists primarily of compensation and associated costs for executive management , finance , legal and other administrative personnel , outside legal and professional fees , insurance premiums and fees , allocated facilities costs and other corporate expenses such as charges and benefits related to the change in allowance for doubtful debt . factors and trends that affect our operations and financial results in reading our financial statements , you should be aware of the following factors and trends that our management believes are important in understanding our financial performance . net sales . story_separator_special_tag for example , we recorded provisions for slow-moving , obsolete or excess inventory totaling $ 11.3 million , $ 15.1 million and $ 8.2 million in 2014 , 2013 and 2012 , respectively . sales and marketing expense . we expect to continue to expand our worldwide direct sales organization , build and expand applications centers , hire additional personnel involved in marketing in our existing and new geographic locations , increase the number of units for demonstration purposes and otherwise increase expenditures on sales and marketing activities in order to support the growth in our net sales . as such , we expect that our sales and marketing expenses will increase in the aggregate . research and development expense . we plan to continue to invest in research and development to improve our existing components and products and develop new components , products and systems . the amount of research and development expense we incur may vary from period to period . in general , if net sales continue to increase we expect research and development expense to increase in the aggregate . general and administrative expense . we expect our general and administrative expenses to increase as we continue to invest in systems and resources in management , finance , legal , information technology , human resources and administration to support our worldwide operations . legal expenses vary from quarter to quarter based primarily upon the level of litigation and transaction activities . major customers . while we have historically depended on a few customers for a large percentage of our annual net sales , the composition of this group can change from year to year . net sales derived from our five largest customers as a percentage of our annual net sales were 23 % , 21 % and 16 % in 2014 , 2013 and 2012 . in 2014 and 2013 , sales to our largest customer accounted for 11 % of our net sales . no customer accounted for more than 10 % of sales in 2012 . we seek to add new customers and to expand our relationships with existing customers . we anticipate that the composition of our significant customers will continue to change . if any of our significant customers were to substantially reduce their purchases from us , our results would be adversely affected . critical accounting policies and estimates the preparation of financial statements in conformity with accounting principles generally accepted in the united states ( `` 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 the reported amounts of net sales and expenses . by their nature , these estimates and judgments are subject to an inherent degree of uncertainty . on an ongoing basis we re-evaluate our judgments and estimates including those related to inventories , income taxes and the fair value of certain debt and equity instruments including stock-based compensation . we base our estimates and judgments on our historical experience and on other assumptions that we believe are reasonable under the circumstances , the results of which form the basis for making the judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results could differ from those estimates , which may materially affect our operating results and financial position . the accounting policies described below are those which , in our opinion , involve the most significant application of judgment , or involve complex estimation , and which could , if different judgments or estimates were made , materially affect our reported results of operations and financial position . revenue recognition . we recognize revenue in accordance with financial accounting standards board ( `` fasb '' ) accounting standards codification ( `` asc '' ) 605. revenue from orders with multiple deliverables is divided into separate units of accounting when certain criteria are met . these separate units generally consist of equipment and installation . the consideration for the arrangement is then allocated to the separate units of accounting based on their relative selling prices . the selling price of equipment is based on vendor-specific objective evidence and the selling price of installation is based on third-party evidence . applicable revenue recognition criteria are then applied separately for each separate unit of accounting . revenue for laser and amplifier sources generally is recognized upon the transfer of ownership which is typically at the time of shipment . installation revenue is recognized upon completion of the installation service which typically occurs within 30 to 90 days of delivery . for laser systems , which may carry customer specific processing requirements , revenue is recognized at 36 the latter of customer acceptance date or shipment date if the customer acceptance is made prior to shipment . returns and customer credits are infrequent and are recorded as a reduction to revenue . rights of return generally are not included in sales arrangements . accounts receivable and allowance for doubtful accounts . accounts receivable include $ 25.2 million and $ 17.7 million of bank acceptance drafts issued in china at december 31 , 2014 and 2013 , respectively . bank acceptance drafts are bank guarantees of payment on specified dates . the maturity of these bank acceptance drafts is less than 90 days . we maintain an allowance for doubtful accounts to provide for the estimated amount of accounts receivable that will not be collected . the allowance is based upon an assessment of customer creditworthiness , historical payment experience and the age of outstanding receivables . inventory . inventory is stated at the lower of cost ( first-in , first-out method ) or market value . inventory includes parts and components that may be specialized in nature and subject to rapid obsolescence . we maintain a reserve for inventory items to provide for an estimated amount of excess or obsolete inventory .
| results of operations the following table sets forth selected statement of operations data for the periods indicated in dollar amounts and expressed as a percentage of net sales . replace_table_token_8_th comparison of year ended december 31 , 2014 to year ended december 31 , 2013 net sales . net sales increased by $ 121.8 million , or 18.8 % , to $ 769.8 million in 2014 from $ 648.0 million in 2013 . the table below sets forth sales by application ( in thousands , except for percentages ) : replace_table_token_9_th sales for materials processing applications increased primarily due to higher sales of high-power , medium-power and qcw lasers used in cutting , welding and laser sintering applications , offset by decreased sales of pulsed lasers used in marking and engraving applications . we continue to see increased acceptance of the advantages of fiber laser technology . a growing number of oem customers have developed cutting systems that use our high-power lasers and sales of these systems are gaining sales from gas laser systems . we also increased sales of qcw lasers used for percussion drilling of holes in the aerospace industry as well as for cutting and welding thin sheet metal as demand increased for these devices from oem customers because they are displacing lamp pumped yag lasers . the decrease in sales of pulsed lasers was attributable to a decrease in consumer electronics demand for marking and engraving compared to a year ago and increased competition for certain models of pulsed lasers . the decrease in other applications sales relates primarily to the continued softness in telecommunications sales in russia and north america . 39 cost of sales and gross margin . cost of sales increased by $ 45.2 million , or 14.7 % , to $ 353.3 million in 2014 from $ 308.1 million in 2013 . our gross margin increased to 54.1 % in 2014 from 52.5 % in 2013 .
| 2,379 |
the words โ expect , โ โ estimate , โ โ anticipate , โ โ predict , โ โ believe โ and similar expressions and variations thereof are intended to identify forward-looking statements . these statements appear in a number of places in this document and include statements regarding the intent , belief or current expectations of twenty-first century fox , inc. , its directors or its officers with respect to , among other things , trends affecting twenty-first century fox , inc. 's financial condition or results of operations . the readers of this document are cautioned that any forward-looking statements are not guarantees of future performance and involve risks and uncertainties . more information regarding these risks , uncertainties and other factors is set forth under the heading โ risk factors โ in item 1a of this annual report on form 10-k ( the โ annual report โ ) . twenty-first century fox , inc. does not ordinarily make projections of its future operating results and undertakes no obligation ( and expressly disclaims any obligation ) to publicly update or revise any forward-looking statements , whether as a result of new information , future events or otherwise , except as required by law . readers should carefully review this document and the other documents filed by twenty-first century fox , inc. with the securities and exchange commission ( the โ sec โ ) . this section should be read together with the audited consolidated financial statements of twenty-first century fox , inc. and related notes set forth elsewhere in this annual report . introduction management 's discussion and analysis of financial condition and results of operations is intended to help provide an understanding of twenty-first century fox , inc. and its subsidiaries ' ( together , โ twenty-first century fox โ or the โ company โ ) financial condition , changes in financial condition and results of operations . this discussion is organized as follows : overview of the company 's business - this section provides a general description of the company 's businesses , as well as developments that occurred either during the fiscal year ended june 30 , ( โ fiscal โ ) 2017 or early fiscal 2018 that the company believes are important in understanding its results of operations and financial condition or to disclose known trends . results of operations - this section provides an analysis of the company 's results of operations for fiscal 2017 , 2016 and 2015. this analysis is presented on both a consolidated and a segment basis . in addition , a brief description is provided of significant transactions and events that impact the comparability of the results being analyzed . liquidity and capital resources - this section provides an analysis of the company 's cash flows for fiscal 2017 , 2016 and 2015 , as well as a discussion of the company 's outstanding debt and commitments , both firm and contingent , that existed as of june 30 , 2017. included in the discussion of outstanding debt is a discussion of the amount of financial capacity available to fund the company 's future commitments and obligations , as well as a discussion of other financing arrangements . critical accounting policies - this section discusses accounting policies considered important to the company 's financial condition and results of operations , and which require significant judgment and estimates on the part of management in application . in addition , note 2 to the accompanying consolidated financial statements of twenty-first century fox summarizes the company 's significant accounting policies , including the critical accounting policy discussion found in this section . overview of the company 's business the company is a diversified global media and entertainment company , which manages and reports its businesses in the following segments : cable network programming , which principally consists of the production and licensing of programming distributed primarily through cable television systems , direct broadcast satellite operators , telecommunication companies and online video distributors in the united states ( โ u.s. โ ) and internationally . 37 television , which principally consists of the broadcasting of network programming in the u.s. and the operation of 28 full power broadcast television stations , including 11 duopolies , in the u.s. ( of these stations , 17 are affiliated with the fox broadcasting company ( โ fox โ ) , nine are affiliated with master distribution service , inc. ( โ mynetworktv โ ) , one is affiliated with both the cw television network and mynetworktv and one is an independent station ) . filmed entertainment , which principally consists of the production and acquisition of live-action and animated motion pictures for distribution and licensing in all formats in all entertainment media worldwide , and the production and licensing of television programming worldwide . direct broadcast satellite television , which consisted of the distribution of programming services via satellite , cable and broadband directly to subscribers in italy , germany and austria . the direct broadcast satellite television ( โ dbs โ ) segment consisted entirely of the operations of sky italia and sky deutschland ag ( โ sky deutschland โ ) ( collectively , the โ dbs businesses โ ) . on november 12 , 2014 , twenty-first century fox completed the sale of sky italia and its 57 % interest in sky deutschland to sky plc ( โ sky โ ) ( see note 3 โ acquisitions , disposals and other transactions to the accompanying consolidated financial statements of twenty-first century fox under the heading โ sky italia and sky deutschland โ ) . sky is a pan-european digital television provider , which operates in italy , germany , austria , the united kingdom ( โ u.k. โ ) and ireland . other , corporate and eliminations , which principally consists of corporate overhead and eliminations . following the sale of the dbs businesses , the company continues to report in five segments for comparative purposes , and there is no current activity in the dbs segment . story_separator_special_tag operating costs incurred by the filmed entertainment segment include : exploitation costs , primarily theatrical prints and advertising and home entertainment marketing and manufacturing costs ; amortization of capitalized production , overhead and interest costs ; and participations and talent residuals . selling , general and administrative expenses include salaries , employee benefits , rent and other routine overhead expenses . other business developments see note 3 โ acquisitions , disposals and other transactions , under the heading โ fiscal 2017 โ to the accompanying consolidated financial statements of twenty-first century fox for a discussion of the company 's business developments . 39 story_separator_special_tag production activities and a 2 % benefit from the company 's foreign operations . the company 's tax provision and related effective tax rate of 27 % for fiscal 2016 was lower than the statutory rate of 35 % primarily due to a 3 % rate reduction from the company 's foreign operations and a 4 % rate reduction from increased tax amortization deductions for certain film and television properties as a result of a ruling that was received by the company . in addition , increases in the net provision for uncertain tax positions were substantially offset by the final settlement of a foreign matter . net income โ net income increased for fiscal 2017 , as compared to fiscal 2016 , primarily due to higher operating results . 41 results of operationsโfiscal 2016 versus fiscal 2015 the following tables set forth the company 's operating results for fiscal 2016 , as compared to fiscal 2015 , including presentation of revenues by component excluding the dbs segment and related intersegment eliminations . replace_table_token_8_th replace_table_token_9_th * * not meaningful 42 overview โ the company 's revenues decreased 6 % for fiscal 2016 , as compared to fiscal 2015. the changes in revenues were primarily due to the effect of the sale of the dbs businesses in november 2014. excluding the activity of the dbs businesses , the company 's revenues increased 1 % for fiscal 2016 , as compared to fiscal 2015 , primarily due to higher affiliate fee and advertising revenues partially offset by lower content revenue . the increase in affiliate fee revenue was primarily due to higher average rates per subscriber across most channels , and the increase in advertising revenue was led by higher pricing at fox news and increases at the international cable channels . the decrease in content revenue was primarily attributable to lower worldwide home entertainment and theatrical revenues and the effect of the disposition of shine group in december 2014. the strengthening of the u.s. dollar against local currencies resulted in a revenue decrease of approximately $ 725 million for fiscal 2016 , as compared to fiscal 2015. operating expenses decreased 8 % for fiscal 2016 , as compared to fiscal 2015 , primarily due to the sale of the dbs businesses in november 2014 and shine group in december 2014 partially offset by higher operating expenses at the cable network programming and television segments . selling , general and administrative expenses decreased 3 % for fiscal 2016 , as compared to fiscal 2015 , primarily due to the sale of the dbs businesses and shine group partially offset by higher selling , general and administrative expenses at the cable network programming segment . depreciation and amortization , including the amortization of acquired identifiable intangible assets , decreased 28 % for fiscal 2016 , as compared to fiscal 2015 , primarily due to lower depreciation and amortization as a result of the sale of the dbs businesses . impairment and restructuring charges โ see note 5 โ restructuring programs and note 6 โ inventories , net to the accompanying consolidated financial statements of twenty-first century fox . equity ( losses ) earnings of affiliates โ equity ( losses ) earnings of affiliates decreased $ 938 million for fiscal 2016 , as compared to fiscal 2015 , primarily due to lower results at sky . included in sky 's results for fiscal 2015 was the company 's proportionate share of approximately $ 790 million of sky 's gains related to the sale of its investments in ngc network international , llc and ngc network latin america , llc ( collectively , โ ngc international โ ) , sky betting & gaming ( โ sky bet โ ) and itv plc . also contributing to this decrease were lower results at endemol shine group ( see note 3 โ acquisitions , disposals and other transactions to the accompanying consolidated financial statements of twenty-first century fox under the heading โ shine group โ ) and hulu . endemol shine group 's results for fiscal 2016 include the company 's proportionate share related to the loss on deconsolidation of a subsidiary and other impairment charges of approximately $ 95 million ( see note 7 โ investments to the accompanying consolidated financial statements of twenty-first century fox under the heading โ other equity affiliates โ ) . replace_table_token_10_th * * not meaningful interest expense , net โ interest expense decreased $ 14 million for fiscal 2016 , as compared to fiscal 2015 , primarily due to the effect of the amendment to the yes network credit agreement in fiscal 2015 ( as described in note 11 โ borrowings to the accompanying consolidated financial statements of twenty-first century fox under the heading โ bank loans โ ) partially offset by higher average debt outstanding as a result of the issuance in october 2015 of $ 600 million of 3.70 % senior notes due 2025 and $ 400 million of 4.95 % senior notes due 2045. other , net โ see note 22 โ additional financial information to the accompanying consolidated financial statements of twenty-first century fox under the heading โ other , net โ .
| results of operations results of operationsโfiscal 2017 versus fiscal 2016 the following table sets forth the company 's operating results for fiscal 2017 , as compared to fiscal 2016 : replace_table_token_6_th * * not meaningful overview โ the company 's revenues increased 4 % for fiscal 2017 , as compared to fiscal 2016 , primarily due to higher affiliate fee , advertising and other revenues partially offset by lower content revenue . the increase in affiliate fee revenue was primarily attributable to higher average rates per subscriber at the domestic channels . the increase in advertising revenue was primarily due to the broadcast of super bowl li in february 2017 , higher ratings and pricing at fox news channel ( โ fox news โ ) and the broadcast of the major league baseball ( โ mlb โ ) world series , which benefited from higher ratings and two additional games . partially offsetting these increases in advertising revenue were lower entertainment advertising revenue at both fox and the company 's television stations due to lower entertainment ratings at fox as compared to fiscal 2016 , which included the final season of american idol . the increase in other revenues was primarily due to the acquisition of the publishing , travel and certain other businesses ( the โ ngs media business โ ) in november 2015 from the national geographic society ( see note 3 โ acquisitions , disposals and other transactions to the accompanying consolidated financial statements of twenty-first century fox under the heading โ national geographic partners โ ) . the decrease in content revenue was primarily attributable to lower worldwide theatrical and home entertainment revenues from motion pictures partially offset by higher subscription video-on-demand ( โ svod โ ) and network and syndication revenues . the 4 % revenue increase is net of a decrease of approximately $ 220 million due to the strengthening of the u.s. dollar against local currencies for fiscal 2017 , as compared to fiscal 2016 .
| 2,380 |
the company evaluates the useful lives of its intangible assets each reporting period to determine whether events and circumstances require revising the remaining period of amortization . in addition , the company reviews indefinite lived intangible assets for impairment when events or story_separator_special_tag this section and other parts of this annual report on form 10-k contain forward-looking statements within the meaning of the private securities litigation reform act of 1995. these statements involve risks and uncertainties . forward-looking statements can also be identified by words such as โ expects , โ โ anticipates , โ โ targets , โ โ goals , โ โ projects , โ โ intends , โ โ plans , โ โ believes , โ โ seeks , โ โ estimates , โ โ continues , โ โ may , โ โ will be , โ โ will continue , โ โ will likely results , and similar terms . forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements . factors that might cause such differences include , but are not limited to , those discussed in โ item 1a โ risk factors โ above . the following discussion should be read in conjunction with the consolidated financial statement and notes thereto included in item 8 of this report . we assume no obligation to revise or update any forward-looking statements for any reason , except as required by law . overview we are a global leader in the design , engineering and manufacture of production tools , modules and subsystems for the semiconductor and display capital equipment markets . our products include chemical delivery modules , frame assemblies , gas delivery systems , fluid delivery systems , precision robotics , process modules as well as other high-level assemblies . our services provide part cleaning , surface encapsulation , and high sensitivity micro contamination analysis primarily for the semiconductor device makers and wafer fabrication ( wfe ) equipment markets . historically , the company has operated under one operating segment . however , as a result of recent acquisitions , w e elected to reorganize our organizational and reporting structure to capture efficiencies and operating leverage . we now report results for two segments : products and services . we ship a majority of our products and provide most of our services to u.s. registered customers with locations both in and outside the u.s. in addition to u.s. manufacturing and service operations , we manufacture products and provide parts cleaning and other related services in our asian and european facilities to support local and u.s. based customers . over the long-term , we believe the semiconductor market we serve will continue to grow due to multi-year industry inflections creating demand from a broad range of drivers including mobile demand driven by 5g , new cpu architectures which are enabling higher performance servers , and cloud , ai and machine learnings . we also believe that semiconductor equipment oems are increasingly relying on partners like uct to fulfill their expanding capacity requirements . critical accounting estimates our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the united states , which require us to make estimates and judgments that affect the reported amounts of assets , liabilities , revenue and expenses and related disclosure at the date of our consolidated financial statements . on an on-going basis , we evaluate our estimates and judgments , including those related to inventories , income taxes , business combinations and goodwill , intangible assets and long-lived assets . we base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances , the results of which form the basis of our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates . we consider certain accounting policies related to revenue recognition , inventory valuation , accounting for income taxes , business combinations , valuation of goodwill , intangible assets and long-lived assets to be critical policies due to the estimates and judgments involved in each . 31 revenue recognition our revenues for fiscal years 2020 , 2019 and 2018 were highly concentrated in a small number of oem customers in the semiconductor capital equipment industry . we recognize revenue when promised goods or services ( performance obligations ) are transferred to a customer in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services . we perform the following five steps to determine when to recognize revenue : 1. identification of the contract ( s ) with customers โ our standard arrangement for our customers includes a signed purchase order or contract , no right of return of delivered products and no customer acceptance provisions . we assess collectability based on the creditworthiness of the customer and past transaction history . we perform on-going credit evaluations of , and do not require collateral from , our customers . 2. identification of the performance obligations in the contract โ our performance obligations include delivery of promised goods or services . 3. determination of the transaction price โ the transaction price of our contracts with customers may include both fixed and variable consideration . we include variable consideration in the transaction price to the extent that it is probable that a significant reversal of revenue will not occur when the uncertainty associated with the variable consideration is subsequently resolved . we generally invoice our customers upon shipment of goods and completion of services with payment due within 30 to 90 days after issuance . 4. allocation of the transaction price to the performance obligations in the contract โ for contracts that contain multiple performance obligations , we allocate the transaction price to the performance obligations on a relative standalone selling price basis . story_separator_special_tag we evaluate our goodwill and indefinite life tradename for impairment on an annual basis , and whenever events or changes in circumstances indicate that the carrying value may not be fully recoverable . in addition , we evaluate our identifiable intangible assets and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable . factors we consider important which could trigger an impairment review include the following : significant changes in the manner of our use of the acquired assets or the strategy of our overall business ; significant negative changes in revenue of specific products or services ; significant negative industry or economic trends ; and significant decline in our stock price for a sustained period . we continually apply judgment when performing these evaluations and continuously monitor for events and circumstances that could negatively impact the key assumptions in determining fair value , including long-term revenue growth projections , undiscounted cash flows , discount rates , recent market valuations from transactions by comparable companies , volatility in our market capitalization and general industry , market and macroeconomic conditions . it is possible that changes in such circumstances , or in the variables associated with the judgments , assumptions and estimates used in assessing fair value , would require us to record a non-cash impairment charge . 33 story_separator_special_tag p style= '' margin-bottom:0pt ; margin-top:0pt ; text-indent:0 % ; font-family : times new roman ; font-size:10pt ; '' > our primary cash inflows and outflows were as follows : we generated net cash from operating activities of $ 97.3 million in fiscal year 2020 , compared to $ 121.0 million in fiscal year 2019. the $ 23.7 million decrease was driven by a decrease of $ 120.2 million in the net change from operating assets and liabilities offset by an increase of $ 8.4 million in non-cash items and by an increase of $ 88.1 million in net income . the major contributors to the net change in operating assets and liabilities , net of effects of acquisition , in fiscal year 2020 were as follows : o accounts receivable increased $ 32.7 million primarily due to the increase in revenues in fiscal 2020 and the timing of collections . o inventories increased $ 8.0 million due primarily to the customer demand outlook in 2021. o accounts payable decreased $ 12.6 million , accrued compensation and related benefits increased $ 9.7 million , and other liabilities decreased $ 7.4 million , primarily due to the timing of payments . cash used in investing activities was $ 29.8 million in fiscal year 2020 compared to $ 49.2 million in fiscal year 2019. during fiscal year 2020 , net cash used for investing activities primarily consisted of $ 36.4 million for purchases of property , plant and equipment , offset by $ 6.6 million in proceeds from insurance related to the cinos korea fire in 2018. during fiscal year 2019 , net cash used for investing activities primarily consisted of $ 29.9 million , net of cash acquired , for the dms acquisition and $ 26.3 million for purchases of property , plant and equipment . cash used in financing activities was $ 31.1 million in fiscal year 2020 compared to cash used by financing activities of $ 53.4 million in fiscal year 2019. during fiscal year 2020 , net cash used in financing activities primarily consisted of $ 28.8 million net of debt repayments and $ 1.5 million of taxes paid upon the vesting of restricted stock units . during fiscal year 2019 , net cash used in financing activities primarily consisted of $ 51.2 million net of debt repayments , $ 0.6 million dividends payments made to a joint venture shareholder and $ 1.9 million of taxes paid upon the vesting of restricted stock units . we believe we have sufficient capital to fund our working capital needs , satisfy our debt obligations , maintain our existing capital equipment , purchase new capital equipment and make strategic acquisitions from time to time . as of december 25 , 2020 , we had cash of $ 200.3 million compared to $ 162.5 million as of december 27 , 2019. our cash and cash equivalents , cash generated from operations and amounts available under our revolving line of credit described below were our principal sources of liquidity as of december 25 , 2020. in february of 2018 , we completed an underwritten public offering of 4,761,905 shares of our common stock , in which we received net proceeds of approximately $ 94.3 million , after deducting the underwriting discounts and offering expenses payable by us . in august 2018 , in conjunction with the acquisition of qgt , we entered into a credit agreement with barclays bank that provided a term loan , a revolving credit facility , and a letter of credit facility ( the โ credit facilities โ ) . see further discussion under borrowing arrangements below . 38 we anticipate that our existing cash and cash equivalents balance and operating cash flow will be sufficient to service our indebtedness and meet our working capital requirements and technology development projects for at least the next twelve months . the adequacy of these resources to meet our liquidity needs beyond that period will depend on our growth , the size and number of any acquisitions , the state of the worldwide economy , our ability to meet our financial covenants with our credit facility , the cyclical expansion or contraction of the semiconductor capital equipment industry and the other industries we serve and capital expenditures required to meet possible increased demand for our products . in order to expand our business or acquire additional complementary businesses or technologies , we may need to raise additional funds through equity or debt financings . if required , additional financing may not be available on terms that are favorable to us , if at all .
| results of operations fiscal year our fiscal year is the 52- or 53-week period ending on the friday nearest december 31. fiscal 2020 , 2019 and 2018 each contained 52 weeks . a discussion regarding our financial condition and results of operations for fiscal 2020 compared to fiscal 2019 is presented below . a discussion regarding our financial condition and results of operations for fiscal 2019 compared to fiscal 2018 can be found under item 7 in our annual report on form 10-k for the fiscal year ended december 27 , 2019 , filed with the sec on march 11 , 2020 , which is available on the sec 's website at www.sec.gov and our investor relations website at ww.uct.com/investors . discussion of results of operations revenues replace_table_token_4_th total products revenues increased in fiscal year 2020 over fiscal year 2019 , primarily due to an increase in customer demand in the semiconductor industry , in particular , the wafer fabrication equipment industry . total services revenues increased in fiscal year 2020 over fiscal year 2019 , primarily due to increases in demand across its customer base . replace_table_token_5_th on a geographic basis , revenues represent products shipped from or services performed in our u.s. and international locations . united states revenue increased in absolute terms and as a percentage of total revenue due to two factors . the first of these was an overall increase in semiconductor industry demand in the u.s. the second factor relates to the april , 2019 acquisition of dms , whose customers are primarily u.s. based . the increase in foreign revenues in absolute terms and as a percentage of total revenue is due primarily to the overall higher semiconductor and semiconductor capital equipment demand outside of the u.s. 34 cost of revenues replace_table_token_6_th total cost of revenues increased in fiscal year 2020 over fiscal year 2019 due to higher demand for both products and services .
| 2,381 |
noncontrolling interests are a separate component of equity and not a liability . increases story_separator_special_tag the following section discusses management 's view of the financial condition , results of operations and cash flows of diodes incorporated and its subsidiaries ( collectively , โ the company , โ โ our company , โ โ we , โ โ our , โ โ ours , โ or โ us โ ) and should be read together with the consolidated financial statements and the notes to consolidated financial statements included elsewhere in this form 10-k. the following discussion contains forward-looking statements and information relating to our company . we generally identify forward-looking statements by the use of terminology such as โ may , โ โ will , โ โ could , โ โ should , โ โ potential , โ โ continue , โ โ expect , โ โ intend , โ โ plan , โ โ estimate , โ โ anticipate , โ โ believe , โ โ project , โ or similar phrases or the negatives of such terms . we base these statements on our beliefs as well as assumptions we made using information currently available to us . such statements are subject to risks , uncertainties and assumptions , including those identified in part i , item 1a. โ risk factors , โ as well as other matters not yet known to us or not currently considered material by us . should one or more of these risks or uncertainties materialize , or should underlying assumptions prove incorrect , actual results may vary materially from those anticipated , estimated or projected . given these risks and uncertainties , prospective investors are cautioned not to place undue reliance on such forward-looking statements . forward-looking statements do not guarantee future performance and should not be considered as statements of fact . you should not unduly rely on these forward-looking statements , which speak only as of the date of this annual report on form 10-k. unless required by law , we undertake no obligation to publicly update or revise any forward-looking statements to reflect new information or future events or otherwise . the private securities litigation reform act of 1995 ( the โ act โ ) provides certain โ safe harbor โ provisions for forward-looking statements . all forward-looking statements made in this annual report on form 10-k are made pursuant to the act . this discussion and analysis does not address certain items in respect of fiscal 2017 in reliance on amendments to disclosure requirements adopted by the sec in 2019. a discussion and analysis of fiscal 2017 may be found in item 7. management 's discussion and analysis of financial condition and results of operations of our annual report on form 10-k for the fiscal year ended december 31 , 2018 , filed with the sec on february 21 , 2019 , and such discussion and analysis is hereby incorporated into this form 10-k by this reference . summary of the twelve months ended december 31 , 2019 revenue grew to a record $ 1.25 billion , an increase of 2.9 % over the $ 1.21 billion in 2018 ; gross profit was a record $ 465.8 million , a 7.0 % increase , compared to the $ 435.3 million in 2018 ; gross margin improved 140 basis points to a record 37.3 % from 35.9 % in 2018 ; operating income increased 29.9 % to a record $ 200.6 million , or 16.1 % of revenue , compared to $ 154.5 million , or 12.7 % , of revenue in 2018 ; net income was a record $ 153.3 million , or $ 2.96 per diluted share , compared to $ 104.0 million , or $ 2.04 per share , in 2018 ; and achieved $ 229.8 million cash flow from operations . we had $ 98.5 million of capital expenditures , or 7.9 % of revenue . net cash flow was a positive $ 17.7 million , which includes the net pay down of $ 117.3 million of long-term debt . summary of the twelve months ended december 31 , 2018 revenue grew to a record $ 1.2 billion , an increase of 15.2 % over the $ 1.05 billion in 2017 ; gross profit was a record $ 435.3 million , a 22.0 % increase , compared to the $ 356.8 million in 2017 ; gross margin improved 210 basis points to 35.9 % from 33.8 % in 2017 ; operating income increased to a record $ 154.5 , or 12.7 % of revenue , compared to 7.5 % , in 2017 ; net income was a record $ 104.0 million , or $ 2.04 per diluted share , compared to a net loss of ( $ 1.8 ) million , or ( $ 0.04 ) per share , in 2017 ; and achieved $ 185.6 million cash flow from operations . we had $ 87.5 million of capital expenditures , or 7.2 % of revenue . net cash flow was a positive $ 36.6 million , which includes the net pay down of $ 56.8 million of long-term debt . - 34 - business outlook and factors relevant to our results of operations we continue to pursue our previously announced goals of achieving revenue of $ 2.5 billion and gross margin of 40 % , representing gross profit of $ 1.0 billion , all by 2025. acquisitions will continue to be a key part of our growth strategy to reach our 2025 revenue goal . we have a solid pipeline of designs and expanded customer relationships across all regions and product lines . the success of our business depends on , among other factors , the strength of the global economy and the stability of the financial markets , our customers ' demand for our products , the ability of our customers to meet their payment obligations , the likelihood of customers not canceling or deferring existing orders , and the strength of consumers ' demand for items containing our products in the end-markets we serve . story_separator_special_tag we expect cash generated by our operations together with existing cash , cash equivalents , short-term investments and available credit facilities to be sufficient to satisfy our working capital needs , capital asset purchases , outstanding commitments and other liquidity requirements associated with our existing operations for at least the next 12 months . short-term investments as of december 31 , 2019 , we had short-term investments of approximately $ 4.8 million . these investments are highly liquid with maturity dates greater than three months at the date of purchase . the decrease from $ 7.5 million in 2018 , to $ 4.8 million in 2019 reflects the use of these investments to reduce our debt levels . we generally can access these investments in a relatively short amount of time but in doing so we generally forfeit a portion of interest income . short-term debt our asia subsidiaries maintain credit facilities with several financial institutions through our foreign entities worldwide totaling $ 126.6 million . at december 31 , 2019 , borrowings were $ 13.3 million and letters of credit were $ 1.4 million under the asia credit facilities . other than two taiwanese credit facilities that are collateralized by assets , our foreign credit lines are unsecured , uncommitted , repayable on demand , terminable by the lender at any time and contain no restrictive covenants . these credit facilities bear interest at libor or similar indices plus a specified margin . interest payments are due quarterly on outstanding amounts under the credit lines . long-term debt we currently have a u.s. banking credit facility ( the โ u.s . credit facility โ ) under which we may draw up to $ 250 million on a revolving basis , in addition to a $ 250 million term loan . the u.s. credit facility matures october 26 , 2021. the remaining portion of the term loan included in the u.s. credit facility is repayable in part through quarterly installments that increase over time from $ 6.3 million per quarter in the first three quarters of 2019 to $ 9.4 million per quarter in the final year of the u.s. credit facility . we may , from time to time , request increases in the aggregate commitments under the u.s. credit facility of up to $ 200 million , subject to the lenders electing to increase their commitments or by means of the addition of new lenders , and subject to at least half of each increase in aggregate commitments being in the form of term loans , with the remaining amount of each increase being an increase in the amount of the revolving portion of the u.s. credit facility . the u.s. credit facility contains certain financial and non-financial covenants , including , but not limited to , a maximum consolidated leverage ratio , a minimum consolidated fixed charge coverage ratio , and restrictions on liens , indebtedness , investments , fundamental changes , dispositions , and restricted payments ( including dividends and share repurchases ) . the obligations of the company and the other borrowers under the u.s. credit facility are secured by substantially all of the assets of the company , including controlling interests in its first-tier subsidiaries , and by specified assets of certain of its subsidiaries . in addition to our u.s. credit facility , our 51 % owned subsidiary , eris technology corporation ( โ eris โ ) , borrowed $ 23.5 million on a long-term basis from local taiwan banks in order to make an investment . the first loan of $ 4.3 million matures in 2033 , while the second loan of $ 19.2 million matures in 2024. see note 8 of โ notes to consolidated financial statements โ of this annual report for additional information . capital expenditures and investments in 2019 and 2018 , our capital expenditures were approximately $ 96.2 million and $ 79.7 million , respectively , which includes approximately $ 9.3 million and $ 10.2 million of capital expenditures related to the investment agreement with the management committee of the chengdu hi-tech industrial development zone ( the โ cdht โ ) for 2019 and 2018 , respectively . our capital expenditures for these periods were primarily related to manufacturing expansion in our facilities in china and , to a lesser extent , our office buildings . capital expenditures in 2019 were approximately 7.7 % of our net sales . in 2010 , we announced an investment agreement with the management committee of the cdht . under this agreement , we formed a joint venture with a chinese partner , chengdu ya guang electronic company limited ( โ ya guang โ ) , to establish a semiconductor assembly and test facility in chengdu , china . in december 2016 , we increased our investment and currently own approximately 98 % of the joint venture entity . the cdht granted the joint venture a 50 year land lease , provides corporate and employee tax incentives , tax refunds , subsidies and other financial support . we believe that this will be a long-term , multi-year project that will provide us additional capacity as needed . as of december 31 , 2019 , we have invested $ 178.3 million in this joint venture , primarily for infrastructure , buildings and equipment related capital expenditures . - 39 - restricted cash is pledged as collateral when we enter into agreements with banks for certain banking facilities . as of december 31 , 2019 , restricted cash of $ 1.1 million was pledged as collateral for issuance of bank acceptance notes and letters of credit . our foreign operations expose us to unique intellectual property technology risks compared to a company with fewer or no international operations . for example , we are exposed to potential cyber security breaches that may target our employees or infrastructure outside the united states . these risks may result in material and adverse impacts on our financial condition and results of operations .
| results of operations the following table sets forth , for the periods indicated , the percentage that certain items in the statements of income bear to net sales : replace_table_token_4_th the following discussion explains in greater detail our consolidated operating results and financial condition . this discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this annual report ( in thousands ) . replace_table_token_5_th - 37 - net sales net sales increased for the twelve months ended december 31 , 2019 , compared to the same period last year due to growth in our automotive and industrial markets combined with growth in our frequency control products . the table below sets forth our revenue as a percentage of total revenue by end-user market : replace_table_token_6_th cost of goods sold cost of goods sold increased approximately $ 4.6 million for the twelve months ended december 31 , 2019 compared to the same period last year , primarily as a result of our increased sales . as a percent of sales , cost of goods sold was 62.7 % for the twelve months ended december 31 , 2019 , compared to 64.1 % for the same period last year . average unit cost increased 7.4 % for the twelve months ended december 31 , 2019 , compared to the same period last year , due to the sale of higher margin products and increased production facility utilization . for the twelve months ended december 31 , 2019 , gross profit increased approximately 7.0 % when compared to the same period last year . gross profit margin for the twelve month periods ended december 31 , 2019 and 2018 , was 37.3 % and 35.9 % , respectively . operating expenses operating expenses for the twelve months ended december 31 , 2019 decreased approximately $ 15.6 million , or 5.6 % , compared to the same period last year . a significant contributing factor to this decrease was a $ 24.3 million one-time gain we realized upon selling land .
| 2,382 |
it is not practicable to estimate the amount of income taxes story_separator_special_tag concerning forwardโlooking statements this annual report on form 10-k , including management 's discussion and analysis of financial condition and results of operations , contains not only historical information , but also forward-looking statements within the meaning of section 27a of the securities act of 1933 , as amended , and section 21e of the securities exchange act of 1934 , as amended . statements that are not historical are forward-looking and reflect expectations for future company performance . in addition , forward-looking statements may be made orally or in press releases , conferences , reports , on the company 's web site , or otherwise , in the future by or on behalf of the company . when used by or on behalf of the company , the words โ expect , โ โ anticipate , โ โ estimate , โ โ believe , โ โ intend , โ โ will , โ โ plan , โ โ predict , โ โ project , โ โ outlook , โ โ could , โ โ may , โ โ should , โ and similar expressions generally identify forward-looking statements . for these statements throughout the annual report on form 10-k , the company claims the protection of the safe harbor for forward-looking statements contained in the private securities litigation reform act of 1995. the entire sections entitled โ financial overview and outlook โ and โ risk factors โ should be considered forward-looking statements . forward-looking statements involve a number of risks and uncertainties , including but not limited to those discussed in the โ risk factors โ section contained in item 1a . readers should not place undue reliance on any forward-looking statement and should recognize that the statements are predictions of future results or conditions , which may not occur as anticipated . actual results or conditions could differ materially from those anticipated in the forward-looking statements and from historical results , due to the risks and uncertainties described herein , as well as others not now anticipated . the risks and uncertainties described herein are not exclusive and further information concerning the company and its businesses , including factors that potentially could materially affect the company 's financial results , may emerge from time to time . except as required by law , the company assumes no obligation to update forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements . company overview the company manufactures and markets center pivot , lateral move , and hose reel irrigation systems . the company also produces and markets irrigation controls , chemical injection systems , remote monitoring and irrigation scheduling systems . these products are used by farmers to increase or stabilize crop production while conserving water , energy , and labor . through its acquisitions and third-party commercial arrangements , the company has been able to enhance its capabilities in providing innovative , turn-key solutions to customers through the integration of designs , controls , and pump stations . the company sells its irrigation products primarily to a world-wide independent dealer network , who resell to their customers , the farmers . the company 's primary production facilities are located in the united states . the company has smaller production and sales operations in brazil , france , china , turkey , and south africa , as well as distribution and sales operations in the netherlands , australia , and new zealand . the company also manufactures and markets , through distributors and direct sales to customers , various infrastructure products , including moveable barriers for traffic lane management , crash cushions , preformed reflective pavement tapes , and other road safety devices , through its production facilities in the united states and italy , and has produced road safety products in irrigation manufacturing facilities in china and brazil . in addition , the company 's infrastructure segment produces large diameter steel tubing , and railroad signals and structures , and provides outsourced manufacturing and production services for other companies . for the business overall , the global , long-term drivers of population growth , water conservation and environmental sustainability , the need for increased food production , and the need for safer , more efficient transportation solutions remain positive . key factors which impact demand for the company 's irrigation products include total worldwide agricultural crop production , the profitability of agricultural crop production , agricultural commodity prices , net farm income , availability of financing for farmers , governmental policies regarding the agricultural sector , water and energy conservation policies , the regularity of rainfall , regional climate conditions , and foreign currency exchange rates . a key factor which impacts demand for the company 's infrastructure products is the amount of spending authorized by governments to improve road and highway systems . much of the u.s. highway infrastructure market is driven by government spending programs . for example , the u.s. government funds highway and road improvements through the federal highway trust fund program . this program provides funding to improve the nation 's roadway system . in december 2015 , the u.s. government enacted a five-year , $ 305 billion highway-funding bill ( the fast act โ ) to fund highway and bridge projects . the fast act expired september 30 , 2020 and a one-year extension has been approved by congress . matching funding from the various states may be required as a condition of federal funding . 20 the company continues to have an ongoing , structured , acquisition process that it expects to generate additional growth opportunities throughout the world and add to its irrigation and infrastructure capabilities . the company is committed to achieving earnings growth by global market expansion , improvements in margins , and strategic acquisitions . covid-19 impact in march 2020 , the world health organization declared coronavirus ( covid-19 ) a global pandemic . story_separator_special_tag as a result of these factors , the actual amount of costs incurred by the company in connection with the remediation of contamination of its lindsay , nebraska site could exceed the amounts accrued for this expense at this time . while any revisions could be material to the operating results of any fiscal quarter or fiscal year , the company does not expect such additional expenses would have a material adverse effect on its liquidity or financial condition . financial overview and outlook operating revenues in fiscal 2020 were $ 474.7 million , a 7 percent increase compared to $ 444.1 million in the prior year . irrigation segment revenues decreased 2 percent to $ 343.5 million and infrastructure segment revenues increased 42 percent to $ 131.2 million . net earnings for fiscal 2020 were $ 38.6 million or $ 3.56 per diluted share compared with $ 2.2 million or $ 0.20 per diluted share in the prior year . prior year net earnings were reduced by after-tax costs of $ 11.6 million , or $ 1.07 per diluted share , related to the company 's foundation for growth initiative and by after-tax costs of $ 1.8 million , or $ 0.17 per diluted share , related to a valuation adjustment for indirect tax credits in a foreign jurisdiction . foundation for growth was a focused performance improvement initiative that includes setting strategic direction , defining priorities , and improving overall operating margin performance . pre-tax costs of $ 15.1 million in fiscal 2019 associated with the initiative were comprised of professional consulting fees , net loss on business divestitures , severance costs and plant closing costs . these costs have been substantially recovered through improved operating income in fiscal 2020. the global drivers for the company 's irrigation segment are population growth and the attendant need for expanded food production and efficient water use . the need for irrigated agricultural crop production , which depends upon many factors , including the following primary drivers : agricultural commodity prices - during fiscal 2020 , agricultural commodity prices declined significantly because of impacts caused by the global coronavirus pandemic . the pandemic resulted in the shutdown of economies globally , a significant increase in unemployment , the disruption of food supply systems and consumption patterns , and the reduction in gasoline consumption and demand for ethanol . under the u.s.-china phase 1 trade deal signed january 15 , 2020 , china has pledged to increase purchases of u.s. agricultural products by $ 32 billion over two years , to an average annual total of $ 40 billion compared to the 2017 baseline of $ 24 billion . commodity prices have recovered by august 2020 due to lower yield expectations in the u.s. as well as increased exports to china , with c orn prices approximately five percent lower and soybean prices approximately seven percent higher compared to august 2019. net farm income - as of september 2020 , the u.s. department of agriculture ( the โ usda โ ) estimated u.s. 2020 net farm income to be $ 102.7 billion , an increase of 22.7 percent from the usda 's final u.s. 2019 net farm income of $ 83.7 billion . this increase is projected to come primarily from higher federal government direct farm program payments through the expansion of the coronavirus food assistance program ( โ cfap โ ) . cfap was designed to provide direct assistance to farmers affected by price declines and market disruptions caused by the coronavirus pandemic . weather conditions โ demand for irrigation equipment is often positively affected by storm damage and prolonged periods of drought conditions as producers look for ways to reduce the risk of low crop 22 production and crop failures . conversely , demand for irrigation equipment can be negatively affected during periods of more predictable or excessive natural precipitation . governmental policies - a number of government laws and regulations can impact the company 's business , including : o the agricultural improvement act of 2018 ( the โ 2018 farm bill โ ) was signed into law in december 2018 and continued many of the programs that were in previous federal farm bills that are designed to provide a degree of certainty to growers . the programs include funding for the environmental quality incentives program , which provides financial assistance to farmers to implement conservation practices , and is frequently used to assist in the purchase of center pivot irrigation systems . o u.s. tax reform enacted in december 2017 increased the benefit of certain tax incentives , such as the section 179 income tax deduction and section 168 bonus depreciation , which are intended to encourage equipment purchases by allowing the entire cost of equipment to be treated as an expense in the year of purchase rather than amortized over its useful life . o biofuel production continues to be a major demand driver for irrigated corn , sugar cane and soybeans as these crops are used in high volumes to produce ethanol and biodiesel . on december 19 , 2019 , the u.s. environmental protection agency finalized renewable fuels standard ( rfs ) volume requirements for 2020 that slightly increased volumes of conventional biofuels as well as volumes for advanced and cellulosic biofuels . demand for biofuels has been negatively impacted in 2020 by reduced driving and fuel consumption caused by the coronavirus pandemic . o many international markets are affected by government policies such as subsidies and other agriculturally related incentives . while these policies can have a significant effect on individual markets , they typically do not have a material effect on the consolidated results of the company . currency โthe value of the u.s. dollar fluctuates in relation to the value of currencies in a number of countries to which the company exports products and maintains local operations . the strengthening of the dollar increases the cost in the local currency of the products exported from the u.s. into these countries and , therefore , could negatively affect the company 's international sales and margins .
| results of operations the following โ fiscal 2020 compared to fiscal 2019 โ section presents an analysis of the company 's consolidated operating results displayed in the consolidated statements of earnings and should be read together with the information in note 17 , industry segment information , to the consolidated financial statements . a discussion regarding our financial condition and results of operations for fiscal 2019 compared to fiscal 2018 can be found in โ management 's discussion and analysis of financial condition and results of operations โ in item 7 of part ii of our annual report on form 10-k for the fiscal year ended august 31 , 2019 , filed with the securities and exchange commission ( โ sec โ ) on october 31 , 2019 , which is available free of charge on the sec 's website at www.sec.gov and the company 's website at www.lindsay.com under the tab โ investor relations โ sec filings. โ fiscal 2020 compared to fiscal 2019 the following table provides highlights for fiscal 2020 compared with fiscal 2019 : replace_table_token_3_th ( 1 ) includes corporate general and administrative expenses of $ 29.8 million for fiscal 2020 . ( 2 ) see note 19 industry segment information , to the consolidated financial statements , for further details regarding segments . revenues operating revenues in fiscal 2020 were $ 474.7 million , an increase of 7 percent or $ 30.6 million , compared to $ 444.1 million in fiscal 2019. irrigation segment revenues decreased $ 8.0 million , or 2 percent , and infrastructure revenues increased $ 38.6 million , or 42 percent , compared to the prior fiscal year . the increase in infrastructure revenues was due in part to the completion of a large project in the u.k. of approximately $ 27.0 million .
| 2,383 |
service revenue from individual customers greater than 10 % of consolidated service revenue in the respective periods was as follows : replace_table_token_17_th 79 pra health sciences , inc. and subsidiaries notes to consolidated financial statements ( continued ) december 31 , 2016 accounts receivable and unbilled receivables from individual customers that were equal to or greater than 10 % of consolidated accounts receivable and unbilled receivables at the respective dates were as follows story_separator_special_tag you should read the following discussion and analysis of our financial condition and results of operations together with our โ selected financial data โ and the consolidated financial statements and the related notes included elsewhere in โ financial statements and supplementary data. โ some of the information contained in this discussion and analysis or set forth elsewhere in this annual report , including information with respect to our plans and strategy for our business , includes forwardโlooking statements that involve risks and uncertainties . you should read the โ risk factors โ section of this annual report on form 10โk for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forwardโlooking statements contained in the following discussion and analysis . overview we are one of the world 's leading global cros , by revenue , providing outsourced clinical development services to the biotechnology and pharmaceutical industries . we believe we are one of a select group of cros with the expertise and capability to conduct clinical trials across major therapeutic areas on a global basis . our therapeutic expertise includes areas that are among the largest in pharmaceutical development , and we focus in particular on oncology , central nervous system inflammation , respiratory , cardiometabolic and infectious diseases . we believe that we further differentiate ourselves from our competitors through our investments in medical informatics and clinical technologies designed to enhance efficiencies , improve study predictability and provide better transparency for our clients throughout their clinical development processes . contracts define the relationships with our clients and establish the way we earn revenue . three types of relationships are most common : a fixedโprice contract , a time and materials contract and feeโforโservice arrangements . in cases where the contracts are fixed price , we may bear the cost of overruns for the contracted scope , or we may benefit if the costs are lower than we anticipated for the contracted scope . in cases where our contracts are feeโforโservice , the contracts contain an overall budget for contracted resources . if actual resources used are lower than anticipated , the client generally keeps the savings and we may be responsible for covering the cost of the unused resource if we are unable to redeploy the resource . for time and material contracts , we bill the client only for the actual hours we spend to complete the contracted scope based upon stated hourly rates by position . the duration of our contracts range from a few months to several years . revenue for services is recognized only after persuasive evidence of an arrangement exists , the sales price is determinable , services have been rendered , and collectability is reasonably assured . once these criteria have been met , we recognize revenue for the services provided on fixedโfee contracts based on the proportional performance methodology , which determines the proportion of outputs or performance obligations which have been completed or delivered compared to the total contractual outputs for performance obligations . to measure performance , we compare the contract costs incurred to estimated total contract costs through completion . as part of the client proposal and contract negotiation process , we develop a detailed project budget for the direct costs based on the scope of the work , the complexity of the study , the geographical location involved and our historical experience . we then establish the individual contract pricing based on our internal pricing guidelines , discount agreements , if any , and negotiations with the client . the estimated total contract costs are reviewed and revised periodically throughout the lives of the contracts , with adjustments to revenue resulting from such revisions being recorded on a cumulative basis in the period in which the revisions are first identified . our costs consist of expenses necessary to carry out the clinical development project undertaken by us on behalf of the client . these costs primarily include the expense of obtaining appropriately qualified labor to administer the project , which we refer to as direct cost headcount . other costs we incur are attributable to the expense of operating our business generally , such as leases and maintenance of information technology and equipment . revenue from time and materials contracts is recognized as hours are incurred . revenues and the related costs of feeโforโservice contracts are recognized in the period in which services are performed . how we assess the performance of our business in addition to our gaap financial measures , we review various financial and operational metrics , including , new business awards , cancellations , and backlog . many of our current contracts include clinical trials covering multiple geographic locations . we utilize the same management systems and reporting tools to monitor and manage these activities on the same basis worldwide . for this reason , we consider our operations to be a single business segment , and we present our results of operations as a single reportable segment . 41 our gross new business awards for the years ended december 31 , 2016 , 2015 and 2014 were $ 2,367.1 million , $ 1,927.6 million and $ 1,745.4 million , respectively . new business awards arise when a client selects us to execute its trial and is documented by written or electronic correspondence or for our strategic solutions offering when the amount of revenue expected to be recognized is measurable . the number of new business awards can vary significantly from year to year , and awards can have terms ranging from several months to several years . story_separator_special_tag our investment in wuxipra totaled $ 1.1 million as of december 31 , 2015. we entered into a joint venture agreement with a2 healthcare corporation ( formerly part of asklep , inc. ) . the joint venture provides research and development outsourcing solutions in japan to the biopharmaceutical and medical device industries . this joint venture is based in tokyo , japan and is owned by us ( 49 % ) and asklep ( 51 % ) . on october 17 , 2014 , the joint venture changed its name from rps asklep , inc. to a2pra corporation , or a2pra . we recorded a $ 0.1 million increase to the investment balance during the year ended december 31 , 2016. there was no change in the investment balance for the year ended december 31 , 2015 and we recorded a $ 0.1 million reduction to the investment balance during the year ended december 31 , 2014 , for our equity in the venture 's net income ( loss ) for the period , which is recorded in the equity in gains ( losses ) of unconsolidated joint venture , net of tax in our consolidated statement of operations . the investment will be adjusted for our equity in the venture 's net income ( loss ) , cash contributions , distributions , and other adjustments required by the equity method of accounting . our investment in a2pra totaled $ 0.3 million and $ 0.2 million at december 31 , 2016 and 2015 , respectively . in august 2015 , we entered into a joint venture , along with an affiliate of kkr . the joint venture was dissolved in december 2015. the purpose of the joint venture included , among other things , the evaluation of investments or acquisitions to enhance our strategic objectives . the joint venture was jointly owned by us ( 11 % ) and kkr ( 89 % ) . we contributed $ 20.0 million to the joint venture in august 2015 and received $ 19.5 million in december 2015 when the joint venture was dissolved . we recorded the $ 0.5 million reduction to the investment balance in equity in gains ( losses ) of unconsolidated joint ventures , net of tax in the consolidated statement of operations . the investment in the joint venture was adjusted for our equity in the venture 's net income ( loss ) , cash contributions , distributions , and other adjustments required by the equity method of accounting . sources of revenue total revenues are comprised of service revenue and reimbursement revenue , each of which is described below . service revenue we generally enter into contracts with customers to provide services with payments based on either fixedโfee , time and materials , or feeโforโservice arrangements . revenue for services is recognized only after persuasive evidence of an arrangement exists , the sales price is determinable , services have been rendered , and collectability is reasonably assured . once these criteria have been met , we recognize revenue for the services provided on fixedโfee contracts based on the proportional performance methodology , which determines the proportion of outputs or performance obligations which have been completed or delivered compared to the total contractual outputs for performance obligations . to measure performance , we compare the contract costs incurred to estimated total contract costs through completion . as 43 part of the client proposal and contract negotiation process , we develop a detailed project budget for the direct costs based on the scope of the work , the complexity of the study , the geographical location involved and our historical experience . we then establish the individual contract pricing based on our internal pricing guidelines , discount agreements , if any , and negotiations with the client . the estimated total contract costs are reviewed and revised periodically throughout the lives of the contracts , with adjustments to revenue resulting from such revisions being recorded on a cumulative basis in the period in which the revisions are first identified . revenue from time and materials contracts is recognized as hours are incurred . billable hours typically fluctuate during the terms of individual contracts , as services we provide generally increase at the beginning of a study and decrease toward the end of a study . revenues and the related costs of feeโforโservice contracts are recognized in the period in which services are performed . a majority of our contracts undergo modifications over the contract period and our contracts provide for these modifications . during the modification process , we recognize revenue to the extent we incur costs , provided client acceptance and payment is deemed reasonably assured . we often offer volume discounts to our large customers based on annual volume thresholds . we record an estimate of the annual volume rebate as a reduction of revenue throughout the period based on the estimated total rebate to be earned for the period . most of our contracts can be terminated by the client either immediately or after a specified period , typically 30 to 60 days , following notice . in the case of early termination , these typically contracts require payment to us of fees earned to date , the fees , and in some cases , a termination fee or some portion of the fees or profit that we could have earned under the contract if it had not been terminated early . based on ethical , regulatory , and health considerations , this windโdown activity may continue for several quarters or years . therefore , revenue recognized prior to cancellation generally does not require a significant adjustment upon cancellation . increases in the estimated total direct costs to complete a contract without a corresponding proportional increase to the total contract price result in a cumulative adjustment to the amount of revenue recognized in the period the change in estimate is determined .
| results of operations year ended december 31 , 2016 compared to the year ended december 31 , 2015 replace_table_token_4_th service revenue increased by $ 204.2 million , or 14.8 % , from $ 1,375.8 million during the year ended december 31 , 2015 to $ 1,580.0 million during the year ended december 31 , 2016. service revenue for the year ended december 31 , 2016 benefited from an increase in billable hours and an increase in the effective rate of the hours billed on our studies , offset by an unfavorable impact of $ 5.3 million from foreign currency exchange rate fluctuations . the growth in service revenue and the increase in billable hours were due largely to the increase in our backlog as we entered the year , the type of services we are providing on our active studies , which was driven by the life cycles of projects that were active during the period , the growth in new business awards as a result of higher demand for our services across the industries we serve , and more effective sales efforts and the growth in the overall cro market . new business awards arise when a client selects us to execute its trial . the number of awards can vary significantly from period to period and our studies have terms ranging from several months to several years . the increase in our effective rate of the hours billed on our studies is attributable to the contract pricing terms on our current mix of active studies and the mix of clients and the services that we provide to those clients .
| 2,384 |
goodwill impairment is now the amount by which a reporting unit 's carrying value exceeds its fair value limited to the total amount of story_separator_special_tag the following discussion and analysis of our financial condition and results of operations should be read together with the consolidated financial statements and the related notes that are included in item 8 of part ii of this annual report on form 10-k. this discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties . our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors , including those set forth under the section entitled โ risk factors. โ please also refer to the section entitled โ cautionary note regarding forward-looking statements. โ business overview we believe we are a leading provider of smart mobility technology solutions and services throughout the united states , canada and europe . these solutions and services include toll and violations management , title and registration , automated safety solutions , and other data-driven solutions , to our customers , which include racs , fmcs , other large fleet owners , municipalities , school districts and violation-issuing authorities . our solutions simplify the smart mobility ecosystem by utilizing what we believe are industry-leading capabilities , information and technology expertise , and integrated hardware and software to efficiently facilitate the automated processing of tolls and violations and safety solutions for hundreds of agencies and millions of end users annually , while also making cities and roadways safer for everyone . recent events covid-19 's impact on our operating results in december 2019 , covid-19 emerged and has since spread throughout the world . the world health organization declared covid-19 a pandemic in march 2020 , and it continues to significantly disrupt the global economy . in the united states and abroad , many federal , state and local governments have instituted travel restrictions , stay-at-home orders , social distancing orders , and border closures in order to minimize the spread of the virus . although we began to see moderate signs of recovery towards the latter half of 2020 due to an increase in travel activity and the availability of covid-19 vaccines , we expect that covid-19 will continue to have a significant negative impact on the global economy and travel industry , including racs in future quarters . revenues from racs in our commercial services segment decreased significantly in 2020 as a result of reduced airline travel and widespread travel restrictions related to covid-19 . our rac customers have experienced reductions in volume and revenue . many of these rac customers have reduced their rental fleet sizes in response to the decline in customer demand . on may 22 , 2020 , the hertz corporation , one of our key commercial services customers , filed for bankruptcy protection under chapter 11 of the u.s. bankruptcy code , as amended , in the united states bankruptcy court for the district of delaware . while there were moderate improvements in travel demand towards the latter half of 2020 , the full extent and duration of covid-19 's impact on the rac industry and the financial health of our key rac customers can not be predicted at this time . these trends have had , and are expected to continue to have , a significant negative effect on revenues in our commercial services segment . in our government solutions segment , school closures resulting from the covid-19 pandemic have negatively impacted revenues from our school bus stop arm camera and school zone speed camera products . reductions in vehicle traffic in jurisdictions where we operate photo enforcement programs , payment rates for photo enforcement tickets and temporary inactivity of school zone speed cameras have all negatively impacted service revenue in our government solutions segment . we can not predict the duration or full impact of covid-19 on our overall business and results of operations at this time , but we expect the impact to continue into the first half of 2021. as a precautionary measure in response to covid-19 , we shifted most of our workforce to remote operations in march 2020 and we have implemented changes in our physical locations to ensure social distancing . we have not experienced any significant disruptions in our operations as a result of these measures . 47 in light of the extraordinary impact of covid-19 and related containment measures on the global economy and our business , prior trends in our business may not be applicable to our operations for the duration of the pandemic . pending acquisition on january 21 , 2021 , we entered into an agreement pursuant to which all of the holders of redflex 's outstanding equity as of the record date will sell , and we will cause one of our subsidiaries to purchase , one hundred percent ( 100 % ) of the outstanding equity of redflex . the aggregate consideration payable by us under the agreement will be aud 146.1 million , and the closing of the acquisition is expected to take place in the second quarter of 2021 , subject to the satisfaction or waiver of specified conditions . for additional information , see note 21 , subsequent event , in item 8 , financial statements and supplementary data . segment information we have two operating and reportable segments , commercial services and government solutions : our commercial services segment offers toll and violation management solutions and title and registration services for racs and fmcs in north america . in europe , we provide violations processing through epc and consumer tolling services through pagatelia . our government solutions segment provides complete , end-to-end red-light , speed , school bus stop arm and bus lane enforcement solutions . we implement and administer traffic safety programs and products for municipalities and local government agencies of all sizes . story_separator_special_tag we saw growth in our speed program revenue in 2020 and aniticipate continued growth in 2021 based on the full year impact of 2020 camera installations . however , we anticipate the negative impacts of covid-19 will continue to impact our other revenue programs in future quarters . product sales . product sales were $ 57.3 million and $ 32.0 million for fiscal years 2020 and 2019 , respectively , which relate to revenue generated from government solutions customers who purchase their equipment . product sales increased by $ 25.3 million which was primarily driven by sales to a single customer that is currently expanding its existing school zone speed program . a small number of customers purchase this equipment , and their buying patterns vary greatly from period to period . without a specific notice to proceed with additional installation , we anticipate product revenue for 2021 to be in line with 2018. cost of service revenue . cost of service revenue decreased year over year , from $ 5.6 million for fiscal year 2019 to $ 4.0 million for fiscal year 2020. the decrease resulted from decreased costs of collection and other third-party professional services and associated with the delivery of certain ancillary services performed by both of our segments . cost of product sales . cost of product sales increased by $ 15.7 million from $ 13.9 million in fiscal year 2019 to $ 29.6 million in fiscal year 2020 , and was driven by the increase in product sales volume . operating expenses . operating expenses decreased by $ 9.9 million , or 7.9 % , from $ 125.6 million for fiscal year 2019 to $ 115.7 million in fiscal year 2020. this decrease was primarily attributable to decreases of $ 4.6 million in employee wages due to furloughs , reduced headcount and bonus expense , and $ 9.1 million in transaction processing and other volume related costs , which were partially offset by increases in subcontractor expenses and operational equipment costs . operating expenses as a percentage of total revenue increased from 28.0 % to 29.4 % in fiscal years 2019 and 2020 , respectively . the following table presents operating expenses by segment : replace_table_token_9_th 52 selling , general and administrative expenses . selling , general and administrative expenses increased by $ 4.2 million to $ 89.7 million for fiscal year 2020 compared to $ 85.5 million for fiscal year 2019. we recorded a $ 14.4 million credit loss expense during the year as a result of the new credit loss accounting standard , which contributed to a $ 6.3 million year over year increase . we also had increases to stock based compensation and consulting fees of $ 2.6 million and $ 1.5 million , respectively . these increases were partially offset by an aggregate $ 7.6 million of cost-cutting measures including the elimination of the bonus payout and the related expense along with reductions to marketing and non-essential travel . selling , general and administrative expenses as a percentage of total revenue increased from 19.1 % to 22.8 % in fiscal years 2019 and 2020 , respectively . the following table presents selling , general and administrative expenses by segment : replace_table_token_10_th depreciation , amortization and ( gain ) loss on disposal of assets , net . depreciation , amortization and ( gain ) loss on disposal of assets , net , increased from $ 115.8 million in fiscal year 2019 to $ 116.8 million in fiscal year 2020. the increase is primarily due to the increased depreciation and amortization expense resulting from the pagatelia acquisition included in the entire fiscal year 2020 compared to only two months in 2019. impairment of property and equipment . impairment of property and equipment for the fiscal year 2019 included a $ 5.9 million impairment charge as a result of legislation that banned most red-light photo enforcement programs in texas on june 1 , 2019 , which was in the government solutions segment . interest expense , net . interest expense , net decreased by $ 19.9 million from $ 60.7 million in fiscal year 2019 to $ 40.9 million in fiscal year 2020. this decrease was primarily as a result of lower interest rates coupled with the refinancing of our new first lien term loan ( as defined and discussed below ) in february 2020 , which reduced the applicable margin on the interest rate by 50 basis points . see โ liquidity and capital resources โ below . tax receivable agreement liability adjustment . we recorded a $ 6.8 million charge in fiscal year 2020 and income of $ 0.1 million in fiscal year 2019. the adjustment in 2020 reflects the impact of an increase to the company 's deferred tax rate arising from higher estimated state tax rates due to a change in apportionment . other income , net . other income , net was $ 11.9 million in fiscal year 2020 compared to $ 11.1 million in fiscal year 2019. the increase of $ 0.8 million was primarily due to a $ 1.4 million gain related to the hta settlement agreement and another $ 1.4 million gain for the receipt of insurance proceeds related to this matter , both of which are further discussed in note 17 , commitments and contingencies , partially offset by the decreased volume in purchasing card rebates resulting from covid-19 's impact on toll usage . income tax provision . income tax provision was $ 5.4 million representing an effective tax rate of 273.4 % for fiscal year 2020 compared to $ 13.6 million , representing an effective tax rate of 28.9 % for fiscal year 2019. the effective tax rate change was primarily due to lower pre-tax income in 2020 , resulting in the company 's permanent book and tax differences having a proportionately greater impact on the effective tax rate in the current year . 53 net ( loss ) income . we had a net loss of $ 3 .
| executive summary we operate with long-term contracts and a highly reoccurring service revenue model . we continue to execute on our strategy of growing revenues with existing customers , expanding offerings into adjacent markets through innovation or acquisition and reducing operating costs . during the periods presented , we : executed on the growth strategy by completing strategic acquisitions : hta โ we acquired hta during the first quarter of 2018 which strengthened our position in tolling and related services to rac and fmc customers . epc โ in the second quarter of 2018 , we acquired epc which provided a platform to expand our rac and fmc solutions into europe . pagatelia โ during the fourth quarter of 2019 , we acquired pagatelia which provides consumer tolling and parking solutions and is accelerating our european expansion . generated total revenue of $ 393.6 million in fiscal year 2020 compared to $ 448.7 million in fiscal year 2019. we grew product sales by $ 25.3 million year over year ; however , due to the ongoing impact of covid-19 , our service revenue declined significantly , as discussed below . during fiscal year 2019 , we grew total revenue by $ 78.6 million , from $ 370.1 million in fiscal year 2018 to $ 448.7 million in fiscal year 2019. acquisitions contributed $ 21.6 million to the revenue growth , while expansion in existing products and customers contributed to the remaining growth . generated cash flows from operating activities of $ 46.9 million , $ 133.8 million , and $ 46.0 million for fiscal years 2020 , 2019 and 2018 , respectively . our cash on hand was $ 120.3 million as of december 31 , 2020. reduced our financing costs by refinancing our term loan in february 2020 , which reduced the applicable margin on our interest rate by 50 basis points .
| 2,385 |
our customers include trucking fleets and their drivers , independent truck drivers and highway and local motorists . we offer a broad range of products and services , including diesel fuel and gasoline , as well as nonfuel products and services such as truck repair and maintenance services , full service restaurants , more than 39 different brands of quick service restaurants , or qsrs , travel/convenience stores and various driver amenities . we also collect rents , royalties and other fees from our tenants , franchisees and dealers . we manage our business on the basis of two reportable segments : travel centers and convenience stores . see note 15 to the notes to consolidated financial statements included in item 15 of this annual report for more information about our segments . we have a single travel center located in a foreign country , canada , that we do not consider material to our operations . as of december 31 , 2015 , our business included 252 travel centers in 43 states in the united states , or u.s. , primarily along the u.s. interstate highway system , and the province of ontario , canada . our travel centers included 176 operated under the `` travelcenters of america '' and `` ta '' brand names , or the ta brand , including 161 that we operated and 15 that franchisees operated , including five we lease to franchisees , and 76 operated under the `` petro stopping centers '' and `` petro '' brand names , or the petro brand , including 62 that we operated and 14 that franchisees operated . of our 252 travel centers at december 31 , 2015 , we owned 32 , we leased 194 , including 192 that we leased from hospitality properties trust , or hpt , we operated two for a joint venture and our franchisees owned or leased from others 24 . substantially all of our travel centers include a convenience store , at least one restaurant , a truck service/repair facility and fueling lanes for trucks and passenger vehicles . we report this portion of our business as our travel center segment . as of december 31 , 2015 , our business also included 204 convenience stores not located on a travel center property in 11 , primarily midwestern , states of the u.s. we operate our convenience stores primarily under the `` minit mart '' brand name , or the minit mart brand . of these 204 convenience stores at december 31 , 2015 , we owned 173 and we leased or managed 29 , including one that we leased from hpt , and we operated two for a joint venture in which we own a noncontrolling interest . additionally , we collect rent from one dealer who operates a convenience store we own . we report this portion of our business as our convenience store segment . executive summary our revenues and income are subject to material changes as a result of market prices and the availability of diesel fuel and gasoline . these factors are subject to the worldwide petroleum products supply chain , which historically has experienced price and supply volatility and shocks as a result of , among other things , severe weather , terrorism , political crises , military actions and variations in demand that are often the result of changes in the macroeconomic environment . over the past few years there has been significant volatility in the cost of fuel . during the years ended december 31 , 2015 and 2014 , the price we pay for fuel generally trended downward , ending at a lower price than at the start of the year . at the end of 2015 , diesel oil futures contract prices were approximately 43 % below the prices experienced at the end of 2014 . some current economic forecasts reflect continued depressed prices for fuel ; however , as noted above , various factors and events can cause fuel prices to change , sometimes suddenly and sharply . due to the price volatility of fuel products we buy and our pricing to fuel customers , we believe that fuel revenue is not a reliable metric for analyzing our results of operations from period to period . as a result solely of changes in fuel prices , our fuel revenue may materially increase or decrease , in both absolute amounts and on a percentage basis , without a comparable change in fuel sales volumes or in fuel gross margin . we therefore consider fuel volume and fuel gross margin to be better measures of comparative performance . we generally are able to pass changes in our cost for fuel products to customers , but typically with a delay , such that during periods of rising fuel commodity prices fuel gross margins per gallon tend to be lower than they otherwise may have been and during periods of falling fuel commodity prices fuel gross margins per gallon tend to be higher than they otherwise may have been . increases and volatility in the prices we pay for fuel can have negative effects on our sales and profitability and increase our working capital requirements . for more information about fuel market risks that may affect us and our actions to mitigate those risks , see item 7a , `` quantitative and qualitative disclosures about market risk '' elsewhere in this annual report . 34 we believe that demand for fuel by trucking companies will tend to be reduced over time for any given level of economic activity by technological innovations that permit , and regulatory changes that encourage , require or give rise to , improved fuel efficiency of motor vehicle engines and other fuel conservation practices . we believe these factors were significant contributors to the modest increases in the level of fuel sales volumes we realized on a same site basis for 2015 , as compared to 2014 , despite generally improving economic conditions during 2015 . story_separator_special_tag we estimate that the convenience stores that we acquire will generally reach financial stabilization within one year after acquisition , but the actual results can vary widely from the estimate due to many factors , some of which are outside our control . as of december 31 , 2015 , the convenience stores acquired since 2013 have been owned by us for an average of eight months , and the planned renovations have been completed at 57 of these acquired convenience stores for an average of five months . the 37 travel centers and 201 convenience stores we acquired since the beginning of 2011 through december 31 , 2015 , have produced , from the beginning of each period or , if later , the dates we began to operate them , the following amounts of revenues in excess of cost of goods sold and site level operating expenses : replace_table_token_6_th 36 results of operations story_separator_special_tag style= '' font-family : inherit ; font-size:10pt ; '' > and 55.0 % of nonfuel revenues during 2014 and 2013 , respectively . the nonfuel gross margin percentage decreased primarily due to the mix of products and services sold as our convenience store segment comprised a larger percentage of our total nonfuel sales in 2014 than in 2013 . real estate rent expense . rent expense for 2015 was $ 231,591 , an increase of $ 14,436 , or 6.6 % , from 2014 . rent expense increased as a result of the sale and lease back in june 2015 and september 2015 of 14 owned travel centers and certain assets at 11 properties currently leased from hpt , as described above , and improvements at leased sites we sold to hpt during 2015 and 2014. rent expense for 2014 was $ 217,155 , an increase of $ 7,835 , or 3.7 % , from 2013 . rent expense increased for 2014 compared to 2013 as a result of improvements at leased sites we sold to hpt during 2014 and an increase in percentage rent recognized under the hpt leases based on increases in 2014 fuel and nonfuel revenues over base amounts at the properties leased from hpt . selling , general and administrative expenses . selling , general and administrative expenses for 2015 were $ 121,767 , an increase of $ 14,944 , or 14.0 % , from 2014 . the increase was primarily attributable to increased personnel costs , which were due to annual compensation increases and increased headcount to support the growth of our business , especially the significant growth in our convenience store segment . these increases were partially offset by lower audit and contractor fees . selling , general and administrative expenses for 2014 were $ 106,823 , a decrease of $ 624 , or 0.6 % , from 2013 . the decrease was primarily attributable to a $ 10,000 legal settlement charge in 2013 that did not recur in 2014 and the settlement of this and other litigation early in 2014 resulted in an additional $ 3,848 reduction in legal expense in 2014 . this decrease was largely offset by higher audit fees , personnel costs and contractor fees for 2014. audit expense increased in connection with additional audit work from the delayed filing of our annual report on form 10-k for the year ended december 31 , 2013. personnel costs increased due to annual compensation increases , an increase in share based compensation expense as result of an increase in the market price of our shares , and increased headcount in support of the growth in our business . contractor fees increased largely due to fees paid in connection with the completion of our 2013 annual and 2014 quarterly financial reporting , and fees paid in connection with improving the design , operation and documentation of our internal control over financial reporting . depreciation and amortization . depreciation and amortization for 2015 was $ 72,383 , an increase of $ 6,799 , or 10.4 % , from 2014 that primarily resulted from the acquisitions and other capital investments we completed ( and did not subsequently sell to hpt ) during 2014 and 2015 . the increase was partially offset by the reduction in our depreciable assets as a result of the sale and lease back in june 2015 and september 2015 of 14 owned travel centers and certain assets we owned at 11 properties leased from hpt , as described above . depreciation and amortization for 2014 was $ 65,584 , an increase of $ 6,656 , or 11.3 % , from 2013 , that primarily resulted from the acquisitions and other capital investments we completed ( and did not subsequently sell to hpt ) during 2013 and 2014 . interest expense , net . interest expense , net for 2015 was $ 22,545 , an increase of $ 5,833 , or 34.9 % , from 2014 , primarily as a result of our issuance of senior notes in october 2015 for $ 100,000 and in december 2014 for $ 120,000 . this increase was partially offset by a decrease in interest expense associated with the june 2015 transaction agreement with hpt as described above , which resulted in the qualification as operating leases of certain leased properties that previously were accounted for as financing leases . interest expense , net for 2014 was $ 16,712 , an increase of $ 376 , or 2.3 % , from 2013 , primarily as a result of our issuance of senior notes in december 2014 , for $ 120,000 . income tax provision . our provision for income taxes was $ 16,539 and $ 38,023 for the years ended december 31 , 2015 and 2014 , respectively . the income tax provision for 2015 and 2014 reflects an effective tax rate of 37.0 % and 38.2 % , respectively . the decrease in the effective tax rate for 2015 is primarily due to an increase in the utilization of various tax credits and incentives .
| consolidated financial results the following table presents changes in our operating results for the year ended december 31 , 2015 , as compared with the year ended december 31 , 2014 and for the year ended december 31 , 2014 , as compared with the year ended december 31 , 2013 . replace_table_token_7_th revenues . revenues for 2015 were $ 5,850,633 , a decrease of $ 1,928,000 , or 24.8 % , from 2014 that resulted from a decrease in fuel revenue that was partially offset by an increase in nonfuel revenue . revenues for 2014 were $ 7,778,633 , a decrease of $ 166,098 , or 2.1 % , from 2013 that resulted from a decrease in fuel revenue that was partially offset by an increase in nonfuel revenue . 37 fuel revenues for 2015 were $ 4,055,448 , a decrease of $ 2,094,001 , or 34.1 % , from 2014 . fuel revenues for 2014 were $ 6,149,449 , a decrease of $ 331,803 , or 5.1 % , from 2013 . the tables below show the change in sales volumes and fuel revenues for each of our reportable segments . replace_table_token_8_th replace_table_token_9_th ( 1 ) included within corporate and other are unallocated corporate expenses , our distribution center operations and all other businesses which do not meet the definition of a travel center or convenience store and which individually are not material to our operations . fuel revenues for the 2015 period reflected the significant decreases in market prices for fuel partially offset by increases in sales volume in both the travel center and convenience store segments , as compared to the 2014 period , primarily due to acquisitions . wholesale fuel sales increased primarily as a result of our acquisitions in the second half of 2015 .
| 2,386 |
words such as โ may โ , โ will โ , โ should โ , โ would โ , โ anticipates โ , โ expects โ , โ intends โ , โ plans โ , โ believes โ , โ seeks โ , โ estimates โ and similar expressions identify such forward-looking statements . the forward-looking statements contained herein are based on current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements . factors that might cause such a difference include , among other things , those set forth under โ risk factors โ and those appearing elsewhere in this form 10-k. readers are cautioned not to place undue reliance on these forward-looking statements , which reflect management 's analysis only as of the date hereof . we assume no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting forward-looking statements . readers are cautioned that any forward-looking statements are not guarantees of future performance . overview we are a diversified global brokerage and financial services firm providing execution , risk management and advisory services , market intelligence and clearing services with significant asset class coverage and significant market coverage globally . we help our clients to access market liquidity , maximize profits and manage risk . our revenues are derived primarily from financial products and advisory services intended to fulfill our clients ' commercial needs and provide bottom-line benefits to their businesses . our businesses are supported by our global infrastructure of regulated operating subsidiaries , our advanced technology platform and our team of more than 1,700 employees as of september 30 , 2018. we believe our client-first approach differentiates us from large banking institutions , engenders trust and has enabled us to establish leadership positions in a number of complex fields in financial markets around the world . we report our operating segments based on services provided to clients . our business activities are managed as operating segments and organized into five reportable segments , including commercial hedging and physical commodities , which are commercial client focused ; clearing & execution services ( โ ces โ ) and securities , which are institutional client focused ; and global payments . see segment information for a listing of our operating segment components . recent events affecting the financial services industry the dodd-frank act created a comprehensive new regulatory regime governing the over-the-counter ( โ otc โ ) and listed derivatives markets . most of the rules related to this regime have come into effect , however some important rules , such as those setting capital and margin requirements , have not been finalized or fully implemented . effective september 2016 , cftc margin rules came into effect , imposing new requirements on registered swap dealers ( such as our subsidiary , intl fcstone markets , llc ) and certain of their counterparties to exchange initial and variation margin , with an implementation period ending in september 2020. we will continue to monitor all applicable developments in the ongoing implementation of the dodd-frank act . the legislation and implementing regulations affect not only us , but also our clients and counterparties . the european markets infrastructure regulation ( โ emir โ ) is the european regulations on otc derivatives , central counterparties and trade repositories . emir has been implemented across the european economic area member states . emir has imposed new requirements on our european entities , including ( a ) reporting derivatives to trade repositories , ( b ) setting up enhanced risk management procedures for otc derivative transactions , ( c ) changes to our clearing account models and increased central counterparty margin requirements . reporting requirements and most risk mitigation procedures were set at the end of 2013. implementation of collateral obligations applicable to non-cleared otc transactions came into force during 2017. european securities and markets authority ( โ esma โ ) is continuing to evaluate and set clearing obligations for certain otc derivatives . intl fcstone ltd complies with the enacted provisions and will do so when pending emir provisions are finalized as relevant to its activities . in addition to the emir , european union financial market legislation markets in financial instruments directive ( โ mifid โ ) ii and markets in financial instruments regulation ( โ mifir โ ) took effect on january 3 , 2018. principal areas of impact related to these regulatory texts involve the emergence and oversight of organized trade facilities ( โ otf 's โ ) for trading otc non-equity products , client categorization , enhanced investor protection , conflicts of interest and execution policies , transparency obligations and extended transaction reporting requirements . we will continue to monitor all applicable regulatory developments . 29 recent events affecting the company during the week ended november 16 , 2018 , balances in approximately 300 accounts of the fcm division of our wholly owned subsidiary , intl fcstone financial , declined below required maintenance margin levels , primarily as a result of significant price fluctuations in the natural gas markets . all positions in these accounts , which were managed by optionsellers.com inc. ( โ optionsellers โ ) , an independent commodity trading advisor ( โ cta โ ) , were liquidated in accordance with the intl fcstone financial 's customer agreements and obligations under market regulation standards . a cta is by definition registered with the cftc and a member of , and subject to audit by , the nfa . optionsellers is registered under a cftc rule 4.7 exemption for โ qualified eligible persons โ , which requires the account holders authorizing optionsellers to act as their cta to meet or exceed certain minimum financial requirements . story_separator_special_tag the company has not yet determined the potential tax impact of provisions that are not yet effective , such as gilti , beat , and the elimination of u.s. tax on dividends of future foreign earnings . the company expects to make the policy election to treat gilti as a period expense in the fiscal year ending september 30 , 2019. fiscal 2018 highlights realized records in both operating revenues of $ 975.8 million and pre-tax income of $ 101.5 million . our subsidiary intl fcstone dtvm ltda . was granted a full-service broker-dealer license in brazil allowing expansion of its offering to its substantial existing institutional client base , as well as provide clients outside of brazil greater access to that local market . our global payments business significantly enhanced its regulatory capability in brazil with an fx bank license , making the company one of the few foreign companies with that status , which has led to an immediate three-fold increase in payments in that key market . agreed to purchase carl kliem s.a. , an independent inter-dealer broker based in luxembourg , which upon closing will provide a strong european client base and a european union based footprint for us , post brexit . acquired the fully accredited swift service bureau from paycommerce in the fourth quarter , which will enable the company to act as a swift service bureau for its more than 300 correspondent clearing banks . executive summary we achieved strong operating revenue growth of 24 % , or $ 191.8 million , to $ 975.8 million in fiscal 2018 compared to the prior year . the return of periods of market volatility in our key markets resulted in increased client activity and a widening of spreads in fiscal 2018 , which combined with increases in short term interest rates and average client balances resulted in record operating revenues in all five of our reporting segments . overall segment income increased 55 % , with commercial hedging and clearing & execution services ( โ ces โ ) adding $ 23.6 million and $ 17.9 million , respectively . in addition , our global payments segment added $ 9.2 million , while the physical commodities segment increased segment income by $ 48.0 million versus the prior year . these increases were modestly offset by a $ 5.8 million decline in securities segment income . commercial hedging segment income increased 32 % , to $ 96.4 million , primarily as a result of strong growth in both exchange-traded and otc revenues as well as a $ 9.5 million increase in interest income . a $ 1.3 million increase in interest expense was partially offset by a $ 0.7 million decline in non-variable direct expenses compared to the prior year . ces segment income increased 59 % , to $ 48.3 million , primarily as a result of the increase in operating revenues , most notably a 60 % increase in our exchange-traded futures & options business , driven by a 35 % increase in exchange-traded volumes as well as an $ 11.5 million increase in interest income . in addition , cost savings initiatives in our fx prime brokerage and correspondent clearing businesses resulted in a $ 4.1 million decline in non-variable direct expenses in this segment . global payments segment income increased 18 % , to $ 59.8 million , primarily as a result of the increase in operating revenues , driven by a 13 % increase in the average revenue per trade versus the prior year period . in addition , introducing broker commissions declined $ 2.6 million versus the prior year , which was partially offset by a $ 1.4 million increase in non-variable direct expenses . segment income in physical commodities was $ 16.6 million in fiscal 2018 compared to a segment loss of $ 31.4 million in the prior year . segment income in the prior year includes a $ 47.0 million charge to earnings for an allowance for doubtful accounts recorded in the fourth quarter of 2017 related to our physical coal business , discussed further below . fiscal 2018 segment income includes a related $ 1.0 million charge to earnings , recorded in the first quarter of fiscal 2018 upon our exit of the physical coal business . while operating revenues in our securities segment increased 29 % , segment income declined $ 5.8 million , impacted by weaker performance in our domestic institutional fixed income business including a $ 17.8 million increase in interest expense which more than offset the growth in operating revenues in that business . in addition , difficult market conditions led to a decline in performance in our argentinian operations versus the prior year . also , the prior year period included a $ 2.5 million realized gain on the sale of exchange shares in argentina . on the expense side , we continue to focus on maintaining our variable cost model and limiting the growth of our non-variable expenses . to that end , variable expenses were 61 % of total expenses in fiscal 2018 compared to 53 % in the prior year period . non-variable expenses declined $ 30.7 million versus the prior year , however excluding the bad debt on physical coal , non-variable expenses increased $ 15.3 million year-over-year . 31 the fiscal 2018 results include $ 5.5 million in operating revenues , presented in โ trading gains , net ' , related to economic hedges in place against the effect of the devaluation of the argentine peso on our argentine operations . the argentine peso has historically served as our functional currency in the argentine operations , and as such the revaluation of the net assets of our argentine subsidiaries was recorded as a component of accumulated other comprehensive loss , net in the consolidated balance sheets .
| total segment results the following table shows summary information concerning all of our business segments combined . replace_table_token_8_th year ended september 30 , 2018 compared to year ended september 30 , 2017 the net contribution of all our business segments increased 12 % to $ 432.4 million in fiscal 2018 compared to $ 387.0 million in fiscal 2017 . segment income increased 55 % to $ 261.9 million in fiscal 2018 compared to $ 169.0 million in fiscal 2017 . year ended september 30 , 2017 compared to year ended september 30 , 2016 the net contribution of all our business segments increased 12 % to $ 387.0 million in fiscal 2017 compared to $ 347.0 million in fiscal 2016. segment income decreased 18 % to $ 169.0 million in fiscal 2017 compared to $ 206.0 million in fiscal 2016. commercial hedging we serve our commercial clients through our team of risk management consultants , providing a high-value-added service that we believe differentiates us from our competitors and maximizes the opportunity to retain our clients . our risk management consulting services are designed to quantify and monitor commercial entities ' exposure to commodity and financial risk . upon assessing this exposure , we develop a plan to control and hedge these risks with post-trade reporting against specific client objectives . our clients are assisted in the execution of their hedging strategies through a wide range of products from listed exchange-traded futures and options , to basic otc instruments that offer greater flexibility and structured otc products designed for customized solutions . our services span virtually all traded commodity markets , with the largest concentrations in agricultural and energy commodities ( consisting primarily of grains , energy and renewable fuels , coffee , sugar , cotton , and food service ) and base metals products listed on the lme .
| 2,387 |
if there is any story_separator_special_tag you should read the following discussion and analysis of our financial condition and results of operations together with โ selected financial data โ and our financial statements and the related notes appearing elsewhere in this report . in addition to historical information , this discussion and analysis contains forwardโlooking statements that involve risks , uncertainties and assumptions . our actual results may differ materially from those discussed below . factors that could cause or contribute to such differences include , but are not limited to , those identified below , and those discussed in the section titled โ risk factors โ included elsewhere in this prospectus . all amounts in this report are in u.s. dollars , unless otherwise noted . overview we are a clinical stage biopharmaceutical company utilizing novel artificial intelligence-based approaches to identify the next wave of medicines across neuroscience and immuno-oncology . our drug re-innovation approach leverages existing approved drugs and or clinically validated product candidates together with big data and proprietary machine learning algorithms to identify new therapeutic indices . we believe that this differentiated approach has the potential to reduce the cost and time of drug development in diseases with substantial unmet medical need . our two most advanced clinical development programs are bxcl501 , a sublingual thin film formulation of the ฮฑ2a adrenergic receptor agonist dexmedetomidine , or dex , for acute treatment of agitation resulting from neurological and psychiatric disorders , and bxcl701 , an immunoโoncology agent for treatment of a rare form of prostate cancer and pancreatic cancer . we intend to develop firstโinโclass , high value therapeutics by leveraging evolverai , a research and development engine created and owned by our parent , bioxcel corporation , or bioxcel . we believe the combination of our therapeutic area expertise and our ability to generate product candidates through our exclusive collaborative relationship with bioxcel in the areas of neuroscience and immunoโoncology gives us a significant competitive advantage . evolverai was developed over the last decade and integrates millions of fragmented data points using artificial intelligence and proprietary machine learning algorithms . after evaluating multiple product candidates using evolverai , we selected our lead programs because our analysis indicated these drugs may have utility in new therapeutic indices where there is substantial unmet medical needs and limited competition . by focusing on clinical candidates with relevant human data , we believe our approach will help us design more efficient clinical trials , thereby accelerating our product candidates ' time to market . we retain global development and commercialization rights to these two programs . 75 our clinical programs the following table summarizes our lead development programs : our strategy our goal is to become a leader in the field of neuroscience and immunoโoncology . the key elements to achieving this goal are to : ยท advance bxcl501 , a sublingual thin film formulation of dex , a selective ฮฑ 2a adrenergic receptor agonist , designed for acute treatment of agitation , to approval through an accelerated fda section 505 ( b ) ( 2 ) pathway . ยท neurological and psychiatric disorders . we believe that bxcl501 has the potential to become the standard of care for the acute treatment of agitation arising from diseases such as schizophrenia , bipolar disorder , senile dementia ( alzheimer 's type ) , and other indications . dex has been shown to significantly reduce agitation in elderly patients experiencing post surgical anestheticโinduced delirium who did not respond to treatment with haloperidol , a potent antipsychotic that is used to treat symptoms for schizophrenia . ยท additional indications . we also plan to expand into additional indications for acute treatment of agitation resulting from delirium , alcohol or opioid withdrawal , and postโtraumatic stress disorder , or ptsd , as well as explore the use of bxcl501 in patients who are claustrophobic and anxious awaiting an mri or other out-patient medical procedures . ยท advance bxcl701 into phase 2 trials to assess its potential to be the first approved therapy for tnepc and for the second line treatment of pancreatic cancer . ยท tnepc ( orphan segment of prostate cancer ) . bxcl701 was previously studied in multiple clinical trials and demonstrated single agent antiโtumor activity in melanoma , an immunoโsensitive tumor . in our preclinical studies , bxcl701 has demonstrated the ability to 76 synergistically increase the antiโtumor activity of checkpoint inhibitors . we believe the existing preclinical and clinical data for bxcl701 may significantly reduce our development time for this compound . the fda accepted our ind proposal to test bxcl701 in tnepc , and the trial opened to accrual in february 2019 . ยท pancreatic cancer . data indicates that fibroblast activation protein positive , or fap contribute to checkpoint inhibitor resistance , and immunosuppression more generally in pancreatic cancer . we believe provides a strong rationale for combining bxcl701 with a checkpoint inhibitor avelumab ( bavencio ) or nivolumab ( opdivo ) . furthermore we have shown strong synergy between bxcl 701 checkpoint inhibition and nktr 214 , a cd122 based agonist of il2 , in a pancreatic preclinical model . bxcl701 has been granted orphan drug designation by the fda for the treatment of pancreatic cancer . we believe the existing clinical and preclinical data for bxcl701 in pancreatic cancer may reduce our development time for this compound . ยท potential for accelerated clinical and regulatory approval . given that both indications represent high unmet medical needs with few treatment options , we intend to pursue breakthrough therapy designation and accelerated approval pathways for both indications . ยท additional indications . we believe bxcl701 is active at multiple stages of the cancer immunity cycle . as such , we believe bxcl701 offers a โ pipeline in a product โ platform given its potential application across other solid tumor types . we believe existing preclinical and clinical evidence support the combination of bxcl701 with checkpoint inhibitors , agents that stimulate of โ co-stimulate โ immune effoctor calles . story_separator_special_tag all of these drugs were identified by insights in biology and disease pathophysiology . the successful business models of biotech companies like puma biotechnology , inc. and corvus pharmaceuticals , inc. are based on the reโinnovation of existing clinical candidates or marketed drugs to provide novel solutions for patients . unfortunately , such discoveries have been severely limited in scope due to the lack of a genuinely integrated big data analytics based approach . we believe that only evolverai allows a comprehensive and unbiased evaluation of the complete pharmacological space . our drug portfolio was identified using evolverai and the lead programs were chosen among more than 20 compounds selected using this approach . we believe our drug reโinnovation model and exclusive collaborative relationship with bioxcel has the potential to reduce the cost and time of drug development , help us design more 78 efficient trials and accelerate our product candidates ' time to market . this assumption is based on capitalizing product candidates with substantial clinical data and mitigated risk due to wellโdefined safety profiles , known pk/pd properties , and an established manufacturing and regulatory path . basis of presentation for periods prior to june 30 , 2017 , our financial statements are presented on a carve-out basis from the financial records of bioxcel . the carve-out includes reasonable allocations of assets and liabilities and expenses attributable to our business . our financial results reflect amounts specifically attributable to the bti business , which include expenses , assets and liabilities of bioxcel relating to the candidates that were contributed to us by bioxcel under the contribution agreement for the period from january 1 , 2015 until june 30 , 2017. the services agreement provides us with certain general and administrative and development support services that became effective june 30 , 2017. the general and administrative services were reduced when we occupied separate office space in the early part of 2018. in addition , financial support services were phased out during the balance of 2018. management believes the assumptions underlying the allocations of indirect expenses in the carve-out financial information are reasonable , however , our financial position , results of operations and cash flows may have been materially different if it had operated as a stand-alone entity . our financial information for periods beginning july 1 , 2017 have been prepared as if we are standalone entity . for the year ended december 31 , 2018 the results are on a stand-alone entity basis . components of our results of operations revenues we have not recognized any revenue since inception . operating costs and expenses research and development research and development expenses consist primarily of costs incurred for the research and development of our clinical and pre-clinical candidates , which includes payments to bioxcel , our parent . ยท employee-related expenses , including salaries , benefits and stock-based compensation expense and travel expenses for employees engaged in research and development functions ยท expenses incurred under agreements with contract research organizations , or cros , and sites that conduct our non-clinical studies and clinical trials ยท costs of outside consultants engaged in research and development activities , including their fees , stock-based compensation and travel expenses ยท the cost of acquiring , developing and manufacturing pre-clinical and clinical trial materials and lab supplies ยท depreciation and other expenses . we expense research and development costs to operations as incurred . historically we have not segmented costs associated with our various development programs , however , beginning january 1 , 2018 , we have begun assigning costs to our individual development candidates . 79 our research and development costs by program for the year ended december 31 , 2018 are as follows : replace_table_token_4_th general and administrative general and administrative expenses consist primarily of personnel costs , including salaries , benefits , stock-based compensation and travel expenses , for our executive , finance , corporate development and other administrative functions . general and administrative expenses also include legal expenses to pursue patent protection of our intellectual property , professional fees for audit and tax and insurance charges . we expect that our general and administrative expenses will increase as we operate both as an independent entity and as a public company . we expect increased administrative costs resulting from our anticipated clinical trials and the potential commercialization of our product candidates . we believe that these increases will likely include increased costs for director and officer liability insurance , hiring additional personnel to support future market research and future product commercialization efforts and increased fees for outside consultants , attorneys and accountants . we also expect to incur increased costs to comply with corporate governance , internal controls , investor relations and disclosures and similar requirements applicable to public companies . recently issued accounting pronouncements a description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is set forth in note 3 to the financial statements included in this annual report on form 10โk . story_separator_special_tag style= '' display : inline ; font-family : times new roman , times , serif ; '' > conduct additional research and development with our product candidates ; ยท seek to identify , acquire , develop and commercialize additional product candidates ; ยท integrate acquired technologies into a comprehensive regulatory and product development strategy ; ยท maintain , expand and protect our intellectual property portfolio ; ยท hire scientific , clinical , quality control and administrative personnel ; ยท add operational , financial and management information systems and personnel , including personnel to support our drug development efforts ; ยท seek regulatory approvals for any product candidates that successfully complete clinical trials ; ยท ultimately establish a sales , marketing and distribution infrastructure and scale up external manufacturing capabilities to commercialize any product candidates for which we may obtain regulatory approval ; and ยท continue to operate as a public company . 83 we expect that we will need to obtain substantial additional funding in order to complete our clinical trials .
| results of operations comparison of the years ended december 31 , 2018 and 2017 the following table summarizes our results of operations for the years ended december 31 , 2018 and 2017 : replace_table_token_5_th 80 research and development expense research and development expenses for the years ended december 31 , 2018 and 2017 were $ 14,558 and $ 2,690 , respectively . the increase of $ 11,868 is attributable to the costs described in the table below : replace_table_token_6_th salaries , bonus and related costs increased due to higher bonus accruals , increases in headcount , payroll taxes , recruiting fees and travel related costs . non-cash stock-based compensation has increased as a result of options granted to a significantly increased headcount following our ipo . drug acquisition expenses included a payment to bioxcel of $ 1,000 pursuant to the contribution agreement for the bti business programs . professional research , project related costs , clinical trials expenses and cmc costs increased due to the completion of clinical trials that commenced in 2017 and the initiation of new trials related to thin film formulation of dex and iv dex and the acceleration of research and development activities . costs also increased as the company prepared for bxcl 701clinical trials in tnepc and pancreatic cancer . general and administrative expense general and administrative expenses for the years ended december 31 , 2018 and 2017 were $ 5,404 and $ 1,847 , respectively . the increase of $ 3,557 is attributable to the costs described in the table below : replace_table_token_7_th salaries , bonus and related costs increased due to increases in headcount , higher bonus accruals , payroll taxes , recruiting fees and travel related costs . non-cash stock-based compensation has increased as a result of options granted to a significantly increased headcount following our ipo . professional fees increased due to expanding operations and operating as a public company .
| 2,388 |
also , projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions , or that the degree of compliance with the policies or procedures may deteriorate . โ โ baker tilly virchow krause , llp โ we have served as the company 's auditor since 2020 . โ milwaukee , wisconsin โ june 29 , 2020 f-2 โ report of independent registered public accounting firm stockholders and board of directors hallmark financial services , inc. and subsidiaries dallas , texas opinion on the consolidated financial statements we have story_separator_special_tag the following discussion should be read together with our consolidated financial statements and the notes thereto . this discussion contains forward-looking statements . please see โ risks associated with forward-looking statements in this form 10-k โ for a discussion of some of the uncertainties , risks and assumptions associated with these statements . overview hallmark is an insurance holding company which , through its subsidiaries , engages in the sale of property/casualty insurance products to businesses and individuals . our business involves marketing , distributing , underwriting and servicing our insurance products , as well as providing other insurance related services . we pursue our business activities primarily through subsidiaries whose operations are organized into business units and are supported by our insurance carrier subsidiaries . our insurance activities are organized by business units into the following reportable segments : โ specialty commercial segment . our specialty commercial segment includes our commercial auto business unit which offers primary and excess commercial vehicle insurance products and services ; our e & s casualty business unit which offers primary and excess liability , excess public entity liability , and e & s package and garage liability insurance products and services ; our e & s property business unit which offers primary and excess commercial property insurance for both catastrophe and non-catastrophe exposures ; our professional liability business unit which offers healthcare and financial lines professional liability insurance products and services primarily for businesses , medical professionals , medical facilities and senior care facilities ; and our aerospace & programs business unit which offers general aviation and satellite launch property/casualty insurance products and services , as well as certain specialty programs . these products were previously reported as the contract binding and specialty commercial operating units . this realignment did not impact our reportable segments . โ standard commercial segment . our standard commercial segment includes the package and monoline property/casualty and occupational accident insurance products and services handled by our commercial accounts business unit ( f/k/a standard commercial p & c operating unit ) and the runoff of workers compensation insurance products handled by our former workers compensation operating unit . effective june 1 , 2016 , we ceased marketing new or renewal occupational accident policies . effective july 1 , 2015 , the former workers compensation operating unit ceased retaining any risk on new or renewal policies . โ personal segment . our personal segment includes the non-standard personal automobile and renters insurance products and services handled by our specialty personal lines business unit . the retained premium produced by these reportable segments is supported by our american hallmark insurance company of texas , hallmark specialty insurance company , hallmark insurance company , hallmark national insurance company and texas builders insurance company insurance subsidiaries . in addition , control and management of hallmark county mutual is maintained through our wholly owned subsidiary , cyr insurance management company ( โ cyr โ ) . cyr has as its primary asset a management agreement with hcm which provides for cyr to have management and control of hcm . hcm is used to front certain lines of business in our specialty commercial and personal segments in texas . hcm does not retain any business . ahic , hic , hsic and hnic have entered into a pooling arrangement pursuant to which ahic retains 32 % of the net premiums written by any of them , hic retains 32 % of the net premiums written by any of them , hsic retains 26 % of the net premiums written by any of them and hnic retains 10 % of the net premiums written by any of them . neither hcm nor tbic is a party to the intercompany pooling arrangement . 34 โ critical accounting estimates and judgments certain significant accounting policies requiring our estimates and judgments are discussed below . such estimates and judgments are based on historical experience , changes in laws and regulations , observation of industry trends and information received from third parties . while the estimates and judgments associated with the application of these accounting policies may be affected by different assumptions or conditions , we believe the estimates and judgments associated with the reported consolidated financial statement amounts are appropriate in the circumstances . for additional discussion of our accounting policies , see note 1 to the audited consolidated financial statements included in this report . impairment of investments . we complete a detailed analysis each quarter to assess whether any decline in the fair value of any debt investment below cost is deemed other-than-temporary . all debt securities with an unrealized loss are reviewed . we recognize an impairment loss when a debt investment 's value declines below cost , adjusted for accretion , amortization and previous other-than-temporary impairments , and it is determined that the decline is other-than-temporary . debt investments : we assess whether we intend to sell , or it is more likely than not that we will be required to sell , a fixed maturity investment before recovery of its amortized cost basis less any current period credit losses . for fixed maturity investments that are considered other-than-temporarily impaired and that we do not intend to sell and will not be required to sell , we separate the amount of the impairment into the amount that is credit related ( credit loss component ) and the amount due to all other factors . story_separator_special_tag goodwill is tested for impairment at the reporting unit level ( business unit or one level below a business unit ) on an annual basis ( october 1 ) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value . for purposes of evaluating goodwill for impairment , we have determined that our reporting units are the same as our business units except for the e & s casualty and aerospace & programs business units for which reporting units are at the component level ( โ one level below โ ) . our consolidated balance sheet as of december 31 , 2019 includes goodwill of acquired businesses of $ 44.7 million that is assigned to our business units as follows : commercial accounts business unit - $ 2.1 million ; commercial auto business units - $ 21.3 million ; e & s casualty business unit - $ 6.3 million ( comprised of $ 2.6 million for the primary/excess liability and public entity component and $ 3.7 million for the e & s package component ) ; aerospace & programs business unit- $ 9.7 million ( comprised entirely of the general aviation component ) ; and specialty personal lines business unit - $ 5.3 million . this amount has been recorded as a result of prior business acquisitions accounted for under the acquisition method of accounting . under asc 350 , โ intangibles - goodwill and other , โ goodwill is tested for impairment annually . we completed our last annual test for impairment on the first day of the fourth quarter of 2019 and determined that there was no impairment at that time . a significant amount of judgment is required in performing goodwill impairment tests . such tests include estimating the fair value of our reporting units . as required by asc 350 , we compare the estimated fair value of each reporting unit with its carrying amount , including goodwill . under asc 350 , fair value refers to the amount for which the entire reporting unit may be bought or sold . 36 โ the determination of fair value was based on an income approach utilizing discounted cash flows . the valuation methodology utilized is subject to key judgments and assumptions . estimates of fair value are inherently uncertain and represent management 's reasonable expectation regarding future developments . these estimates and the judgments and assumptions upon which the estimates are based will , in all likelihood , differ in some respects from actual future results . declines in estimated fair value could result in goodwill impairments in future periods which could materially adversely affect our results of operations or financial position . the income approach to determining fair value computed the projections of the cash flows that the reporting unit is expected to generate converted into a present value equivalent through discounting . significant assumptions in the income approach model include income projections , discount rates and terminal growth values . the income projections reflect an improved premium rate environment across most of our lines of business that continued throughout 2019. the income projections also include loss and lae assumptions which reflect recent historical claim trends and the movement towards a more favorable pricing environment . the income projections also include assumptions for expense growth and investment yields which are based on business plans for each of our business units . the discount rate was based on a risk free rate plus a beta adjusted equity risk premium and specific company risk premium . the assumptions were based on historical experience ( including factors such as prior year loss reserve development ) , expectations of future performance ( including premium growth rates , premium rate increases and loss costs ) , expected market conditions and other factors requiring judgment and estimates . while we believe the assumptions used in these models were reasonable , the inherent uncertainty in predicting future performance and market conditions may change over time and influence the outcome of future testing . the fair values of each of our business units were in excess of their respective carrying values , including goodwill , as a result of our annual test for impairment during the fourth quarter 2019. however , a 36 % decline in the fair value of our commercial accounts business unit , a 35 % decline in the fair value of our commercial auto business unit , a 73 % decline in the primary/excess liability and public entity component , a 60 % decline in the e & s package and garage liability component , a 26 % decline in our general aviation and satellite component , or a 38 % decline in the fair value of our specialty personal lines business unit would have caused the carrying value of the respective reporting unit to be in excess of its fair value , resulting in the need to perform the second step of impairment testing prescribed by asc 350 , which could have resulted in an impairment to our goodwill . while we believe the estimates and assumptions used in determining the fair value of our business units were reasonable , actual results could vary materially . if our actual results are not consistent with our estimates and assumptions used to calculate fair value , we may be required to perform the second step of impairment testing prescribed by asc 350 in future periods and impairment of goodwill could result . we can not predict future events that might impact the fair value of our business units and goodwill impairment . such events include , but are not limited to , increased competition in insurance markets , global economic changes and significant declines in our market capitalization . deferred income tax assets and liabilities . we file a consolidated federal income tax return .
| results of operations comparison of years ended december 31 , 2019 and december 31 , 2018 management overview . during fiscal 2019 , our total revenues were $ 486.4 million , which was $ 107.1 million more than the $ 379.3 million in total revenues for fiscal 2018. during the year ended december 31 , 2019 , we reported net loss before tax of $ 1.0 million as compared to a net income before tax of $ 12.8 million during the same period of 2018. this increase in revenue was largely due to a $ 73.8 million increase in net premiums earned during the year ended december 31 , 2019 as compared to the same period of 2018. in addition , the increase in revenue for the year ended december 31 , 2019 was impacted by investment gains of $ 20.6 million as compared to investment losses of $ 10.2 million during the same period of 2018. higher finance charges and investment income also contributed to the increase in revenue , partially offset by lower commission and fees and other income during the year ended december 31 , 2019 as compared to the same period of 2018 . 38 โ the increase in revenue for the year ended december 31 , 2019 was partially offset by increased losses and lae of $ 106.1 million , higher operating expenses of $ 13.9 million and increased interest expense of $ 0.9 million as compared to the same period of 2018. the increase in losses and lae was primarily the result of unfavorable net prior year loss reserve development of $ 60.9 million for the year ended december 31 , 2019 as compared to $ 6.0 million of unfavorable net prior year loss reserve development for the year ended december 31 , 2018 , as well as higher net premiums earned .
| 2,389 |
the facility has a general term of five years and provides for an unsecured line of credit of up to $ 125 million , including a $ 50 million letter of credit subfacility , and a $ 35 million swingline subfacility . the revolving credit facility includes a full and unconditional guarantee by the company 's 100 percent owned domestic subsidiaries whose assets equal substantially all of the consolidated assets of rpc and its subsidiaries . the company 's subsidiaries that are not guarantors are considered minor . on november 30 , 2015 , the company gave notice to the syndicate it was reducing the size of the facility , which was story_separator_special_tag overview the following discussion should be read in conjunction with โ selected financial data , โ and the consolidated financial statements included elsewhere in this document . see also โ forward-looking statements โ on page 2. rpc , inc. ( โ rpc โ ) provides a broad range of specialized oilfield services primarily to independent and major oilfield companies engaged in exploration , production and development of oil and gas properties throughout the united states , including the southwest , mid-continent , gulf of mexico , rocky mountain and appalachian regions , and in selected international markets . the company 's revenues and profits are generated by providing equipment and services to customers who operate oil and gas properties and invest capital to drill new wells and enhance production or perform maintenance on existing wells . our key business and financial strategies are : - to focus our management resources on and invest our capital in equipment and geographic markets that we believe will earn high returns on capital . - to maintain a flexible cost structure that can respond quickly to volatile industry conditions and business activity levels . - to maintain an efficient , low-cost capital structure which includes an appropriate use of debt financing . - to maintain high asset utilization which leads to increased revenues and leverage of direct and overhead costs , while also ensuring that increased maintenance resulting from high utilization does not interfere with customer performance requirements or jeopardize safety . - to deliver equipment and services to our customers safely . - to secure adequate sources of supplies of certain high-demand raw materials used in our operations , both in order to conduct our operations and to enhance our competitive position . - to maintain and selectively increase market share . - to maximize stockholder return by optimizing the balance between cash invested in the company 's productive assets , the payment of dividends to stockholders , and the repurchase of our common stock on the open market . - to align the interests of our management and stockholders . in assessing the outcomes of these strategies and rpc 's financial condition and operating performance , management generally reviews periodic forecast data , monthly actual results , and other similar information . we also consider trends related to certain key financial data , including revenues , utilization of our equipment and personnel , maintenance and repair expenses , pricing for our services and equipment , profit margins , selling , general and administrative expenses , cash flows and the return on our invested capital . additionally , we compare our trends to those of our peers . we continuously monitor factors that impact current and expected customer activity levels , such as the price of oil and natural gas , changes in pricing for our services and equipment and utilization of our equipment and personnel . our financial results are affected by geopolitical factors such as political instability in the petroleum-producing regions of the world , overall economic conditions and weather in the united states , the prices of oil and natural gas , and our customers ' drilling and production activities . current industry conditions are characterized by oil prices which have declined rapidly from more than $ 100 per barrel in the third quarter of 2014 to approximately $ 30 per barrel early in the first quarter of 2016 , a level not observed since the fourth quarter of 2008. as a result , the u.s. domestic rig count has declined , and early in the first quarter of 2016 had declined by approximately 73 percent since the third quarter of 2014. the catalysts for the recent steep decline in the price of oil include the industry estimates that global oil supplies are higher than demand , the forecasted decline in oil demand growth rates , and the strength of the u.s. dollar on global currency markets . the decline in both the price of oil and our customers ' drilling and completion activities began during the third quarter of 2014 and accelerated following an announcement by opec during the fourth quarter of 2014 that the oil cartel would not limit its production in response to falling prices and excess supply . we anticipate that the u.s. domestic rig count will continue to decline until world oil prices increase due to a combination of increased global demand , declining production , or an increase in political instability in the world 's oil-producing regions outside of the united states . rpc believes that the most predictable catalyst for an increase in world oil prices is declining production in the united states . we believe this because the united states grew to be the world 's largest producer of oil during the second quarter of 2015 , and the increase in oil production was due to the growth of oil-directed drilling in shale formations . these wells produce a large amount of oil immediately following their completion , but typically experience large production declines within two years . therefore , the declining production of these wells , and the rapid decline in drilling of new wells of this type beginning in 2015 are the most likely initial catalysts for improving industry conditions . story_separator_special_tag the current and projected prices of oil , natural gas and natural gas liquids are important catalysts for u.s. domestic drilling activity . as of the first quarter of 2016 , the price of oil has fallen to levels that discourage our customers from undertaking most of their potential exploration and production activities . the price of natural gas also fell during 2015. although the price of natural gas has stabilized during the first quarter of 2016 , it remains at levels that discourage exploration and production activities directed towards natural gas . early in the first quarter of 2016 the natural gas-directed rig count fell to its lowest level during the time that this statistic has been recorded . the average price of natural gas liquids during 2015 declined by approximately 56 percent compared to the prior year , and by an additional approximately 25 percent early in the first quarter of 2016 compared to the average price in 2015. these trends have negative implications for our near-term activity levels . the low price of oil should continue to have a negative impact on our customers ' activity levels and our financial results , since the majority of the u.s. domestic drilling rig count is directed towards oil . it is likely that these low commodity prices will continue to depress our financial results during the near term . 18 the majority of the u.s. domestic rig count remains directed towards oil . at the end of 2015 , approximately 77 percent of the u.s. domestic rig count was directed towards oil , a decrease compared to approximately 82 percent at the end of 2014. we believe that oil-directed drilling will remain the majority of domestic drilling , and that natural gas-directed drilling will remain a low percentage of u.s. domestic drilling in the near term . we believe that this relationship will continue due to relatively low prices for natural gas , high production from existing natural gas wells , and industry projections of limited increases in domestic natural gas demand during the near term . during the first quarter of 2016 , the rig count continued to decline , and approached the historic low for u.s. domestic drilling activity set in the second quarter of 1999. we continue to monitor the market for our services and the competitive environment in 2016. we are cautious about the market for our services because of the decline in the u.s. domestic rig count and the prices of oil and natural gas during 2016 , and the highly competitive nature of pricing for our services in the current environment . the current low prices of oil and natural gas discourage us from believing that the u.s. domestic rig count will recover during the near term . over the long term , we believe that the steep decline in oil-directed drilling in the u.s. domestic market will reduce u.s. domestic oil production and serve as a catalyst for oil prices to increase . this belief is due to the fact that oil-directed wells drilled in shale resource plays typically exhibit high initial production soon after being completed followed by a decline in production in later years . we note that both u.s. domestic oil and natural gas production peaked in the third quarter of 2015 , and have declined through the first quarter of 2016. we are also encouraged by the fact that the drilling and completion activities that took place during 2015 and continue in 2016 are highly service-intensive and require a large amount of equipment and raw materials . furthermore , we note that a large number of wells in the u.s. domestic market have been drilled but not completed . these uncompleted wells represent potential revenue for rpc 's completion-directed service lines , which comprise the majority of rpc 's revenues . finally , we are encouraged by our belief that our competitors are not increasing the size of their revenue-producing fleets of equipment during this period , and furthermore , that some of our competitors are not maintaining their equipment to a level that allows them to provide services to their customers . during the first three quarters of 2015 , we responded to the significant declines in industry activity levels and pricing for our services by reducing costs by seeking price concessions from our suppliers . in addition , we have reduced employee headcount , closed selected operational locations and revised our variable compensation programs . as we monitor the competitive environment during 2016 , we note that many of our smaller competitors have high levels of debt , higher cost structures , and less-developed logistical capabilities than rpc . these characteristics have forced these competitors to cease operations because current pricing and activity levels do not allow them to generate enough cash to service their debt and fund their working capital and capital expenditure requirements . during 2015 several smaller competitors ceased operations and initiated the process of selling their equipment , and this trend has accelerated early in the first quarter of 2016. these observations encourage us to believe that our markets will eventually become less competitive . in the fourth quarter of 2015 we initiated a process whereby we more closely scrutinize the maintenance status of our currently idled revenue-producing assets . through this process , we are attempting to ensure that our idle equipment is prepared to return to service as soon as market conditions encourage us to do so . we believe that this process will provide an advantage to rpc , in contrast to many competitors who do not have the liquidity to maintain their fleets , and thus will not be able to return their assets to service in a timely manner when market conditions improve . in this environment rpc also monitors the financial stability of our customers , due to the fact that many of them have also financed their operations with a large amount of debt , and this type of financing is less available in 2016 than in previous years .
| results of operations replace_table_token_3_th year ended december 31 , 2015 compared to year ended december 31 , 2014 revenues . revenues in 2015 decreased $ 1.1 billion or 45.9 percent compared to 2014. the technical services segment revenues for 2015 decreased 46.1 percent compared to the prior year due primarily to lower activity levels and pricing as compared to prior year , partially offset by increasing service intensity in our pressure pumping service line , which is the largest service line within this segment . the support services segment revenues for 2015 decreased 43.6 percent compared to 2014 due principally to lower pricing and activity levels in the rental tool service line , which is the largest service line within this segment . both the technical and support services reported operating losses due to lower revenues , partially offset by cost control efforts undertaken throughout the company . the average price of oil decreased 47.7 percent while the average price of natural gas decreased 39.3 percent during 2015 compared to the prior year . the average domestic rig count during 2015 was 47.3 percent lower than 2014. we believe that our activity levels are affected primarily by the price of oil , since oil-directed activity has become the majority of total u.s. drilling activity . the prices of natural gas and natural gas liquids also impact our activity levels because of the service-intensive nature of this type of drilling and completion . we also believe that the total number of directional and horizontal wells more directly affect our activity levels , regardless of whether the wells are directed towards oil or natural gas . this belief is based on the fact that directional and horizontal wells require more of the services within our technical services segment .
| 2,390 |
10 ( uuu ) 1.25 lien security agreement , dated as of october 31 , 2019 , relating to the 10.5 % senior secured 1.25 lien notes due 2026 , made by k. hovnanian enterprises , inc. , hovnanian enterprises , inc. and the other guarantors party thereto in favor of wilmington trust , national association , as 1.25 lien collateral agent and joint first lien collateral agent ( incorporated by reference to exhibits to current report on form 8-k of the registrant filed on october 31 , 2019 ) . 10 ( vvv ) 1.25 lien pledge agreement , dated as of october 31 , 2019 , relating to the 10.5 % senior secured 1.25 lien notes due 2026 , given by k. hovnanian enterprises , inc. , hovnanian enterprises , inc. story_separator_special_tag hovnanian enterprises , inc. ( โ hei โ ) conducts all of its homebuilding and financial services operations through its subsidiaries ( references herein to the โ company , โ โ we , โ โ us โ or โ our โ refer to hei and its consolidated subsidiaries and should be understood to reflect the consolidated business of hei 's subsidiaries ) . key performance indicators the following key performance indicators are commonly used in the homebuilding industry and by management as a means to better understand our operating performance , trends affecting our business and compare our performance with the performance of other homebuilders . we believe these key performance indicators also provide useful information to investors in analyzing our performance : โ net contracts is a volume indicator which represents the number of new contracts executed during the period for the purchase of homes , less cancellations of contracts in the same period . the dollar value of net contracts represents the dollars associated with net contracts executed in the period . these values are an indicator of potential future revenues ; โ contract backlog is a volume indicator which represents the number of homes that are under contract , but not yet delivered as of the stated date . the dollar value of contract backlog represents the dollar amount of the homes in contract backlog . these values are an indicator of potential future revenues ; โ active selling communities is a volume indicator which represents the number of communities which are open for sale with ten or more home sites available as of the end of a period . we identify communities based on product type ; therefore at times there are multiple communities at one land site . these values are an indicator of potential revenues ; โ net contracts per average active selling community is used to indicate the pace at which homes are being sold ( put into contract ) in active selling communities and is calculated by dividing the number of net contracts in a period by the average number of active selling communities in the same period . sales pace is an indicator of market strength and demand ; and โ contract cancellation rates is a volume indicator which represents the number of sales contracts cancelled in the period divided by the number of gross sales contracts executed during the period . contract cancellation rates as a percentage of backlog is calculated by dividing the number of cancelled contracts in the period by the contract backlog at the beginning of the period . cancellation rates as compared to prior periods can be an indicator of market strength or weakness . overview market conditions and covid-19 impact and strategy the demand for new and existing homes is dependent on a variety of demographic and economic factors , including job and wage growth , household formation , consumer confidence , mortgage financing , interest rates and overall housing affordability . in general , at the start of our fiscal year , factors including rising levels of household formation , a constrained supply of new and used homes , wage growth , strong employment conditions and mortgage rates that continue to be low by historical standards were contributing to improving conditions for new home sales . however , this year , overall economic conditions in the united states have been , and continue to be , impacted negatively by the covid-19 pandemic , which has resulted in , among other things , quarantines , `` stay-at-home '' or `` shelter-in-place '' orders , and similar mandates from national , state and local governments that have substantially restricted daily activities and caused many businesses to curtail or cease normal operations . notwithstanding these developments , all of the state and local governments in the markets in which we operate have deemed housing to be an essential business , which has allowed us to continue with construction and sales of homes . although most of the states in which we operate have begun to resume normal business operations , the united states continues to struggle with rolling outbreaks of the virus . accordingly , we can not predict the magnitude of either the near-term or long-term effects that the pandemic will have on our business . earlier this year , in response to the pandemic , we actively took steps to navigate through this extraordinary period by placing our highest priority on helping to protect the health and safety of our associates , trade partners and customers . among other measures , we implemented appropriate health and safety protocols so that our community construction and sales activities , wherever authorized , could continue operations . during the second quarter of fiscal 2020 and the initial impact of covid-19 , we experienced adverse business conditions , including a slowdown in customer traffic and sales pace and an increase in cancellations . story_separator_special_tag we sell and lease back certain of our model homes with the right to participate in the potential profit when each home is sold to a third party at the end of the respective lease . as a result of our continued involvement , for accounting purposes in accordance with asc 606-10-55-68 , these sale and leaseback transactions are considered a financing rather than a sale . therefore , for purposes of our consolidated balance sheets , at october 31 , 2020 , inventory of $ 48.8 million was recorded to โ consolidated inventory not owned , โ with a corresponding amount of $ 47.2 million recorded to โ liabilities from inventory not owned. โ 25 we have land banking arrangements , whereby we sell our land parcels to the land banker and they provide us an option to purchase back finished lots on a quarterly basis . because of our options to repurchase these parcels , for accounting purposes , in accordance with asc 606-10-55-70 , these transactions are considered financings rather than sales . for purposes of our consolidated balance sheets , at october 31 , 2020 , inventory of $ 133.4 million was recorded as โ consolidated inventory not owned , โ with a corresponding amount of $ 84.0 million recorded to โ liabilities from inventory not owned โ for the amount of net cash received from the transactions . the recoverability of inventories and other long-lived assets is assessed in accordance with the provisions of asc 360-10 , โ property , plant and equipment โ overall โ ( โ asc 360-10 โ ) . asc 360-10 requires long-lived assets , including inventories , held for development to be evaluated for impairment based on undiscounted future cash flows of the assets at the lowest level for which there are identifiable cash flows . as such , we evaluate inventories for impairment at the individual community level , the lowest level of discrete cash flows that we measure . we evaluate inventories of communities under development and held for future development for impairment when indicators of potential impairment are present . indicators of impairment include , but are not limited to , decreases in local housing market values , decreases in gross margins or sales absorption rates , decreases in net sales prices ( base sales price net of sales incentives ) , or actual or projected operating or cash flow losses . the assessment of communities for indication of impairment is performed quarterly . as part of this process , we prepare detailed budgets for all of our communities at least semi-annually and identify those communities with a projected operating loss . for those communities with projected losses , we estimate the remaining undiscounted future cash flows and compare those to the carrying value of the community , to determine if the carrying value of the asset is recoverable . the projected operating profits , losses , or cash flows of each community can be significantly impacted by our estimates of the following : โ future base selling prices ; โ future home sales incentives ; โ future home construction and land development costs ; and โ future sales absorption pace and cancellation rates . these estimates are dependent upon specific market conditions for each community . while we consider available information to determine what we believe to be our best estimates as of the end of a quarterly reporting period , these estimates are subject to change in future reporting periods as facts and circumstances change . local market-specific conditions that may impact our estimates for a community include : โ the intensity of competition within a market , including available home sales prices and home sales incentives offered by our competitors ; โ the current sales absorption pace for both our communities and competitor communities ; โ community specific attributes , such as location , availability of lots in the market , desirability and uniqueness of our community , and the size and style of homes currently being offered ; โ potential for alternative product offerings to respond to local market conditions ; โ changes by management in the sales strategy of the community ; โ current local market economic and demographic conditions and related trends of forecasts ; and โ existing home inventory supplies , including foreclosures and short sales . these and other local market-specific conditions that may be present are considered by management in preparing projection assumptions for each community . the sales objectives can differ between our communities , even within a given market . for example , facts and circumstances in a given community may lead us to price our homes with the objective of yielding a higher sales absorption pace , while facts and circumstances in another community may lead us to price our homes to minimize deterioration in our gross margins , although it may result in a slower sales absorption pace . in addition , the key assumptions included in our estimate of future undiscounted cash flows may be interrelated . for example , a decrease in estimated base sales price or an increase in homes sales incentives may result in a corresponding increase in sales absorption pace . additionally , a decrease in the average sales price of homes to be sold and closed in future reporting periods for one community that has not been generating what management believes to be an adequate sales absorption pace may impact the estimated cash flow assumptions of a nearby community . changes in our key assumptions , including estimated construction and development costs , absorption pace and selling strategies , could materially impact future cash flow and fair-value estimates . due to the number of possible scenarios that would result from various changes in these factors , we do not believe it is possible to develop a sensitivity analysis with a level of precision that would be meaningful to an investor . 26 if the undiscounted cash flows are more than the carrying value of the community , then the carrying amount is recoverable , and no impairment adjustment is required .
| operating results we experienced overall positive operating results for the year ended october 31 , 2020 as follows : our cash position allowed us to spend $ 624.2 million on land purchases and land development during fiscal 2020 , and still have total liquidity of $ 399.1 million , including $ 262.5 million of homebuilding cash and cash equivalents as of october 31 , 2020 and $ 125.0 million of borrowing capacity under our senior secured revolving credit facility . additional results for the year ended october 31 , 2020 were as follows : โ for the year ended october 31 , 2020 , sale of homes revenues increased 15.5 % as compared to the prior year , as a result of a 15.0 % increase in deliveries , primarily due to our increased community count that occurred during fiscal 2019 and our 39.2 % increase in sales absorption pace in fiscal 2020 as compared to fiscal 2019 . โ gross margin percentage increased from 14.2 % for the year ended october 31 , 2019 to 14.7 % for the year ended october 31 , 2020 , and gross margin percentage , before cost of sales interest expense and land charges , increased from 18.1 % for the year ended october 31 , 2019 to 18.4 % for the year ended october 31 , 2020. the increases were primarily due to the mix of communities delivering compared to the prior year , along with increases in home prices in virtually all of our markets during the last half of fiscal 2020 .
| 2,391 |
the amount of goodwill for tax purposes that is expected to story_separator_special_tag the following management 's discussion and analysis ( ยmd & aย ) is intended to facilitate an understanding of the results of operations and financial condition of abm industries incorporated and its consolidated subsidiaries ( hereinafter collectively referred to as ยabmย , ยweย , ยusย , ยourย , or the ยcompanyย ) . this md & a should be read in conjunction with the consolidated financial statements and the accompanying notes ( ยfinancial statementsย ) contained in item 8 , ยfinancial statements and supplementary dataย . the following discussion and analysis of our financial condition and results of operations may contain forward-looking statements about our business , operations and industry that involve risks and uncertainties , such as statements regarding our plans , objectives , expectations and intentions . our future results and financial condition may differ materially from those we currently anticipate . see the ยforward-looking statementsย and ยrisk factorsย sections of this annual report on form 10-k. unless otherwise indicated , all information in the discussion and references to years are based on the company 's fiscal year , which ends on october 31. business overview abm is a leading provider of end-to-end integrated facility solutions services to thousands of commercial , governmental , industrial , institutional , retail , and residential client facilities located primarily throughout the united states . the company 's comprehensive capabilities include expansive facility solutions , energy solutions , commercial cleaning , maintenance and repair , hvac , electrical , landscaping , parking , and security services , provided through stand-alone or integrated solutions . strategy and outlook in fiscal 2012 , we further developed a platform to deliver an end-to-end service model to our clients . as a result , we began to realign our operational structure to an on-site , mobile and on-demand market based structure . during fiscal 2013 , this realignment will continue and should improve our long-term growth prospects and provide higher margin opportunities by giving us the ability to better deliver end-to-end services to our clients located in urban , suburban and rural areas . our on-site service lines will include janitorial , security , parking and a portion of our facility solutions business , which will allow us to focus and better cross sell our end-to-end services to clients . the mobile and on-demand service lines , which include building and energy solutions , will provide end-to-end service to clients with multiple locations or having specific service needs related to the maintenance and on-going operations of their facilities . the company 's strategy includes the expansion of its vertical market expertise in servicing the end-to-end needs of clients in certain industries . the company expects to achieve its long-term growth opportunities through strategic acquisitions and through organic growth , while maintaining desirable profit margins and keeping overall costs low . additionally , the company continues to assess the impact that the annual federal budget and u.s. government policy and strategy changes will have on its government clients and its business . on november 1 , 2012 , we acquired air serv corporation ( ยair servย ) , a provider of integrated facility solutions services for airlines and freight companies , and hha services , inc. ( ยhhaย ) , a provider of food and facility solutions services to hospitals , healthcare systems , long-term care facilities and retirement communities . the purchase prices for the air serv and hha acquisitions were $ 157.5 million and $ 34.0 million , respectively , and are subject to certain closing adjustments . the air serv and hha acquisitions should allow the company to significantly expand its vertical market expertise in servicing the end-to-end needs of the airlines , airport authorities and healthcare service market . in december 2010 , the company acquired the linc group , llc ( ยlincย ) for an aggregate purchase price of $ 298.7 million in cash ( the ยlinc acquisitionย ) . linc provides end-to-end integrated facility solutions services , military base operation services , and translation and other services in support of u.s. military operations . linc 's clients include state and federal governments , commercial entities and residential customers , throughout the united states and in select international locations . the operations of linc are included in the facility solutions segment as of the acquisition date . 20 summary of key financial performance indicators during the second half of 2011 and continuing throughout 2012 , the u.s. economy was generally weak and the company faced increasing competitive pricing pressures which led to a reduction in scope of work and certain contract losses from the company 's clients . this competitive environment impacted overall margins in fiscal 2012. further , a significant portion of the revenues in the facility solutions segment is generated from contracts with the u.s. government . the company is continually assessing the potential impact that the size , composition , and timing of congressional approval of the annual federal budget will have on its government clients . in addition , the company monitors and assesses the potential impact of u.s. government policy and strategy changes on its business . while the volume of bid activity and request for proposals for future awards remains active , the company 's government business has experienced and may continue to experience delays in new contract awards and in the start dates of currently awarded contracts or early termination of existing contracts . in addition , during the year ended october 31 , 2012 , there were unfavorable developments in certain general liability and workers ' compensation claims for certain policy years prior to fiscal 2012. certain general liability claims related to earlier policy years experienced losses significantly higher than were previously estimated . workers ' compensation expense was unfavorable in california and other states where the company maintains a significant presence . specifically in california , workers ' compensation claims were favorable for older years , but adverse for more current years due primarily to california 's post-reform workers ' compensation environment . story_separator_special_tag during the year ended october 31 , 2012 , the company changed the name of its engineering segment to facility solutions to better reflect the variety of end-to-end integrated facility solutions services , building operation and maintenance , and bundled energy solutions services provided to its clients . most corporate expenses are not directly allocated . such expenses include certain chief executive officer and other finance and human resource departmental costs , certain information technology costs , share-based compensation costs , certain legal and settlement costs , and current actuarial developments of self-insurance reserves related to claims incurred in prior years . segment revenues and operating profits for the years ended october 31 , 2012 and 2011 were as follows : replace_table_token_5_th janitorial replace_table_token_6_th janitorial revenues increased by $ 14.1 million , or 0.6 % , during the year ended october 31 , 2012 , as compared to the year ended october 31 , 2011. the increase was primarily related to additional revenues from new business , partially offset by the continuing impact of lost business and reduction in scope of work starting in fiscal 2011. operating profit decreased by $ 4.7 million , or 3.3 % , during the year ended october 31 , 2012 , as compared to the year ended october 31 , 2011. operating profit margins decreased by 0.2 % , to 5.7 % in the year ended october 31 , 2012 from 5.9 % in the year ended october 31 , 2011. the decrease in operating profit was primarily related to higher payroll and payroll related expenses , including the impact of higher state unemployment insurance rates and one additional working day in the year ended october 31 , 2012. also contributing to the decrease in operating profit were higher legal expenses and the continuing impact of lost business and increasing competitive pricing pressures starting in fiscal 2011. the decrease in operating profit was partially offset by a reduction in the sales allowance reserve , lower selling , general and administrative expenses due to additional cost control measures , and lower amortization of intangible assets expense in the year ended october 31 , 2012 . 24 facility solutions replace_table_token_7_th facility solutions revenues increased by $ 25.0 million , or 2.8 % , during the year ended october 31 , 2012 , as compared to the year ended october 31 , 2011. the increase was primarily related to revenues associated with the timing of the linc acquisition , which was acquired on december 1 , 2010 , and an increase in abes and commercial facility solutions services revenues as a result of new contracts . the increase was partially offset by decreases in government revenues , including the termination of certain u.s. government contracts in iraq earlier in the fiscal year . operating profit decreased by $ 1.4 million , or 4.3 % , during the year ended october 31 , 2012 , as compared to the year ended october 31 , 2011. operating profit margins decreased by 0.2 % , to 3.5 % in the year ended october 31 , 2012 from 3.7 % in the year ended october 31 , 2011. the decrease in operating profit margins was primarily related to the unfavorable margin impact as a result of lower government revenues . additionally , the decrease in operating profit margins was impacted by lower margins on new business contracts related to commercial facility solutions services as a result of increasing competitive pricing pressures and the impact of higher state unemployment insurance rates . the decrease in operating profit was partially offset by higher margins on increased abes revenues and lower selling , general and administrative expenses due to additional cost control measures in the year ended october 31 , 2012. parking replace_table_token_8_th parking revenues decreased by $ 0.5 million , or 0.1 % , during the year ended october 31 , 2012 , as compared to the year ended october 31 , 2011. the decrease was primarily related to lost contracts , including the termination of certain unprofitable contracts , partially offset by increased revenues from existing and new clients . operating profit increased by $ 1.9 million , or 8.0 % , during the year ended october 31 , 2012 , as compared to october 31 , 2011. operating profit margins increased by 0.4 % , to 4.3 % in the year ended october 31 , 2012 from 3.9 % in the year ended october 31 , 2011. the increase in operating profit was primarily related to improved margins on certain existing contracts , the termination of certain unprofitable contracts and the impact of a favorable legal settlement in the current year . 25 security replace_table_token_9_th security revenues increased by $ 15.5 million , or 4.4 % , during the year ended october 31 , 2012 , as compared to the year ended october 31 , 2011. the increase was primarily related to additional revenues from new business that exceeded contract losses and increased revenues from existing clients . operating profit decreased by $ 0.1 million , or 1.7 % , during the year ended october 31 , 2012 , as compared to the year ended october 31 , 2011. operating profit margins decreased by 0.2 % , to 2.1 % in the year ended october 31 , 2012 from 2.3 % in the year ended october 31 , 2011. the slight decrease was primarily related to increases in payroll and payroll related expenses , including higher state unemployment insurance rates , partially offset by a reduction in selling , general and administrative expenses due to additional cost control measures in the year ended october 31 , 2012. corporate and other years ended october 31 , ( $ in thousands ) 2012 2011 increase / ( decrease ) corporate expenses $ ( 105,390 ) $ ( 88,662 ) $ 16,728 18.9 % corporate expenses increased by $ 16.7 million , or 18.9 % , during the year ended october 31 , 2012 , as compared to the year ended october 31 , 2011. the increase in corporate expenses was primarily related to : a $ 5.2 million increase in the
| results of operations the year ended october 31 , 2012 compared with the year ended october 31 , 2011 consolidated replace_table_token_4_th * not meaningful revenues revenues increased by $ 53.4 million , or 1.3 % , during the year ended october 31 , 2012 , as compared to the year ended october 31 , 2011. the increase was primarily related to revenues associated with the timing of the linc acquisition , which occurred on december 1 , 2010 , new business within the security and janitorial segments , and additional revenues from new abes contracts . the increase in revenues was partially offset by the continuing impact of reduction in scope of work and contract losses starting in fiscal 2011 and the termination of certain u.s. government contracts in iraq earlier in the fiscal year . operating expenses operating expenses increased by $ 73.1 million , or 1.9 % , during the year ended october 31 , 2012 , as compared to the year ended october 31 , 2011. as a percentage of revenues , gross margin decreased by 0.6 % , to 10.4 % in the year ended october 31 , 2012 from 11.0 % in the year ended october 31 , 2011. the decrease in gross margin was primarily related to an increase in payroll and payroll related expenses , including higher state unemployment insurance rates , and the impact of one additional working day in the year ended october 31 , 2012. also contributing to the decrease were higher self-insurance expenses related to prior year claims primarily as a result of unfavorable developments in certain general liability and workers ' compensation claims during the year ended october 31 , 2012 ; the absence of a refund of paid health insurance premiums during the year ended october 31 , 2011 ; and the continuing impact of increasing competitive pricing pressures and contract losses starting in fiscal 2011 , including the termination of certain u.s. government contracts in iraq earlier in the fiscal year .
| 2,392 |
in accordance with asc topic 360-10-45 , the property met all the criteria to be classified as held for sale in the fourth quarter of fiscal 2019 , and accordingly the company recorded a loss on property held for sale of $ 434,000 , which loss was included in continuing operations in the consolidated statement of income for the year ended october 31 , 2019. the amount of the loss represented the net carrying amount of the property over the fair value of the asset less estimated cost to sell . the net book value of the bernardsville property was insignificant to financial statement presentation and as a result the company did not include the asset as held for sale on its consolidated balance sheet at october 31 , 2019. in december 2019 ( fiscal 2020 ) , the bernardsville property sale was completed and the company realized an additional loss on sale of property of $ 86,000 , which loss is included in continuing operations in the consolidated statement of income for the year ended october 31 , 2020. in june 2019 , the company sold for $ 3.7 million its property located in monroe , ct ( the `` monroe property `` ) , as that property no longer met the company 's investment objectives . in conjunction with the sale the company realized a gain on sale of property in the amount of $ 416,000 , which is included in continuing operations in the consolidated statement of income for the year ended october 31 , 2019. the combined operating results of the monroe property , the bernardsville property , the carmel property and the sold portion of the pompton lakes properties , which are included in continuing story_separator_special_tag the following discussion should be read in conjunction with the consolidated financial statements of the company and the notes thereto included elsewhere in this report , the โ special note regarding forward-looking statements โ in part i and โ item 1a . risk factors. โ executive summary overview we are a fully integrated , self-administered real estate company that has elected to be a real estate investment trust ( `` reit '' ) for federal income tax purposes , engaged in the acquisition , ownership and management of commercial real estate , primarily neighborhood and community shopping centers , anchored by supermarkets , pharmacy/drug-stores and wholesale clubs , with a concentration in the metropolitan tri-state area outside of the city of new york . other real estate assets include office properties , single tenant retail or restaurant properties and office/retail mixed-use properties . our major tenants include supermarket chains and other retailers who sell basic necessities . at october 31 , 2020 , we owned or had equity interests in 81 properties , which include equity interests we own in five consolidated joint ventures and six unconsolidated joint ventures , containing a total of 5.3 million square feet of gross leasable area ( โ gla โ ) . of the properties owned by wholly-owned subsidiaries or joint venture entities that we consolidate , approximately 90.4 % was leased ( 92.9 % at october 31 , 2019 ) . of the properties owned by unconsolidated joint ventures , approximately 91.1 % was leased ( 96.1 % at october 31 , 2019 ) . we have paid quarterly dividends to our shareholders continuously since our founding in 1969. impact of covid-19 the following discussion is intended to provide stockholders with certain information regarding the impacts of the covid-19 pandemic on our business and management 's efforts to respond to those impacts . unless otherwise specified , the statistical and other information regarding our property portfolio and tenants are estimates based on information available to us as of december 10 , 2020. as a result of the rapid development , fluidity and uncertainty surrounding this situation , we expect that such statistical and other information will change going forward , potentially significantly , and may not be indicative of the actual impact of the covid-19 pandemic on our business , operations , cash flows and financial condition for fiscal 2021 and future periods . the spread of covid-19 is having a significant impact on the global economy , the u.s. economy , the economies of the local markets throughout the northeast region in which our properties are located , and the broader financial markets . nearly every industry has been impacted directly or indirectly , and the u.s. retail market has come under severe pressure due to numerous factors , including preventive measures taken by local , state and federal authorities to alleviate the public health crisis , such as mandatory business closures , quarantines , restrictions on travel and โ shelter-in-place โ or โ stay-at-home โ orders . during the early part of the pandemic , these containment measures , as implemented by the tri-state area of connecticut , new york and new jersey , generally permitted businesses designated as โ essential โ to remain open , although limiting the operations of different categories of our tenants to varying degrees . since early summer , many ( but not all ) of these restrictions have been gradually lifted as the covid-19 situation in the tri-state area significantly improved , with most businesses now permitted to open at reduced capacity and under other limitations intended to control the spread of covid-19 . the situation , however , has been evolving as we head deeper into the winter months . moreover , not all tenants have been impacted in the same way or to the same degree by the pandemic and the measures adopted to control the spread of covid-19 . for example , grocery stores , pharmacies and wholesale clubs have been permitted to remain fully open throughout the pandemic and have generally performed well given their focus on food and necessities . many restaurants have also been considered essential , although social distancing and group gathering limitations have generally prevented or limited dine-in activity , forcing them to evaluate alternate means of operations , such as outdoor dining , delivery and pick-up . story_separator_special_tag in addition , the gaap accounting standard governing leases requires , among other things , that if a specific tenant 's future lease payments as contracted are not probable of collection , revenue recognition for that tenant must be converted to cash-basis accounting and be limited to the lesser of the amount billed or collected from that tenant , and any straight-line rental receivables would need to be reversed in the period that the collectability assessment is changed to not probable . as a result of analyzing our entire tenant base , in the fiscal year ended october 31 , 2020 , we determined that 64 tenants ' future lease payments were no longer probable of collection ( 7.1 % of our approximate 900 tenants ) and , as a result of this assessment , in the three and twelve months ended october 31 , 2020 we reversed previously billed lease income in the amount of $ 551,000 and $ 2.3 million , respectively . for the year ended october 31 , 2020 , this $ 2.3 million represented approximately 2.4 % of abr . in addition , as a result of this assessment , we reversed $ 179,000 and $ 1.1 million in the three and twelve months ended october 31 , 2020 , respectively , of accrued straight-line rent receivables related to these 64 tenants . for the year ended october 31 , 2020 , this $ 1.1 million represented approximately 1.1 % of abr . both of these reversals , totaling $ 730,000 and $ 3.4 million in the three and twelve months ended october 31 , 2020 , respectively , result in a direct reduction of lease income on our consolidated income statement . each reporting period management assesses whether there are any indicators that the value of its real estate investments may be impaired and has concluded that none of its investment properties are impaired at october 31 , 2020. the covid-19 pandemic has however , significantly impacted many of the retail sectors in which our tenants operate , and if the effects of the pandemic are prolonged , it could have a significant adverse impact on the underlying industries of many of our tenants . we will continue to monitor the economic , financial , and social conditions resulting from the covid-19 pandemic and will assess our real estate asset portfolio for any impairment indicators as required under gaap . if we determine that any of our real estate assets are impaired , we would be required to take impairment charges and such amounts could be material . see footnote 1 to the notes to the company 's consolidated financial statements for additional discussion regarding impairment charges . 14 actions taken in response to covid-19 we have taken a number of proactive measures to maintain the strength of our business and manage the impact of covid-19 on our operations and liquidity , including the following : along with our tenants and the communities we together serve , the health and safety of our employees is our top priority . we have adapted our operations to protect employees , including by implementing a work-from-home policy in march 2020 , which worked seamlessly with no disruption in our service to tenants and other business partners . on may 20 , 2020 , in response to a change in the state of connecticut 's mandates , we re-opened our office at less than 50 % capacity , with employees encouraged to continue working from home when feasible consistent with business needs . we continue to closely monitor the recommendations and mandates of federal , state and local governments and health authorities to ensure the safety of our own employees as well as our properties . we are in regular communication with our tenants , providing assistance in identifying local , state and federal resources that may be available to support their businesses and employees during the pandemic , including stimulus funds that may be available under the coronavirus aid , relief , and economic security act of 2020 ( the `` cares act โ ) . we compiled a robust set of tenant materials explaining these and other programs , which have been posted to the tenant portal on our website , disseminated by e-mail to all of our tenants through the tenant portal of our general ledger system and communicated directly by telephone through our leasing agents . each of our tenants was also assigned a leasing agent to whom the tenant can turn with questions and concerns during these uncertain times . in addition , we launched a program designating dedicated parking spots for curbside pick-up at our shopping centers for use by all tenants and their customers , assisted restaurant tenants in securing municipal approvals for outdoor seating , and are assisting tenants in many other ways to improve their business prospects . to enhance our liquidity position and maintain financial flexibility , we borrowed $ 35 million under our unsecured revolving credit facility ( `` facility '' ) during march and april 2020 to fund capital improvements and for general corporate purposes . at october 31 , 2020 , we had $ 40.8 million in cash and cash equivalents on our consolidated balance sheet , and an additional $ 64 million available under our facility ( excluding the $ 50 million accordion feature ) . we do not have any unsecured debt maturing until august 2021. additionally , we do not have any secured debt maturing until january 2022. all maturing secured debt is generally below a 55 % loan-to-value ratio , and we believe we will be able to refinance that debt . construction related to three large re-tenanting projects , two for grocery stores and one for a national junior anchor , was completed during the second quarter and all three tenants are open and operating as of the date of this report . we do not have any other material re-tenanting projects ongoing .
| results of operations fiscal 2020 vs. fiscal 2019 the following information summarizes our results of operations for the years ended october 31 , 2020 and 2019 ( amounts in thousands ) : replace_table_token_6_th note 1 โ properties held in both periods includes only properties owned for the entire periods of 2020 and 2019 and for interest expense the amount also includes parent company interest expense . all other properties are included in the property acquisition/sales column . there are no properties excluded from the analysis . base rents decreased by 1.1 % to $ 99.4 million for the fiscal year ended october 31 , 2020 as compared with $ 100.5 million in the comparable period of 2019. the change in base rent and the changes in other income statement line items analyzed in the table above were attributable to : property acquisitions and properties sold : in fiscal 2019 , we purchased one property totaling 177,000 square feet , and sold one property totaling 10,100 square feet . in fiscal 2020 , we sold two properties totaling 18,100 square feet . these properties accounted for all of the revenue and expense changes attributable to property acquisitions and sales in the year ended october 31 , 2020 when compared with fiscal 2019. properties held in both periods : revenues base rent the net decrease in base rents for the fiscal year ended october 31 , 2020 , when compared to the corresponding prior period was predominantly caused by a decrease in base rent revenue at seven properties related to tenant vacancies .
| 2,393 |
we currently sell our products in more than 90 countries through domestic and international retailers and distributors and directly to end-user consumers through our company-operated retail stores , outlets , kiosks and webstores . since the initial introduction and popularity of the beach and crocs classic designs , we have expanded our croslite products to include a variety of new styles and products and have further extended our product reach through the acquisition of brand platforms such as jibbitz and ocean minded . we intend to continue to expand the breadth of our footwear product lines , bringing a unique and original perspective to the consumer in styles that may be unexpected from crocs . we believe this will help us to continue to build a stable year-round business as we move toward becoming a four-season brand . the broad appeal of our footwear has allowed us to market our products to a wide range of distribution channels , including department stores and traditional footwear retailers as well as a variety of specialty and independent retail channels . our marketing efforts surround specific product launches and employ a fully integrated approach utilizing a variety of media outlets , including print and websites . our marketing efforts drive business to both our wholesale partners and our company-operated retail and internet stores , ensuring that our presentation and story are first class and drive purchasing at the point of sale . as a global company , we have significant revenues and costs denominated in currencies other than the u. s. dollar . sales in international markets in foreign currencies are expected to continue to represent a substantial portion of our revenues . likewise , we expect our subsidiaries with functional currencies other than the u.s. dollar will continue to represent a substantial portion of our overall gross margin and related expenses . accordingly , changes in foreign currency exchange rates could materially affect revenues and costs or the comparability of revenues and costs from period to period as a result of translating our financial statements into our reporting currency . recent events on january 27 , 2014 , we issued to blackstone capital partners vi l.p. ( `` blackstone '' ) and certain of its permitted transferees ( together with blackstone , the `` blackstone purchasers '' ) , 200,000 shares of our series a preferred stock for an aggregate purchase price of $ 198.0 million , or $ 990 per share , pursuant to an investment agreement between us and blackstone , dated december 28 , 2013 ( as amended , the `` investment agreement '' ) . in connection with the issuance of the series a preferred stock ( the `` closing '' ) and pursuant to the investment agreement , we paid blackstone a closing fee of $ 2.0 million and reimbursed blackstone 's transaction fees and expenses of approximately $ 4.0 million . we intend to use the net proceeds of the transactions , as well as cash on hand , to fund the previously announced $ 350.0 million stock repurchase authorization approved by the board of directors . the blackstone investment represented approximately 13.5 % ownership of the company as of january 31 , 2014. we believe this investment provides an opportunity to drive shareholder value and refine the strategic direction of the business . 35 the series a preferred stock ranks senior to our common stock with respect to dividend rights and rights on liquidation , winding-up and dissolution . holders of series a preferred stock are entitled to cumulative dividends payable quarterly in cash at a rate of 6 % per annum as well as any dividends declared or paid on common stock and are entitled to vote together with the holders of common stock on an as-converted basis . pursuant to the investment agreement , the series a preferred stock is subject to several different conversion features as well as redemption rights , which are at the option of the holder , the company or contingent events . the conversion rate is subject to customary anti-dilution and other adjustments subject to certain share caps and other restrictions . as a condition of the investment agreement , blackstone received rights to designate two out of eight members of the board of directors . as a result , stephen cannon and jeffrey margolis have resigned from the company 's board and blackstone 's two nominees , prakash melwani and gregg ribatt , have been added to the board of directors . the board of directors will remain at eight members . mr. melwani is currently a senior managing director at blackstone and chief investment officer of the firm 's private equity group ; mr. ribatt most recently served as the president and chief executive officer of collective brands performance + lifestyle group . in addition , on december 27 , 2013 , john mccarvel resigned from his position as president , chief executive officer and director of the company effective upon the earlier to occur of ( i ) april 30 , 2014 or ( ii ) the board of director 's appointment of his successor as ceo . in connection with his resignation , we entered into a separation agreement that will pay mr. mccarvel $ 2.1 million within one year of the effectiveness of his resignation . mr. mccarvel has agreed to continue in a consulting capacity with the company through april 30 , 2014 if his successor is appointed prior to such date . the separation payments are conditioned upon the effectiveness of mr. mccarvel 's release of claims in favor of the company and his compliance with the non-competition , non-solicitation and confidentiality covenants contained in the separation agreement . pursuant to the terms of the investment agreement , as amended , the board of directors formed a special committee on january 24 , 2014 and has granted to such committee the sole power and authority to identify , consider , assess , evaluate , research , and recommend individual nominees for the position of ceo of the company to replace mr. mccarvel . story_separator_special_tag net income decreased $ 120.9 million , or 92.1 % , to $ 10.4 million compared to 2012 driving our diluted earnings per share from $ 1.44 to $ 0.12. we continued to expand our retail channel through the net addition of 82 stores in 2013 in order to further increase brand recognition and create opportunities to present new and classic product lines . in january 2014 , we opened our much anticipated three-story flagship location with approximately 4,500 square feet of selling space in a 13,600 square foot building located on 34 th street in new york . we continue to fund the implementation of our customized and fully integrated operations , accounting , and finance erp system , which is expected to launch globally in late 2014. the introduction of the new erp system to our current environment will allow for seamless and high-quality data across the company . as of december 31 , 2013 , total costs to date related to the erp implementation were $ 41.4 million , of which $ 34.6 million was capitalized and $ 6.8 million was expensed . as of december 31 , 2013 , we had $ 16.8 million in outstanding borrowings related to the erp system under a master installment payment agreement ( `` master ipa '' ) with pnc equipment finance , llc ( `` pnc equipment '' ) . we repurchased approximately 0.8 million shares at an average price of $ 14.99 per share for a total value of $ 12.5 million , excluding related commission charges . future outlook given the recent events including the investment from blackstone and the resignation of our ceo , we expect to undergo some strategic transitioning during the next fiscal year to refine our short-term and long-term growth strategies , which will include prioritizing earnings growth , and our focus on becoming the leading brand in casual lifestyle footwear . the investment by blackstone is a vote of confidence in our company and our brand , and we anticipate both will benefit from blackstone 's financial , consumer , retail and brand experience . due to these recent events and additional changes expected in 2014 , we expect an environment that is more challenging to predict the impact on our business , financial position and results of operations . we head into 2014 with a renewed sense of focus and an emphasis on delivering shareholder value . we intend to use the proceeds from the blackstone investment as well as internal cash to repurchase approximately $ 350.0 million of our common stock . we intend to be patient , methodical and opportunistic in the execution of this expanded buyback plan . in addition , we are excited about our new product launches for spring/summer , including the stretch sole and busy day , as well as carryover products such as the huarache and a-leigh wedge , which are proving more successful in their second seasons . entering the year , our backlog was up approximately $ 24.6 million to $ 378.9 million , which shows the strength of our wholesale relationships . we have implemented several investment strategies that we believe will drive revenue growth while improving the operational and technological efficiency of the business . as part of our overall retail expansion strategy , we ended the year with 619 global retail locations . in 2014 , as we intend to increasingly focus on profitable growth and retail excellence , we may moderate the pace of our investments in new retail stores as well as consolidate some existing locations . we remain in the testing and development phase of our erp system implementation . this implementation represents the beginning of a transformational change intended to improve our operational efficiency as we adapt as a global company . we expect to launch our new erp system globally in late 2014. overall , the organization is focused on delivering shareholder value through our focus on casual lifestyle footwear sales and balancing long-term global growth between company-operated retail locations , partner store and multiband independent wholesale accounts and internet sites in local languages . 38 story_separator_special_tag inc '' , dn= '' 1 '' , chk=163415 , folio='41 ' , file='disk130 : [ 14zar1.14zar73701 ] cg73701a . ; 11 ' , user='mbradt ' , cd='25-feb-2014 ; 13:41 ' -- > impact on gross profit due to foreign exchange rate fluctuations . changes in average foreign currency exchange rates used to translate revenues and costs of sales from our functional currencies to our reporting currency during the year ended december 31 , 2013 decreased our gross profit by $ 15.9 million compared to 2012. the majority of this decrease was related to the decrease in value of the japanese yen compared to the u.s. dollar due to the political and macroeconomic environment in japan . selling , general and administrative expenses . selling , general and administrative expenses increased $ 88.8 million , or 19.3 % , during the year ended december 31 , 2013 compared to 2012. we continue to focus our operating expense increases around the long-term growth of the company and are currently undergoing several long-term strategic projects including global retail expansion and the implementation of our erp system , which resulted in selling , general and administrative charges as well as capitalized expenditures . the increase in selling , general and administrative expenses is primarily due to : ( i ) an increase of $ 39.6 million , or 19.3 % , related to the global expansion of our retail channel , in which we opened 82 company-operated stores ( net of store closures ) during the year . this increase includes $ 23.5 million of additional building expenses such as rent and maintenance fees , $ 11.4 million in additional labor expenses and $ 3.2 million in depreciation and amortization ; ( ii ) an increase of $ 14.9 million , or 13.9 % , related to non-retail labor charges including variable and stock compensation as well as the normalization of 2012 headcount increases ; ( iii ) an increase of $ 9.9
| results of operations comparison of the years ended december 31 , 2013 and 2012 replace_table_token_8_th revenues . during the year ended december 31 , 2013 , revenues increased $ 69.4 million , or 6.2 % , compared to the same period in 2012 , primarily due to an increase of 4.4 million , or 8.8 % , in global footwear unit sales . this increase was partially offset by a decrease of $ 0.28 per unit , or 1.3 % , in average footwear selling price . for the year ended december 31 , 2013 , revenues from our wholesale channel increased $ 27.9 million , or 4.3 % , compared to 2012 , which was primarily driven by increased wholesale demand in our asia pacific , europe and americas segments partially offset by decreased wholesale sales in our japan segment . these increases were driven by strong commitments from current wholesale customers and global distributors in emerging markets specifically in our asia pacific and europe regions . we faced challenges in our americas segment due to lower than anticipated at-once sales as a result of accounts remaining lean on inventory and in our japan segment due to continued macroeconomic pressure on consumer spending and unfavorable exchange rates between the japanese yen and u.s. dollar . for the year ended december 31 , 2013 , revenues from our retail channel increased $ 43.2 million , or 11.5 % , compared to 2012 , primarily driven by the disciplined expansion of our global retail presence , which included the opening of 82 company-operated stores ( net of store closures ) during the year . this increase was driven by a global balance as we realized retail revenue growth in all four segments on a constant currency basis .
| 2,394 |
all of these are difficult to predict , and many are beyond the ability of the company to control . certain statements in this annual report on form 10-k that are not historical facts , but rather reflect the company 's current expectations concerning future results and events , constitute forward-looking statements within the meaning of the private securities litigation reform act of 1995. the words โ believes โ , โ expects โ , โ intends โ , โ plans โ , โ anticipates โ , โ hopes โ , โ likely โ , โ will โ , and similar expressions identify such forward-looking statements . such forward-looking statements involve known and unknown risks , uncertainties and other important factors that could cause the actual results , performance or achievements of the company , or industry results , to differ materially from future results , performance or achievements expressed or implied by such forward-looking statements . readers are cautioned not to place undue reliance on these forward-looking statements , which reflect management 's view only as of the date of this form 10-k. the company undertakes no obligation to update the result of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events , conditions or circumstances . - 19 - overview the company is a leading manufacturer of flexible metal hose , and is currently engaged in a number of different markets , including construction , manufacturing , transportation , petrochemical , pharmaceutical and other industries . the company 's business is managed as a single operating segment that consists of the manufacture and sale of flexible metal hose and accessories . the company 's products are concentrated in residential and commercial construction , and general industrial markets , with a comprehensive portfolio of intellectual property and patents issued in various countries around the world . the company 's primary product , flexible gas piping , is used for gas piping within residential and commercial buildings . through its flexibility and ease of use , the company 's tracpipe ยฎ and tracpipe ยฎ counterstrike ยฎ flexible gas piping , along with its fittings distributed under the trademarks autosnap ยฎ and autoflare ยฎ , allows users to substantially cut the time required to install gas piping , as compared to traditional methods . the company 's newest product line meditrac ยฎ corrugated medical tubing is used for piping medical gases ( oxygen , nitrogen , nitrous oxide , carbon dioxide , and medical vacuum ) in health care facilities . building on the recognized strengths and strategies employed in the flexible gas piping market , meditrac ยฎ can be used in place of rigid copper pipe , and due to its long continuous lengths and flexibility , it can be installed approximately five times faster than rigid copper pipe , saving on installation labor and construction schedules . the company 's products are manufactured at its exton , pennsylvania facilities in the united states , and in banbury , oxfordshire in the united kingdom . a majority of the company 's sales across all industries are generated through independent outside sales organizations such as sales representatives , wholesalers and distributors , or a combination of both . the company has a broad distribution network in north america and to a lesser extent in other global markets . changes in financial condition the company 's cash balance of $ 32,392,000 at december 31 , 2018 , decreased $ 5,546,000 ( 14.6 % ) from the $ 37,938,000 balance at december 31 , 2017. the primary reasons for the decrease were that the company used cash to purchase short-term investments of $ 35,099,000 , net of proceeds from sale of $ 20,155,000 , for a balance of $ 14,944,000 as of the end of 2018 , with the purpose of earning a higher level of investment income while maintaining a minimal level of risk , and the company also paid dividends during 2018 totaling $ 9,284,000 , as detailed in note 6 , โ shareholders ' equity โ . lastly , the company used funds for various capital projects , including those designated for the new meditrac products . those cash outflows were partially offset by income generated from operations during 2018 , as well as the receipt of the $ 1,600,000 cash bond described below . other long term assets were $ 1,307,000 and $ 3,079,000 at december 31 , 2018 and december 31 , 2017 , respectively , decreasing $ 1,772,000 ( 57.6 % ) . during may 2018 , the company received back the cash bond of approximately $ 1,600,000 , which was previously held as security during an appeals process as detailed in note 10 , commitments and contingencies . - 20 - story_separator_special_tag font-size : 10pt '' > twelve-months ended december 31 , 2017 vs. december 31 , 2016 the company reported comparative results from operations for the twelve-month period ended december 31 , 2017 and 2016 as follows : replace_table_token_5_th net sales . the company 's sales for the full year of 2017 were $ 101,799,000 , reflecting an increase of $ 7,748,000 , or 8.2 % , over $ 94,051,000 in 2016. the majority of the increase was related to an increase in unit volume , combined with higher sales prices that were necessary to help offset a rise in the company 's material costs . gross profit . the company 's gross profit margins decreased slightly between the two periods , at 60.7 % and 61.5 % for the twelve-months ended december 31 , 2017 and 2016 , respectively . selling expenses . selling expenses consist primarily of employee salaries and associated overhead costs , commissions , and the cost of marketing programs such as advertising , trade shows and related communication costs , and freight . selling expense was $ 16,359,000 and $ 15,694,000 for 2017 and 2016 , respectively , representing a year over year increase of $ 665,000 , or 4.2 % . story_separator_special_tag the principle of topic 606 was achieved through applying the following five-step approach : โ identification of the contract , or contracts , with a customer โ a contract with a customer exists when the company enters into an enforceable contract with a customer , typically a purchase order initiated by the customer , that defines each party 's rights regarding the goods to be transferred and identifies the payment terms related to these goods . โ identification of the performance obligations in the contract โ performance obligations promised in a contract are identified based on the goods that will be transferred to the customer that are distinct , whereby the customer can benefit from the goods on their own or together with other resources that are readily available from third parties or from us . persuasive evidence of an arrangement for the sale of product must exist . the company ships product in accordance with the purchase order and standard terms as reflected within the company 's order acknowledgments and sales invoices . โ determination of the transaction price โthe transaction price is determined based on the consideration to which the company will be entitled in exchange for transferring goods to the customer . this would be the agreed upon quantity and price per product type in accordance with the customer purchase order , which is aligned with the company 's internally approved pricing guidelines . โ allocation of the transaction price to the performance obligations in the contract โ if the contract contains a single performance obligation , the entire transaction price is allocated to the single performance obligation . this applies to the company as there is only one performance obligation to ship the goods . โ recognition of revenue when , or as , the company satisfies a performance obligation โ the company satisfies performance obligations at a point in time when control of the goods transfers to the customer . determining the point in time when control transfers requires judgment . indicators considered in determining whether the customer has obtained control of a good include : โ the company has a present right to payment โ the customer has legal title to the goods โ the company has transferred physical possession of the goods โ the customer has the significant risks and rewards of ownership of the goods โ the customer has accepted the goods it is important to note that the indicators are not a set of conditions that must be met before the company can conclude that control of the goods has transferred to the customer . the indicators are a list of factors that are often present if a customer has control of the goods . the company has typical , unmodified fob shipping point terms . as the seller , the company can determine that the shipped goods meet the agreed-upon specifications in the contract or customer purchase order ( e.g . items , quantities , and prices ) with the buyer , so customer acceptance would be deemed a formality , as noted in asc 606-10-55-86. as a result , the company has a legal right to payment upon shipment of the goods . - 24 - based upon the above , the company has concluded that transfer of control substantively transfers to the customer upon shipment . other considerations of topic 606 include the following : โ contract costs - costs to obtain a contract ( e.g . customer purchase order ) include sales commissions . under topic 606 , these costs may be expensed as incurred for contracts with a duration of one year or less . the majority of the company 's customer purchase orders are fulfilled ( e.g . goods are shipped ) within two days of receipt . โ warranties - the company does not offer customers to purchase a warranty separately . therefore there is not a separate performance obligation . the company does account for warranties as a cost accrual and the warranties do not include any additional distinct services other than the assurance that the goods comply with agreed-upon specifications . there is no impact of warranties under topic 606 upon the financial reporting of the company . โ returned goods - from time to time , the company provides authorization to customers to return goods . if deemed to be material , the company would record a โ right of return โ asset for the cost of the returned goods which would reduce cost of sales . upon adoption of topic 606 , the company will monitor pending authorized returns of goods and , if deemed appropriate , record the right of return asset accordingly . โ volume rebates ( promotional incentives ) - volume rebates are variable ( dependent upon the volume of goods purchased by our eligible customers ) and , under topic 606 , must be estimated and recognized as a reduction of revenue as performance obligations are satisfied ( e.g . upon shipment of goods ) . also under topic 606 , to ensure that revenue recognized would not be probable of a significant reversal , the four following factors are considered : โ the amount of consideration is highly susceptible to factors outside the company 's influence . โ the uncertainty about the amount of consideration is not expected to be resolved for a long period of time . โ the company 's experience with similar types of contracts is limited . โ the contract has a large number and broad range of possible consideration amounts . if it was concluded that the above factors were in place for the company , it would support the probability of a significant reversal of revenue . however , as none of the four factors apply to the company , promotional incentives are recorded as a reduction of revenue based upon estimates of the eligible products expected to be sold . regarding disaggregated revenue disclosures , as previously noted , the company 's business is controlled as a single operating segment that consists of the manufacture and sale of flexible metal hose .
| results of operations twelve-months ended december 31 , 2018 vs. december 31 , 2017 the company reported comparative results from operations for the twelve-month period ended december 31 , 2018 and 2017 as follows : replace_table_token_4_th net sales . the company 's sales for the full year of 2018 were $ 108,313,000 , reflecting an increase of $ 6,514,000 , or 6.4 % , over $ 101,799,000 in 2017. the increase in sales resulted from an increase in unit volume , combined with higher sales prices that were necessary to help offset a rise in the company 's material costs . gross profit . the company 's gross profit margins increased slightly between the two periods , at 61.0 % and 60.7 % for the twelve-months ended december 31 , 2018 and 2017 , respectively . selling expenses . selling expenses consist primarily of employee salaries and associated overhead costs , commissions , and the cost of marketing programs such as advertising , trade shows and related communication costs , and freight . selling expense was $ 17,117,000 and $ 16,359,000 for 2018 and 2017 , respectively , representing a year over year increase of $ 758,000 , or 4.6 % . the increase was primarily attributable to an increase in freight and commissions , which change in conjunction with sales unit volume . for the same periods , selling expense as a percentage of net sales was 15.8 % and 16.1 % , respectively . general and administrative expenses . general and administrative expenses consist primarily of employee salaries , benefits for administrative , executive and finance personnel , legal and accounting , insurance , and corporate general and administrative services . general and administrative expenses were $ 17,800,000 and $ 17,897,000 for the years ended december 31 , 2018 and 2017 , respectively , decreasing $ 97,000 , or 0.5 % between periods . as a percentage of net sales , general and administrative expenses were 16.4 % and 17.6 % for the twelve-months ended december 31 , 2018 and 2017 , respectively .
| 2,395 |
you should review the sections of this annual report on form 10-k captioned โ risk factors โ and โ special note regarding forward-looking statements โ for a discussion of important factors that could cause our actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis . overview reata 's mission is to develop innovative therapies that change patients ' lives for the better . we focus on developing small-molecule therapeutics with novel mechanisms of action for the treatment of severe , life-threatening diseases with few or no approved therapies . our lead product candidates , bardoxolone methyl ( bard ) and omaveloxolone ( omav ) , activate the transcription factor nrf2 , which plays an important role in regulating the cellular response to injury . by activating nrf2 , bard and omav normalize mitochondrial function , restore redox balance , and resolve inflammation . we have fully enrolled two registrational clinical trials : cardinal , studying bard in chronic kidney disease ( ckd ) caused by alport syndrome , and moxie , studying omav in friedreich 's ataxia ( fa ) . ckd caused by alport syndrome and fa are rare , serious diseases with no approved therapy . we designed cardinal and moxie based on the results of earlier clinical studies and guidance from the fda on a potential path to approval . we expect to have top-line data from both of these clinical trials in the second half of 2019. in each of these trials , fda approval may provide expansion opportunities into other related indications . we are also conducting a third registrational trial , catalyst , studying bard in patients with a rare and serious form of pulmonary arterial hypertension caused by connective tissue disease ( ctd-pah ) , and we expect to have top-line data from this trial during the first half of 2020. we expect our current cash to fund our operations through data readouts for these three ongoing registrational clinical trials . we are developing bard for the treatment of patients with ckd caused by alport syndrome , autosomal dominant polycystic kidney disease ( adpkd ) , and other rare forms of ckd that , in the aggregate , affect more than 700,000 patients in the united states . ckd is characterized by a progressive worsening in the rate at which the kidney filters waste products from the blood , called the glomerular filtration rate ( gfr ) . when gfr gets too low , patients typically develop end-stage kidney disease ( eskd ) and require dialysis or a kidney transplant to survive . in 10 separate ckd clinical trials , bard has been shown to consistently improve estimated gfr ( egfr ) in patients with diverse etiologies of ckd . we believe that bard treatment has the potential to delay or prevent gfr declines that cause the need for dialysis or a transplant in patients with alport syndrome , adpkd , and other rare forms of ckd . we are conducting a phase 2/3 clinical trial studying bard in patients with ckd caused by alport syndrome called cardinal . alport syndrome affects both children and adults and , in patients with the most severe forms of the disease , approximately 50 % progress to dialysis by age of 25 , 90 % by age 40 , and nearly 100 % by age 60. in the phase 2 portion of cardinal , bard demonstrated a statistically significant increase from baseline in mean egfr after 48 weeks of treatment in 25 patients . available historical data for 22 of these patients showed an average annual decline in egfr of 4.2 ml/min/1.73 m 2 in the three-year period prior to study entry . bard also demonstrated a statistically significant increase from baseline in mean egfr at week 52 after withdrawal of drug for four weeks . this retained egfr benefit is important because it provides compelling evidence that drug treatment will delay or prevent the need for dialysis or transplant . the fda has provided us with written guidance that , in patients with ckd caused by alport syndrome , an analysis of retained egfr demonstrating an improvement versus placebo after one year of bard treatment may support accelerated approval , and an improvement versus placebo after two years of treatment may support full approval . the phase 3 portion of cardinal is an international , multi-center , randomized , double-blind , placebo-controlled trial studying the safety and efficacy of bard in 157 alport syndrome patients randomized one-to-one to active drug or placebo . we have fully enrolled the phase 3 portion of cardinal , and we expect to have one year top-line results available in the second half of 2019. if the trial results are positive , we believe the results , together with other data from our development program , will be sufficient to form the basis of an nda submission to the fda seeking approval of bard for the treatment of ckd caused by alport syndrome . 94 we are currently initiating a phase 3 trial studying bard in patients with adpkd called falcon . adpkd is a rare and serious hereditary form of ckd caused by a genetic defect in genes called pkd1 or pkd2 and is characterized by the formation of fluid-filled cysts in the kidneys . adpkd is the most common single-gene disorder of the kidneys , and there are an estimated 400,000 patients in the united states , with approximately 140,000 patients diagnosed with the disease . during 2018 , we completed a phase 2 clinical trial studying bard in patients with adpkd . in the phase 2 study , bard demonstrated a statistically significant increase from baseline in mean egfr after 12 weeks of treatment in 31 patients . available historical data for 29 of these patients showed an average annual decline in egfr of 4.8 ml/min/1.73 m 2 in the three-year period prior to study entry . story_separator_special_tag if we do not successfully develop and obtain regulatory approval of our existing product candidates or any future product candidates and effectively manufacture , market , and sell any products that are approved , we may never generate revenue from product sales . furthermore , even if we do generate revenue from product sales , we may never again achieve or sustain profitability on a quarterly or annual basis . our prior losses , combined with expected future losses , have had and will continue to have an adverse effect on our stockholders ' equity and working capital . our failure to become and remain profitable could depress the market price of our class a common stock and could impair our ability to raise capital , expand our business , diversify our product offerings , or continue our operations . on july 27 , 2018 , we closed a follow-on underwritten public offering of 3,450,000 shares of our class a common stock for gross proceeds of $ 248.4 million . the company received net proceeds from the offering of $ 232.9 million , after deducting underwriting discounts and commissions and offering expenses . we intend to use the net proceeds for working capital and general corporate purposes , which include , but are not limited to , advancing the development of bard and omav through clinical trials , preparing to file one or more ndas , and planning for commercialization of our potential products . the probability of success for each of our product candidates and clinical programs and our ability to generate product revenue and become profitable depend upon a variety of factors , including the quality of the product candidate , clinical results , investment in the program , competition , manufacturing capability , commercial viability , and our collaborators ' ability to successfully execute our development and commercialization plans . we will also require additional capital through equity or debt financings in order to fund our operations and execute on our business plans , and there is no assurance that such financing will be available to us on commercially reasonable terms or at all . for a description of the numerous risks and uncertainties associated with product development and raising additional capital , see โ risk factors โ included in this annual report . financial operations overview revenue our revenue to date has been generated primarily from licensing fees received under our collaborative license agreements and reimbursements for expenses . we currently have no approved products and have not generated any revenue from the sale of products to date . in the future , we may generate revenue from product sales , royalties on product sales , reimbursements for collaboration services under our current collaboration agreements , or license fees , milestones , or other upfront payments if we enter into any new collaborations or license agreements . we expect that our future revenue will fluctuate from quarter to quarter for many reasons , including the uncertain timing and amount of any such payments and sales . 96 our license and milestone revenue has been generated primarily from our license agreement with khk , our license agreement with abbvie , and our collaboration agreement with abbvie and consists of upfront payments and milestone payments . license revenue recorded with respect to the khk license agreement , the abbvie license agreement , and the abbvie collaboration agreement consists solely of the recognition of deferred revenue . under our revenue recognition policy , license revenue associated with upfront , non-refundable license payments received under the license and collaboration agreements with abbvie and khk are deferred and recognized ratably over the expected term of the performance obligations under the agreements . the abbvie collaboration agreement and the khk license agreement extend through 2021 , and 2026 , respectively . as of november 2017 , the deferred revenue related to the abbvie license agreement has been fully recognized , which resulted in a decrease in license revenue recognized in 2018. the company achieved and received a milestone payment of $ 30.0 million related to the khk license agreement in 2018. the company included this variable consideration to the transaction price and recognized $ 22.5 million in collaboration revenue , including a cumulative catch-up for the portion of this milestone that was satisfied in prior periods . the remaining balance was recorded in deferred revenue on the balance sheet and is being recognized over the remaining performance obligation period . additionally , we recognized approximately $ 3.6 million in related license fees and other expenses related to the achievement of this regulatory milestone . we also have other license revenue , which consists of milestone payments from a disease advocacy organization in 2018 and 2017 , and other revenue , which consists of reimbursements from khk for expenses incurred to obtain drug supplies . research and development expenses the largest component of our total operating expenses has historically been our investment in research and development activities , including the clinical development of our product candidates . from our inception through december 31 , 2018 , we have incurred a total of $ 646.8 million in research and development expense , a majority of which relates to the development of bard and omav . we expect our research and development expense to continue to increase in the future as we advance our product candidates through clinical trials and expand our product candidate portfolio . the process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming , and we consider the active management and development of our clinical pipeline to be crucial to our long-term success . the actual probability of success for each product candidate and preclinical program may be affected by a variety of factors , including the safety and efficacy data for product candidates , investment in the program , competition , manufacturing capability , and commercial viability .
| results of operations comparison of the years ended december 31 , 2018 , 2017 , and 2016 the following table sets forth our results of operations for the years ended december 31 : replace_table_token_10_th revenue license and milestone revenue represented approximately 98 % , 98 % , and 100 % of total revenue for the years ended december 31 , 2018 , 2017 , and 2016 , respectively , and consisted primarily of the recognition of deferred revenue . license and milestone revenue increased by 11 % during 2018 compared to 2017. the increase was primarily due to additional revenue of $ 22.5 million related to the khk agreement , offset by the full recognition of deferred revenue for the abbvie license agreement in november 2017. license and milestone revenue decreased by 5 % during 2017 compared to 2016. the decrease was primarily due to full recognition of deferred revenue for the abbvie license agreement in november 2017 , compared to a full year of recognition in 2016. other revenue increased by 30 % during 2018 compared to 2017 and by 658 % during 2017 compared to 2016 , primarily due to revenue recognized for reimbursements of expenses from khk for expenses incurred . the following table summarizes the sources of our revenue for the years ended december 31 : replace_table_token_11_th 100 research and development expenses research and development expenses increased by 37 % during 2018 compared to 2017. the increase was primarily due to an increase in clinical and manufacturing activities , primarily from increases totaling $ 24.9 million for cardinal , phoenix , and part 2 of moxie , offset by decreases totaling $ 10.3 million in clinical and manufacturing activities related to reveal , motor , and rta 901 , which were completed in 2017. additionally research and development expenses increased by $ 4.8 million in medical affairs activities in our bard clinical programs , $ 4.6 million in personnel and equity compensation expenses to support growth in our development activities , and $ 1.8 million in additional discovery activities .
| 2,396 |
f- 9 china pharma holdings , inc. notes to consolidated financial statements years ended december 31 , 2020 and 2019 leases โ at lease commencement , the company records a lease liability based on the present value of lease payments over the expected lease term including any options to extend the lease that the company is reasonably certain to exercise . the company calculates the present value of lease payments using an incremental borrowing rate as the company 's leases do not provide an implicit interest rate . the company 's incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms . at the lease commencement date , the company records a corresponding right-of-use lease asset based on the lease liability , adjusted for any lease incentives received and any initial direct costs paid to the lessor prior to the lease commencement date . the company may enter into leases with an initial term of 12 months or less ( โ short-term leases โ ) . for any short-term leases , the company records the rent expense on a straight-line basis and does not record the leases on the condensed balance sheet . after lease commencement , the company measures its leases as follows : ( i ) the lease liability based on the present value of the remaining lease payments using the discount rate determined at lease commencement and ( ii ) the right-of-use lease asset based on the remeasured lease liability , adjusted for any unamortized lease incentives received , any unamortized initial direct costs and the cumulative difference between rent expense and amounts paid under the lease agreement . any lease incentives received and any initial direct costs are amortized on a straight-line basis over the expected lease term . rent expense is recorded on a straight-line basis over the expected lease term . valuation of long-lived assets โ the carrying values of long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying values may not be recoverable . when such an event occurs , the company projects the undiscounted cash flows to be generated from the use of the asset and its eventual disposition over the remaining life of the asset . if projections indicate that the carrying value of an asset will not be story_separator_special_tag the statements contained in this report with respect to our financial condition , results of operations and business that are not historical facts are forward-looking statements . forward-looking statements can be identified by the use of forward-looking terminology , such as โ anticipate โ , โ believe โ , โ expect โ , โ plan โ , โ intend โ , โ seek โ , โ estimate โ , โ project โ , โ could โ , โ may โ or the negative thereof or other variations thereon , or by discussions of strategy that involve risks and uncertainties . management wishes to caution the readers that any such forward-looking statements contained in this report reflect our current beliefs with respect to future events and involve known and unknown risks , uncertainties and other factors , including , but not limited to , economic , competitive , regulatory , technological , key employees , and general business factors affecting our operations , markets , growth , services , products , licenses and other factors , some of which are described in this report including in โ risk factors โ in item 1a and some of which are discussed in our other filings with the securities and exchange commission . these forward-looking statements are only estimates or predictions . no assurances can be given regarding the achievement of future results , as actual results may differ materially as a result of risks facing our company , and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events . these risk factors should be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue . all written and oral forward-looking statements made in connection with this report that is attributable to our company or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements . given these uncertainties , we caution investors not to unduly rely on our forward-looking statements . we do not undertake any obligation to review or confirm analysts ' expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events , except as required by applicable law or regulation . business overview & recent developments we are principally engaged in the development , manufacture and marketing of pharmaceutical products for human use in connection with a variety of high-incidence and high-mortality diseases and medical conditions prevalent in the people 's republic of china ( the โ prc โ ) . all of our operations are conducted in the prc , where our manufacturing facilities are located . we manufacture pharmaceutical products in the form of dry powder injectables , liquid injectables , tablets , capsules , and cephalosporin oral solutions . the majority of our pharmaceutical products are sold on a prescription basis and all have been approved for at least one or more therapeutic indications by the national medical products administration ( the โ nmpa โ , formerly china food and drug administration , or cfda ) based upon demonstrated safety and efficacy . story_separator_special_tag we believe the ongoing generic drug consistency evaluations and reform of china 's drug production registration and review policies will have major effects on the future development of our industry and may change its business patterns . we will continue to actively adapt to the national policy guidance and further evaluate market conditions for our existing products , and competition in the market in order to optimize our development strategy . 37 results of operations for the fiscal year ended december 31 , 2020 revenue revenue was both $ 10.9 million for the years ended december 31 , 2020 , and 2019 , respectively . this was mainly due to a foreign trade of covid-19 testers we completed in the second quarter of 2020 that offsets the sales decrease of our current existing products in 2020 as compared to 2019. because of the market demand for covid-19 related products , we received an export order for diagnostic test , which we purchased from a third party . this one-time business contributed approximately $ 1.7 million to our revenue in 2020. this is a milestone of our continuous efforts to explore various niche markets , products and regions based on our experiences and abilities . except for revenue from the export of covid-19 tester , sales of our existing products decreased in 2020 compared to the condition in 2019. the main reason for this decline was that the negative impact on our sales caused by temporarily suspended operations , staff quarantine , and significantly declined outpatient volume at the primary hospitals caused by covid-19 . set forth below are our revenues by product category in millions ( usd ) for the years ended december 31 , 2020 and 2019 , excluding the one-time revenue from the trading of covid-19 testers for the year ended december 31 , 2020 : replace_table_token_1_th the most significant revenue decrease in terms of dollar amount was in our โ anti-viral/ infection & respiratory โ product category , which generated $ 5.13 million in sales revenue in 2020 compared to $ 6.33 million in 2019 , a decrease of $ 1.20 million . this decrease was mainly due to a decrease in sales of our roxithromycin caused by the implementation of the centralized procurement policy by the chinese government , a stricter drug pricing control policy , as well as market fluctuation . sales in โ cns cerebral & cardio vascular โ product category was $ 2.03 million in sales revenue in 2020 , which represented a decrease of $ 0.33 million compared to $ 2.35 million in 2019. this decrease was mainly due to a decrease in sales of our ozagrel caused by the implementation of centralized procurement policy , a stricter drug centralized procurement policy , as well as market fluctuation . sales revenue in the โ other โ category was $ 1.58 million in 2020 , which represented a decrease of $ 0.28 million compared to $ 1.86 million in 2019. this decrease was mainly due to the sales decrease of vitamin b6 in this year , caused by the implementation of centralized procurement policy , a stricter drug centralized procurement policy , as well as market fluctuation . our โ digestive diseases โ category generated $ 0.40 million of sales in 2020 , which represented a decrease of $ 0.06 million compared to $ 0.46 million in 2019. this decrease was mainly due to a decrease in sales of our omeprazole , caused by the implementation of centralized procurement policy , a stricter drug centralized procurement policy , as well as market fluctuation . replace_table_token_2_th for the year ended december 31 , 2020 , revenue breakdown by product category experienced certain variances compared with that of the prior year . sales in the โ anti-viral/infection & respiratory โ product category represented 56 % and 58 % of total sales in the years ended december 31 , 2020 and 2019 , respectively . the โ cns cerebral & cardio vascular โ category represented 22 % of total revenue in 2020 , compared to 21 % in 2019. the โ digestive diseases โ category represented 5 % and 4 % of total revenue in 2020 and 2019 , respectively . the โ other โ category represented both 17 % of revenues in 2020 and 2019 , respectively . 38 cost of revenue for the year ended december 31 , 2020 , our cost of revenue was $ 9.0 million , or 82.0 % of total revenue , which represented a decrease of $ 0.4 million from $ 9.4 million , or 86.4 % of total revenue , in 2019. this was mainly due to the impact of the one-time covid-19 tester transaction and the government relief for employees ' social insurance in 2020. gross profit and gross margin gross profit for the year ended december 31 , 2020 was $ 2.0 million , compared to $ 1.5 million in 2019. our gross profit margin in 2020 was 18.0 % compared to 13.6 % in 2019. this increase in our gross profit margin was mainly due to the impact of the one-time covid-19 tester transaction and the government relief for employees ' social insurance in 2020. selling expenses our selling expenses for the year ended december 31 , 2020 were $ 2.2 million , a decrease of $ 0.2 million compared to $ 2.4 million for the year ended december 31 , 2019. selling expenses accounted for 20.4 % of the total revenue in 2020 compared to 21.5 % in 2019. this decrease was mainly due to emergency quarantine measures which reduced business travel and marketing activities due to the covid-19 pandemic . story_separator_special_tag style= '' font : 10pt times new roman , times , serif ; margin : 0pt 0 ; text-align : justify '' > the number of basic and diluted weighted-average outstanding shares used to calculate loss per share was 43,623,273 for 2020 , as compared to 43,579,557 for 2019 .
| general and administrative expenses our general and administrative expenses for the year ended december 31 , 2020 were $ 1.8 million , as compared to $ 2.3 million in 2019. general and administrative expenses accounted for 16.8 % and 21.0 % of our total revenues in 2020 and 2019 , respectively . this decrease was mainly due to lower travel and office costs due to the impact of covid-19 , as well as offsets for administrative costs from government subsidies . research and development expenses our research and development expenses for the year ended december 31 , 2020 was $ 0.38 million , compared to $ 0.23 million in 2019. research and development expenses accounted for 3.5 % and 2.1 % of our total revenues in 2020 and 2019 , respectively . these expenditures were mainly spent on the consistency evaluation of our existing products . impairment loss there was no impairment loss for the year ended december 31 , 2020. however , we recognized $ 17.02 million impairment loss for the year ended december 31 , 2019 , among which , there was an impairment loss for the advances made to laboratories for the year december 31 , 2019 in the amount of $ 17,015,117. as a pharmaceutical company , we have been focusing on the development and maintenance of our intangible assets , mainly in the form of medical formulas . the consistency evaluations discussed under the โ business overview & recent developments โ section hereof is expected to have a significant impact on all generic products not only in our pipeline , but also throughout the existing chinese market .
| 2,397 |
replace_table_token_41_th [ 65 ] 6. investment securities โ available for sale the following table shows a comparison of amortized cost and fair values of investment securities available-for-sale : replace_table_token_42_th proceeds from sales of securities and the realized gains and losses are as follows : replace_table_token_43_th the following table shows the corporation 's securities available-for-sale with gross unrealized losses and fair value , aggregated by investment category and length of time that individual securities have been in a continuous unrealized position , at story_separator_special_tag this discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto for the year ended december 31 , 2011 , which are included in item 8 of part ii of this annual report . recent developments effective on january 1 , 2012 , the insurance group sold substantially all of its assets , net of cash , to an unrelated third party ( the โ acquirer โ ) for $ 3.6 million . prior to that date , the insurance group operated as a full service insurance agency with offices in maryland and west virginia . as part of this sale , we agreed that we would not compete with the acquirer for insurance business other than with respect to insurance related to our banking , trust , lending , consumer finance company , and or securities sales businesses . we also agreed to not solicit the acquirer 's customers or any person who was a customer of the insurance group at any time within three years prior to the sale . these restrictions will terminate on january 1 , 2017. as a result of these agreements , we anticipate that our insurance activities for the foreseeable future will be limited to the sale of credit-related insurance products and the sale , through our networking arrangements , of annuities . also as part of the sale , we agreed , until january 1 , 2013 , to refer insurance business to the acquirer . to the extent permitted by law , we will be entitled to a referral fee , equal to 10 % of the commission payable to the acquirer , when our referrals result in the sale of an insurance policy of a type not previously sold to the customer by the acquirer . total revenues for 2011 were $ 2.4 million and pre-tax operating expenses , net of amortization expense and expenses related to the sale were $ 2.2 million . management does not expect the sale of the insurance group 's assets or the referral arrangement to have a material impact on our future financial condition or results of operations . overview first united corporation is a financial holding company which , through the bank and its non-bank subsidiaries , provides an array of financial products and services primarily to customers in four western maryland counties and four northeastern west virginia counties . its principal operating subsidiary is the bank , which consists of a community banking network of 28 branch offices located throughout its market areas . our primary sources of revenue are interest income earned from our loan and investment securities portfolios and fees earned from financial services provided to customers . consolidated net income available to common shareholders was $ 2.0 million for the year ended december 31 , 2011 , compared to a net loss attributable to common shareholders of $ 11.8 million for the same period of 2010. basic and diluted net income per common share for the year ended december 31 , 2011 were $ .33 , compared to basic and diluted net loss per common share of $ 1.91 for the same period of 2010. the change in earnings , from a net loss for the year ended december 31 , 2010 to net income for the year ended december 31 , 2011 , resulted primarily from a $ 6.6 million reduction in provision for loan losses and a $ 3.8 million reduction in net losses from sales of securities and other real estate owned . in addition , $ 19,000 in non-cash other-than-temporary impairment ( โ otti โ ) charges were realized for the year ended december 31 , 2011 , compared to $ 8.4 million for the same period of 2010. during 2011 , we also recognized a gain of $ 1.4 million from the sale of a portion of the indirect auto loan portfolio . the decreases in expenses and the gain on the sale of indirect auto loans were offset by a decrease of $ 7.4 million in income tax benefit and a decline in net interest income of $ 3.3 million . the decrease in net interest income was driven by an $ 11.7 million reduction in interest income on a fully tax-equivalent ( โ fte โ ) basis attributable to lower levels of loans , the sale of a portion of the indirect auto portfolio and the lower interest rate environment . the net interest margin for the year ended december 31 , 2011 , on an fte basis , increased to 2.96 % from 2.71 % for the year ended december 31 , 2010. the increase in the net interest margin was driven primarily by the strategic plan to reduce cash levels by paying off certain liabilities that matured during 2011 and to change the composition of our deposit mix , focusing on lower cost core deposits . the provision for loan losses was $ 9.2 million for the year ended december 31 , 2011 , compared to $ 15.7 million for fiscal year 2010. the lower provision expense was primarily due to a leveling in the credit quality of our loan portfolio . management continued to make specific allocations for impaired loans where it was determined that the collateral supporting the loans is not adequate to cover the loan balance , and management adjusted the qualitative factors affecting the allowance for loan losses ( the โ all โ ) to reflect changes in the economic environment . story_separator_special_tag net gains of $ .9 million from sales of investments , the $ 1.4 million gain from the sale of our indirect auto loan portfolio and $ .3 million of gains on sales of other real estate owned were offset by $ 2.0 million in write-downs of other real estate owned . other operating expenses decreased $ 3.2 million ( 7 % ) for the year ended december 31 , 2011 when compared to the year ended december 31 , 2010. the decrease was primarily due to a $ 1.1 million decline in salaries and benefits , resulting primarily from a reduction of full-time equivalent employees through attrition and reduced pension expense , and a $ 1.7 million decline in fdic premiums attributable to the repayment of brokered deposits . dividends โ during 2011 , first united corporation did not declare or pay any dividends on the shares of its common stock on account of the board of directors ' decision in november 2010 to defer quarterly cash dividends on the series a preferred stock . there were no dividends paid on the series a preferred stock in 2011. in 2010 , first united corporation paid a total of $ .8 million in cash dividends on the shares of common stock and a total of $ 1.1 million in cash dividends on the series a preferred stock . looking forward โ we will continue to face risks and challenges in the future , including , without limitation , changes in local economic conditions in our core geographic markets , potential yield compression on loan and deposit products from existing competitors and potential new entrants in our markets , fluctuations in interest rates , and changes to existing federal and state laws and regulations that apply to banks and financial holding companies . for a more complete discussion of these and other risk factors , see item 1a of part i of this annual report . critical accounting policies and estimates this discussion and analysis of our financial condition and results of operations is based upon our consolidated financial s tatements , which have been prepared in accordance with accounting principles generally accepted in the united states of america . the preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses , and related disclosure of contingent liabilities . ( see note 1 to the consolidated financial statements . ) on an on-going basis , management evaluates estimates , including those related to loan losses and intangible assets . management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions . management believes the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the consolidated financial statements . allowance for loan losses , or all one of our most important accounting policies is that related to the monitoring of the loan portfolio . a variety of estimates impact the carrying value of the loan portfolio , including the calculation of the all , the valuation of underlying collateral , the timing of loan charge-offs and the placement of loans on non-accrual status . the allowance is established and maintained at a level that management believes is adequate to cover losses resulting from the inability of borrowers to make required payment on loans . estimates for loan losses are arrived at by analyzing risks associated with specific loans and the loan portfolio , current and historical trends in delinquencies and charge-offs , and changes in the size and composition of the loan portfolio . the analysis also requires consideration of the economic climate and direction , changes in lending rates , political conditions , legislation impacting the banking industry and economic conditions specific to western maryland and northeastern west virginia . because the calculation of the all relies on management 's estimates and judgments relating to inherently uncertain events , actual results may differ from management 's estimates . the all is also discussed below in item 7 under the heading โ allowance for loan losses โ and in note 7 to the consolidated financial statements . goodwill and other intangible assets accounting standards codification ( โ asc โ ) topic 350 , intangibles โ goodwill and other , establishes standards for the amortization of acquired intangible assets and impairment assessment of goodwill . we have $ 1.6 million related to acquisitions of insurance โ books of business โ whi ch are subject to amortization . the $ 12.9 million in recorded goodwill is primarily related to the acquisition of huntington national bank branches that occurred in 2003 and the acquisition of insurance books of business in 2008 that are not subject to periodic amortization . [ 27 ] goodwill arising from business combinations represents the value attributable to unidentifiable intangible elements in the business acquired . goodwill is not amortized but is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired . impairment testing requires that the fair value of each of first united corporation 's reporting units be compared to the carrying amount of its net assets , including goodwill . if the estimated current fair value of the reporting unit exceeds its carrying value , no additional testing is required and an impairment loss is not recorded . otherwise , additional testing is performed , and to the extent such additional testing results in a conclusion that the carrying value of goodwill exceeds its implied fair value , an impairment loss is recognized .
| summary of loan portfolio table 3 the following table presents the composition of our loan portfolio for the past five years : replace_table_token_18_th comparing december 31 , 2011 to december 31 , 2010 , outstanding loans decreased by $ 38.6 million ( 3.8 % ) , net of the sale of $ 32.5 million of the indirect auto portfolio . cre loans decreased $ 12.4 million as a result of the payoff of several large loans , charge-offs of loan balances and ongoing scheduled principal payments . commercial and industrial ( โ c & i โ ) loans increased $ 8.7 million and residential mortgages declined $ 9.5 million . acquisition and development loans decreased $ 14.0 million due primarily to principal repayments and charge offs . the decrease in the residential mortgage portfolio was attributable to regularly scheduled principal payments on existing loans and management 's decision to use secondary market outlets such as fannie mae for the majority of new , longer-term , fixed-rate residential loan originations . the consumer portfolio declined $ 43.9 million due primarily to the sale of $ 32.5 million of retail installment contracts in our indirect auto loan portfolio and $ 11.4 million of repayment activity in the indirect auto portfolio exceeded new production due to special financing offered by the automotive manufacturers , credit unions and certain large regional banks .
| 2,398 |
selected financial data and the risk factors identified in item 1a . risk factors of this annual report . for further discussion regarding our results of operations for the year ended december 31 , 2019 as compared to the year ended december 31 , 2018 , refer to item 7 management 's discussion and analysis of financial condition and results of operations in our annual report on form 10-k for the fiscal year ended december 31 , 2019. general overview eagle bulk shipping inc. ( โ eagle โ or the โ company โ ) is a u.s. based fully integrated shipowner-operator providing global transportation solutions to a diverse group of customers including miners , producers , traders , and end users . headquartered in stamford , connecticut , with offices in singapore and copenhagen , eagle focuses exclusively on the versatile mid-size drybulk vessel segment and owns one of the largest fleets of supramax/ ultramax vessels in the world . the company performs all management services in-house such as strategic , commercial , operational , technical , and administrative services and employs an active management approach to fleet trading with the objective of optimizing revenue performance and maximizing earnings on a risk-managed basis . typical cargoes we transport include both major bulk cargoes , such as iron ore , coal and grain coal , grain , and iron ore , and minor bulk cargoes such as fertilizer , steel products , petcoke , cement , and forest products . as of december 31 , 2020 , we owned and operated a modern fleet of 45 supramax/ultramax dry bulk vessels . we chartered-in three ultramax vessels for a remaining lease term of less than one year . in addition , the company charters-in third-party vessels on a short to medium term basis . our owned fleet totals 45 vessels , with an aggregate carrying capacity of 2,686,570 dwt and had an average age of 8.8 years as of december 31 , 2020. financing on june 9 , 2020 , ultraco shipping llc ( `` ultraco '' ) , a wholly-owned subsidiary of the company , and certain initial and additional guarantors entered into the third amendment ( the `` third amendment '' ) to the new ultraco debt facility to provide for incremental commitments and pursuant to which on june 12 , 2020 , ultraco borrowed $ 22.6 million for general corporate purposes which was secured by two ultramaxes already owned by the company , the m/v hong kong eagle and m/v santos eagle . the company paid $ 0.4 million as financing costs to the lenders . the company incurred an additional $ 0.2 million in other financing costs in relation to the transaction . on december 22 , 2020 , the company issued an aggregate of 1,381,215 shares in two concurrent public offerings ( `` equity offerings '' ) . the total net proceeds from the offerings , net of issuance costs was $ 23.5 million . the company used the net proceeds to finance the acquisition of two modern ultramax vessels and general corporate purposes . the following are certain significant events with respect to our vessels that occurred during 2020 : for the year ended december 31 , 2020 , the company sold five vessels ( goldeneye , skua , shrike , osprey i and hawk ) for total net proceeds of $ 23.2 million after brokerage commissions and associated selling expenses . the company recorded a net loss of $ 0.5 million from the sale of the five vessels in its consolidated statement of operations for the year ended december 31 , 2020. during the fourth quarter of 2020 , the company entered into a series of memorandum of agreements to purchase three high specification scrubber-fitted ultramax bulkcarriers for a total purchase price of $ 50.2 million excluding direct expenses of acquisition . the company took delivery of the vessels during 72 the first quarter of 2021. the company paid and recorded $ 3.3 million on two of the above mentioned vessels in advances for vessel purchases in the consolidated balance sheet as of december 31 , 2020. vessel upgrades - scrubbers and ballast water systems during the third quarter of 2018 , the company entered into a series of agreements to purchase up to 37 scrubbers , which were fitted on the company 's vessels . the actual costs , including installation , were approximately $ 2.4 million per scrubber . during the second quarter of 2020 , the company completed and commissioned all 37 scrubbers and recorded $ 88.9 million in vessels and vessel improvements in the consolidated balance sheet as of december 31 , 2020. during the third quarter of 2018 , the company entered into a contract for the installation of bwts on 39 of our owned vessels . the projected costs , including installation , are approximately $ 0.5 million per bwts . the company intends to complete the installations during scheduled drydockings . the company completed installation of bwts on 15 vessels and recorded $ 7.1 million in vessels and vessel improvements in the consolidated balance sheet as of december 31 , 2020. additionally , the company recorded $ 2.3 million as advances paid towards installation of bwts on the remaining vessels as a noncurrent asset in its consolidated balance sheet as of december 31 , 2020. during the second quarter of 2020 , the company applied for and received extensions from the uscg of up to one year from their deadline for bwts installation on 18 of our vessels . additionally , the company cancelled the bwts installation orders on three of its oldest vessels . business strategy and outlook : we believe our strong balance sheet allows us the flexibility to opportunistically make investments in the drybulk segment that will drive shareholder growth . story_separator_special_tag however , if the covid-19 pandemic continues to impact the global economy on a prolonged basis , or vaccination program goes slower than expected , the rate environment in the drybulk market and our vessel values may deteriorate further and our operations and cash flows may be negatively impacted as well as our ability to meet the debt covenants under our existing debt facilities . u.s.-china trade dispute over the course of 2018 and 2019 , the united states imposed tariffs on various goods imported from a number of countries . certain of these countries , including china , undertook retaliatory actions by implementing tariffs on select u.s. products . most notably in terms of drybulk trade volumes is china 's tariff placed upon u.s. soybean exports . these tariffs impacted trade-flows with much of the us exports being substituted with soybeans from south america . this also had an impact on seasonality , given the different timing of harvests between the northern and southern hemispheres . with the signing of the โ phase one โ trade agreement between china and the u.s. in january 2020 , china has agreed in principle to purchase meaningful quantities of agricultural products , including soybeans , from the u.s. in recent months , china has purchased large amounts of agricultural products that are transported on drybulk vessels which has helped support freight rates for the mid-sized and smaller vessel classes . it remains to be seen the stance the new u.s. administration will take towards china as well as any previously agreed upon trade deals . a deterioration in the trading relationship or a re-escalation of protectionist measures taken between these countries or others could lead to reduced volumes of drybulk trade as well as changes in trade flows . market overview the international shipping industry is highly competitive and fragmented with no single owner accounting for more than 3.5 % of the on-the-water drybulk fleet . as of december 31 , 2020 , there are approximately 12,300 drybulk vessels over 10,000 dwt totaling 911 million dwt . we compete with other ( primarily private ) owners of drybulk vessels in the handysize , supramax/ultramax , and panamax asset classes . competition in the shipping industry varies according to the nature of the contractual relationship as well as the specific commodity being shipped . our business will fluctuate as a result of changes in the supply and demand for drybulk commodities and also the main patterns of trade in these commodities . competition in virtually all bulk trades is intense and based primarily on supply of ships and demand for our ocean transportation services . we compete for charters on the basis of price , vessel location , size , age , and condition of the vessel , as well as on our reputation as an owner and operator . increasingly , major customers are demonstrating a preference for modern vessels based on concerns about the environmental and operational risks associated with older vessels . consequently , owners of large modern fleets have gained a competitive advantage over owners of older fleets . our strategy is to focus primarily on the supramax/ultramax asset class , defined as drybulk vessels that range in size from approximately 50,000 to 65,000 dwt . these vessels have the cargo loading and unloading flexibility offered by their on-board cranes , while the cargo carrying capacity approaches that of panamax , which ranges in size between 65,000 and 100,000 dwt but which require onshore facilities to load and offload their cargoes . we believe that the cargo handling flexibility and cargo carrying capacity of the supramax/ultramax class makes it the preferred type of ship attractive to potential charterers . as of december 31 , 2020 , all of our owned vessels range in size between 50,000 and 64,000 dwt . the supply of drybulk vessels depends primarily on the size of the orderbook and the scrapping of older or less efficient vessels . during 2020 , approximately 486 newbuilding vessels were delivered to industry participants , and 143 vessels were scrapped , resulting in 3.7 % net growth in the drybulk fleet on a dwt-adjusted basis , as compared to 4.0 % for 2019 . 77 the typical trading life of a supramax/ultramax vessel is approximately 25 years . as of december 2020 , 10 % of the world 's drybulk fleet ( by vessel count ) was 20 years or older . fleet growth for 2021 is expected to continue at moderate to low levels of 2.6 % for the drybulk fleet and 2.2 % for supramax/ultramax vessels . the orderbook as of february 2021 stands at approximately 5.8 % of the total drybulk fleet , with the orderbook for the supramax/ultramax segment at 5.3 % of the on-the-water fleet , with both figures representing the smallest orderbook in approximately 30 years . the imf is currently forecasting worldwide gdp growth at 5.5 % for 2021 , as the global economy recovers from the covid-19 pandemic . this represents the strongest growth since 2010 , when the economy was recovering from the 2009 recession . drybulk trade , which tends to be correlated to global gdp , is expected to grow by approximately 3.7 % in 2021 , driven by a rebound in iron ore , and continued strong growth in bauxite , along with modest increases in coal , grain , and other minor bulk commodities . critical accounting policies and estimates the discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states ( โ u.s . gaap โ or โ gaap โ ) . the preparation of the financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities , revenues and expenses and related disclosure of contingent assets and liabilities at the date of our financial statements . actual results may differ from these estimates under different assumptions and conditions .
| results of operations for years ended december 31 , 2020 and 2019 this section of this form 10-k generally discusses 2020 and 2019 results and year-to-year comparisons between 2020 and 2019. a discussion of 2019 results of operations compared to 2018 has been omitted from this form 10-k , but may be found in โ part ii , item 7 management 's discussion and analysis of financial condition and results of operations โ of our form 10-k for the year ended december 31 , 2019 , filed with the sec on march 12 , 2020 . 83 factors affecting our results of operations the following tables represent the operating data and certain financial statement data for the years ended december 31 , 2020 and 2019 on a consolidated basis . we believe that the important measures for analyzing future trends in our results of operations consist of the following : replace_table_token_12_th ownership days : we define ownership days as the aggregate number of days in a period during which each vessel in our fleet has been owned by us . ownership days are an indicator of the size of our fleet over a period and affect both the amount of revenues and the amount of expenses that we record during a period . chartered-in days : we define chartered-in days as the aggregate number of days in a period during which the company chartered-in vessels . available days : we define available days as the number of our ownership days and chartered-in days less the aggregate number of days that our vessels are off-hire due to vessel familiarization upon acquisition , repairs , vessel upgrades or special surveys . the shipping industry uses available days to measure the number of days in a period during which vessels should be capable of generating revenues .
| 2,399 |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.